Morning Brief: From Chip Makers to EV Production & What is New in Crypto and Stock Market so Far

Stocks dropped Monday as bond yields hit fresh highs, though markets are shifting their focus to earnings season. The Dow Jones Industrial Average closed down 40 points, or 0.1%. The S&P 500 was flat, while the Nasdaq Composite declined 0.1%.

The 10-year Treasury yield rose to 2.87%, a new pandemic-era closing high, above the previous one of 2.83% hit Thursday before markets closed for Good Friday. Bond yields have jumped recently, as markets expect the Federal Reserve to soon reduce its bond holdings as part of its effort to fight relatively high inflation.

Higher bond yields hurt tech stocks the most because many technology companies are fast-growing and valued on the basis that they’ll churn out a chunk of their profits many years in the future. Higher long-dated bond yields make future profits less valuable. Continue Reading

"If anything occurs in the globe and you ask an economist about the consequences, they will always answer 0.3 percentage points," says Perkins, a 44-year-old managing director at the London-based macroeconomic forecasting agency.He recently spoke on Zoom with Barron's on global inflation, increasing interest rates, the 1970s, and the "Tangible '20s." The following is an edited transcript of our conversation:

Barron’s: How do you see the world economy right now, given the reopening of Covid-19 and Russia's invasion of Ukraine?

Dario Perkins: Prior to the Ukraine crisis, this was the most difficult economy I'd seen in my career to comprehend. It was difficult to determine in late 2020 if the world had completely altered during the epidemic or whether people were over-extrapolating from huge Covid-19 distortions. And plainly, a lot of people in Europe are going to struggle with the reality that the price of half of our energy has suddenly skyrocketed. The problem is that we don't know how long this situation will persist. Barron’s: Do you believe Europe will enter a recession? Where might we observe the first indications of this? Dario Perkins:The European economy is definitely declining right now, because inflation is at 7% to 8% and salaries are rising by 1%. People are feeling the pinch, but we aren't seeing it in the numbers because it is too early. But there has undoubtedly been a short-term recession in the economy — the question is whether it will spill over into a deeper, larger crisis.There's still a chance we'll be able to shrug this off. If this [invasion] is over, the slowness will dissipate rapidly. If this continues for several months, the likelihood of a broad European recession skyrockets. My bet is that once we get out of this situation, inflation will fall swiftly.

On Monday, bitcoin fell to slightly around $39,000, reaching one-month lows, while ether fell below $3,000 as risky assets such as cryptocurrencies continued under pressure from global central banks' plans to tighten monetary policy.

The top digital asset is down 14.9 percent year to far and remains considerably behind its all-time high of $68,990 achieved in early November of last year. Ether, the Ethereum blockchain's underlying asset, plummeted 4.6 percent to $2,927. Due to delays in a network update, the second-largest cryptocurrency may face more challenges.

Bitcoin may struggle this week, according to Yuya Hasegawa, an analyst at crypto exchange Bitbank, "but the upper trend line running through the January and February lows will likely function as a support for the price." Continue Reading

Automakers are struggling to get essential materials for reaching their electric-vehicle targets, especially as costs climb. Ford Motor, General Motors, and Tesla have all recently made deliberate measures to shore up supplies for the production of EV batteries. GM intends to sell one million EVs per year in North America by 2025, whereas Ford intends to sell two million EVs per year by 2026.

General Motors (GM) signed a cobalt supply agreement with global mining conglomerate Glencore on Tuesday (GLEN.London). Cobalt is used in rechargeable EV batteries with metals such as lithium, nickel, and iron. Cobalt is also pricey, which is why GM and others, like Tesla (TSLA), are utilizing alternate battery chemistries that help cut costs, such as lithium-iron-phosphate. Ford (F) said on Monday that it had inked a supply agreement with lithium miner Lake Resources (LKE.Australia). "Ford is sourcing further into the battery supply chain," stated Lisa Drake, vice president of EV Industrialization at Ford, in a corporate news release. "This is one of several deals we're looking into to assist us in securing raw materials to support our rapid EV acceleration."

Battery materials are especially important for Tesla (TSLA), which just sells EVs. According to Wall Street, the EV pioneer will sell around 3.6 million vehicles by 2025. For many years, it has had its own battery manufacturing joint ventures. It has also made agreements with lithium mines to safeguard its raw material supply. Elon Musk, Tesla's CEO, said on Friday that the company might enter the lithium mining business. He was complaining about how pricey the material had grown. By the way, year to date, benchmark lithium prices have risen over 80%. Continue Reading

China's quarterly semiconductor production fell for the first time since early 2019 as consumer electronics demand fell and Covid-triggered lockdowns in locations like Shanghai hampered work.

According to National Bureau of Statistics statistics, integrated circuit output fell 4.2 percent in the first three months of the year, with chipmakers reporting a greater decrease in March. It was the country's poorest quarterly result since the first quarter of 2019 when chip output fell 8.7 percent.

As Xi Jinping's administration attempts to halt the spread of Covid infections, China has placed Shanghai, a vital chipmaking hub, under a month-long lockdown. Due to transportation restrictions enforced by local authorities, the nation's largest chip makers, from Semiconductor Manufacturing International Corp. to Hua Hong Semiconductor, have difficulty getting some components. In the month of March, chip manufacturing fell by 5.1 percent. Continue Reading