Per reporter: Zhang Lingxiao Lan Suying
This week, the situation in Russia and Ukraine can be described as a changeable situation. Russia's special military operation in the Donbass region has pushed the tense atmosphere that has been fermenting for several months to a peak, the Ukrainian president announced that Ukraine and Russia have broken diplomatic relations, Europe and the United States and other countries have announced a series of sanctions against Russia, including the prohibition of its use of the SWIFT system, which is considered a "nuclear button" of financial sanctions. At present, the war has reached Kiev, the capital of Ukraine.
The conflict between the two sides has also stimulated the nerves of the global market, and stock indexes, bonds, crude oil, natural gas, gold, soybeans, wheat, non-ferrous metals, etc. in many regions have fluctuated sharply. Brent crude futures briefly hit $105 a barrel, the first time since 2014, and gold is also approaching the $2,000/oz mark.
Previously, both Russia and Ukraine signaled their willingness to negotiate, but then because they were not satisfied with the conditions, kiev refused to negotiate, and the Russian side continued to promote military operations. The crisis is not over, what impact will it have on global energy markets? Will the pace of rate hikes by central banks change as a result? Why are chips and automotive supply chains "lying guns" in this conflict?
More content, just in "A Week of International Finance".
The Russian-Ukrainian war burned to the capital of Ukraine
Global Market Volatility What is the impact of the energy sector?
On February 24, local time, Russian President Vladimir Putin said in a televised speech that he decided to launch a special military operation in the Donbass region. Earlier, Putin signed a presidential decree recognizing the Donetsk People's Republic and the Luhansk People's Republic, which are self-proclaimed by the people's armed forces in Eastern Ukraine, as independent states.
According to CCTV News, on February 26, local time, the Russian Ministry of Defense issued the latest announcement that the Russian armed forces have paralyzed 821 Ukrainian military infrastructure. By the morning, the fighting between the two sides had spread to the urban area of Kiev, the capital of Ukraine. On the 27th, an artillery battle broke out in the Kharkiv region, the second largest city in Ukraine, the fiercest since the war between Russia and Ukraine.
On the 26th, both Russia and Ukraine released their willingness to negotiate. But advisers to the head of Ukraine's president's office later said Kiev refused to negotiate because they were not satisfied with the terms. Prior to this, Russian Presidential Press Secretary Peskov also said that the Ukrainian side has refused peace talks and that Russia's military operations will continue. Peskov said that Russian President Putin ordered the Russian army to stop advancing on the 25th, but the Ukrainian side refused to negotiate, the Russian army resumed its military action plan, and the main force continued to advance on the afternoon of the 26th.
In addition, according to CCTV news reports, Russian State Duma President Volodin said on the social platform on the 26th that Ukrainian President Zelenskiy had left Kiev on the 25th local time, and all his appeals from the Ukrainian capital were filmed in advance.
In response to the Ukrainian issue, the EU will hold a foreign ministers' meeting in the form of video on the 27th, and the EU High Representative for Foreign Affairs and Security Policy Borrelli said on social media that he will propose a package of emergency measures to assist the Armed Forces of Ukraine for discussion by member states. The UN Security Council also decided to convene a special session on the afternoon of 27 February. It is understood that the meeting voted on sending the situation in Ukraine to the 76th session of the United Nations General Assembly to convene an emergency special session.
During the intensification of the Russian-Ukrainian conflict, countries such as the European Union, the United States, Canada and Japan announced a series of sanctions against Russia, including freezing Russian assets in parts of the country and suspending the certification of the Nord Stream 2 gas project. More importantly, according to CCTV news reports, on February 26, local time, the United States and the European Union, the United Kingdom and Canada issued a joint statement announcing that several major Banks in Russia are prohibited from using the International Settlement System of the Association for Financial Telecommunications of Global Interbanks (SWIFT), while implementing "restrictive measures" against the Russian central bank to prevent the Russian central bank from deploying its international reserves in a way that may undermine sanctions. According to a joint statement issued by several countries, the latest sanctions will ensure that Russian banks are cut off from the international financial system, "undermining their ability to operate globally." This means that Russian banks will not be able to communicate safely and effectively with offshore banks.
A factory in CF Industries in the United States photographed in Cheshire, England
Photo credit: Photo by Jon Hupper of Xinhua News Agency
Affected by the turbulent situation, stock indexes, bonds, crude oil, natural gas, gold, soybeans, wheat, non-ferrous metals and other stocks in many parts of the world have experienced large fluctuations.
Monday to Thursday, U.S. stocks (closed on Monday), European stocks and Asia-Pacific markets all saw sharp declines as market concerns affected supply issues, with the NASDAQ plunging into a bear market, the Russian stock index falling 50% and the Asia-Pacific MSIC on Thursday hitting its lowest point since November 2020.
Energy and some commodity prices soared. Brent crude futures hit $105 a barrel at one point on Thursday, the first time since 2014. Dutch TTF benchmark natural gas futures, seen as a "weather vane for European gas prices," rose for the fourth consecutive trading day, reaching 41 percent during the day. Spot gold once broke through $1960 / ounce, pulling up more than $50. Wheat, soybeans and palm oil hit a new high in about 10 years.
On Friday, markets reversed as Russia showed a willingness to negotiate diplomatically and sanctions that did not affect energy. On the same day, the three major U.S. stock indexes and major European stock indexes all closed higher, and the S&P, NASDAQ and NASDAQ 100 all ended a two-week streak of declines. Brent and WTI crude oil closed lower, spot gold fell below $1890 in a row, and the Dutch TTF benchmark natural gas futures fell more than 30% intraday.
As one of the world's largest oil and gas producers, what impact will Russia's crude oil and gas exports be on the global market if its crude oil and gas exports are blocked?
Edward Moya, senior market analyst at investment bank Oanda, told the Daily Economic News that "the problem of Russian crude oil exports will put the global oil market at risk, which can easily make oil prices much higher than the level of $100 per barrel, and Brent crude may even break through the level of $120 per barrel." ”
The market believes that the If the Iranian nuclear agreement can be restored, it may bring some relief to the oil market. However, Moya told reporters, "Oil inventories are now low everywhere, and even if the Iran nuclear deal is restarted, it will take several months to increase production." However, if the Iranian nuclear negotiations can be resolved quickly, the surge in oil prices may be limited. ”
In terms of natural gas, Russia supplies about 40% of Europe's natural gas imports. Commodity data provider Kpler told the "Daily Economic News" reporter that if Russia's natural gas supply into Europe continues to decrease, The price of natural gas in Europe may remain above 70 euros / kWh.
The world's leading petrochemical intelligence provider ICIS U.S. LNG editor told reporters that this year's European natural gas storage level fell to a historical low for many years, although the supply of new liquefied natural gas in Europe continues to set new records, but European countries still have a strong dependence on Russian natural gas supply, Russia's natural gas supply to Europe will continue to be a major factor affecting The price of European natural gas.
Note: The above interview content only represents the views of the interviewee, does not represent the position of the Daily Economic News, and does not constitute investment advice.
1
U.S. inflationary pressure "high fever does not recede"
Will the Ukraine crisis affect the pace of rate hikes?
Image source: Photo Network - 401052364
On the evening of February 25, Beijing time, the US Department of Commerce released data showing that in January, the US personal consumption expenditure (PCE) price index increased by 6.1% year-on-year, the largest monthly increase since 1982, the previous value of 5.8%; excluding food and energy prices, the core PCE price index increased by 5.2% year-on-year, the previous value of 4.9%, the largest increase since 1983.
At the same time, U.S. consumer confidence is declining. The University of Michigan's consumer confidence index, released earlier, has fallen to 67.2 from 70.6 a month ago, the lowest since November 2011. Consumers cite inflation as their main concern.
With inflation continuing to rise, the Fed is widely expected to raise interest rates in March, but expectations of a 50 basis point rate hike recede quickly as the situation in Ukraine escalates sharply.
The Federal Reserve's semi-annual report on monetary policy released on the 25th reiterated that in the context of the active US job market, in order to cope with high inflation, it will enter the rate hike cycle "soon". In the report, the Fed said that inflation rates well above the 2% target, as well as the "strong" performance of the labor market, provide the right environment for the Fed to raise interest rates in the near future.
Nomura believes that to avoid geopolitical risks, the Fed may avoid raising interest rates by 50 basis points in March because "in an already high inflation environment, the rise in commodity prices triggered by the situation in Ukraine may put further upward pressure on US consumer inflation expectations." However, Nomura also expects that the probability of a 50 basis point rate hike at a meeting after March is still very large to make up for the first smaller rate hike.
Other central banks said that they would pay attention to the development of the situation for the time being and maintain a wait-and-see posture in monetary policy. On February 24, local time, the European Central Bank's management committee and The Austrian Central Bank President Robert Holzmann said that the Ukraine conflict may delay the ECB's withdrawal from the stimulus policy plan, and the uncertainty related to the Ukraine conflict will increase, the ECB will carefully analyze the possible economic impact of the crisis, but he also stressed that the ECB will still promote the normalization of monetary policy.
2
Behind the Hot War: The "Lying Gun" of the Global Chip and Automotive Supply Chain
The Russian-Ukrainian conflict has added another disturbance to the supply of the global semiconductor industry chain, and the nerves of the chip supply chain have been tightened again, mainly because many semiconductor manufacturers are more dependent on raw materials (such as neon and palladium) from Russia and Ukraine.
As a major supplier of semiconductor raw gas in the world, Ukraine is a major supplier of neon, argon, krypton, xenon and other gases, of which the supply of neon gas is the global market leader. According to a february 1 report released by market research firm Techcet, Ukraine's global supply share of neon gas reached 70%, while the global supply share of krypton and xenon reached 40% and 30%, respectively. Neon, krypton and xenon are important raw materials for laser mixed (Laser Mix) gas in semiconductor processes.
Russia, a major producer of palladium, accounted for about 40 percent of the global total last year. Palladium is a rare metal, and palladium is used in the semiconductor field in products such as sensors and memory.
With the escalation of the situation in Russia and Ukraine, manufacturers' concerns about the supply of semiconductor raw materials have increased. Lithography giant Asma is looking for other sources of neon supply, and U.S. memory chip giant Micron is also worried about raw material supply.
In fact, the industries affected are far more than the chip industry, from cigarette manufacturers to car manufacturers and beverage producers have suspended production and operations in Ukraine.
On February 25, several companies, including Volkswagen, Renault and tire manufacturer Nokian Tire, announced plans to suspend or transfer manufacturing operations. Volkswagen said the two German plants would shut down for a few days due to the delay in getting parts produced in Ukraine. Renault said it would suspend some of its operations at its auto assembly plant in Russia next week due to parts shortages and transportation difficulties. Nokian Tire said it was moving some key product lines from Russia to Finland and the United States in response to further sanctions that Russia could face.
On the same day, Japan Tobacco also said it had stopped production operations at a factory in Kremenchuk in central Ukraine. Companies such as Coca-Cola HBC, Carlsberg, Nestlé and AB InBev have also closed their operations in Ukraine.
3
Heavy! Buffett's 2022 annual letter to shareholders is out
On the evening of February 26, Beijing time, Buffett announced the annual open letter to shareholders, and also announced Berkshire Hathaway's fourth quarter (Q4) and annual financial reports in 2021, of which Q4 net profit was 39.646 billion US dollars, an increase of 10.63% year-on-year; Q4 operating profit was 7.285 billion US dollars, an increase of 45.1% year-on-year.
According to the usual practice, the shareholder letter began with Berkshire's performance and the US stock weather vane: the performance of the S&P 500 index, berkshire per stock value increase of 29.6% in 2021, the S&P 500 index increased by 28.7%, Berkshire outperformed by 0.9 percentage points.
In the long run, Berkshire's compound annual growth rate per stock price from 1965 to 2021 was 20.1%, significantly exceeding the S&P 500 index's 10.5%, while Berkshire's market capitalization growth rate from 1964 to 2021 was a surprising 3641613%, that is, 36416 times, while the S&P 500 index was 30209%, or more than 302 times.
In this year's open letter, Buffett focused on Berkshire Hathaway's holdings, holdings of U.S. Treasuries, shares the company bought back, and the reasons for the acquisition of railroad company BNSF.
In terms of holdings, the company's current "big four" businesses are the insurance company cluster, Apple, BNSF, the largest freight railroad company in the United States, and Berkshire Hathaway Energy (BHE), a new energy company.
Buffy praised Apple's buyback of its own shares because of the higher value of Berkshire Hathaway's shares after the buyback. He mentioned that Berkshire's stake in Apple this year rose to 5.55 percent from 5.39 percent a year ago, and the company received $785 million in dividends from Apple last year.
In terms of U.S. Treasury holdings, Buffett said Berkshire's balance sheet includes $144 billion in cash and cash equivalents (excluding BNSF and BHE holdings). Of that, $120 billion is held in the form of U.S. Treasuries, all of which mature within a year.
Buffett also mentioned three ways to increase the value of investments in the letter, and stock buybacks are one of them. Buffett believes that since the beginning of this year, Berkshire has gained more value from buying back its own stock than the acquisition. Over the past two years, Berkshire Hathaway has repurchased 9 percent of its external shares outstanding as of the end of 2019 at a total cost of $51.7 billion. From the end of last year to February 23, 2022, the cost of buying back shares was $1.2 billion.
4
The EU regulator issued a preliminary resolution
Facebook and Instagram or pull out of Europe?
Image source: Daily Economic News Infographic
According to Reuters on February 24, Meta may be banned from transmitting EU user data to the United States as early as May this year. (Note: According to previous media reports, Meta and many other companies, organizations, and services rely on data transfer between Europe and the United States to operate global services.) ）
Earlier this week, Meta received a "revised" preliminary resolution from the Irish Data Protection Commission (IDPC), the EU's main privacy regulator, which was believed to restrict meta's transfer of EU data to the US. Graham Doyle, deputy commissioner of the IDPC, said, "Meta has 28 days to comment on this preliminary decision, and we are ready to prepare a draft 'Article 60' for other relevant regulators, which is expected to take place in April." ”
In early February, Meta warned in its annual report that it considered shutting down Facebook and Instagram services in Europe if it could not continue to transmit user data back to the United States.
Since Edward Snowden, a former U.S. defense contractor employee, revealed in 2013 that U.S. intelligence agencies were conducting mass surveillance, eu concerns about the transmission of user data have been intensifying. On July 16, 2020, the European Court of Justice ruled that the data transfer standards between the EU and the United States did not adequately protect the privacy of European citizens, and that the previously concluded transatlantic personal data transfer agreement, the EU-US Privacy Shield, was invalid. The ruling ended the privilege of U.S. companies in obtaining personal data of EU users.
Affected by the change in the agreement, U.S. giants such as Meta and Google are currently facing difficulties in moving European user data to the United States, and discussions about whether these companies will withdraw from the European market have gradually increased. In recent months, Meta and Google have been publicly calling for a new transatlantic data transfer agreement to continue to survive in the European market.
At present, negotiations between the European Commission and the United States on replacing the lapsed Privacy Shield data transfer arrangement are still ongoing.
5
Tesla is in trouble again? Autonomous driving systems face scrutiny in Germany
As regulators around the world intensify scrutinize the driver assistance technology of car companies, the prospect of commercializing Tesla's self-driving car technology is facing more and more trouble.
On February 21, the media quoted a spokesperson for the German Federal Motor Vehicle Office (KBA) as saying that the office was investigating Tesla's automatic lane change function and whether it was approved for use in Europe. KBA is also in contact with the Dutch auto agency responsible for approving Tesla vehicle sales in Europe.
Notably, this is the second time this month that Tesla's autopilot system has been investigated by regulators.
Last week, the National Highway Traffic Safety Administration (NHTSA) announced that it would launch a formal investigation into 416,000 Tesla vehicles after the agency received complaints that Tesla's autopilot assist system, Autopilot, had accidentally activated its brakes. This phenomenon is often referred to as "ghost braking," in which a user turns on a Tesla vehicle's autopilot assistance system when the vehicle suddenly brakes without warning without the need for it.
NHTSA said it has received 354 complaints related to "ghost brakes" in the past nine months, with a preliminary assessment covering model 3 and Model Y cars in the U.S. market in 2021-2022, and all Tesla vehicles reviewed equipped with the company's autopilot assist system, Autopilot.
Image source: Per Warp Mapping
Reporter: Zhang Lingxiao Lan Suying
Editor: Lan Suying
Vision: Liu Qingyan
Typesetting: Lan Suying Wang Shujie
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