This is the year that Russia defaulted on ruble-denominated bonds, triggering the “Moscow recession” that infected markets around the world.
The move caused chaos in Russia, soaring inflation, causing economic contraction and triggering bank failures. Emerging markets took a beating and US investors panicked, especially when news of the impending collapse of hedge fund Long-Term Capital Management came in September.
This time has been different. Global markets barely reacted on Monday. Why here?
1. We saw it coming. The news that foreign investors had not been paid nearly $100 million in interest on Russian government bonds was no shock. In fact, it was widely speculated after Russia froze half of its foreign reserves and the US Treasury ended a carve out of sanctions that allowed US bondholders to be repaid by Moscow.
The European Union also made it harder to meet its debt obligations earlier this month by approving Russia’s National Settlement Depository, the country’s agent for its foreign currency bonds.
“Russia probably went into default in March and April,” Timothy Ashe, emerging market strategist at Bluebay Asset Management, told me.
2. Investors are more insulated. Foreign investors have dramatically reduced their investments in Russia since 1998. The process has accelerated in the wake of sanctions related to Russia’s annexation of Crimea.
“Geopolitical risks around Russia have been building since 2014,” Aish said.
Global emerging markets have also grown dramatically over the past two decades, and Russia’s relative weight has declined. This eases fears about the country’s transition from an economic downturn, although it is always a risk.
3. The upheaval is showing in other ways. Global markets cannot move by default. But they have responded to the war in Ukraine, which has driven up food and fuel prices and fed high inflation for decades.
This has forced central banks to withdraw support for the economy more aggressively, sparking anger on Wall Street. Traders are now obsessed with how quickly counterparts such as the Federal Reserve and European Central Bank will be forced to hike interest rates.
Robinhood shares swing on talk of FTX acquisition
Robinhood shares have tumbled this year. This is creating chatter that eager buyers may turn to, sensing an opportunity to cut a deal.
But FTX CEO Sam Bankman-Fried later pushed back on the report.
Robinhood shares are down 4% in premarket trading on Tuesday.
My bubble of thought: Maybe that’s not the end of the story. Bloomberg reported that FTX is considering internally whether and how to make an offer to Robinhood, but has not made an official approach.
What is FTX? The exchange is privately held, which shields it from some of the market chaos that has gripped the rest of the industry recently. It raised fresh funding earlier this year, valuing the company at $32 billion. Robinhood is now worth less than $8 billion.
4th of July Cookout Will Cost $10 More This Year
It will be more expensive to get cheeseburgers, potato salad and ice cream on picnic tables for Independence Day next week as food prices continue to rise.
According to a new survey by the American Farm Bureau Federation, the average cost of a summer cookout for 10 people is now $69.68, up about 17%, or $10, from last year.
Rise in prices: supply chain problems linked to the pandemic, the war in Ukraine, and a massive spike in inflation.
The biggest contributor to the rise in ground beef prices is The survey found that two pounds of ground beef now cost $11.12, up 36 percent from last year. Two and a half pounds of homemade potato salad is up 19%, while hamburger buns are 16% more expensive.
Strawberries are one of a handful of items to drop in prices. The Farm Bureau attributed this trend to “better weather conditions in some fruit-growing areas”.
The takeaway: The high price of gasoline and rising food costs are the major ways that Americans are experiencing inflation, sabotaging their confidence in the economy. This is starting to affect demand as buyers pull back, although it is still strong.
Still, investors, economists and policy makers are concerned. As the effect of higher prices increases, is a major decline in spending inevitable?
US consumer confidence data for June arrives at 10 a.m. ET.