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Take Five: Spring in the step

EconomyApr 01, 2021 06:55AM ET
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© Reuters. A container ship sails at the Suez Canal, in Ismailia


Financial policymakers from around the globe are preparing to convene -- virtually of course -- for the springtime meetings of the International Monetary Fund (IMF) and the World Bank. G20 nations' finance chiefs meet too on April 7.

The IMF will give a snapshot of the economic scars from the pandemic but it will also revise up forecasts for 2021 and 2022 growth.

The meetings will discuss a $650 billion push to boost - and possibly reallocate - the IMF's own currency, Special Drawing Rights, to support beleaguered economies.

The agenda also contains debt relief initiatives and questions on coordinating stimulus. Finally, governments and mulilateral organisations may face pressures to alleviate vaccine inequality between rich and poor countries.

-IMF to boost global outlook again, warns financial conditions uncertain

Graphic: World GDP


Dust is settling after the Archegos Capital meltdown but discussions will continue around leverage, risk-taking and disclosures on Wall Street.

Shares in companies such as ViacomCBS (NASDAQ:VIAC) and Discovery (NASDAQ:DISCA) Inc remain far below recent highs after the New York-based Archegos fund suffered a margin call, forcing banks to liquidate holdings.

Shares in banks exposed to the fund have been hit, in particular Credit Suisse (SIX:CSGN) and Nomura which were slower than rivals in exiting Archegos-linked positions. Shares in the duo are down around 20% since last Friday.

But many lenders acted as brokers for Archegos and there are fears that collective write-downs could exceed $6 billion.

Banks are benefiting from higher bond yields and steeper bond yield curves, but the upcoming results season will shed light on their financial health. Goldman Sachs (NYSE:GS) reports on April 14, Credit Suisse on April 22 and Nomura on April 27.

-Global banks brace for losses from Archegos fallout

Graphic: Archegos wreck ripples through markets


The 400-foot Ever Given container ship, which ran aground in the Suez Canal on March 23, has been dislodged. But a queue of ships -- loaded ones headed for markets as well as empty ones returning to factories -- will take some days to clear.

The overall fallout may last weeks. Containerized goods worth almost $10 billion traverse the Suez daily, so the delays add to pressures on supply chains already strained by roaring demand for electronics, clothing, factory equipment and commodities.

Several global retailers were impacted, as well as auto firms' just-in-time supply chains.

And if bottlenecks build at other ports, cargo rates and container shortages may rise further. The Baltic dry index, which tracks dry goods freight rates is near 18-month highs while supramax freight costs -- vessels around 50,000 deadweight tonnes -- are approaching record highs.

-New Suez crisis adds to pandemic supply worries for European, U.S. retailers

Graphic: Shipping rates

4/PRICE PULSEAfter falling for much of the past decade, factory prices in China are going up, potentially exacerbating global inflationary pressures that have put bond markets on edge.

China is set to release the Producer Price Index for March on April 9. January brought the first annual price gains in a year while February saw the fastest rises since 2018. With manufacturers swamped by orders and facing higher commodity input costs, upward pressures continue to build.

-China's strong factory growth in March bolsters economic recovery-China's Jan-Feb industrial profits surge in boost to economic recovery

Graphic: China's factory gate prices are surging

5/AGMs and ESG

A year of pandemic-linked suffering worldwide has left companies facing extra scrutiny from investors on how closely they adhere to environmental, social and governance (ESG) metrics.

Expect more of this at upcoming annual general meetings. The calendar includes Clariant and Zurich Insurance Group (OTC:ZFSVF) on Wednesday, UBS, Royal Bank of Canada and Nokia (NYSE:NOK) on Thursday, and Rio Tinto (NYSE:RIO) on Friday.

Executives will face investor warnings on executive pay and perks, climate, workers' rights and diversity. BlackRock (NYSE:BLK) for instance has told companies to implement a "no deforestation" policy or face pushback from it at AGMs.

Some efforts are bearing fruit. Mining company Rio Tinto plans to back shareholder resolutions for emissions targets and for tougher measures against lobby groups that do not follow its climate goals.

-Investors warn CEOs on pay and perks ahead of UK AGM season

Graphic: Climate temperature trajectory by sector Climate temperature trajectory by sector

Take Five: Spring in the step

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