Pre-Market Stocks: Russia’s latest default triggered a crisis. This time it’s different

But we don’t have to go back to 1918 to put the event in context. Instead we can look at 1998.

This is the year Russia defaulted on ruble bonds, sparking the “Moscow Crash” that infected markets around the world.

Fast forward: In August 1998After years of upheaval following the collapse of the Soviet Union, the Russian government defaulted on local debt and devalued the ruble.

The move caused havoc in Russia, fueling inflation, triggering an economic downturn and provoking bank failures. Emerging markets were shaken and American investors panicked, especially when news broke in September of the impending collapse of the hedge fund Long-Term Capital Management.

This time it was different. On Monday the world markets practically did not react. That’s why.

1. We foresaw this. The news that foreign investors were not paid about $100 million in interest on Russian government bonds did not come as a shock. In fact, this was widely expected after half of Russia’s foreign exchange reserves were frozen and the US Treasury lifted the sanctions exemption that allowed Moscow to pay out US bondholders.

The European Union also made it harder for Moscow to meet its debt obligations earlier this month by imposing sanctions on Russia’s National Settlement Depository, the country’s agent for its foreign-currency bonds.

The market was bracing for existing bonds to plummet to pennies per dollar. In the eyes of many investors, the default has already happened. S&P credit rating agency called “selective default” in April because it offered bondholders payouts in rubles rather than dollars.

“Probably in March and April default started in Russia,” Timothy Ash, an emerging markets strategist at BlueBay Asset Management, told me.

2. Investors are more isolated. Foreign investors have drastically reduced their presence in Russia since 1998. This process accelerated after the imposition of sanctions related to the annexation of Crimea by Russia.

“Geopolitical risks around Russia have been on the rise since 2014,” Ash said.

Global emerging markets have also grown dramatically over the past two decades, and Russia’s relative weight has declined. This reduces fears of contagion from the economic downturn in the country, although this is always a risk.

3. Unrest manifests itself in other ways. Global markets cannot be shocked by default. But they have responded to the war in Ukraine, which has driven up food and fuel prices and fueled inflation that has been high in decades.

This forced central banks to more aggressively pull back on support for the economy, causing alarm on Wall Street. Traders are now obsessed with how quickly the Federal Reserve and its peers like the European Central Bank will be forced to raise interest rates.

The tightening of financial conditions as a result of such policies must be carefully managed and is the main reason why the S&P 500 fell into a bear market, losing more than 20% of its recent peak. CNN Business Fear and Greed Index remains deep in “fear” territory after taking “extreme fear” readings a week ago.

Robinhood stock fluctuates amid FTX takeover rumors

Robinhood stock has been hit hard this year. This creates chatter that impatient buyers can spin when they sense an opportunity to close a deal.

Latest: Robinhood shares up 14% on Monday after Bloomberg informed that cryptocurrency exchange FTX is investigating an acquisition, citing people with knowledge of the matter.

But FTX CEO Sam Bankman-Fried later retracted the report.

“There are no active M&A talks with Robinhood,” Bankman-Fried said in an emailed statement. mass media. “We are excited about the business prospects for Robinhood and how we can work with them.”

Shares of Robinhood fell 4% in premarket trading on Tuesday.

My thought bubble: This may not be the end of the story. Bloomberg reported that FTX is discussing internally whether to make the Robinhood offer, and if so, how, but has not yet made an official statement.

Bankman Fried disclosed a 7.6% stake in Robinhood last month. He said it was intended as a passive investment and that he “has no intention at this time of taking any action to change or influence control” of Robinhood.
Of course, Tesla (TSLA) CEO Elon Musk also had a passive stake in Twitter before he changed his mind and made a deal to buy the entire company.

What is FTX? The exchange is private, which insulates it from the recent market chaos that has gripped the rest of the industry. Earlier this year, the company raised new funding that valued the company at $32 billion. Robinhood is now valued at less than $8 billion.

July 4th cooking will cost $10 more this year

Getting cheeseburgers, potato salad and ice cream on the Independence Day picnic table next week will be a lot more expensive as food price increases continue to bite.

According to a new survey by the American Farm Bureau Federation, the average cost of a 10-person summer outing is now $69.68, up about 17% or $10 more than last year.

Rising Prices: Persistent supply chain problems linked to the pandemic, the war in Ukraine, and a wider spike in inflation.

The spike in ground beef prices is the biggest factor. The survey showed that two pounds of ground beef now cost $11.12, up 36% from last year. Homemade potato salad weighing two and a half pounds has risen in price by 19%, and hamburger buns – by 16%.

Strawberries are one of the few foods that are dropping in price. The Farm Bureau attributed the trend to “better weather conditions in some fruit-growing regions.”

Conclusion: High gas prices and rising food prices are key reasons why Americans face inflation, undermining their confidence in the economy. This is starting to take a toll on demand as buyers retreat, though it is still strong.

However, investors, economists and politicians are concerned. As the impact of high prices becomes clear, is more spending cuts inevitable?

Next

US consumer confidence data for June is due at 10:00 am ET.

Tomorrow: Income from General Mills (GIS), Bed Bath and more (BBBI) as well as McCormick (ISS).

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