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White House

Biden explains the ramifications of China’s assistance to Russia. Biden has described the consequences if China provides material support to Russia in his call with Xi. He told Xi that the US policy toward Taiwan has not changed.

Xi appears to be in a difficult situation.

Fed

Barkin of the Fed says he is’very open’ to a 50 basis point move if inflation does not begin to settle.

At the moment, the chances of a 50 basis point cut on May 4 are 47 percent. This debate will last a long time.

• The yield curve is a ‘useful predictor,’ but not a ‘destiny.’ Balance-sheet reduction should begin’soon.’

Europe

European stocks finish the session higher.

Major indices end the week with solid gains

The major European indices ended the day with mixed results, but all ended with solid gains.

The following are the day’s closes:

Germany’s Dax increased by 0.1 percent; France’s CAC increased by 0.1 percent; and the UK’s FTSE 100 increased by 0.3 percent.

Ibex, Spain, +0.1 percent

The FTSE MIB in Italy is up 0.4%.

For the coming trading week:

• Germany’s Dax +5.7 percent • France’s CAC +5.7 percent • the United Kingdom’s FTSE 100 +3.5 percent • Spain’s Ibex+3.38 percent • Italy’s FTSE MIB +4.7 percent

As London/European traders flee, the CHF is the strongest of the major currencies, while the EUR is the weakest. The EURCHF is the most volatile currency, falling -0.72 percent on the day.

Russia

A moderately positive assessment from a Russian negotiator

Moscow and Ukraine are ‘halfway there’ on the issue of Ukraine’s demilitarisation The sides are debating nuances related to security guarantees for Ukraine if it chooses not to join NATO.

Ukraine’s neutral status and refusal to join NATO are the issues where views are most closely aligned.

The final point emphasises that territorial integrity is the issue on which they are the least aligned. Of course, negotiating in public is difficult when Ukraine has soldiers fighting and dying over land that could be negotiated away.

US

US February existing home sales 6.02 million vs 6.10 million expected

US home sales data

Prior was 6.50 million (revised to 6.49 million)

Sales -7.2 percent vs +6.6 percent prior

Inventories at 1.7 months

Prices +15.0 percent y/y to $357.3K

The problem in the United States is that inventories are extremely low. I mentioned it earlier, but it bears repeating: US home price inflation appears set to continue for an extended period:

According to CIBC, the 30-year fixed rate mortgage survey averaged 4.16 percent this week, up from 3.85 percent the previous week and well above the 3.09 percent level a year ago.

Mortgage News Daily (more accurate for capturing movements later in the week) forecasts rates at 4.50 percent (up 22 basis points W/W) following significant weakness in bond markets. Despite higher monthly payments, Redfin’s latest data show that home prices increased 7 percent month over month, the largest four-week increase in over five years.

Last week’s Redfin Homebuyer Demand Index was 10% higher than a year ago (up 1.6 percent W/W). According to real estate brokerage data, active listings were down 23 percent year on year (and 50 percent lower than in 2020) to an all-time low, while median home sale prices over the last four weeks were up 17 percent year on year to a record $376K. (36 percent higher than two years ago).

The US dollar remained unchanged in this report.