Brazil’s Lula Canceled Trip to China After Receiving Treatment for Influenza

GOP lawmaker tells USTR Tai she is ‘too nice’ for job as trade chief

Brazil President Lula canceled his trip to China on Saturday as he receives treatment for influenza, potentially setting back his plan to strengthen relations with Brazil’s largest trading partner. The prospect of forging closer ties between Lula and President Xi Jinping was expected to help boost shipments of soybeans, beef and other commodities.

First Citizens agreed last night to buy most of Silicon Valley Bank at a discount. First Citizens will now be one of America’s 25 biggest banks. The North Carolina-based lender was ranked 30th at the end of 2022, leading to questions about whether it could digest Silicon Valley Bank. But First Citizens is a specialist in buying broken rivals, acquiring over 20 firms since 2009, including the lender CIT last year.

On Tuesday, top officials from the Fed, Treasury and the F.D.I.C., including its chairman, Martin Gruenberg, will face questioning at a Senate Banking Committee hearing on the turmoil in the banking sector and the regulatory response to it. On Wednesday, the House Financial Services Committee will interrogate the same officials on what led to the demise of Silicon Valley Bank and Signature Bank.

Russian President Vladimir Putin said Moscow will transfer nuclear weapons to Belarus. Short-range missiles capable of carrying nuclear warheads have already been moved and Belarusian troops will be trained in how to operate nuclear weapons this week, he added. The move would mark the first nuclear weapons on Belarusian territory since the fall of the Soviet Union. Putin claimed the transfer was in response to Britain supplying Ukraine with depleted-uranium munitions, although the International Atomic Energy Agency says depleted uranium is suitable for military uses.

China received some glowing comments from the IMF… see China section for details.

Saudi Aramco bought a 10 percent stake in a Chinese oil complex, a day after signing a $12.2 billion deal to build an oil refinery and petrochemical plant in northeastern China. More in Markets section.

Is USTR Katherine Tai “too nice” to be the trade chief? That was a point made by a GOP lawmaker during a Friday hearing. See Trade Policy section for more.

Netanyahu fires defense minister. Israeli Prime Minister Benjamin Netanyahu fired his defense minister, Yoav Gallant, a day after Gallant spoke out against the proposed reform to Israel’s judiciary, which he said threatened to undermine Israel’s national security. The firing prompted mass protests in Tel Aviv, and a call from Israeli president Isaac Herzog for an immediate halt to the reform.

President Biden declared a federal emergency for large parts of Mississippi on Sunday, two days after it was hit by a devastating tornado. At least 26 people have been killed and dozens more injured; that is the biggest death toll from a tornado in the state in more than five decades. Rescue workers are still searching for survivors.

Equities today: Global stock markets were mostly higher overnight. U.S. stock indexes are pointed toward higher openings. In Asia, Japan +0.3%. Hong Kong -1.8%. China -0.4%. India +0.2%. In Europe, at midday, London +1%. Paris +1.2%. Frankfurt +1.5%.

U.S. equities Friday: The Dow added 132.28 points, 0.4%, to end at 32,237.53. The Nasdaq rose 36.56 points, 0.3%, to 11,823.96. The S&P 500 gained 22.27 points, 0.6%, to close at 3,970.99.

All three major indexes ended the week in the green, with the Nasdaq up the most at 1.7% for the week. The S&P 500 gained 1.4% and the Dow rose 1.2%. The 10-year Treasury yield fell to 3.379%, declining for three consecutive weeks.

Agriculture markets Friday:

• Corn: May corn settled 11 1/4 cents higher at $6.43, marking an 8 3/4 cent gain on the week.
• Soy complex: May soybeans rose 8 3/4 cents to $14.28 1/4 but is down 47 cents on the week. May meal rose $6.80 to $445.10, but down $20.90 on the week, while may soyoil rose 110 points to 53.27 cents, losing 419 points on the week.
• Wheat: May SRW wheat futures rose 26 1/2 cents to $6.88 1/2, nearer the session high and on the week falling 22 cents. May HRW wheat gained 28 1/4 cents at $8.48, nearer the session high and for the week rising 12 1/4 cents. May spring wheat futures rose 16 1/4 cents to $8.57 1/2.
• Cotton: May cotton fell 104 points to 76.54 cents, losing 121 points on the week.
• Cattle: April live cattle futures surged 85 cents to $163.00 at Friday’s close, thereby marking a weekly advance of 67.5 cents. Meanwhile, April feeder futures slid 20 cents to $194.80 at Friday’s settlement; that represented a 15-cent weekly rise. Cash cattle rebounded during the week, with the Monday-Thursday average for the five-market area rising to $164.39, up 28 cents from the week-prior level.
• Hogs: April lean hog futures rose $1.425 to $77.175 and nearer the daily high. For the week, however, April futures lost $2.70.
  

Ag markets today: Soybeans mildly built on Friday’s corrective gains during overnight trade while the corn and wheat markets pulled back. As of 7:30 a.m. ET, corn futures were trading fractionally to 4 cents lower, soybeans were 3 to 4 cents higher, SRW wheat futures were 5 to 6 cents lower, HRW wheat was 2 to 5 cents lower and HRS wheat was 1 to 2 cents lower. Front-month crude oil futures were around 75 cents higher, and the U.S. dollar index was modestly weaker.

Technical viewpoints from Jim Wyckoff:

On tap today:

• Dallas Fed’s manufacturing survey for March is out at 10:30 a.m. ET.
• USDA Grain Export Inspections report, 10:30 a.m. ET.
• Bank of England Gov. Andrew Bailey speaks at the London School of Economics at 1 p.m. ET (livestream).
• Federal Reserve governor Philip Jefferson speaks on monetary policy at 5 p.m. ET.

Minneapolis Fed President Neel Kashkari said recent bank turmoil has increased the risk of a U.S. recession. “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. Would that slow down the economy? This is something that we’re monitoring very, very closely,” Kashkari, a voter on monetary policy this year, said in an interview on CBS’s Face the Nation. Before this month’s bank collapses and market turmoil, Kashkari had said the Fed should lift rates to about 5.4% — from a target range of 4.75% to 5% currently — and then hold them there until inflation cooled.

Banking turmoil and recession risks have kept the global IPO market mired in a slump. Companies have raised just $19.7 billion via initial public offerings this year, according to data compiled by Bloomberg. That’s down 70% year-on-year and the lowest comparable amount since 2019. The steepest fall is in the U.S., where only $3.2 billion has been raised.

Market perspectives:

• Outside markets: The U.S. dollar index was weaker, with several currencies firmer against the greenback. The yield on the 10-year U.S. Treasury note was higher, trading around 3.47%. Crude oil futures were higher U.S. crude was around $70.20 per barrel while Brent was around $75.50 per barrel. Gold and sliver are seeing losses, with gold around $1,955 per troy ounce and silver around $23.20 per troy ounce.

• Saudi Aramco announced Monday it would take a 10% stake in Rongsheng Petrochemical Co., a giant oil complex, for roughly $3.6 billion. The deal significantly increases its refining presence in China, but also ties it more closely to a key demand market, ensuring it will supply 480,000 barrels a day to Rongsheng’s refinery in the eastern province of Zhejiang. A day earlier, Aramco signed a landmark deal with Chinese partners to build a huge refining and petrochemical complex in the world’s biggest oil importer, completing a deal suspended during the pandemic.

• Retailers reaping big savings on ocean transport costs. Retailers are gaining huge savings on ocean container transport as once sky-high shipping prices tumble toward prepandemic levels and companies delay signing annual contracts so they can bargain rates down even further, the Wall Street Journal reports (link). Ocean carriers are struggling to fill space on ships after a steep drop-off in cargo that began in the fall and that has continued into 2023. Spot market rates have crashed more than 90% from pandemic-era highs as shipping demand has declined.

• Biden urged to speed up West Coast port labor talks. A group of more than two hundred importers, exporters, logistics providers, and retailers urged the White House to intervene in West Coast port labor talks that have been underway since last May. In a letter Friday (link) to Biden, groups including the National Retail Federation, the American Trucking Associations, and the U.S. Chamber of Commerce, urged the administration to help speed the agreement on a new labor contract between the International Longshore and Warehouse Union and the Pacific Maritime Association. The group asked the White House to appoint a new point person on the talks now that Labor Secretary Marty Walsh has left his post, and to offer mediation services to the ILWU and PMA given the lack of progress to date. The request came as cargo volumes have dropped off at West Coast ports since the pandemic’s record highs, in part because retailers and importers have sought to avoid potential disruption and delays because of the labor negotiations.

• Traders have been betting on corn ahead USDA’s Prospective Plantings report due on Friday. Bloomberg notes the closely tracked ratio between December corn and November soybean futures has been favoring corn plantings since earlier this month, meaning its comparatively stronger performance will push more farmers to plant the grain at the expense of the beans. That’s as top producer Brazil is harvesting a record soy crop while corn supplies in No. 1 grower the US were depleted by drought last year.

• NWS weather outlook: Heavy rain with the potential for flash flooding and severe weather continues in the Southeast... ...Series of frontal systems increase precipitation chances for the Northeast Monday... ...Chilly temperatures and the chance for snow across portions of the Plains and Great Lakes... ...Powerful storm system to bring yet another round of heavy snow/rainfall to California...

Items in Pro Farmer’s First Thing Today include:

• Soybeans firmer, corn and wheat weaker overnight.
• Some beneficial precip in the Plains
• China sells most of the wheat put up for auction.
• Wholesale beef still sputtering
• Slide in cash hog index continues

— Russia assumes the presidency of the U.N. Security Council this week. On Saturday, April 1, Russia assumes the presidency of the United Nations Security Council for a one-month term. The last time Russia held the rotating Security Council presidency was February 2022 — the same month it launched its invasion of Ukraine. According to the U.N., the primary responsibility of the Security Council is the “maintenance of international peace and security.”

— Ukraine says the frontlines around Bakhmut are stabilizing. Russian forces have moved to encircle the embattled city in recent weeks while also intensifying attacks across eastern Ukraine, putting Kyiv on the defensive. Yet, Western officials and analysts say Russia’s Bakhmut offensive is losing momentum. Ukraine has suffered heavy casualties defending the city, raising concerns that the battle is depleting Ukrainian combat power ahead of an anticipated offensive using fresh, Western-trained troops and modern equipment provided by the U.S. and its allies.

— Russian President Vladimir Putin announced this weekend that he will station tactical nuclear weapons in Belarus. Putin said he made this decision because the United Kingdom agreed to provide Ukraine with armor-piercing rounds that contain depleted uranium. He did not specify how many would be kept in Belarus. Putin also said he was following the lead of the United States, which has nuclear weapons based in places like Germany and Turkey. “We are doing what they have been doing for decades, stationing them in certain allied countries, preparing the launch platforms and training their crews. We are going to do the same thing,” he said.

— Russia’s diesel exports are on course to hit a record this month despite European Union sanctions depriving the country of its biggest market. Shipments out of Russia during the first 19 days of March stood at about 1.5 million barrels a day, according to Vortexa Ltd. data.

— Infrastructure development glitch. A coalition of 350 businesses told lawmakers in a letter this morning that “the broken permitting system” is holding back infrastructure development. Link to letter.

— China’s Xi tells Putin of ‘changes not seen for 100 years.’ President Xi Jinping and his Russian counterpart Vladimir Putin were filmed saying warm goodbyes as their meeting ended with China’s leader saying they were driving geopolitical change around the world. The two leaders called for “responsible dialogue” to resolve the Ukraine crisis, with Xi acknowledging Beijing and Moscow had signed an agreement bringing their ties into a “new era” of cooperation. “Right now there are changes — the likes of which we haven’t seen for 100 years — and we are the ones driving these changes together,” Xi told Putin as he stood at the door of the Kremlin to bid him farewell. The Russian president responded: “I agree.” Xi then put out his hand to shake Putin’s and said: “Take care please, dear friend.” Putin responded by holding Xi’s hand with both of his and saying, “Have a safe trip.”

— The IMF urged Beijing to rebalance the economy toward consumption. The head of the International Monetary Fund (IMF) struck a positive note on China’s outlook, describing it as one of the “green shoots” in the world economy and urging authorities to rebalance the economy toward consumption. IMF Managing Director Kristalina Georgieva said the “strong rebound” in the China economy is important not only for itself, but for the world. “The robust rebound means China is set to account for around one third of global growth in 2023 — giving a welcome lift to the world economy,” Georgieva said in prepared remarks to the China Development Forum in Beijing on Sunday. IMF’s January forecast for China puts GDP growth at 5.2% this year, an increase of more than 2 percentage points from the 2022 rate, and driven by the anticipated rebound of private consumption as the economy reopened and activity normalized, she said.

— China’s sow herd higher than target. China’s sow herd increased 1.7% in February compared with a year earlier to 43.4 million head, 5% more than the targeted capacity, state media reported. However, that was down 0.6% from January.

— Is Tai too nice to be trade chief? A congressional hearing on President Biden’s trade policy got interesting Friday when U.S. Trade Representative Katherine Tai told a GOP lawmaker, “I don’t need your pity,” after he said she was “too nice” to negotiate trade deals for the U.S. Tai appeared before the Republican-controlled House Ways and Means Committee to defend and talk about President Biden’s agenda on trade for 2023.

Rep. Greg Murphy (R-N.C.) told Tai that she was “very highly spoken of,” but then added, “I personally think you’re too nice a person for the job that you’re in.” Murphy continued: “I think you’re handicapped because of administrative folks that you have to report to, etc., that are handicapping you and your job. Negotiators are usually very, very tough, and sometimes mean people. They aren’t nice people like you are,” Murphy said. “If you look at what’s happened with us, we are absolutely handcuffing the United States,” he added, accusing the Democratic administration of focusing more on green energy while China expands its influence on the world’s fossil fuel sectors. “If you look at what we’re doing to the United States, all we’re doing is giving the open door for China. “And you’re stuck. Personally, I feel sorry for you, you’re stuck in the middle of it. … It’s just an absolute frustration because you just see this country swirling down the drain because we’re just so distracted with so many other different issues that China doesn’t give a damn about… they are just swarming over the rest of the world with influence,” Murphy said.

Tai responded that she had “never been faulted for being too nice.” Tai said, “I also don’t need you to feel sorry for me, so please don’t do that.” Tai added: “Well, let me just take off the nice a little bit. I don’t need your pity. I stand up for the American people. When I speak, people listen, because I represent the interests of the United States,” the trade adviser said.

The Ways and Means Committee hearing was the second in two days in which members of Congress expressed dissatisfaction with President Biden’s trade agenda, particularly the administration’s unwillingness to seek market access with reduced tariffs.

— New York to become first state to pass a law banning natural gas in new buildings. The measure is on track to be added to the state’s budget, which is due to be completed this week. Democratic Gov. Kathy Hochul in January pitched an all-electric building mandate in her spending plan, and both chambers of the Democratic-controlled state legislature outlined similar plans. The proposed gas-stove ban faces opposition from some Republicans, labor unions, gas companies and business groups, which cite concerns including affordability and reliability.

Environmental groups cheered the efforts. Democrats are still hammering out final details, lawmakers said. A recent Siena College Poll found 53% of all New Yorkers, and 71% of upstate residents, said they opposed the idea.

— Global passenger electric vehicle sales are set to hit a fresh record in 2023, according to BloombergNEF. While growth may be slower than in prior years, adoption in the U.S. is poised for a breakout year thanks to improved manufacturing capacity and new federal tax credits under the Inflation Reduction Act. The Treasury Department is expected to release requirements later this week for consumers to qualify for up to $7,500 in credits, including standards for the batteries and critical minerals that are meant to encourage more North American production and cut out supplies from China.

— Egg prices in Japan are soaring as the ongoing avian flu outbreak increases the number of chickens and other birds culled across the country, affecting the restaurant sector and households struggling with inflation. Egg prices jumped 20% in February from a year earlier, the fastest pace since May 2005, according to the statistics bureau of Japan. Concerns about shortages also are growing, with an increasing number of restaurants and companies opting to suspend their offerings of egg-based dishes, including McDonald’s Corp., 7-Eleven and mayonnaise-maker Kewpie Corp.

— Huge protests erupted in Israel after Binyamin Netanyahu, the prime minister, sacked Yoav Gallant, the defense minister, over his opposition to planned judicial reforms. Thousands took to the streets of Tel Aviv and other cities, intensifying demonstrations that have run since January. Unions may call a general strike. Isaac Herzog, Israel’s president, urged Netanyahu to halt his controversial plans, which include allowing the government to appoint Supreme Court judges. Israeli media suggested Netanyahu may be wavering.

— Congress’ schedule: Both the House and Senate are in session. Key focus will be the plethora of fiscal year 2024 budget hearings, including several to be headlined by USDA Secretary Tom Vilsack. Link for Sunday’s report, The Week Ahead.

— Shipping antitrust targeted in bill. House lawmakers introduced bipartisan legislation on Friday aimed at cracking down on consolidation in the shipping industry by repealing an exemption for foreign ocean carriers from federal antitrust laws. Rep. Jim Costa (D-Calif.), the bill’s sponsor, said in a statement his bill would “hold foreign monopolies accountable” as US ports suffer congestion and delays. The House Transportation and Infrastructure Committee will hold a subcommittee hearing Tuesday to probe supply chain issues in maritime transportation.

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