Key headline

Commodities

• Saudi Aramco posted a net income of $161 billion for FY’2022, its highest net income since listing and up 46% since 2021. The world’s largest energy company unexpectedly increased dividends to $19.5 billion for Q4’22 which was a 4% increase from Q3. It also announced plans to hike spending.

• As the Chinese economy rebounds post its Covid lockdown, Beijing authorities are warning traders to stop hoarding and start selling iron ore, after major price rallies of 50% since October 2022. The Dalian Commodity Exchange imposed a position cap on futures contracts in a bid to curb speculative trading. The government also created a state-owned firm last year, China Mineral Resources Group, which was instructed to purchase imports on behalf of domestic steel mills. The government are also considering a rise in port-storage fees for large cargoes, if the situation doesn’t improve.

• U.S. Jobless Claims came in higher than expected, again surpassing economists’ forecasts and leading gold to rise unexpectedly from a near YTD low. Unemployment claims for the week rose by 21k, giving spot gold a 1.8% boost to $1,831.50 per ounce. Other precious metals such as silver, platinum and palladium all gained.

Equities

• FTX is to sell its stake in Sequoia Capital to Abu Dhabi state-backed investment firm, Al Nawwar Investments RSC LTD, a deal to the value of $45 million that was agreed on Wednesday. Al Nawwar is an existing investor in Sequoia.

• Macquarie Group Ltd backed by Italian state lender CPD, have a made an offer to acquire Telecom Italia, with a bid matching that of KKR’s EUR20 billion for the network, however offering more in cash. Italy’s government retains the right to veto any deals, as it owns almost 10% of the landline network, with the Italian PM Giorgia Meloni noting that Telecom Italia is a strategic asset that must remain under public oversight. The offer expires March 31st and will likely be cross-examined in the upcoming board meeting on March 15th.

• SVB Financial Group had planned to raise $2.25 billion in common, convertible and preferred shares, through a deal due to be managed by Goldman Sachs and inclusive of a commitment by General Atlantic. The plan announced on Wednesday, included the sale of $1.25bn in common stock and $500m in securities, representing convertible preferred shares. General Atlantic committed to purchase $500m of common stock. Of course, this has now been cancelled.

Treasuries & Rates

• With just over a month until the CME begins to phase out its Eurodollar contracts, there has been a surge in derivative activity priced against the Libor replacement, Secured Overnight Financing Rate (SOFR) for the month in February. Inflows were more than 13.4m contracts, exceeding a previous record in Eurodollar contracts of 10.4m in 2016. As the countdown is on until the planned cessation of Libor at the end of Q2’23, SOFR contracts are appealing to traders who want to protect against potential Fed interest rate moves. SOFR is tied to overnight repurchase agreements, which are backed by U.S. Treasuries.

• On Monday 3-month U.S. Libor breached the 5% limit, a first since 2007, as it increased by 2.4bps to 5.008%. Much of the surge has been linked to views of the Fed’s continuing monetary policy tightening plans, as traders expect a high terminal rate for a longer period than previously forecasted.

• Argentina entered into a debt swap to the value of $21.7 billion (64% of its debt), for debt that is due to mature in June 2023, now pushing it out to 2024 and 2025, significantly easing immediate concerns of local debt default. With the majority of upcoming debt maturities being held by the public sector, this also highlights the low participation of private sector bond issuers in the debt markets. Rating agency S&P Global Ratings cut Argentina’s local currency debt rating on Thursday to selective default.

• European junk mutual funds saw inflows of EUR850m in January, almost near a high of EUR870m recorded in June 2021. Junk mutual funds, which had outflows every single month of 2022, had inflows of EUR380m in January.

Currencies

• It was a tumultuous week for the greenback; on Tuesday, ahead of his semi- annual Senate testimony, comments from Fed Chair Jerome Powell, were nothing short of hawkish. In response the Bloomberg Dollar Spot Index rose by 0.6%, EURUSD fell by 0.7%, and AUDUSD dropped by 1.8% to its lowest level since November 2022. On Thursday, U.S. Jobless Claims which came in higher than expected led USD to change course and decline, and this was further supported by the collapse of SVB and subsequent measures announced in response.

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  BOE policy maker Catherine Mann in an interview on Tuesday, stated that the pound could weaken further, depending on how much of the proposed U.S. and EU interest rate rising has already been priced into GBP. She also flagged that she believes there’s “more to go” on GBP weakness, and that would feed through to rising prices and inflation. The Bloomberg British Pound Index, a well-noted marker of the sterling’s strength, has dropped by 20% since the U.K.’s Brexit vote in 2016

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  As close of Asian Trading on Friday, CHF was the best performing G10 currency appreciating 0.67% against USD. CHF is also best performing YTD, whilst NOK remained worst performer of both the week (-2.84% Vs USD) and YTD (-0.59% Vs USD).

• Gaining 0.4% against USD, Swedish Krona was the best performing and most volatile G10 currency for the week and also YTD. Worst performing for the week was AUD, which depreciated by almost 1.25% against the dollar. NOK is the worst performing YTD, down 5.05%.

Key Economics Events