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European Gas Prices Jump As US Announces Nord Stream 2 Sanctions

European Gas Prices Jump As US Announces Nord Stream 2 Sanctions

On Tuesday, European natural gas futures jumped after the U.S. imposed new…



This article was originally published by Zero Hedge

European Gas Prices Jump As US Announces Nord Stream 2 Sanctions

On Tuesday, European natural gas futures jumped after the U.S. imposed new sanctions on the highly contested Nord Stream 2 pipeline. 

U.S. Secretary of State Antony Blinken issued a statement on Monday describing the new round of sanctions targeting a vessel and a “Russian-linked entity” called Transadria Ltd. associated with the pipeline’s construction that allows natural gas flows from Russia directly to Germany. 

Blinken said a report had been sent to Congress and the sanctions support Protecting Europe’s Energy Security Act of 2019. There’s been a lot of concern over Moscow’s ability to leverage natural gas supplies over Europe. 

“Today’s report is in line with the United States’ continuing opposition to the Nord Stream 2 pipeline and the U.S. Government’s continued compliance with PEESA,” Blinken said in his statement. “With today’s action, the Administration has now sanctioned 8 persons and identified 17 of their vessels as blocked property pursuant to PEESA in connection with Nord Stream 2.”

“Even as the Administration continues to oppose the Nord Stream 2 pipeline, including via our sanctions, we continue to work with Germany and other allies and partners to reduce the risks posed by the pipeline to Ukraine and frontline NATO and E.U. countries and to push back against harmful Russian activities, including in the energy sphere,” Blinken said.

Any action against the Nord Stream 2 has stoked higher natural gas prices in Europe. After the U.S. announced sanctions, the Dutch month-ahead gas, the European benchmark, increased as much as 8.7% to 91.34 euros a megawatt-hour. 

Kremlin spokesperson Dmitry Peskov said the move by the U.S. to sanction a ship involved in the pipeline construction is “illegal and wrong.” He said, “We view this extremely negatively.” 

Nord Stream 2 is one of several undersea pipelines that Russia has laid in the Black Sea and Baltic Sea to replace old pipelines that run through eastern Europe. The move to reshuffle supplies could allow Moscow to target eastern Europe and western Europe energy flows. 

Natural gas flows on the controversial pipeline have yet to begin and suffered a significant setback last week after the German energy regulator suspended the certification process. Even though the lines are filled with natural gas, the latest hurdles could suggest gas will not be flowing during the Northern Hemisphere winter amid Europe’s lowest gas storage levels since 2013. 

Europe is hungry for more gas. If E.U. politicians want to remain in power by not upsetting their constituents over soaring energy inflation, they might have to rely on Moscow, a move that would infuriate Washington. 

Tyler Durden
Tue, 11/23/2021 – 09:02

Author: Tyler Durden


Stocks Soar After Gartman Says “A Bear Market Is Required” And “Stocks Are Headed Lower”

Stocks Soar After Gartman Says "A Bear Market Is Required" And "Stocks Are Headed Lower"

To those who listened to Goldman trader Scott Rubner…

Stocks Soar After Gartman Says “A Bear Market Is Required” And “Stocks Are Headed Lower”

To those who listened to Goldman trader Scott Rubner who in a note last night said “We Have Seen The Lows For The Year“, and bought the latest dip, congratulations. To those who are still not convinced, and believe that the slide has more to go, we present what may be the most irrefutable exhibit that the massively oversold market has nowhere to go but up: speaking to Bloomberg radio this morning, Dennis Gartman, who is no longer known as the author of the Gartman letter (since that was halted several years ago and is now being only sent out to “friends and family” for obvious reasons), but is instead the University of Akron Endowment Chairman, and who said that “A bear market is required at this point.”

“We had an expansion for a long period of time and I think over the course of next year, he or she who loses the least amount of money will be the winner.”

That he or she probably will excludes those who listen to Dennis, because if just going by this example, stocks have exploded since Gartman’s latest “forecast.”

For those who are worried they missed the Gartman dip, fear not: in the wide-ranging interview about stock market volatility and “over-valued” equities, Wall Street’s favorite contrarian indicator (at least until Ray Dalio’s “cash is trash” prediction became the surest indicator of an imminent market crash) predicted that prices should go lower within the next year and the 10-year Treasury yield will rise to 2-3% over the next several years.

“The Fed clearly will be tightening monetary policy rather than being as expansionary as it has been, and stock prices are probably headed — the best that one can say is, ‘Get the trend right’ and I think that the trend is now to the down, not the upside.”

And there goes your bearish case.

But it gets better: asked where investors should seek refuge to cope with a less accommodative central bank, Gartman recommended high-dividend stocks and to “avoid the high-tech stuff Cathie Wood et al. have been exposed to.”

“They’re having a rather difficult time and I think they’re going to have an even more difficult time over the course of the next several months,” he said.

Coming from Dennis, this may be the clearest indication that the bottom in ARKK is now in.

Tyler Durden
Mon, 12/06/2021 – 15:16

Author: Tyler Durden

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At the New York Fed: Implications of Federal Reserve Actions in Response to the COVID-19 Pandemic

On September 30 and October 1, 2021, the New York Fed held a virtual conference on the implications of the Fed’s actions in response to the COVID-19…

On September 30 and October 1, 2021, the New York Fed held a virtual conference on the implications of the Fed’s actions in response to the COVID-19 pandemic. New York Fed President John Williams gave the opening and concluding remarks.

Market Impact

The first session was moderated by Susan McLaughlin from the New York Fed’s Markets Group and focused on the market impact of the Fed’s response to the pandemic. Andy Haughwout, David Arseneau, and Or Shachar – all economists in the Federal Reserve System — presented research on the design and impact of the Fed’s interventions. Andy discussed a paper on the role of the Municipal Liquidity Facility, co-authored with Ben Hyman and Or Shachar, David presented work on the Main Street Lending Program, co-authored with Jose Fillat, Molly Mahar, Don Morgan, and Skander Van den Heuvel, while Or focused on the Primary and Secondary Corporate Credit Facilities, based on a paper co-authored with Nina Boyarchenko, Caren Cox, Richard Crump, Andrew Danzig, Anna Kovner, and Patrick Steiner. The New York Fed also released a series of Staff Reports dedicated to the facilities set up in response to the pandemic.

Watch the related conference video.

Financial Fragilities

The second session was on “Financial Ecosystem Fragilities Revealed by the Pandemic” and moderated by Beverly Hirtle, director of research at the New York Fed. First, Marcin Kacperczyk, from Imperial College London, talked about the consequences of global flows for financial stability. He also described research showing the benefits of swing pricing for open-ended mutual funds. Next, Arvind Krishnamurthy, from Stanford Graduate School of Business, discussed the fragility of bond markets and the implications for policy. Adair Morse, deputy assistant secretary for capital access at the Department of the Treasury, followed with an overview of small business finance and challenges to small firms during the pandemic. Finally, Stefan Nagel, from the University of Chicago Booth School of Business, discussed the dislocations that occurred in the Treasury market in March 2020.

Macroeconomic Impact

The third session, moderated by Andreas Lehnert, director of the Division of Financial Stability at the Federal Reserve Board, was on the topic of the macroeconomic impact of the interventions initiated in response to the pandemic. Markus Brunnermeier, from Princeton University, gave an overview of the financial dominance theory of monetary policy. Kinda Hachem, from the University of Virginia Darden School of Business, discussed differential trends in bank balance sheets across different bank sizes over the pandemic. Ricardo Reis from the London School of Economics, followed with a discussion of the role of central bank swap lines and the FIMA repo facility in helping to support the U.S. dollar as a global currency.

Lessons Learned

Lorie Logan, manager of the System Open Market Account (SOMA), moderated the fourth session on lessons for the future. Isabel Schnabel, executive board member of the European Central Bank, talked about the challenges faced by central banks in responding to events such as a pandemic. Hyun Song Shin, from the Bank for International Settlements, discussed the role of leverage in understanding threats to financial stability. Viral Acharya, from the New York University Stern School of Business, mentioned some steps that central banks could take to limit the risk posed by extreme events (for example, by limiting leverage in the financial system and addressing the proliferation of demandable claims). Finally, Thomas Philippon, from New York University’s Stern School of Business, provided some lessons from the global financial crisis and the pandemic, including the importance of debt guarantees, how best to restructure segments of the economy most affected by a shock, and the benefits of decentralizing shutdown decisions.

Nina Boyarchenko is a research officer in the Federal Reserve Bank of New York’s Research and Statistics Group.

Anna Kovner is the policy leader for financial stability in the Bank’s Research and Statistics Group.

Antoine Martin is a senior vice president in the Bank’s Research and Statistics Group.

How to cite this post:
Nina Boyarchenko, Anna Kovner, and Antoine Martin, “At the New York Fed: Implications of Federal Reserve Actions in Response to the COVID-19 Pandemic,” Federal Reserve Bank of New York Liberty Street Economics, October 15, 2021,

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Author: peterstevens

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An Update on the U.S.–China Phase One Trade Deal

A Liberty Street Economics post from last summer by Matthew Higgins and Thomas Klitgaard contained an assessment of the Phase One trade agreement between…

A Liberty Street Economics post from last summer by Matthew Higgins and Thomas Klitgaard contained an assessment of the Phase One trade agreement between the United States and China. The authors of that note found that, depending on how successfully the deal was implemented, the impact on U.S. economic growth could have been substantially larger than originally foreseen by many of its critics, as a result of the fact that the pandemic had depressed the U.S. economy far below its potential growth path. Here we take another look at these considerations with the benefit of an additional year’s worth of trade data and a much different economic environment in the United States.

Is China Meeting Its Phase One Trade Commitments?

The Phase One trade agreement that was signed in January 2020 included specific targets for Chinese purchases of agriculture, manufactured goods, energy, and service exports from the United States (these were laid out in Chapter 6 and Annex 6.1 of the agreement). These commitments were extremely ambitious: The agreement specified numerical targets for increases in U.S. goods and services exports to China, relative to a 2017 baseline, of $77 billion in 2020 and $123 billion in 2021. The 2021 target was 82 percent greater than the baseline level in 2017, and about double the level of 2019, just prior to the signing of the agreement.

The U.S.’s exports of goods to China fell precipitously over the course of the trade conflict, ultimately contracting by 35 percent as of February of last year, but since then have shown a strong recovery. From that low point, exports to China had grown by nearly 70 percent as of June. So, is China meeting its purchase targets? As suggested in the table below, the short answer is “no.”

Merchandise Trade Has Substantially Missed Targets That Were Set Under the Phase One Trade Deal

U.S. exports to China
(Billions of U.S. dollars) Target Target
2017 (Baseline) 2018 2019 2020 (Actual) 2021
(12m rolling sum as of July)
2020 2021
Total goods targeted 95 85 78 93 114 159 193
  Manufactures 67 67 60 56 65 99 111
  Agricultural 21 10 15 27 36 33 40
  Energy 8 8 4 10 14 26 42
Total goods not targeted* 35 35 29 31 35 33 33
Services** 55 57 57 40 36 68 80
Total goods and services 185 177 163 165 184 260 306
Source: U.S. Census Bureau
* “Not targeted” 2020 and 2021 projections assume constant 2017-2019 average level.
**Services column for 2021 shows seasonally adjusted data for Q1 and Q2 at an annual rate.

Even so, some of the details show more positive developments. The category closest to meeting the targets is agriculture, in which exports to China are booming and have well surpassed 2017 levels and approximately doubled from 2019. In this area China fell within 80 percent of the 2020 target and appears on track to perform similarly this year. These exports have benefited from higher agriculture prices as well as strong demand for feed from China’s livestock industry, which is recovering from a devastating swine flu epidemic in 2019.

Progress under manufactured goods, energy, and services has been modest at best, however. Manufactured goods exports to China remain below 2017 levels and currently are running at somewhat over half of the 2021 target. (The figures in the table include certain aircraft products that were not included in the post from last year). Energy exports have nearly doubled from their 2017 level, helped by sharply higher prices, but ended 2020 about 60 percent below target and are currently about two-thirds below the 2021 target. Finally, service exports have simply collapsed, with the most recent data in the first half of 2021 (at an annual rate) one-third below the 2017 level and less than one-half of the 2021 target.

The chart below put these figures into a longer time perspective. The left panel shows that U.S. exports to China of manufactured and energy goods are little changed from historical levels: the rebound that began last year has basically been making up ground that was lost during the trade conflict. By contrast, agricultural goods have rebounded to well-above historical norms. At this point it remains too early to know whether these gains will be sustained, however. The right panel of the chart compares total goods exports to China that are targeted in the Phase One agreement with the same set of goods to the rest of the world except for China (which are not subject to any targets). The goods to China experienced a significant decline during the trade conflict that was not mirrored in the rest of the world data. Now, both sets of data have recovered strongly, with China’s growth faster thanks to strong agriculture exports, but the level of U.S. exports for both sets of data remain below the pre-trade conflict trend lines.

U.S. Exports of Specified Goods Have Increased, But Are Well Below Target

Source: U.S/ Census Bureau.

What Has Been the Impact on the U.S. Merchandise Trade Balance?

A broad goal of the Phase One agreement was to reduce the U.S. merchandise trade deficit. As many analysts had foreseen, imposition of tariffs against China and other countries, as well as the purchase commitments in the Phase One deal, had little durable effect on the U.S.’s trade deficit. As shown in the red line in the chart below, the U.S.’s trade deficit with the world increased notwithstanding the many tariffs that were imposed on China and other countries. Even with China itself, the impact on the trade balance was not large. As shown in the dotted blue line in the chart below, the reported deficit with China did shrink somewhat. But that decline was exaggerated as a result of underreporting of U.S. import data to avoid import tariffs (perhaps as much as $55 billion). After making an adjustment for this underreporting of imports, the decrease in the trade deficit was quite small, and it had already surpassed 2018 levels by this June.

The U.S. Trade Deficit Increased During Trade Conflict

Sources: Authors’ calculations, China Customs, U.S. Customs.

Reconsidering the Phase One Deal in Light of the U.S. Recovery 

So, with this data as background, what should we make of the Phase One deal? The authors of last summer’s blog argued that, because the United States was operating so far below its growth potential as a result of the pandemic, an exogenous increase in demand from China would likely have a larger impact than most economists had expected when the agreement was signed.

How do these arguments hold up now? The authors of the previous post discussed the issues of trade creation versus trade diversion and commodity market feedbacks: There would be no effect on U.S. growth if the “extra” exports to China were simply offset by decreased exports to other countries or by lower sales into the U.S. market, which could induce increased imports from other countries. The benefit to U.S. commodity producers would also be dampened if Chinese demand of U.S. energy products induced increases in supply from other producers, which would lower prices.

Thus far such factors do not appear evident in the data. Although it is true that exports to China have grown faster than to the rest of the world, most U.S. trade partners have been slow to recover from the pandemic, and this is probably the main reason exports of covered goods have been rather more subdued than to China. Moreover, commodity prices have risen substantially to the benefit of U.S. commodity exporters. Finally, increases in exports to China probably have been too small thus far to induce trade diversion or commodity supply effects. In fact, agriculture exports to China of major producers in Latin America are doing well, albeit not growing as strongly as the United States.

However, U.S. economic conditions have changed quite dramatically over the past year in ways that suggest that the growth multiplier from increased Chinese demand may be much lower than what the previous Liberty Street post proposed. The “multiplier” refers to the extra amount that GDP may increase in response to an initial increase in demand, incorporating secondary responses on both the demand- and supply-sides of the economy. Both theory and empirical evidence indicate that multipliers can be considerably greater than one during recessions (around 1.5 to 2.0) than during expansions (less than 0.5). For a point of reference, the incremental demand implied by China’s 2021 goods and service purchase commitments totaled 0.6 percent of  U.S. GDP. 

During the depths of the pandemic there were strong reasons to believe that this multiplier would be considerably higher than one. However, the economic picture is much different now. GDP growth is strong, inflation is rising, and employment is recovering, all boosted by expansionary fiscal and monetary policies. Moreover, financial markets and professional forecasters are already debating the timing and extent of an eventual shift to less accommodative economic policies. Against such a backdrop, it no longer seems likely that China’s purchase commitments—even if they were met—would have a GDP multiplier greater than one (and probably considerably less).

So, if the economic impact of the purchase commitments is not likely to be large, is the Phase One agreement unimportant? We argue that it would be a mistake to simply dismiss the agreement.

The Phase One agreement covered a range of substantive issues in Chapters 1 through 5 that deserve more attention than the purchase targets in Chapter 6. These included enhanced protections for intellectual property and technology transfer; removal of non-tariff barriers and other unfair trade practices in agriculture and financial services; and greater flexibility and transparency in China’s exchange rate regime, all with the intent to level the playing field between China and its trading partners. The set of concerns reflected in these chapters are particularly salient given the large and arguably growing role of the Chinese government in ownership and control of the country’s economy and financial system (for example, as outlined in the most recent 14th Five-Year Plan). Against this backdrop the U.S. economy could experience considerable long-term benefits from close enforcement of commitments under the first five chapters of the agreement.

Hunter L. Clark is an assistant vice president in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this post:
Hunter L. Clark, “An Update on the U.S. – China Phase One Trade Deal,” Federal Reserve Bank of New York Liberty Street Economics, October 6, 2021,

The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Author: trevordelaney

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