A Vast Reservoir.

A third La Niña.

1. Robin Wigglesworth on yesterday’s action in financial markets:

Well that was interesting. After a pretty positive initial reaction to the Federal Reserve’s meeting this week, stocks decided to have a proper tantrum.

It’s telling that none of the market reports come up with any really compelling reasons why the market suddenly went from phlegmatic to freaking out, with a lot of the markets reporter’s trusty “as” and “amid” being trotted out….

We don’t have anything more sensible to say, so we’ll leave it at that, except to note was another day where value stocks generally outperformed, while growth was brutalized in degrees of magnitude almost perfectly correlated to how frothy and speculative it is.

Goldman Sachs’ index of unprofitable technology stocks collapsed by nearly 10 per cent yesterday, taking out the previous low seen in mid-March to trade at the lowest since the summer of 2020, when the trash rally really started to take off. (Sources: penguinrandomhouse.com, ft.com)

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2. Ukrainian soldiers went on the offensive against Russian forces in northeast Ukraine earlier today, seeking to drive them back from outside two key cities, as the grueling battle for control over territory in the east increasingly turns into a brutal war of attrition, with neither side able to score a major breakthrough in the fighting. Ukrainian officials are bracing for what they fear could be even more intense Russian assaults over the weekend, as President Vladimir V. Putin of Russia seeks to claim a victory that he can showcase on Monday, Russia’s Victory Day holiday, an annual celebration of the Soviet defeat of Nazi Germany. Local leaders announced new curfews and issued urgent warnings about the threat of stepped-up Russian missile strikes. (Source: nytimes.com)

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3. Ukrainian officials say Russian forces have taken vast stores of grain from Ukraine and exported them to Russia, exacerbating the risk of shortages and hunger in areas under Russian control. Farmers in Ukrainian territory occupied by Russian forces reported that the Russians were “stealing their grain en masse,” according to a statement released over the weekend by Ukraine’s Ministry of Agrarian Policy and Food. (Source: washingtonpost.com)

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4. Ambrose Evans-Pritchard:

The destruction of Ukraine’s black earth farm belt is even worse than feared. Half of this year’s output will be lost to the world. A global shortage of fertilizers largely caused by Putin’s war will depress yields across the globe.

This might be manageable were it not for everything else going wrong for global food supply. Atmospheric scientists fear that La Niña global weather, already in an extended “double dip”, will morph into a rare triple dip event. This would extend the drought in Latin America’s grain regions, as well as wreaking havoc in the Prairies, and as far away as East Africa and central Asia.

“There is a better than 50 percent chance of a third La Niña, and that has only happened twice in the last 40 years,” said Eric Snodgrass, weather wizard at the agro-industrial giant Nutrien.

La Niña events are caused by unusually cold water in the tropical Pacific, which distorts the Jet Stream at mid-latitudes. “It tends to cause drought in the big global agricultural baskets like the US farm belt. If La Niña maintains its grip, it’ll shave yields by a few bushels per acre and that can have a global impact when markets are tight as they are today,” he said. (Source: telegraph.co.uk)

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