Natural gas plummets as Freeport delays facility restart following explosion

Smoke billows from the Freeport LNG plant in Quintana, Texas, U.S., June 8, 2022, in this still image obtained from a social media video on June 9, 2022. 

Maribel Hill | Reuters

Natural gas prices plunged on Tuesday, after Freeport LNG said its facility that had a fire last week likely won’t be back up and running soon.

“[C]ompletion of all necessary repairs and a return to full plant operations is not expected until late 2022,” the company said Tuesday in a statement. The facility, located in Quintana Island, Texas, had an explosion last Wednesday.

“Given the relatively contained area of the facility physically impacted by the incident, a resumption of partial operations is targeted to be achieved in approximately 90 days,” Freeport LNG said.

U.S. natural gas fell about 16% to $7.22 per million British thermal units (MMBtu).

“The U.S. natural gas market will now be temporarily oversupplied as 2 bcf/d or a little over 2% of demand for U.S. natural gas has been abruptly eliminated,” said Rob Thummel, managing director at Tortoise Capital.

“U.S. natural gas supply will likely remain at current levels as producers won’t reduce production by 2 bcf/d. The result is an oversupplied U.S. natural gas market,” he added.

Freeport’s operation is roughly 17% of the U.S.’ LNG processing capacity.

Despite Tuesday’s drop, natural gas prices are still up 93% since the start of the year. Demand has rebounded as worldwide economies emerge from the pandemic, while supply has remained constrained.

Russia’s invasion of Ukraine upended a market that was already tight. As Europe looks to move away from Russian energy, record amounts of U.S. LNG are now heading to the continent.

Surging prices are adding to inflationary pressures across the economy. Drivers are already grappling with record prices at the pump with the national average for a gallon of gas topping $5 over the weekend, and now utility bills are also set to rise.

Natural gas prices surged above $9 per MMBtu in May, hitting the highest level since August 2008.

After the explosion at Freeport’s facility last week, the company initially said the plant would be shut for several weeks.

“The incident occurred in pipe racks that support the transfer of LNG from the facility’s LNG storage tank area to the terminal’s dock facilities,” the company said Tuesday. “None of the liquefaction trains, LNG storage tanks, dock facilities, or LNG process areas were impacted,” the company added.



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WHO convenes experts to decide if monkeypox is an emergency

Pavlo Gonchar | Lightrocket | Getty Images

The World Health Organization will convene an emergency committee of experts to determine if the expanding monkeypox outbreak that has mysteriously spread outside Africa should be considered a global health emergency.

WHO Director-General Tedros Adhanom Ghebreyesus said Tuesday he decided to convene the emergency committee on June 23 because the virus has shown “unusual” recent behavior by spreading in countries well beyond parts of Africa where it is endemic.

“We believe that it needs also some coordinated response because of the geographic spread,” he told reporters.

Declaring monkeypox to be an international health emergency would give it the same designation as the Covid-19 pandemic and mean that WHO considers the normally rare disease a continuing threat to countries globally.

The U.K. said Monday it had 470 cases of monkeypox across the country, with the vast majority in gay or bisexual men. British scientists said last week they could not tell if the spread of the disease in the U.K. had peaked.

The meeting of outside experts could also help improve understanding and knowledge about the virus, Tedros said, as WHO released new guidelines about vaccinating against monkeypox.

Dr. Ibrahima Soce Fall, WHO’s emergencies director for Africa, said case counts were growing every day and health officials face “many gaps in terms of knowledge of the dynamics of the transmission” — both in Africa and beyond.

“With the advice from the emergency committee, we can be in a better position to control the situation. But it doesn’t mean that we are going straight to a public health emergency of international concern,” he said, referring to WHO’s highest level of alert for viral outbreaks. “We don’t want to wait until the situation is out of control to start calling the emergency committee.”

The U.N. health agency does not recommend mass vaccination, but advises the “judicious” use of vaccines. It said controlling the disease relies primarily on measures like surveillance, tracking cases and isolating patients.

Last month, a leading adviser to WHO said the outbreak in Europe and beyond was likely spread by sex at two recent rave parties in Spain and Belgium.

Scientists warn that anyone, regardless of sexual orientation, is susceptible to catching monkeypox if they are in close, physical contact with an infected person or their clothing or bed sheets.

WHO has been working with partner countries to create a mechanism by which some vaccines for smallpox — a related disease — might be made available to countries that are affected, as research continues into their effectiveness against the new outbreak.

Tedros said more than 1,600 cases and nearly 1,500 suspected cases have been reported this year in 39 countries, including seven where monkeypox has been reported for years. A total of 72 deaths have been reported but none in the newly affected countries, which include Britain, Canada, Italy, Poland, Spain and the United States.

The ongoing outbreak of monkeypox in Europe and elsewhere marks the first time the disease has been known to spread among people who have no travel links to Africa.



The Fed’s balance sheet reduction officially starts Wednesday. Here’s how it works



Make these money moves before the Fed hikes rates again

Chairman of the Federal Reserve Jerome Powell (left) meets with President Joe Biden in the Oval Office on May 31, 2022.

Saul Loeb | AFP | Getty Images

The Federal Reserve is again poised to raise interest rates in an attempt to slow down the highest inflation in four decades without pushing the U.S. economy into a recession.

The central bank was expected to hike its benchmark rate at each meeting this year, likely by a half-point. But, after May’s worse-than-expected consumer price index report, some analysts are now projecting a 75 basis point increase from the Fed on Wednesday.

As rates rise, there are some key money moves financial experts recommend consumers make to put themselves in a better financial situation and prepare for any impending downturn.

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These broadly include paying down debt and shoring up personal budgets to be able to withstand any sudden shocks to the economy.

“If your New Year’s resolution was to build a household budget, it may need a refresh and a review,” said Cathy Schaeffer, a certified financial planner, vice president and family advisor manager at Baker Boyer in Walla Walla, Washington. Now is the time “to really look at your personal budget and identify some ways to pay down your debt more aggressively as these rate hikes are expected to continue.”

Pay down debt

Certain borrowers should be especially careful right now.  

That includes anyone looking to buy a home, is shopping for a car or is carrying credit card debt, according to CFP Lauren Anastasio, director of financial advice at Stash.

“If you are shopping for a home, you might want to ask your lender if you can lock in your rate now,” she said. “Sometimes the lender, for a flat fee, will allow you to lock in today’s rate even if you’re not going to close for another few months.”

Some borrowers are considering adjustable-rate mortgages, which offer lower initial rates but eventually revert to market conditions. People who had ARMs and are nearing the end of that period may want to consider refinancing to a fixed rate.

Car shoppers may want to stick with newer models and avoid the used car market, where prices have jumped the most. Taking time to shop for the best deal you can find is also in your best interest.

“There’s still a lot of value out there,” said Jacqui Kearns, chief brand and strategy officer at Affinity Federal Credit Union in New Jersey, adding that while rates are rising, they’re still historically low.

This is a very delicate dance that the Fed is conducting.

Lauren Anastasio

director of financial advice at Stash

People carrying credit card debt may also want to contact their lenders to see if they can strike a deal.

“I always recommend that folks actually call their lender and see if they’re able to lower their interest rate,” Anastasio said.

It may also make sense to consolidate credit card debt into something with a fixed rate, as this kind of debt is the most sensitive to rate hikes and often has the highest interest. Right now, the average interest rate on a new credit card is nearly 20%, according to LendingTree.

Paying off debt entirely is also a good idea, if possible. Kearns recommends tackling those cards that have relatively low balances.

“If you have that nagging $200 or $300 [debt] out there, just pay it off,” she said.

Prepare for the future

Dmytro Varavin | Istock | Getty Images

Paying down debt is just one way to set yourself up for financial success in the future, something that’s especially important as people weigh the risk of a recession.

“This is a very delicate dance that the Fed is conducting,” said Anastasio, adding that while the central bank will do its best to tamp down inflation without halting the economy too much, there’s a lot of factors that are out of its control, such as uncertainty stemming from the war in Ukraine.

Financial experts recommend taking time now to review your spending and saving to strike a solid balance.

“Be smart about spending the money you do have,” Kearns said. This may mean cutting back on discretionary purchases or budgeting more for items that have gone up in price. It also means reviewing your emergency savings to ensure you have enough socked away to cover increased prices.

As people plan for future spending, such as an upcoming vacation, they may also want to budget more than they usually would, Anastasio said.

“The reality is we may see a taper off in the rapid rise of costs but that doesn’t necessarily mean that when I go into the grocery store to buy baby formula that all of a sudden the manufacturer is going to go back to what they were charging two years ago,” she said.  

Enlist help

To be sure, there are some benefits to rising interest rates. In time, savers may start seeing better rates on savings accounts, Schaeffer said. Investors also have opportunities to gain from market volatility, said Kearns.

“It’s a great time to invest if you have the appetite for it,” Kearns said. “Literally just a few dollars a day on the volatility we’re seeing can pick up a lot of value if you stay in for the long term.”



Investors worry another possible crypto collapse will bring down other key players

Cryptocurrencies have taken a tumble in 2022.

Chesnot | Getty Images

A liquidity crisis at cryptocurrency lending firm Celsius has investors worried about a broader contagion that could bring down other major players in the market.

Celsius recently moved to pause all account withdrawals, sparking fears that it may be about to go bust. The company lends out clients’ funds similar to a bank — but without the strict insurance requirements imposed on traditional lenders.

Bitcoin sank below $21,000 on Tuesday, extending sharp declines from the previous day and sinking deeper into 18-month lows. The total value of all digital tokens combined also dipped below $1 trillion for the first time since early 2021, according to CoinMarketCap data.

Crypto investors fear the possible collapse of Celsius may lead to even more pain for a market that was already on shaky ground after the demise of $60 billion stablecoin venture Terra. Celsius was an investor in Terra, but says it had “minimal” exposure to the project.

Celsius did not return multiple CNBC requests for comment.

“In the medium term, everyone is really bracing for more downside,” said Mikkel Morch, executive director of crypto hedge fund ARK36.

Read more about tech and crypto from CNBC Pro

“Bear markets have a way of exposing previously hidden weaknesses and overleveraged projects so it is possible that we see events like last month’s unwinding of the Terra ecosystem repeat.”

Monsur Hussain, senior director of financial institutions at Fitch Ratings, said a liquidation of Celsius’ assets would “further rock the valuation of cryptoassets, leading to a wider round of contagion within the crypto sphere.”

Celsius has a large presence in the so-called decentralized finance space, which aims to recreate traditional financial products like loans without the involvement of intermediaries like banks.

Celsius owns numerous popular assets in the DeFi world, including staked ether, a version of the ether cryptocurrency that promises users rewards on their deposits.

“If it goes into full liquidation mode, then it will have to close out these positions,” said Omid Malekan, an adjunct professor at Columbia Business School.

USDD, a so-called stablecoin that’s meant to always be worth $1, fell as low as 97 cents Monday, echoing the woes of Terra’s UST stablecoin last month. Justin Sun, the coin’s creator, accused unnamed investors of “shorting” the token and pledged $2 billion in financing to shore up its dollar peg.

Elsewhere, rival crypto lenders Nexo and BlockFi sought to downplay concerns over the health of their operations after Celsius announced its decision to halt withdrawals.

Nexo said it had a “solid liquidity and equity position,” and had even offered to acquire some of Celsius’ loan portfolio — a proposal it says the company “refused.” BlockFi, meanwhile, said all its services “continue to operate normally” and that it has “zero exposure” to staked ether.

That doesn’t mean it hasn’t been impacted by the downturn, though — BlockFi this month laid off about 20% of its workforce in response to a “dramatic shift in macroeconomic conditions.”

Celsius’ liquidity crunch has raised worries of possible knock-on effects in other financial markets.

CDPQ, the manager of Canada’s second-biggest pension fund, co-led an equity investment in Celsius earlier this year. In a statement Monday, the company said it is “closely monitoring the situation.”

Many analysts agree any spillover effects from the Celsius debacle are likely to be limited to crypto. “The biggest risk of contagion is within crypto markets themselves,” Malekan said.

Hussain of Fitch said the sell-off in crypto prices reflected a “shrinking of the entire crypto market,” adding “contagion with the broader centralised financial system will be limited.”



Stocks have officially entered bear market territory—here’s what that means and what you should do

The months-long slide for the S&P 500 index has officially thrown stocks far enough off of their all-time highs to be considered a bear market.

Since the beginning of 2022, the S&P 500 index is down nearly 21% as of Monday afternoon, with companies like Amazon and Google parent Alphabet leading the way with their 39% and 27% respective drops. Elon Musk’s Tesla has also lost 45% of its market value since January — shaving more than $500 billion off of its market cap.

The problem has been exacerbated by inflation and global uncertainty, with experts predicting that a recession could be around the corner.

Here’s what you need to know about bear markets, and what you should do when you find yourself in one.

What exactly is a bear market?

Put simply, bear market is the term used to describe when the equity markets are down 20% or more from their most recent all-time high. In this case, the S&P 500 index closed Monday at 3,749.91, with its previous high being 4,818.62.

Since World War II, there have been 14 bear markets that have pulled the S&P down an average of 30%, according to CNBC. Each bear market is unique, says Laura Veldkamp, a finance and economics professor at Columbia University, and the current one has a slew of causes.

Wherever there’s a lot of guessing and a lot of uncertainty, that means people’s beliefs can move around a lot. And with those beliefs go stock prices.

Laura Veldkamp

Professor, Columbia University

Two of those causes are interest rates being raised to fight runaway inflation and pandemic-related uncertainty fueling the stock slide as investors try to figure out the long-term repercussions that Covid-19 will have on the global economy, Veldkamp says.

“The truth is, nobody knows what will be the long-term consequences of having [shut down parts of the economy for long periods of time], because we don’t have any experience having done it before,” she tells CNBC Make It. “Wherever there’s a lot of guessing and a lot of uncertainty, that means people’s beliefs can move around a lot. And with those beliefs go stock prices.”

What should investors do during a bear market?

For many investors, seeing their investment portfolios turn red can be alarming and make them want to pull their money out to avoid further losses. But this is the wrong strategy, Veldkamp says.

“Do not sell right now unless you absolutely need that money,” she says. “If you’re a young person who’s putting some stocks in a 401(k) for retirement, don’t worry about this. Just keep doing what you’re doing.”

Indeed, bear markets “are historically fantastic opportunities to build wealth for longer-term investors,” says Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management.

“An investor that starts off methodically putting money into a 401(k) is going to have a bigger balance 20 or 30 years from now if earlier on during their investing career they were able to take advantage of bear markets versus having to buy at all-time highs all the time,” he says.

Still, Stucky recommends that investors don’t rush to invest all their money. They should also focus on growing their savings. The important thing is for investors to “make sure that you can handle these swings” when buying stocks, because there will be more volatility to come.

“Just from a sleeping-at-night situation, you don’t want your portfolio to create anxiety for you that affects your mental health,” he says.

How long do bear markets last?

The bright side is that the market has bounced back from every single bear market, Veldkamp says.

“Have faith that it’s going to come back in due course well before you retire,” she says. “Usually, it takes a couple of years to recover some losses like this.”

The average bear market lasts 359 days, and Stucky adds that it can take a full 38 months to go from the bottom of a bear market to a new all-time high. He says that getting through an extended stretch like that can be stressful, and for some investors, it might be helpful to get out of the habit of checking their balance frequently.

“There’s no reason you need to introduce more anxiety into your life by looking at your balance multiple times a day or every day or every other day,” Stucky says. “You could check it once a month and be fine.”

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Coinbase lays off 18% of workforce as executives prepare for recession and ‘crypto winter’

Coinbase Founder and CEO Brian Armstrong attends Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.

Steven Ferdman | Getty Images

Coinbase is laying off almost a fifth of its workforce amid a collapse in its stock and crypto prices.

The cryptocurrency exchange will cut 18% of full-time jobs, according to an email sent to employees Tuesday morning. Coinbase has roughly 5,000 full-time workers, translating to a headcount reduction of around 1,100 people.

Shares of Coinbase are down about 7% premarket.

CEO Brian Armstrong pointed to a possible recession, and a need to manage Coinbase’s burn rate and increase efficiency. He also said the company grew “too quickly” during a bull market.

“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period,” Armstrong said, adding that past crypto winters have resulted in a significant decline in trading activity. “While it’s hard to predict the economy or the markets, we always plan for the worst so we can operate the business through any environment.”

Coinbase had initially said it was pausing hiring. Two weeks later, the crypto giant announced that it was extending the freeze for the “foreseeable future.” Earlier this year, Coinbase said it planned to add 2,000 jobs across product, engineering and design.

“Our employee costs are too high to effectively manage this uncertain market,” Armstrong said. “While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”

The news comes during a deep rout for Coinbase shares. The stock went public via a direct listing last April during a boom in crypto markets and investors clamoring for high-growth tech stocks. Coinbase’s stock is down 79% this year and 85% from the all-time high. Meanwhile, bitcoin has dropped to near $22,000 and has lost 53% of its value this year.

San Francisco-based Coinbase reported a slump in users in its last quarter and a 27% decline in revenue from a year ago. The company makes the majority of its top line from transaction fees, which are closely tied to trading activity.

Employees of Coinbase Global Inc, the biggest U.S. cryptocurrency exchange, watch as their listing is displayed on the Nasdaq MarketSite jumbotron at Times Square in New York, U.S., April 14, 2021.

Shannon Stapleton | Reuters

President and chief operating officer Emilie Choi called it a “very difficult decision for Coinbase” but given the economic backdrop,” she said it “felt like the most prudent thing to do right now.”

Affected employees received a notification from HR. If so, the memo was sent to a personal email as Coinbase cut off access to the company systems. Armstrong called it the “only practical choice” given the number of employees with access to customer information, and a way to “ensure not even a single person made a rash decision that harmed the business or themselves.”

Coinbase employees will have access to a talent hub to find new jobs in the industry, including Coinbase Ventures’ portfolio companies. Choi said they would still be “doubling down” on areas like security and compliance and may be “reorienting” employees to near-term revenue drivers.

“If there are any cuts to new product areas, it’s going to be more around experimental venture areas that we’re still very bullish on, but that we don’t want to invest in in this part of the cycle,” Choi told CNBC in an interview at the company’s headquarters.

“We will continue to invest in incredible innovative areas of crypto that we think are emerging over the longer term, but we’re probably going to do those in a more measured way in this type of an environment.”

Coinbase joins dozens of other tech and crypto companies slamming the brakes on hiring. Crypto lender BlockFi said it was cutting 20% of its employees on Monday. Open-source tracker estimates that more than 5,500 start-up and tech jobs have been cut in June alone.

Coinbase’s intention is “that this is a one time event,” Choi said adding that the company has $6 billion of cash on the balance sheet. The company has lived through multiple bear markets in crypto before, also known as “crypto winters.”

“We will power through any macro environment, any crypto winter, or anything that’s coming,” she said. “The reality though, is that we have to adjust when we feel that there’s a very dynamic economic environment in play.”

Tech companies have been fighting low morale and attrition as their stocks get slammed. Last week, a petition posted to a decentralized publishing platform called for the removal and a “vote of no confidence” regarding several Coinbase executives, including Choi.

Coinbase Brian Armstrong called attention to the since-deleted petition, and in a Tweet urged employees to quit if they don’t believe in the company.


“We will always encourage our employees to share feedback internally on how we operate as a company – and we have a number of mechanisms in place for them to do so. It’s very much unclear if this document came from within the company,” Choi said. “However, if it did, we’re disappointed that those behind it felt the need to breach the trust of the company and their coworkers by sharing this information in a way clearly designed to drive controversy rather than a meaningful dialogue.” 

Coinbase has no plans to offer additional company equity grants, or cash compensation amid the price drop, Choi said. The company offers annual grants, partially so employees could “mitigate the swings” and volatility in crypto. For employees and investors, the COO likened it to Amazon or Tesla: a long-term investment with volatility in the meantime.

“We think that anyone who makes an investment, whether they’re an employee or investor, will have a handsome return over the longer term,” Choi said. “Coinbase is a long-term play — we have very deep conviction in the long-term value of the stock.”



The UK’s plan to rip up Brexit trade rules slammed for being in ‘clear breach’ of international law

The U.K. government has pushed ahead with plans to unilaterally override parts of the Northern Ireland protocol it agreed with the EU in 2019.

Liam Mcburney – Pa Images | Pa Images | Getty Images

LONDON — The U.K. government has pushed ahead with controversial plans to unilaterally override post-Brexit trade rules, ratcheting up the risk of a trade war as the European Union prepares to take retaliatory legal action.

Prime Minister Boris Johnson’s government on Monday published draft legislation to rewrite the Northern Ireland protocol, part of the post-Brexit trading agreement which requires checks on some goods entering Northern Ireland from the rest of the U.K.

The deal, which came into force in January last year, was designed to avoid the need for a hard border between Northern Ireland and the Republic of Ireland, which remains part of the EU.

Johnson wants to simplify the way goods flow from Britain to Northern Ireland and remove additional costs and paperwork for businesses.

The embattled prime minister has insisted the proposed changes are “relatively trivial” — but he’s heading for a fresh fight over the plan on multiple fronts, including with some of his own Conservative Party.

The EU also firmly opposes the move, saying it breaks international law. The world’s largest trading bloc has said it is considering launching legal action against the U.K. over the proposal.

European Commission Vice-President Maros Sefcovic said it was with “significant concern” that the bloc takes note of the U.K.’s decision to table legislation “disapplying core elements of the Protocol.”

“Unilateral action is damaging to mutual trust. The Commission will now assess the UK draft legislation,” Sefcovic said.

“We will react as one to this breach of trust,” German Foreign Minister Annalena Baerbock said via Twitter, adding that peace and prosperity on the island of Ireland is “not a pawn.”

Protesters holding EU and Ireland flags, and a ‘Keep the Protocol’ placard stand outside Parliament.

Sopa Images | Lightrocket | Getty Images

Tensions over the protocol have been simmering for months, particularly in the absence of a functioning devolved government in Northern Ireland.

The situation has sent alarm bells ringing across the Atlantic too, with the U.S. urging the U.K. to continue negotiations with the EU to find solutions.

Sterling traded around 0.5% lower at $1.2077 on Tuesday afternoon, having hit a fresh two-year low of $1.2104 earlier in the session.

What has been proposed?

In what it described as a “doctrine of necessity,” the U.K. government sought to justify the move by claiming the protocol had caused “peril” to stable social and political conditions in Northern Ireland and threatened the protection of the Good Friday Agreement.

Signed on April 10, 1998, the Good Friday Agreement is a historic truce that brought an end to three decades of sectarian violence in Northern Ireland between Irish separatists and British loyalists.

Speaking to Sky News on Tuesday morning, U.K. Foreign Secretary Liz Truss said the impact of the Northern Ireland protocol had undermined the Good Friday Agreement.

“So, people in Northern Ireland, particularly in the unionist community, are feeling less connected to Great Britain and that they are not benefitting from being part of the United Kingdom. And that is a problem that we need to deal with,” Truss said.

Truss had previously warned the U.K. would have “no choice but to act” if EU lawmakers do not show the “requisite flexibility” over the protocol.

Janine Schmitz | Photothek | Getty Images

Somewhat surprisingly, the U.K. appeared to accept that its plans to rip up the previously signed agreement would not meet its obligations under international law.

It said the term “necessity” had been used in the bill to lawfully justify situations where the only way the state can safeguard an essential interest is by breaking another international obligation. The U.K. government said there was “no other way” to safeguard the interests at stake.

At the heart of the U.K.’s plan to ease trade disruption are the so-called green and red channels.

This would mean goods coming into Northern Ireland from Britain (and which are staying) would use the green channel — with minimal paperwork and no checks. Meanwhile, British goods moving through Northern Ireland into the EU would use the red channel and be checked at Northern Ireland ports.

The changes proposed will be debated and voted on in Parliament.

How has the bill been received in Northern Ireland?

Sinn Fein Vice President Michelle O’Neill responded to the plans by describing Johnson’s bill as “illegal,” saying the prime minister is in “clear breach” of international law.

“All that Boris Johnson is doing today is to further political instability and to create even more economic uncertainty for the days and weeks ahead,” O’Neill told reporters on Monday.

Democratic Unionist Party leader Jeffrey Donaldson disputes that the move is illegal and has said the party will now watch to see how the bill progresses through parliament before signing up to a new devolved government.

The DUP, which came second behind Sinn Fein in May 5 elections, has refused to re-enter the executive — which runs the devolved government in Northern Ireland — until the protocol is rewritten. The DUP says U.K. lawmakers must abolish the original protocol, arguing that a customs border has been created across the Irish Sea which undermines Northern Ireland’s place within the U.K.

Sinn Fein, which accepts the protocol, has the right to nominate the executive’s first minister after becoming the first nationalist party to win the most seats in the 101-year history of Northern Ireland.

However, under a power-sharing agreement introduced in the 1990s, a new government cannot be formed without the DUP. The first minister and deputy minister must be one unionist and one nationalist.



‘Profit recession’ warning as markets wait for aggressive central bank moves

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, June 13, 2022.

Brendan McDermid | Reuters

Global stock markets diverged on Tuesday after a worldwide sell-off in the previous session, as analysts assessed the longevity of the bear market and risk of recession.

U.S. stock futures bounced in early premarket trade on Tuesday after the S&P 500 slid back into bear market territory the day before. 

Investors are awaiting a landmark monetary policy announcement from the Federal Reserve on Wednesday, with bets on a 75 basis point interest rate hike rising in light of a shock 8.6% annual inflation print for May.

The prospect that the Fed and other central banks will be forced to hike interest rates more aggressively in order to rein in inflation — at a time when growth is slowing across most major economies — has reignited fears of a global recession.

Profit recession

Guy Stear, head of EM and credit research at Societe Generale, told CNBC on Tuesday that while a recession was looking more likely, there were two prongs to consider.

“One is the pure economic outlook, and secondly the profit outlook. I would actually be more worried about profits than I would about economic growth itself,” Stear said. 

He said that the more-than 25-year trend of profit rising as a percentage of GDP was “more or less finished,” given the ongoing themes of deglobalization, higher energy and input costs, and higher wages.

“So I think that no matter what happens in terms of the economic outlook – and yes, the likelihood of an economic recession is mounting – the likelihood of a profit recession is mounting a lot faster.”

Central banks ‘starting to panic’

As well as the Fed, the Bank of England, Bank of Japan and Swiss National Bank are all set to announce monetary policy decisions this week. Each is facing its own set of economic challenges, along with the global problems of soaring food and energy costs, and supply chain disruptions.

“What we’re currently seeing is central banks somehow starting to panic, markets clearly facing all of a sudden this new era of higher interest rates, therefore we have this big stock market correction, I think rightly so,” said Carsten Brzeski, global head of macro at ING. 

“With central banks now tightening monetary policy, somehow panicking, the likelihood of a recession in the U.S., but also in the euro zone towards the end of the year, has clearly increased.”

Wall Street’s overnight losses bled into markets in Asia-Pacific on Tuesday, with major bourses largely declining and Australia’s S&P/ASX 200 plunging more than 3.5% on its return to trade following a public holiday. European markets were choppy on Tuesday as the Stoxx 600 index jumped to a 1% gain at the start of trading, before sliding back to the flatline around an hour later.

Get defensive

In terms of positioning in response to the current pullback, Soc Gen’s Stear suggested that several defensive areas of the corporate credit market could offer some protection for investors.

“My personal view in terms of where we are on the bear market is we’re about three-fifths of the way through it in credit markets, so I’m waiting for another 80 basis point widening in terms of credit, which means losses of probably not double digits, but close to, in the equity markets before I really start to get interested in terms of valuations,” he said.

In particular, Stear identified energy and utilities, the latter of which he argued represents a necessity in the move towards clean energy and the green transition. However, he also remains positive on the banking sector.

“I think banks have deleveraged so much in the past 10 years that they’re a lot less sensitive to the economic variations, particularly in Europe, than they would have been 10, 15, 20 years ago, so I think that’s more of a defensive sector than people realize,” Stear said.