Positive Vibes from DC, Negative Vibes in Pristina and US Egg Smugglers.
Daily SITREP for Thursday, February 2, 2023
The readout after Wednesday’s meeting between Joe Biden and Kevin McCarthy was positive, giving some hope for smoother-than-anticipated negotiations around the debt ceiling. The Fed continued to raise rates but less quickly, which markets took as a sign that the worst was over. However, Mardi Gras is still three weeks away - and landing the US economy even farther off - so shouts of ‘laissez les bons temps rouler’ from Wall Street are premature. Finally, Kosovo is one of many seemingly small disputes that can cause oversized headaches and is therefore worth keeping an eye on.
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The US Deficit Fight: Round 1 Update
Yesterday’s meeting between President Biden and Speaker McCarthy ended with a positive briefing to reporters from McCarthy.
There’s still a long way to go before this issue is settled but McCarthy’s positive outlook at this early stage, instead of the intransigence that many feared, sets a positive tone and will ease fears of America stumbling into default.
Deal or No-Deal in Kosovo
A peace deal has been proposed to end increasing tension between ethnic Serbs in the north and the government in Pristina has the backing of the US and EU, offering a resolution to the ongoing tension. However, Kosovo’s senior court believes that the deal, which would create a semi-autonomous Serbian municipal area, contravenes Kosovo’s constitution.
That could be solved via a constitutional amendment, but the bigger fear, particularly held by Prime Minister Kurti, is that this creates a de facto partition of the country and that any Serbian municipality would eventually be absorbed into the Serbian state. Meanwhile, Serbia still doesn’t recognize Kosovo's independence.
In itself, Kosovo may seem like something of only local relevance, but it’s another headache on Europe’s borders for Brussels to deal with and a reminder that even after more than 30 years after the bloody breakup of Yugoslavia, there are still issues to resolve. See Reuters for more.
On to the numbers
Relative Values (90-Days)
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Potentially impacting: Fuel prices | Gound shipping costs. | Plastic prices | Changes to fuel subsidies (potentially leading to unrest) | Cost of living (especially transport and heating) | Changes to traffic volume/transportation choices | Demand for automotive products | Theft and smuggling.
Brent Crude is low for this 90-day interval. Prices ended relatively flat over the last 21 days after slight fluctuation.
Iron and Steel
Potentially impacting: Cost of construction projects | Construction project timelines | Cost/availability of raw materials | Infrastructure project timelines/costs | Cost and availability of finished metal goods | Value of scrap | Value of 2nd hand equipment/vehicles.
Iron and Steel is very high for this 90-day interval. Prices increased moderately over the last 21 days after slight fluctuation but continue to creep up.
Market Volatility (VIX-US)
Potentially impacting: Availability of capital for investment | Interest rates| Share prices | Consumer confidence | House prices/rent | Financial certainty/uncertainty | Financial models | Stock-based compensation values.
Market Volatility (VIX) is very low for this 90-day interval. The index decreased moderately over the last 21 days after moderate fluctuation.
Potentially impacting: Bread, pasta, couscous & noodle prices | Changes to food subsidies (potentially leading to unrest) | Cost of living | Movement from low-income to food insecure to undernourished | Increased theft or graft in loosely governed areas | Demand on charities.
Wheat is very high for this 90-day interval. Prices increased moderately over the last 21 days with little fluctuation.
Ocean Freight (FBX)
Potentially impacting: Supply chain costs (direct and indirect) | Supply chain delays | Port capacity/throughput speed | Customs clearance | Availability of goods and materials | Consumer demand/hoarding.
Shipping (FBX) remains very low for this 90-day interval. Prices decreased sharply over the last 21 days after significant fluctuation and a sharp drop at the beginning of the week.
February 5: Cyprus, President
February 5: Monaco, Parliament
February 5: Ecuador, Referendum
February 25: Nigeria, President, House of Representatives and Senate
Turkey’s elections have been brought forward to May 14.
A new wave of smugglers is swarming the US southern border. Except, unlike the more serious issues CBP is dealing with, this time it's Americans trying to buy cheaper eggs. See Reuters for more.
"All units, be on the lookout..." Photo The Yards At Fieldside Village