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- Key Metrics for Friday, December 30, 2022
Key Metrics for Friday, December 30, 2022
Crude climbing slowly but no shock from Moscow while cyber attacks may become too expensive to insure.
Andrew Sheves
December 30th, 2022
Good morning. Here are the updated risk metrics for Friday, December 30, 2022.
Russia's oil announcement was a whimper, not a bang, although oil prices have still crept up. Markets in the US have settled into an end-of-year funk while other key metrics are broadly steady. And to add to your 2023 to-do list, the CEO of insurance firm Zurich warns that cyber events will likely be uninsurable in the future.
(Not sure of how to use these metrics in your risk analysis? Read the white paper here and look out for a detailed user’s guide coming in the early New Year.)
Relative Values (90-Days)
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Trends (21-days)
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Commentary and Evaluation
Brent Crude
Brent Crude remains low for this 90-day interval but has increased sharply over the last 21 days, leaving the price to bump up against the mid-range.
What to Watch
Russia’s announcement of retaliatory measures against the EU’s price cap on Tuesday were “largely symbolic” but leaves room for future action. The announced measures prevent the sale of Russian crude to countries applying contract thresholds but these sales have largely stopped already making the announcement largely symbolic. However, the statement by Putin did leave room for future measures but the immediate danger of a price hike due to Russian actions has receded.
Iron and Steel
(No change) Iron and Steel is very high for this 90-day interval. Prices increased moderately, growing steadily over the last 21 days apart from a small dip.
What to Watch
(No change) China’s relaxation of COVID restrictions should allow the country’s construction and manufacturing sectors to swing back into action which would increase the demand for raw materials, increasing demand and prices. However, there is still uncertainty about how effective the COVID easing policies will be meaning that a manufacturing and construction boom in China may be weaker than anticipated.
See Bloomberg for more.
Market Volatility (VIX-US)
Market Volatility (VIX-US) is low for this 90-day interval and the VIX has stabilized after a very turbulent 21 days. Investors seem to be a little despondent as the New Year approaches.
What to Watch
(No change) The range of conditions facing markets and investors remains significant and complex meaning that it’s unclear what will help ease tensions and reduce volatility. Greater clarity from the Chair of the Federal Reserve will help as will the completion of end-of-year layoffs and staffing cuts. The New Year may allow a market reset where risk and uncertainty have been priced in more effectively, reducing turbulence and volatility.
Wheat
Wheat is mid-range for this 90-day interval. Prices increased moderately over the last 21 days.
What to Watch
(No change) Despite agreements brokered by Turkey, Russia is still in a position to impose a blockade on Ukrainian grain exports to exert pressure on Kiev and her allies. Moscow could also conduct military operations to disrupt spring planting meaning that prices could rise again next spring and summer.
Read more in AGWeek.
Ocean Freight (FBX)
Ocean Freight (FBX) is very low for this 90-day interval. Rates have been relatively stable over the last 21 days although there was an uptick in prices around Dec 23 before rates receded.
What to watch
(No change) China’s easing of COVID restrictions should bring manufacturing levels back up. However, recessionary conditions in many countries, plus the difficulty in raising funds while markets are so unsettled (see VIX above), suggest that demand will not be high enough to place significant demands on supply chains.
“Lunar New Year starts on January 22, 2023, and with it, manufacturing and shipping from China and the Far East will come to a halt. Disruptions can last for up to a month. Learn more about Lunar New Year and how to avoid shipping delays here. “
Insurance / Cyber
The CEO of insurance group Zurich warned that cyber attacks are becoming so prevalent that these events will become uninsurable in the future. Cyber attacks by state actors are already excluded by some policies but CEO Mario Greco told the Financial Times that the prevalence of these attacks, and the extent of the damage, means that insurance companies are unable to absorb this amount of exposure.
“What will become uninsurable is going to be cyber,” Greco said, “What if someone takes control of vital parts of our infrastructure, the consequences of that? There must be a perception that this is not just data . . . this is about civilization. These people can severely disrupt our lives.”
Greco suggested that some kind of public-private scheme, similar to those in place for natural disasters, could be established but such a move would take some time and would be a significant burden on governments.
This was an example of how the industry will likely develop over time, rather than a specific policy change announcement but companies should reevaluate their cyber risk mitigation in light of this likely change. At best, premiums will skyrocket but, at worst, risk transfer via insurance will no longer be an option.
Random Stats
3,000lbs of confetti, 32,000 LEDs, One Duran Duran (?!?)
New York will hold its annual 'New Year’s Rockin’ Eve' tomorrow featuring a giant crystal ball that counts down the last minute of the year as Duran Duran arrives in a time machine to help us celebrate the arrival of 1986.
Happy New Year for those celebrating tomorrow!
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