• China’s fourth-largest developer by sales is approaching a possible default
• the sector’s liquidity crisis shows no sign of easing despite government vows of suppor
• Some of Country Garden Holdings Co.’s dollar bonds were poised for their biggest drops in two months.
• Sunac China Holdings Ltd.’s grace period to make a dollar-bond interest payment ends Wednesday,
• Failure to do so could trigger cross-default on other offshore debt, the bond’s prospectus shows.

BlackRock is the world’s largest asset manager, has circa US$10 tn in assets under management.

In a report issued Monday it (in brief) it highlighted two key concerns it has over China:

• Said risks are rising for China over its ties to Russia during the Ukraine war
• COVID-19 related lockdowns further threaten to slow economic activity in China

Thus Blackrock cut its view on Chinese equities to neutral, from previously overweight.

Weekly candles for the Shanghai Composite. Far be it from me to question the undoubtedly smart peeps at BlackRock … but still ….

The report is here:

Financial Stability Report

As you’d expect, its a chunky document (researchers and analysts at the Fed gotta research and analyse, right?). From the ‘overview’ a bit of a summary:

• Since the November 2021 Financial Stability Report, uncertainty about the economic outlook has increased. The Russian invasion of Ukraine has caused tremendous human and economic hardship, and the implications for the U.S. and global economies are highly uncertain. In the near term, the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity. After deteriorating early in the period because of the emergence and spread of the highly contagious Omicron variant, the pandemic outlook has improved but remains uncertain. Finally, inflation has been higher and more persistent than expected, even before the invasion of Ukraine, and uncertainty over the inflation outlook poses risks to financial conditions and economic activity.

News wires have various headline items, this is a good one and nails current concerns:

• Fed warns of ‘negative feedback loop’ as market liquidity deteriorates

The first official estimate of Q1 US GDP was -0.4% and now second quarter forecasts are falling.

It’s still very early but the latest forecast from the Atlanta Fed model is +1.8%, down from +2.2% on May 4 (both annualized q/q).

• EU’s new round of sanctions include oil ban but still missing agreement on investment in oil infrastructure, sale of property to Russians in Cyprus
• Considers more funds for oil infrastructure in eastern Europe in bid to get a deal

The bottom line here is that a deal is getting closer. That said, Russia’s real problem is transport. There are buyers for its oil all over the world and if they can get more tankers in ports, then they can continue to export.

Headlines via Reuters:

• one member said markets may turn risk aversive if rising inflation triggers withdrawal of monetary easing by central banks
• members agreed japan’s economy likely to recover on rising external demand, accomodative monetary policy
• a few members said spring wage negotiations showed some bright signs such as big firms’ wage hikes
• several members said that the chance of the recent import price rises leading to a sustained increase in consumer  inflation  is low

As posted earlier, the minutes are preceded well in advance by the ‘Summary’, link here:

• BOJ Summary of Opinions at the Monetary Policy Meeting on March 17 and 18, 2022

Full text of the minutes:

Minutes of the Monetary Policy Meeting on March 17 and 18

USD/JPY is sedate:

New package of sanctions targeting 1.7 bn pounds ($2.10 billion) of trade.

• Import tariffs on a range of products will be raised by 35%
• UK will also ban exports of goods such as chemicals, plastics, rubber and machinery to Russia, worth a combined 250 mn pounds

Info via Reuters.

Somewhat related, there are unconfirmed reports of general mobilization notices in Russia

Saudi Arabia lowered the price of its Arab Light crude grade to Asia and Europe for the month of June

• Oil producer Saudi Aramco released the new pricing on Sunday.
• price of the Arab Light benchmark sold in the US in June unchanged from the previous month
• Arab Light sold in June in the Far East priced $4.40 per barrel above the average of the Oman and Dubai benchmarks, compared to a price differential of +$9.35 in May (Asia pricing hit an all time high for May)
• For buyers in northwest Europe, the Arab Light price differential versus the ICE Brent was +$2.10 per barrel in June compared to +$4.60 in May

Info via Arab News