After constant jawboning for over two months, Venezuela is now backing up its threats to annex part of oil-rich Guyana and secure access to some of the world’s largest oil deposits by “moving light tanks, missile-equipped patrol boats and armored carriers to the two countries’ border”, the WSJ reported noting that this is set to rapidly turn into a new security headache for the administration of the now officially senile US president.

The deployment, which was visible in satellite images made public Friday and in videos recently posted by Venezuela’s military on social media, is a “major escalation” in Caracas’s attempts to obtain some leverage over its neighbor’s newfound energy reserves, even though any military confrontation will result in an international response that promptly ousts Maduro. It comes despite a written agreement reached in December between the Venezuelan dictator and Guyanese President Irfaan Ali that denounced the use of force and called for a commission to address territorial disputes.

According to the WSJ, the Washington-based Center for Strategic and International Studies, using satellite images provided by Maxar Technologies and shared exclusively with the Journal, found that in late 2023 and January Venezuela moved armored vehicles and what appear to be light tanks to Anacoco Island on the Cuyuni River just yards from Guyana. Construction work is also taking place, signaling the expansion of a base there.

In Venezuela’s Atlantic port of Güiria, the country deployed between Jan. 18 and Jan. 22 at least three Iranian-made Peykaap III antiship guided-missile patrol boats, as is visible in the satellite images used by CSIS, the Washington think tank. The regime’s military set up two Russian-built Buk M2E antiaircraft systems in Güiria on Jan. 31, almost 400 miles east of their usual position near Venezuela’s capital, Caracas. And a small coast-guard post in Punta Barima, 50 miles from Guyana-controlled Essequibo, is being revamped into a naval and air base.

Those deployments are within easy reach of the Stabroek oil block run by Exxon and its partners, Chevron
and China’s Cnooc, off the coast of Guyana, where production has soared to 645,000 barrels of crude a day, not far off what Venezuela produces.

The deployment and increasingly bellicose language from Caracas has come as Guyana emerges as one of the world’s hottest energy frontiers following offshore oil discoveries by an Exxon Mobil-led consortium. The former British colony, population 800,000, has a defense force of only 3,000 service members, pushing the government to work more closely with the U.S. to enhance its defensive capabilities.

Confirmation of the military deployment comes one day after Venezuela said it would respond in a “forceful” way to Exxon’s plans to drill in the disputed Essequibo region off the coast of Guyana.

Venezuelan Defense Minister Vladimir Padrino said that Exxon’s plan to drill exploration wells in the region will be met with a “proportional, forceful and rightful response,” according to a post on social-media platform X. Padrino said the area is a “maritime space that rightfully belongs to Venezuela.”

Si la ExxonMobil cuenta con una compañía de seguridad privada representada por el Comando Sur y una pequeña sucursal en el gobierno de Guyana, bien por ellos, pero en el espacio marítimo que por derecho es de Venezuela ¡Recibirán una respuesta proporcional, contundente y apegada… https://t.co/FjJzqFOr1K

— Vladimir Padrino L. (@vladimirpadrino) February 7, 2024

The oil giant said it will drill new wells west of the Liza discovery and close to Venezuelan territorial waters, Exxon Guyana President Alistair Routledge told Demerara Waves. The dispute is “not inhibiting that activity in our plans,” he said.

Padrino responded that “If ExxonMobil has a private security company represented by the Southern Command and a small branch in the government of Guyana, good for them, but in the maritime space that rightfully belongs to Venezuela, they will receive a proportional, forceful and rightful response.” Well, Exxon may not have a security company now, but it has billions of dollars more than Venezuela does and if it has to hire a mercenary army to defeat the banana republic’s advances, it can easily do so.

Since late last year, the Venezuelan government, which has an army of up to 150,000 active soldiers has ratcheted up claims to the Essequibo, a mostly jungle-covered region that makes up two-thirds of Guyana.

“We are not surprised by the bad faith of Venezuela,” Guyana’s Foreign Ministry said in a statement to The Wall Street Journal in response to questions about the military deployment. “We are disappointed, not surprised.”

What is amusing is that the war-footing comes just as the senile occupant of the White House has been making overtures to Venezuela’s dictator in hopes that Maduro will flood the US with cheap oil, thus keeping gas prices low ahead of the elections, which has fast emerged as Biden’s only chance of winning; needless to say, should oil prices spike, Biden is done. It gets even funnier though, because while on one hand Maduro has been maintaining a dialog with the US due to his leverage over Biden, at the same time, the country has said it is boosting its defenses in response to the U.S. military’s exercises in Guyana in December and the U.K.’s deployment of a small antinarcotics vessel, the HMS Trent, in Guyanese waters.

In recent months, U.S. officials from the Defense Department and White House have visited Guyana’s capital, Georgetown, for talks on increasing cooperation. President Ali said his government would soon purchase American helicopters, drones and other defense equipment.

“Supporting Guyana to strengthen its defensive capability as it continues to bring enormous oil windfall on the market is something we have a direct interest in,” Juan Gonzalez, a senior Biden adviser, told reporters in Colombia on Monday, a day after meeting Guyana’s president in Georgetown. “We certainly don’t want to escalate tensions, but we have our own strategic relationship with Guyana.”

Then again, Biden’s dementia is so bad – as the entire world saw in the past 24 hours – it wouldn’t surprise us if the US president is so confused he sends US troops to help his BFF Maduro to run over  Guayana if it means oil will be a few cents cheaper come November.

Joking aside, the stock of the largest US E&P company is tumbling because the market is starting to price in legitimate odds of a war as it thinks Biden has become such a laughingstock that Venezuela may actually invade Guyana despite Biden’s demand to the contrary.

Authored by Peter Earle via The American Institute for Economic Research,

Attending the Super Bowl in person has long been a lavish expense, reserved for those willing to part with a significant sum for the ultimate fan experience. But when the Kansas City Chiefs meet the San Francisco 49ers in Las Vegas on Sunday, February 11 for the 58th such championship, it will be the most expensive yet.

Stubhub is reporting tickets ranging from $5,300 to $107,000, with the average price paid around $9,500.

(Ticketmaster and other estimates vary slightly.)

That is a 93 percent increase in ticket prices from last year’s Super Bowl in Phoenix, Arizona, and 300 percent over the past ten years.

Lodging prices are skyrocketing as well. 

A week out from kickoff, rooms at five-star hotels like the Bellagio, Aria, and The Venetian started at $1,500 or more per night for Super Bowl weekend, according to Expedia.

Travelers seeking an affordable stay on the Las Vegas Strip, such as at Excalibur, can find an average nightly rate of $88 on Priceline for this weekend. That jumps to $486 during Super Bowl weekend, an increase of 426 percent. Prices do dip a bit if Super Bowl fans want to stay away from the Strip’s hotels and casinos. Downtown and hotels away from the main drag do offer some cheaper options, with some hotels charging around $200 per night on Fremont Street. Circa, which contains one of the most popular sportsbooks in Las Vegas, is an exception. Rooms this weekend are going for $179 per night on Priceline. That shoots up to $1,232 per night, with only a few rooms remaining at that price, for Super Bowl weekend. 

And then, of course, there are the costs of getting there and subsisting. Intrepid drivers looking to travel from San Francisco to Los Angeles (a trip of between 8 and 9 hours) will do so with gasoline prices at $3.66/gallon. That’s down markedly from the mid-2022 spike, but still vastly above levels before the pandemic. Like hotel and ticket prices, airfare into and out of Las Vegas around the big game has also vaulted in price, although a number of carriers have increased capacity to meet surging demand.

Celebrating at Home

Of course, the vast majority of Super Bowl LVIII viewers will not be in Allegiant Stadium, which holds 65,000 spectators. The remainder of viewers, averaging north of 100 million people, will be watching at home or in their hometown sports bars and restaurants. But the persistent inflation of the past three years extended the financial burden into that seemingly more affordable alternative: hosting or attending Super Bowl parties at home. What was once a casual affair of chips, dips, and budget-friendly beverages has transformed into a costly endeavor, as the price of groceries, alcoholic beverages, and even party supplies have surged, affecting the way fans plan to experience one of America’s most iconic sporting events.  

The top Super Bowl snacks and dishes include chicken wings, guacamole, potato skins, and deviled eggs, so a look at the recent price trends in chicken, beef, pork, avocados, eggs, beans, potatoes, eggs and condiments is relevant. Pizza, alcoholic beverages, and soft drinks are other popular choices prices have been creeping up. 

Below are the prices of a handful of foodstuffs and ingredients which feature prominently in Super Bowl festivities,  as well as the price changes from the pre-pandemic period to the most recent data (December 2019 to December 2023).

The prices are provided by the US Bureau of Labor Statistics Average Prices by Product series, not seasonally adjusted:

And although disinflation has proceeded, by their nature the various indices (Consumer Price Index, Personal Consumption Expenditure Price Index) obscure individual price changes. For example: the US CPI Urban Consumers Food-at-Home index, in December 2023, showed a year-over-year change of 1.31 percent (from 299.089 to 303.005). Below are the actual December 2022 to December 2023 changes in individual food items which are prominent in Super Bowl celebrations.

Avocado prices, according to the Mexico Products CPI, have risen 27.2 percent from December 2019 (83.80) to December 2023 (106.554). From December 2022 (95.922) to December 2023, they rose 11.1 percent. 

Determining the average price of a delivery pizza is more difficult. In local contexts, the price of a slice of pizza can act as an inflationary benchmark of sorts, but estimates indicate that from February 2023 to February 2024 the price of an average delivery pizza has increased from $17.81 to $18.33, or 2.9 percent. 

Comparing these numbers with the year-over-year headline and core CPI numbers (3.4 percent and 3.9 percent, respectively), two significant insights emerge.

• The individual price changes above, over a four- and one-year period, frequently underscore how price indices obscure trends in prices which, at specific times can be considerably graver than the headline figures suggest.

• Second, that one needn’t be anywhere near Las Vegas to feel the damage of expansionary monetary policies acutely.

Well over a year after the lies about Vladimir Putin, gas station owners, ocean shippers, and corporate profits have been told and forgotten, and despite the cynical political impudence of calling a massive green spending bill an “Inflation Reduction Act,” spending Super Bowl Sunday at home in 2024 will be much more expensive than it was in 2023, and vastly more than it was four short years ago.

Meteorologists on X are watching the next big winter storm that could dump snow across the Mid-Atlantic and Northeast next week. 

On Wednesday, Arcfield Weather’s report showed above-normal temperatures across the eastern half would end by late weekend. 

Spring is cancelled per latest European Weeklies Temp Anomalies forecast. It is like this for the majority of March. pic.twitter.com/HSwG7ZwCNX

— Spot On Weather (@eulermatthew4) February 9, 2024

Bloomberg noted in a report, “The girdle of Arctic air around the north pole, known as the polar vortex, is poised to weaken and send a cold blast into the US. And because the El Niño weather pattern is in full force, the deep freeze could collide with stormy conditions on the East Coast to unleash snow this month.”

“I think there are a couple snowstorms down the pipe,” said Paul Pastelok, lead long-range forecaster for AccuWeather. 

Pastelok continued: “A big storm or two is not off the charts here for February or early March.”

Meteorologists on X have posted a series of models that forecast accumulating snow early next week for the Mid-Alantic to Northeast regions. 

Winner, Winner, Chicken Dinner…
We have a model consensus!

The overnight runs of the European and GFS models have focused in on NEPA as ground zero for snow. Some details still need to be worked out in regards to storm strength, dry slot location, and amount of moisture that… pic.twitter.com/zsVeA04F7p

— Mark Margavage (@MeteoMark) February 9, 2024

Storm Mon/Tue next week will set the table for a pattern change that ‘could’ produce a big snow later this month. This one will be a rain to snow thing for Baltimore. Hard to get big accumulations like that, but could be snowing for part of the Tue AM commute. Stay tuned…❄️🚂 pic.twitter.com/Yydv3eaMDl

— Tony Pann (@TonyPannWBAL) February 9, 2024

6z GEFS vs EPS mean snowfall. GEFS is further south with southern PA to NYC in the bullseye zone. EPS is further north with a State College to Boston bullseye. Leaning towards EPS. Update with the 12z model runs. #MdWx pic.twitter.com/OAMMCfu9Xc

— Ryan Kane (@ryankanerWX) February 9, 2024

Threat for #snow increasing across the Ohio Valley on Monday?

If we can get this system to phase, we’d have just enough cold air for ❄️.

A lot of moving parts here, not a slam dunk yet, but latest @CIPSAnalogs show historically this set up produces #MOwx #ILwx #INwx #OHwx pic.twitter.com/c0s7mlGB7c

— Kirk 🇺🇸 Hinz | BAM ⚡️Weather (@Met_khinz) February 8, 2024

Spring is canceled? 

🚨Spring is Canceled🚨

A second Major Sudden Stratospheric Warming event looms for the 3rd week of February. This means the risk for cold weather in the US is enhanced right through March, so any chance of an early Spring is now 100% off the table. The Groundhogs were wrong. Oh… https://t.co/IMEIFxQgPK pic.twitter.com/jcE46RsOu2

— Mark Margavage (@MeteoMark) February 9, 2024

Meanwhile, Punxsutawney Phil – the famous groundhog weather oracle – might have been wrong in his early spring forecast last Friday. 

Yesterday saw the third largest net inflow into spot Bitcoin ETFs, totaling over $400 million with iShares Bitcoin Trust (IBIT) seeing over $200 million inflows alone, dominating the $101 million outflow from GBTC…

Source: Bloomberg

The net inflow yesterday meant that 8,698 BTC were taken off the market and put into cold storage.

“We think bitcoin could be one of the most talked about brands on Wall Street in the next decade,” Mike Willis, CEO and founder of ONEFUND, told CoinDesk.

“You’re at the beginning of the ‘bitcoin era’ on Wall Street.” Although remiss to offer a price prediction, Willis said he thinks bitcoin could easily catch up to gold’s market cap.

That has pushed the total net inflow into spot bitcoin ETFs up to $2.23 Billion…

Source: Bloomberg

IBIT also became the first ETF to exceed GBTC’s daily trading volume. However, the total trading volume of all 11 spot Bitcoin ETFs fell below $1 billion for the first time since they launched.

Source: Bloomberg

The result of all this is that bitcoin prices have soared back up near $48,000, erasing all the post-launch ‘sell the news’ losses…

Source: Bloomberg

Interestingly, this is a seasonally positive period for crypto:

“The next few days are of paramount statistical importance as bitcoin tends to rally by +11% around Chinese New Year, starting on February 10 (Saturday),” Markus Thielen, head of research at Matrixport and founder of 10x Research.

“During the last 9 years, Bitcoin has been up every time traders would have bought bitcoin 3 days before and sold it ten days after the start of the Chinese New Year.”

Coinbase just issued a report that suggests Bitcoin spot ETF activity accounts for around 10-15% of total bitcoin trading activity across centralized exchanges.

Smaller tokens such as Ether, Solana and Cardano also pushed upward…

Source: Bloomberg

As CoinTelegraph reports, Coinbase analysts say there have been more important crypto themes emerging in the aftermath of the spot Bitcoin ETF launches in the U.S., including the rising decentralized finance (DeFi) activity, which could “add meaningfully” to the value proposition for Ether.

Ethereum community member and investor Ryan Berckmans believes that Ethereum’s switch from a proof-of-work to a proof-of-stake consensus mechanism could drive ETH’s price to as high as $27,000 during the bull cycle.

“Bitcoin appears set to resume its march up after the Grayscale outflows finally tapered off,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider Orbit Markets.

The “halving narrative” will gather momentum, potentially taking Bitcoin past $50,000 in the next few weeks, she said.

The quadrennial halving cuts the quantity of Bitcoin that miners receive for operating power-hungry computers that secure the network by solving complex puzzles.

Halving is key to capping the supply of Bitcoin at 21 million tokens. Rewards drop to 3.125 coins per block from 6.25 coins in the upcoming event.

Previous halving events “preceded strong bull runs,” a team including DBS Bank Ltd. Chief Economist Taimur Baig wrote in a note.

“There is a simple economic reason why prices should rise. As the reward for mining decreases, the price for mining output (namely Bitcoin) must increase to compensate and not trigger a withdrawal of computational resources by miners,” the team said.

With the growing demand from institutional investors, the diminishing supply could help BTC hit new market highs.

As we previewed yesterday, today’s most anticipated economic event was the annual revision to the BLS’s seasonal adjustment factors used to calculated the seasonally adjusted headline and core CPI data, and while traditionally this is a non-event for the market, with all attention on the trend in CPI (not to mention Fed governor Waller building up expectations when he said on Jan 16 that “one piece of data I will be watching closely is the scheduled revisions to CPI inflation due next month. Recall that a year ago, when it looked like inflation was coming down quickly, the annual update to the seasonal factors erased those gains”) and also due to the substantial upward revisions last year which had a major impact on Fed market pricing, there was a lot of attention being paid to today’s data.

In retrospect, there should not have been, because as we previewed last night, the annual revision was a nothingburger with revised core inflation at the end of 2023 unchanged compared to what was previously reported on a 3M annualized basis as shown below…

… while the monthly core data was also unchanged for much of late 2023, and the modest changes that did take place in headline MoM CPI did nothing more than to smooth the data.

The uneventful revision may come as a relief to the Fed after last year’s upward revisions which some had expected to be repeated, at a time when inflation has been dropping rapidly according to BLS measurements (whether these are accurate before any seasonal adjustments are applied is a different question entirely).

The results certainly came as relief to the market which sent S&P futures surging to a new all time high, rising as high as 5,043 and yields and the USD dipped sharply when headlines hit that the December Headline CPI print was revised lower by 0.1%, however much of the move was unwound when it became clear that there were virtually no changes between the pre and post-revision data.

Authored by Lance Roberts via RealInvestmentAdvice.com,

The cost of housing remains a hot-button topic with both Millennials and Gen-Z. Plenty of articles and commentaries address the concern of supply and affordability, with the younger generations getting hit the hardest. Such was the subject of this recent CNET article:

“The housing affordability crisis means it’s taking longer for people to become homeowners — and that’s especially impacting millennials and Gen Zers, economically disadvantaged families, and minority groups. There’s not one single driver of the crisis, but several colliding elements that put homeownership out of reach: rising home prices, high mortgage interest rates and limited housing supply. That’s on top of myriad financial challenges, including sluggish wage growth and increasing student loan and credit card debt among middle-income and low-income Americans.”

The chart below of the housing affordability index certainly supports those claims.

As noted by CNET, there are many apparent reasons causing housing to be unaffordable, from a lack of supply to increased mortgage rates and rising prices. Over the last couple of years, as the Fed aggressively hiked interest rates, the supply of homes on the market has grown. Such is because higher interest rates lead to higher mortgage rates and higher monthly payments for homes. It is also worth noting that previously, when the supply of homes exceeded eight months, the economy was in a recession.

At the same time, higher interest rates and increased supply should equate to lower home prices and, therefore, create more “affordability.” As shown, such was the case in prior periods, but post-pandemic housing prices skyrocketed as “stimulus checks” fueled a rash of buyers.

As is always the case with everything in economics, price is ALWAYS a function of supply versus demand.

A Host Of Bad Decisions Created This Problem

The following economic illustration is taught in every “Econ 101” class. Unsurprisingly, inflation is the consequence if supply is restricted and demand increases.

While such was the case following the economic shutdown in 2020, the current housing affordability problem is a function of bad decisions made at the turn of the century. Before 2000, the average home buyer needed good credit and a 20% down payment. Those constraints kept demand and supply in balance to some degree. While housing increased with inflation, median household incomes could keep pace.

However, in the late 90s, banks and realtors lobbied Congress heavily to change the laws to allow more people to buy homes. Alan Greenspan, then Fed Chairman, pushed adjustable-rate mortgages, mortgage companies began using split mortgages to bypass the need for mortgage insurance, and credit requirements were eased for borrowers. By 2007, mortgages were being given to subprime borrowers with no credit and no verifiable sources of income. These actions inevitably led to increased demand that outpaced available supply, pushing home prices well above what incomes could afford.

This episode in the housing market resulted from zero-interest policies by the Federal Reserve. That policy and massive liquidity injections into the financial markets brought hoards of speculators, from individuals to institutions. Institutional players like Blackstone, Blackrock, and many others purchased 44% of all single-family homes in 2023 to turn them into rentals. As prices rose, advances like AirBnB brought more demand from individuals for rentals, further reducing the available housing pool. Those influences lead to even higher prices for available inventory.

Notably, it isn’t a lack of housing construction. The Total Housing Activity Index is not far from its all-time highs following the 2020 pandemic “housing rush.” The issue is the removal of too many homes by “non-home buyers” from the available inventory.

Furthermore, existing home sales are absent. Current homeowners are unwilling to sell homes with a 4% mortgage rate to buy a home with a 7% mortgage. As shown, existing home sales remain remarkably absent.

All of these actions have exacerbated the problem. At the root of it all is the Federal Reserve, keeping interest rates too low for too long. Oversupplying liquidity and creating repeated surges in home prices. It is not a far stretch to realize the bulk of the housing problem directly results from Governmental forces.

So, what does this have to do with the Democrats?

Dems Want To Make The Housing Problem Worse

Sen. Elizabeth Warren, D-Mass., and three other Democratic lawmakers are pushing Jerome Powell to lower interest rates at the upcoming Fed meeting to make housing more affordable.

“As the Fed weighs its next steps in the new year, we urge you to consider the effects of your interest rate decisions on the housing market. The direct effect of these astronomical rates has been a significant increase in the overall home purchasing cost to the average consumer.” – Letter To Jerome Powell

As discussed above, lowering interest rates is not the solution to lowering housing prices. Lower interest rates would bring more buyers into a market already short inventory, thereby increasing home prices. We can already see the impact of lower mortgage rates on home prices just since October. Prices rose as yields fell on hopes the Federal Reserve would cut rates in 2024. If mortgage rates revert to 4%, where they were during most of the last decade, home prices will significantly increase.

The Terrible Terrible Solution

There is only one solution to return home prices to affordability for most of the population. That is to reduce the existing demand. If Elizabeth Warren is serious about doing that, passing laws today would go a long way to solving that problem.

1. Restrict corporate and institutional interests from buying individual homes.

2. Increase the lending standards to require a minimum 15% down payment and a good credit score. (such would also increase the stability of banks against another housing crisis.)

3. Increase the debt-to-income ratios for home buyers.

4. Return the mortgage market to straight fixed-rate mortgages. (No adjustable rate, split, etc.)

5. Require all banks that extend mortgages to hold 25% of the mortgage on their books.

Yes, those are very tough standards to meet and initially would exclude many from home ownership. But, home ownership should be a demanding standard to meet, as the cost of home ownership is high. For the individual, such standards would ensure that home ownership is feasible and that such ownership, along with the subsequent fees, taxes, maintenance costs, etc., would still allow for financial stability. For the lenders, it would reduce the liability of another financial crisis to almost zero, as the housing market’s stability would be inevitable.

But most importantly, such strict standards would immediately cause an evaporation of housing demand. With a complete lack of demand, housing prices would fall and reverse the vast appreciation caused by a decade of fiscal and monetary largesse. Yes, it would be a very tough market until those excesses reverse, but such is the consequence of allowing banks and institutions to run amok in the housing market.

Naturally, none of this will ever happen or considered, as there is too much money in the housing market for corporations, institutions, and banks to feed on. But one thing is for sure: if the Democrats get their wish and the Fed cuts rates again, housing prices will become even more unaffordable.

US futures ticked higher again on Friday morning ahead of the release of CPI revision data (previewed here), assuring that the S&P 500 cash index will rise above the historic 5,000 level when it breaks for trading. S&P 500 futures traded 0.2% higher as 7:50am in New York, while contracts for the Nasdaq 100 Index gained 0.3% as Big Tech stocks made more advances in premarket trading. While Asian stocks fell, weighed by Hong Kong, as China was closed for holidays, European stocks gained paced by the Estoxx 50, where energy sector leads as WTI crude oil futures hold most of Thursday’s 3.2% advance. Meanwhile 10Y interest rates rose again, hitting 4.18%, leaving their yield up about 17 basis points in the past five days, as the US dollar and oil traded flat. Today, we get receive CPI revisions (updated seasonal factors and weights) where few expect any major changes but according to JPM, expect “headline inflation rates for recent months to be lowered somewhat on net.” The next key data point will be the regular US inflation print due Tuesday.

With the S&P set to close well above 4958, it will make it 14 up weeks out of the past 15…

… and it will match the best 15-week stretches in history according to Sentiment Trader.

In premarket trading, Expedia Group shares fell after the online travel agency reported fourth-quarter gross bookings that slightly missed estimates, and named Ariane Gorin chief executive officer of the online travel company, while Pinterest made steep losses after the social-media company’s revenue fell short of estimates.

• Affirm Holdings (AFRM US) sank 10% after the buy-now, pay-later firm’s 2024 forecast for annual transaction volume came in below expectations. Analysts noted that the guidance appeared conservative as they do not see a slowdown in volumes in the second-half of the year.
• Cryptocurrency-linked stocks rallied as Bitcoin rises past the $46,000 mark. Stocks gaining include: Marathon Digital (MARA) +11%, Riot Platforms +9%
• Cloudflare (NET) soars 27% after reporting revenue that beat expectations, with analysts noting that sales were boosted by large new deals and renewals.
• Masonite International (DOOR) soars 35% after agreeing to be bought by Owens Corning (OC).
• PepsiCo (PEP) slips nearly 1% after providing a full-year sales forecast light of analysts’ estimates.
• Take-Two Interactive (TTWO US) fell 8.9% after the video-game company slashed its full-year net bookings forecast below consensus estimates. Analysts flagged softness in NBA 2K24 sales and the pushback of a planned release to next year, though were still confident in GTA VI releasing in FY25.

Cryptocurrency-linked companies rallied on Friday as Bitcoin surged past the $47,000 mark after the latest flow data revealed the 2nd biggest net inflow on record into bitcoin ETFs as GBTC outflows trickle to a halt.

The BLS will release its annual revisions to its consumer price index at 8:30 a.m. New York time. Last year, the update was significant enough to cast doubt on overall inflation progress and traders were speculating again that the recalculations might sway views over when the Federal Reserve will cut interest rates (full review here). “This could have important implications for the Fed,” wrote analysts at Rabobank in a research note. “It could increase or decrease the confidence that the FOMC has in a sustainable return to 2% inflation.”

Back to markets, on Thursday the S&P 500 briefly hit 5,000 for the first time after a massive buy program lifted the market as if just for that one reason, before closing little changed. US equities have posted only one weekly drop since late October and the gauge has more than doubled from its March 2020 pandemic-low — driven by expectations for a soft economic landing and optimism about the impact of artificial-intelligence.

“The equity market is responding to the positive data story and quite incredibly continues to march on,” said Charles Diebel, at Mediolanum International. “If growth holds up and there is a soft or no landing, that’s good for equities. And if something bad happens, the Fed will cut rates.”

Despite some soft earnings this season, US stocks have been buoyed by the technology sector and strong economic data, which has kept the benchmark rallying this year. The fun may be ending however: according to Bank of America’s Michael Hartnett, the rally is getting close to triggering sell signals. The bank’s custom bull-and-bear indicator is nearing a reading that could be interpreted as a contrarian signal to sell, he said.

Europe’s Stoxx 600 was little changed after contrasting updates from heavyweights Hermes and L’Oreal. L’Oreal shares tumbled 7% as Chinese shoppers reined in travel spending, while Tesco advanced after Barclays said it will acquire much of the supermarket chain’s banking business. Hermes rallied after reporting surging sales at the end of last year.  Here are some of the biggest European movers on Friday:

• Hermes shares gain as much as 6.1% to hit a fresh all-time high after the maker of Birkin handbags posted sales figures which exceeded expectations for the fourth quarter, raising hopes of further growth due to its exposure to ultra-rich clients.
• Tesco shares rise as much as 2.4% after Barclays said it will acquire the grocer’s retail banking unit, which includes credit cards, unsecured personal loans, deposits and the operating infrastructure. Barclays shares fall 1.4%
• Ubisoft shares soar as much as 17% after the French video-game company said its bookings in the current quarter will be “sharply up,” boosted by a slew of launches such as Skull & Bones and Prince of Persia: The Lost Crown.
• Yara shares jump as much as 7.9% after the Norway-based fertilizer maker beat fourth-quarter adjusted Ebitda estimates. Sector peers OCI and K+S also gain.
• Carl Zeiss Meditec shares surge as much as 13% after the German medical optics company reported Ebit for the first quarter that beat the average analyst estimate. The results were “decent,” given the low expectations, Bernstein analysts said.
• Hexatronic shares jump as much as 36% after the Swedish fiber-optics firm reported its latest earnings described by Redeye as much better than feared, with cash flow particularly strong.
• AMS-Osram shares gain as much as 19%. The company reported a good profitability outlook despite soft demand, which should be week received, according to Vontobel.
• Coloplast shares jump as much as 11% after the Danish ostomy and continence care company reported stronger-than-expected margin in the first quarter. The Ebit margin is “solidly in the middle of the full-year guidance range,” according to Bernstein analysts.
• L’Oreal shares slide as much as 7.7% after the beauty company’s like-for-like sales miss stoked concerns over a slowdown in its luxury and Asian businesses.
• Deutsche PBB shares drop as much as 3.9%, hitting another all-time low amid concerns about exposure to commercial real estate, which have also hit its European peers this week.
• Delivery Hero shares fall as much as 6.5% after Bloomberg reported that its major rivals in Southeast Asia, Grab and GoTo, have restarted talks for a merger.
• EMS-Chemie shares fall as much as 5.4%, the most since April, after the Swiss chemical firm’s outlook disappointed, with analysts pointing to a tough operating backdrop.
• Verbund shares decline as much as 9.5% to hit its lowest level since April 2021, after the power producer warned that earnings in FY24 will be significantly below market expectations because of the rapid drop in wholesale electricity prices and emission allowances, as well as a smaller contribution from its Grid segment.
• Legal & General shares dip as much as 3.7% after Citi analyst Andrew Baker opens a 30-day downside catalyst watch.

Earlier in the session, Asian stocks fell weighed by Hong Kong, while many markets including China, Taiwan, South Korea, Indonesia, the Philippines and Vietnam were shut for public holidays. The MSCI Asia Pacific Index slipped as much as 0.4%, dropping for a second day, as investors turned cautious about Chinese markets ahead of the multi-day Lunar New Year holiday. Alibaba and Toyota were among the biggest drags. The Hang Seng dropped 0.8% and Hang Seng China Enterprises Index slid 1.1%, both falling a third straight day. Mainland markets were already shut for the holiday, which meant an absence of southbound flows as a potential support. Meanwhile, Japan’s Nikkei 225 breached 37,000 for the first time since February 1990 amid a weaker currency and earnings updates. In Australia, the ASX 200 was rangebound amid light catalysts, while RBA Governor Bullock reiterated a focus on bringing inflation down but noted that the Board hasn’t ruled in or out a further rate hike and even touched upon cuts.

Stocks dropped in Hong Kong as there is “no further positive policy from the mainland, and no stock connect inflows,” said Steven Leung, executive director at UOB Kay Hian Hong Kong. There seemed to be limited buying interest in Hong Kong “other than that from the southbound stock connect recently.”

In rates, treasuries were steady, with US 10-year yields rising 1bps to 4.17%. Bunds and gilts have pared most of an earlier fall. The Bloomberg Dollar Spot Index is flat. The kiwi tops the G-10 FX pile, rising 0.7% versus the greenback after economists at ANZ said the RBNZ will resume hiking interest rates later this month.

In rates, treasuries were marginally cheaper on the day, still inside weekly ranges, with yields higher by 1bp-2bp across the curve. US 10-year around 4.17% is ~1bp wider vs bunds and gilts in the sector; US 5s30s is little changed with corresponding German and UK curves flatter by ~3bp on the day. By contrast, core European rates see curve-flattening as German and UK long end outperform.

In commodities, oil prices edge up, with WTI rising 0.2% to trade near $76.30. Spot gold falls 0.1%. Bitcoin jumps 2.9%.

Market Snapshot

• S&P 500 futures little changed at 5,019.50
• STOXX Europe 600 little changed at 485.36
• MXAP down 0.1% to 167.34
• MXAPJ down 0.2% to 511.59
• Nikkei little changed at 36,897.42
• Topix down 0.2% to 2,557.88
• Hang Seng Index down 0.8% to 15,746.58
• Shanghai Composite up 1.3% to 2,865.90
• Sensex up 0.3% to 71,615.71
• Australia S&P/ASX 200 little changed at 7,644.84
• Kospi up 0.4% to 2,620.32
• German 10Y yield little changed at 2.36%
• Euro little changed at $1.0775
• Brent Futures little changed at $81.66/bbl
• Gold spot down 0.1% to $2,032.52
• U.S. Dollar Index little changed at 104.15

Top Overnight News

• The Biden administration is considering restrictions on imports of Chinese “smart cars” and related components that would go beyond tariffs to address growing US concerns about data security, according to people familiar with the matter. BBG
• China’s property crisis is starting to ripple across the world. “For Sale” signs on buildings from Mayfair to Toronto are popping up as hard-pressed Chinese investors and creditors try to raise cash. Sales prices will help put hard numbers on just how much trouble the wider industry is in. BBG
• China’s new yuan loans for Jan were ahead of plan at CNY4.92B (vs. the Street CNY4.5B and up from CNY1.1T in Dec) while aggregate financing spiked to CNY6.5T (nearly CNY1T above plan). SCMP
• Financial conditions in Japan will remain easy for the time being even after the Bank of Japan puts an end to the world’s last negative rate regime, Governor Kazuo Ueda said. BBG
• Barclays has agreed to buy the bulk of Tesco’s banking business in a £600mn deal, as UK supermarket chains accelerate their retreat from an ill-fated expansion into financial services. Barclays said on Friday that it would take on Tesco Bank’s credit cards and unsecured personal loans, totaling about £8.3bn of lending balances. It has also signed a 10-year distribution deal to sell financial products under the Tesco brand. FT
• BOE policymaker Jonathan Haskel, who voted to raise interest rates last week, said he is encouraged by signs that Britain’s inflation pressures might be on the wane but he would need more evidence of a cool-down before changing his stance. RTRS
• Joe Biden’s attempt to address suggestions he has a memory issue backfired with a new gaffe when he confused the leaders of Egypt and Mexico. Biden had summoned reporters to respond to a DOJ report fueling concerns about his age and insisted that his memory was “fine.” BBG
• New York City’s housing crunch is the worst it has been in more than 50 years. The portion of rentals that were vacant and available dropped to a startling 1.4 percent in 2023, according to city data released on Thursday. It was the lowest vacancy rate since 1968 and shows just how drastically home construction lags behind the demand from people who want to live in the city. NYT
• The special counsel investigating President Biden said in a report released on Thursday that Mr. Biden had “willfully” retained and disclosed classified material after leaving the vice presidency in 2017 but concluded that “no criminal charges are warranted.” NYT

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed and were mostly subdued in holiday-thinned conditions ahead of the Lunar New Year. ASX 200 was rangebound amid light catalysts, while RBA Governor Bullock reiterated a focus on bringing inflation down but noted that the Board hasn’t ruled in or out a further rate hike and even touched upon cuts. Nikkei 225 breached 37,000 for the first time since February 1990 amid a weaker currency and earnings updates. Hang Seng was pressured amid losses in property and tech in a shortened trading session and with mainland participants already away for Chinese New Year celebrations.

Top Asian News

• US President Biden’s administration is said to consider restrictions on China EVs to address data security concerns, while the move would be an additional hurdle beyond tariffs to keep out Chinese smart cars, according to Bloomberg.
• BoJ Governor Ueda said the chances are high for accommodative conditions to stay even if negative rates are abandoned, while he added they will pay heed to the health of the balance sheet if exit from stimulus policy draws near.
• RBA Governor Bullock said the Board is focused on bringing inflation down and recent developments in inflation are encouraging but they have some way to go to meet the inflation target and noted while there are some encouraging signs, Australia’s inflation challenge is not over. Bullock also stated the Board hasn’t ruled out a further increase in interest rates but neither has it ruled it in, while she added that inflation doesn’t need to be in the 2%-3% band for them to think about rate cuts and if consumption slows more quickly than expected, it will be an opportunity to cut rates.

European bourses are mixed and trading around the unchanged mark, following a mostly higher APAC lead, with slight underperformance in the CAC 40, hampered by losses in L’Oreal (-6.2%) post-earnings. European sectors are mixed; Healthcare is propped up by gains in Carl Zeiss Meditec (+9.4%) after it reported strong results. Utilities are on the back foot, after Enel (-0.9%) received a downgrade at RBC. US Equity Futures (ES U/C, NQ +0.2%, RTY +0.3) are on a mixed footing, with overall price action mirroring that seen in Europe; Expedia (-13.9%) is lower after it reported a deeper than expected loss in FCF; Take-Two Interactive (-8.6%) suffers after cutting Net Bookings guidance.

Top European News

• UK’s Ofgem says they are considering new rules to reduce the consumer cost which arises from supplier failures, costs claimed under a solar levy would be a liability of the failed supplier.
• Franklin Templeton’s Head of European Fixed Income Zahn says BoE probably needs to cut rates sooner than peers; says he is overweight UK Government bonds.

FX

• The Dollar is contained within yesterday’s 103.95-104.43 range and in close proximity to the 100DMA at 104.17 ahead of US CPI revisions. A dovish release could see a breach of 104.00 and a test of several DMAs with the 200DMA at 103.60; whilst a hawkish release could see a retest of the recent YTD peak at 104.60.
• EUR is yet to break out of yesterday’s 1.0741-1.0788 range. Likely to remain at the whim of the USD. Upside sees 100DMA at 1.0787.
• Steadier trade for USD/JPY after printing a fresh YTD high at 149.57 overnight. Technicians highlight the importance of a close above the 76.4% fib of the Nov-Dec’24 move at 149.17. Resistance ahead of 150.00 comes via 27th Nov. high at 149.67.
• The Kiwi is the G10 outperformer after ANZ bank forecasted that the RBNZ is to raise the OCR in Feb and April; currently 0.614
• PBoC set USD/CNY mid-point at 7.1036 vs exp. 7.1996 (prev. 7.1063).
• Mexican Central Bank kept its interest rate at 11.25%, as expected, with the decision unanimous and it removed the previous guidance about needing to hold the key rate for some time.

Fixed Income

• USTs are at the unchanged mark as relief from the well-received 30yr auction, making it three from three for the week, proved fleeting with focus switching from supply to the US CPI seasonal adjustment; currently flat in 110-22 to 110-30 bounds.
• Bunds are contained/incrementally softer with specifics light into the US main event. Yields are mixed and exhibit no clear bias given the overall tone but the session’s 133.23-133.61 bound includes a new WTD & YTD trough.
• Gilt price action is in-fitting with peers into the US session. BoE’s hawkish dissenter Haskel spoke pre-open and largely echoed the extensive remarks from peer Mann on Thursday; made a new WTD & YTD trough of 97.45.

Commodities

• Crude is holding near yesterday’s highs which saw the contracts settle higher by almost USD 2.50/bbl apiece amid broadening concerns of a widening Middle East conflict as Israel and Hamas have yet to come to a ceasefire agreement; Brent Apr trades around 81.75/bbl (81.36-81.84/bbl range).
• Horizontal trade across precious metals amid light newsflow and a contained Dollar; XAU dipped back under its 50 DMA (USD 2,033.84/oz) but remains within yesterday’s range (USD 2,020.25-2,038.79/oz).
• Mostly softer trade across base metals, in part amid the buoyant Dollar, whilst Chinese markets have also shut for some 10 days amid the Chinese New Year celebrations.

Earnings

• PepsiCo Inc (PEP) – Q4 2023 (USD): core EPS 1.78 (exp. 1.72), Revenue 27.9bln (exp. 28.4bln); plans to buyback around USD 1bln in shares. Shares -1.7% in pre-market trade
• Expedia Group Inc (EXPE) – Q4 2023 (USD): Adj. EPS 1.72 (exp. 1.68), Revenue 2.89bln (exp. 2.88bln). Negative free cash flow USD 415mln (exp. negative USD 192.6mln). Gross bookings USD 21.67bln (exp. 22.0bln). Announces CEO transition plan with Ariane Gorin to succeed Peter Kern as CEO. (Newswires) Shares -14.1% in pre-market trade
• Take-Two Interactive Software Inc (TTWO) – Q3 2024 (USD): EPS -0.54, Revenue 1.37bln (exp. 1.34bln); currently working on a significant cost reduction programme across the entire business to maximise margins. Cuts FY24 net bookings view to 5.25-5.3bln (prev. 5.45-5.55bln, exp. 5.48bln). (Newswires) Shares -8.5% in pre-market trade
• Hermes (RMS FP) – Q4 (EUR): Revenue 3.36bln (exp. 3.29bln). Sales at constant FX +17.5% (exp. +13.7%). FY recurring operating income 5.65bln (exp. 5.52bln). Proposes exceptional dividend of EUR 10/shr. Q4 Americas revenue +21.6% (exp. 12.1%). Q4 total Europe revenue +18.6% Y/Y. Q4 total Asia revenue +14.8% Y/Y. Confirms guidance. Executive Chairman says the Co. is very confident about the Chinese market; sees no interruptions in US trends (Newswires) Shares +4.5% in European trade
• L’Oreal (OR FP) – Q4 2023 (EUR): Sales 10.61bln (exp. 10.89bln), +6.9% (exp. +9.56%). Q4: North Asia comp. sales -6.2%(exp. +7.29%). Europe sales 3.27bln, +11.6%. North America sales 2.84bln, +9.4%. Luxe sales 4.1bln, +0.4% (exp. +4.42%). Consumer product sales 3.7bln, +7.7%. Professional products sales 1.23bln, +6.4%. Dermatological beauty sale 1.5bln, +27.3%. FY23: EPS 12.08 (exp. 13.15), +7.3%. Sales 41.18bln (exp. 44.5bln), +7.3%. Operating margin 19.8%. Op. 8.1bln (exp. 9.08bln, prev. 7.4bln Y/Y). Notes of the stagnating beauty market in China. (FT/Newswires) Shares -5.8% in European trade
• Ubisoft (UBI FP) – Q3 2023-24 (EUR): Sales 606mln (exp. 697mln, prev. 773mln), Net Bookings 626mln (prev. 727mln). Q4 Net Bookings seen “sharply up”, leading to a record annual net bookings figure. Reaffirms FY targets. “Moving forward, we’re gearing up for a very promising line-up for fiscal year 2025, including the upcoming release of Star Wars Outlaws’ in 2024″ (Newswires/ Ubisoft) Shares +17.5% in European trade

Geopolitics: Middle East

• US President Biden said the conduct of Israel’s response in the Gaza strip has been over the top and he is pushing very hard now to get a sustained pause in Gaza.
• White House said negotiations are ongoing regarding a hostage release and ceasefire deal, while it added that Secretary of State Blinken made it clear the US has concerns regarding Rafah operations. The White House also said that President Biden and German Chancellor Scholz will discuss Ukraine, the Middle East and the Red Sea shipping attacks.
• US Central Command said its forces conducted seven self-defence strikes against four Houthi unmanned surface vessels on Thursday and conducted strikes against seven mobile anti-cruise missiles that were prepared to launch against ships in the Red Sea.
• “Iranian militias move weapons and ammunition from Deir Ezzor to fortified Hezbollah positions on the Syrian-Lebanese border in anticipation of US strikes”, according to Sky News Arabia

Geopolitics: Other

• Russian President Putin said Russia has not yet achieved its goals in Ukraine and suggested the US should encourage Ukraine to resume talks, while he was said to sincerely believe that Russia has a historic claim to land in Ukraine. Putin said the US and Russia hold contacts at different levels and that Russia has no interest in Poland, Latvia or anywhere else, as well as noting that WSJ reporter Evan Gershkovich may be freed if the special services agree. Furthermore, he said those in power in the West have come to realise it is impossible to inflict strategic defeat on Russia and are wondering what to do next, while he added that they are ready for this dialogue.

US Event Calendar

• Revisions: CPI

Central Bank Speakers

• 13:30: Fed’s Logan Speaks in Moderated Q&A

DB’s Jim Reid concludes the overnight wrap

Following news that Deutsche Bank AG, UBS Group AG, and Societe Generale SA have planned to reduce bonus payouts for investment bankers, Barclays Plc has now joined the roster of European banks reducing bonuses for bankers. However, Barclays is taking a step further by altogether scrapping bonuses for some bankers amidst a persistent downturn in capital markets activity and dealmaking.

Based on people familiar with discussions, Bloomberg has reported Barclays executives plan to decrease the firmwide bonus pool because of the downturn in capital markets. The move won’t affect junior bankers, and top dealmakers might receive a 10% reduction, but low-tier investment bankers will receive zero payouts this year. 

The dearth of deals turned 2023 into one of the most challenging years for European banks. 

Names like Societe Generale, UBS, and Deutsche have all recently planned to lower their overall bonuses for 2023. 

Deutsche Bank Chief Financial Officer James von Moltke said last month that bonus pay will “reflect performance in 2023”. In other words, what have you done for us lately?

“And as you have seen in a number of different areas of the investment banking business in particular in 2023, it has been a difficult market,” Moltke added. 

According to analyst data compiled by Bloomberg, Barclays’ dealmaking and underwriting businesses are expected to bring in just £1.86 billion ($2.34 billion) for 2023. This would be a 16% decline compared to a year earlier and about half of what the unit brought in for 2021. 

“It’s been similar to what we experienced in Q2 and Q3 — not quite enough volatility for markets, but a little too much for banking,” Marina Shchukina, head of investor relations, said of the bank’s fourth-quarter earnings report last month. 

Shchukina added: “We hope the recovery will be forthcoming in 2024.”

Last year, Barclays bankers also faced a disappointing bonus payout when the bank considered reducing bonuses by upwards of 40%.  

It echoes across the Atlantic in the US, where Wall Street bankers could see their payouts for 2023 plunge by as much as 25%, according to a November report from compensation consultant Johnson Associates Inc. Bonus for traders are also expected to slump. 

Via SchiffGold.com,

Total gold demand hit an all-time high in 2023, according to a recent report released by the World Gold Council.

Last week, the World Gold Council (WGC) released its Gold Demand Trends report, which tracks developments in the demand for and use of gold around the world. Excluding over-the-counter (OTC) trade, 2023 gold demand fell slightly from 2022 to just under 4,500 tonnes. With OTC demand accounted for, last year’s demand peaked at 4,899 tonnes, the highest figure ever recorded.

Investment in bars and coins varied across the world. While demand in Europe fell in 2023, investment demand in India, Turkey, and the United States increased by 185, 160, and 113 tonnes, respectively. The WGC also notes that 2023 saw little overall change in gold mine production and stable demand in the jewelry sector.

Also of note was gold’s record high price at year-end. At $2,078.4 per oz, gold finished the year 15% higher than it started. Its average price throughout 2023— $1,940.53 per oz— also broke records, exceeding 2022’s average price by 8%.

In a year of monetary tumult, central bankers themselves turned to gold, driving over 21% (1,037 tonnes) of 2023’s total demand and nearly setting a new demand record of their own. Central banks often hold a share of their foreign reserves in gold as a bulwark to economic and geopolitical instability. The Federal Reserve, for example, holds nearly 70% of its foreign reserves in gold.

Turkey’s central bank increased its share of foreign reserves held in gold by 0.73% in Q4 of last year, which is by far the largest increase of any country. This increase is not surprising, since Turkey’s economy has suffered a series of blows since 2020; recent changes in central bank leadership, high inflation, and a weakening currency all contribute to the uncertainty that higher gold reserves may relieve.

Louise Street, a senior analyst at WGC, explains why economic uncertainty is likely to persist this year in a press release associated with the report:

“In addition to monetary policy, geopolitical uncertainty is often a key driver of gold demand, and in 2024 we expect this to have a pronounced impact on the market. Ongoing conflicts, trade tensions, and over 60 elections taking place around the world are likely to encourage investors to turn to gold for its proven track record as a safe haven asset.”

Street’s prediction came only days before Jerome Powell, the chair of the Federal Reserve, announced that the Fed would hold off on interest rate cuts as it evaluates persistent inflation that still plagues the economy. Powell had previously signaled the possibility of rate cuts sometime this spring, leading the market consensus to expect rate cuts at the Fed’s March 2024 meeting. During last week’s Federal Open Market Committee meeting, however, Powell expressed doubts that the Fed will have tamed inflation enough to cut rates in March.

The reaction to Powell’s announcement is illustrative of gold’s hedge against uncertainty. While the stock market plummeted in response to the Fed’s hesitance, the spot price of gold climbed the following day to $2,054 per oz, almost surpassing its 30-day high price.

This resilience is likely what Louise Street has in mind when she predicts high gold demand for the rest of 2024:

“We know that central banks often cite gold’s performance in times of crisis as a reason to buy, which suggests demand from this sector will stay high this year and may help to offset a slowdown in consumer demand due to elevated gold prices and slowing economic growth.”

With the uncertainty of inflation, recessionary pressures, and political conflict around the world, gold may prove to be the best investment in 2024.

By Tsvetana Paraskova of OilPrice.com

Russia’s newest LNG export project, Arctic 2 LNG developed by Novatek, will not be able to start shipments before March as it is still waiting for at least one ice-breaker tanker that’s still in South Korea, Russian daily Kommersant reported on Thursday.

Earlier indications were that Arctic 2 LNG of Russia’s top LNG producer and exporter, Novatek, could begin its first cargo shipments to customers this month.

The U.S. sanctions, however, are holding the project’s start-up and are slowing progress as buyers refuse to take cargoes, according to anonymous sources who spoke to Kommersant.

The first shipment would depend on when the first Arc7 ice-breaker tanker from the South Korean shipyard Hanwha Ocean would arrive at the Russian LNG site on the Gydan Peninsula, the sources with knowledge of the situation told Kommersant. The tanker is still in Korea and even if it begins its journey to Russia now, it would take a month to reach the destination, the sources added.

The U.S. sanctions on Arctic LNG 2 have upended Novatek’s plans for production start-up and export timelines.  

In November, the U.S. Department of State designated limited liability company ARCTIC LNG 2, the operator of the Arctic LNG 2 Project, as part of additional sanctions against Russia “to further target individuals and entities associated with Russia’s war effort and other malign activities.” 

This has led some minority shareholders in the project, including France’s TotalEnergies, to declare force majeure on future deliveries.

Novatek holds a 60% stake in Arctic LNG 2. The other shareholders include CNOOC of China and China National Petroleum Corporation (CNPC), TotalEnergies, and Japanese firms Mitsui Group and Jogmec.  

Potential contract cancellations for the construction of ice-class LNG carriers and U.S. sanctions on Arctic LNG 2 could hamper Russia’s plans to boost LNG sales now that its pipeline route to Europe is largely cut off.