© Reuters. FILE PHOTO: A projection shows a 100 franc banknote in a window in Zurich, Switzerland December 16, 2021. REUTERS/Arnd Wiegmann/File Photo
By Yoruk Bahceli, Saikat Chatterjee and Tommy Wilkes
LONDON (Reuters) – From Silicon Valley shares to U.S. and European government bonds, securities that are already under heavy pressure stand to lose a major buyer as Switzerland ends its long-standing policy of recycling euros and dollars into foreign markets.
The Swiss National Bank recently delivered a surprise half-point interest rate hike and for the first time in years omitted references in its statement to the franc being highly valued.
The shift is a momentous one, suggesting the SNB will no longer prioritise weakening the currency by purchasing foreign exchange – a policy that enabled it to build a reserve pile of nearly $1 trillion.
Unlike most central banks, it recycled these proceeds of intervention into world markets rather than holding them at home, making it a huge stock and bond investor. In recent years it ranked among the top shareholders in the likes of Apple, Amazon (NASDAQ:) and Microsoft (NASDAQ:).
Any reduction in its purchases, or an eventual move towards selling – a possibility after the bank said it is also ready to check a weakening of the franc – risks heightening volatility on already shaky markets.
“The SNB’s departure from its previous approach to keep the franc weak means they will unwind their large U.S. stock holdings, particularly in FAANGS, which should increase selling pressure on these mega-cap names,” said Kaspar Hense, senior portfolio manager at Bluebay Asset Management, referring to the tech quintet of Facebook (NASDAQ:) (Meta), Apple, Amazon, Netflix (NASDAQ:) and Google (NASDAQ:).
The SNB had already cut back forex buying in recent weeks, as evidenced by a drop in “total sight deposits” at Swiss banks that are seen as a proxy for intervention. These deposits declined by 1.3 billion Swiss francs in the week ending June 17, versus a rise of 756 million francs a month earlier and an increase of nearly 6 billion francs in early April.
The SNB said it would seek to minimise the market impact whether it were to let existing bonds expire or actively sell assets, with the focus remaining on the overall liquidity of the portfolio.
With inflation above the SNB’s target, the franc has been allowed to rise to seven-year highs against the euro, briefly pushing beyond one franc per euro in March. It has performed less well against the dollar, which has soared on expectations of aggressive policy tightening by the U.S. Federal Reserve.
The SNB’s recent policy shift is not quite on a par with its shock decision in 2015 to ditch the franc’s euro exchange rate peg. But tighter policy and its potential step back from markets coincides with a deepening market selloff that has sent global stocks to a 21% loss this year.
Bond yields have also surged as inflation hits multi-decade highs, prompting steep rate hikes.
“In isolation, the impact (of potential asset sales) would have been limited but it comes in the middle of a sharp re-pricing and lower market liquidity so the effect will likely be magnified,” said ING senior rates strategist Antoine Bouvet.
It is difficult to gauge accurately the impact of any investment pullback, as the SNB does not provide a breakdown of exactly which assets it holds in each currency.
SNB data does show that a quarter of its FX reserves were in equities as of end-March.
At that time, U.S. regulatory filings show the SNB’s U.S. equity portfolio was worth $177 billion, including $12.4 billion in Apple shares (NASDAQ:), $9.5 billion in Microsoft and $6.4 billion in Amazon. Other holdings included $1.5 billion in Exxon Mobil (NYSE:) and $1.1 billion in Coca Cola.
The SNB also holds 600 billion francs in foreign government bonds, making up 64% of FX reserves, according to Reuters calculations from SNB data.
Assuming bonds make up the same share of holdings in each currency as they do across its entire FX portfolio, Reuters calculations show that might include some $248 billion of U.S. Treasuries and 221 billion euros of euro zone government debt – most of it likely to be in top-rated bonds like Germany’s.
“Their activities have been quite large over the last few years, and we did see in general increased euro holdings by central banks, and the SNB is one of them,” BofA strategist Sphia Salim said. She predicted pressure on short-dated German bonds.
Unsurprisingly, last week’s policy pivot sent euro zone and U.S. bond yields surging.
If the SNB were to wind down bond holdings, it would first stop reinvesting the proceeds of maturing bonds, Lyn Graham-Taylor, senior rates strategist at Rabobank said. That could see the SNB drop nearly 5 billion euros of German government debt by year-end, he estimates.
In 2023, “you’ll get those concerns around the SNB potentially selling bonds, merged with higher issuance next year and the potential for ECB QT,” BofA’s Salim said – a reference to expectations the European Central Bank may eventually start reducing its own balance sheet, a process known as Quantitative Tightening.
Burned and banned: Can the ritual of destroying books kill thoughts or ideas?
“Powerful words cannot be distinguished,” says a remark in the video of veteran author Margaret Atwood, who, in collaboration with Penguin Random House, announced an ‘unburnable’ edition of her most famous work, The Handmaid’s Tale. This edition was not just meant for a burning act to signify censorship against dystopian literature conveyed in Atwood’s book, but was specially auctioned for $130,000 in New York this month. The amount raised will support PEN America’s crucial work to counter the national crisis of censorship.
However, in reality, the author hopes to raise awareness about the proliferating book banning and educational gag orders in American schools nationwide with the video that has already garnered over 5 billion potential views. “Free speech issues are being hotly debated… We hope it raises awareness and leads to reasoned discussion,” Atwood said in a statement.
PEN America has been at the forefront of the fight against this wave of censorship in American schools. Its recent report “Banned in the USA,” documented 1,586 instances of individual books being banned in 86 school districts in 26 states.
Even at the annual PEN Gala in New York, writer and actress Faith Salie said the unburnable book “was made to withstand not only the fire-breathing censors and blazing bigots, but actual flames, the ones they would like to use to burn down our democracy.”
The unburnable printed edition was made in black-and-white-coated aluminum Cinefoils, used in film production to wrap hot lights, which are stable to 660°C/1220°F, textblock hand-sewn with nickel wire, often used in electrical components, which is stable at 1400°C/2,600°F, head and tail bands are woven stainless steel, used in aerospace manufacturing, which are stable up to 1530°C/2790°F.
But book burning and banning has been sort of a ritual in the past. Right from the works of authors like Albert Einstein and Sigmund Freud to American authors such as Ernest Hemingway and Helen Keller, powerful leaders and despots have tried hard to kill, dissuade or ban and destroy many thought-provoking writings.
While the right to dissent does not seem to have lost its credibility, especially with the rise of social media, with desperate crackdown measures, photos and videos going viral, a pertinent question to ask here is, can this sort of activism kill ideas?
Book bans, burnings or educational gag orders are increasingly alarming in this era of free speech, especially when the censors’ primary targets have been literary works about racism, gender, and sexual orientation, often written by authors of colour and LGBTQ+ writers, as well as classroom lessons about social inequality, history, and sexuality.
On the other hand, books do have an emotive power and sometimes it can be dangerous, intolerant, oppressive or ugly. There is no doubt that in the past years book burning or banning have followed a pattern. Either they are offensive or violent or inappropriate for the reading public. JK Rowling’s Harry Potter series was removed from a school library in Tennessee due to the spells in the books being actual curses and risking humans with evil spirits. Not just Harry Potter books, but there are authors who have drawn flak for unattractive writings or hurting sentiments of the public.
A Farewell To Arms by Ernest Hemingway was a semi-autobiographical novel set during World War I, was banned from Boston newsstands for its sexual, ‘vulgar’ content and in Italy for its depiction of the army’s retreat in the battle of Caporetto. American Psycho by Bret Easton Ellis was censored in Queensland for its extreme scenes of graphic violence. The Diary of a Young Girl by Anne Frank was deeply influential and taken off shelves or reading lists for her maturing anatomy. Animal Farm by George Orwell was banned in the USSR until the 1980s and also banned from schools in the United Arab Emirates in 2002 for its depiction of a talking pig, which was felt to oppose Islamic values. Fifty Shades of Grey by EL James faced censure for its pornographic depiction. The Adventures of Huckleberry Finn by Mark Twain reinforced racial stereotypes. To Kill a Mockingbird by Harper Lee saw temporary bans in the US for racism. Recently, the Russian war on Ukraine scorched remains of paintings, sculptures and books burned as part of the destruction of Ukrainian cultural identity.
Thousands march in Munich to demand G7 action on poverty and climate By Reuters
© Reuters. Demonstrators hold signs during a protest march, ahead of the G7 leaders summit, which will take place in the Bavarian alpine resort of Elmau Castle, in Munich, Germany, June 25, 2022. REUTERS/Wolfgang Rattay
BERLIN (Reuters) -Some 4,000 people marched in Munich on Saturday calling on leaders of the Group of Seven industrialized countries to take action to fight poverty, climate change and world hunger and end dependence on Russian fossil fuels.
Leaders of the United States, Germany, France, Britain, Italy, Canada and Japan will meet on Sunday at the start of a three-day summit at Schloss Elmau in the Bavarian mountains, aiming to increase pressure on Russia whose actions in Ukraine have created food and energy shortages across the globe.
Protesters carried banners reading “Stop The War Russia And USA/NATO Hands Off Ukraine” and “Imperialism Starts Here”, and demanded the G7 allocate more funds for crisis prevention, civil conflict management and economic development.
“Today, we are at the G7 again because we realised that nothing has improved … it’s been going on for so long, that we are destroying ourselves,” said Lisa Munz, a protestor wearing a hat topped with a stuffed chicken.
Saturday’s protests in sunny Munich, where the leaders’ flights landed before they headed to Elmau, were sponsored by more than 15 organizations including WWF Germany, Oxfam Deutschland, Greenpeace and Bread for the World.
Officers in riot gear shoved protesters in a brief physical confrontation and police said several officers were physically attacked and nine people detained during the day, but the demonstration remained largely peaceful overall, a Reuters witness said.
Some 3,000 officers were on duty across the city, Munich police said.
The G7 typically attracts protests by dozens of campaign groups that want to court publicity for their causes and send a message to the Western political elite.
This year, however, protesters may struggle to make their presence visible to the leaders given the especially secluded summit venue, though that could change if protesters attempt to traverse the terrain to get closer to the summit itself, as some have said they plan to do.
“The colourful demonstration is a clear sign of how strong the desire of many people is for a fundamentally different policy in the G7 countries,” Oxfam Deutschland said in a statement.
G7 leaders are set to discuss setting up a climate club to better coordinate carbon pricing and other schemes for reducing emissions. Nearly 20,000 police officers have been deployed to ensure security at the summit.
Off-duty Rhode Island cop, ex-GOP state Senate candidate allegedly attacks political opponent at abortion rights rally after Supreme Court Roe ruling
An off-duty police officer and former Rhode Island Republican state Senate candidate attacked his political opponent during a pro-abortion rights rally following the Supreme Court ruling overturning Roe v. Wade, the alleged victim said.
The alleged attacker, Jeann Lugo, dropped out of the race Saturday afternoon and is now under investigation. “I will not be running for any office this fall,” he wrote on Twitter, before temporarily deactivating his account.
Jen Rourke, a progressive running for Senate District 29 who identifies herself as a reproductive rights organizer, said that her political rival “violently attacked me” after her speech at the Friday night rally outside the state house in Providence.
“This is what it is to be a Black woman running for office. I won’t give up,” Rourke wrote in a tweet that included a snippet of a video of the incident.
The five-second clip, taken by Bill Bartholomew, a local journalist who runs the Bartholomewtown podcast, appears to show a man throwing two punches at a woman’s head, at least one of which connects with its target.
Courtesy Bill Bartholomew — The Bartholomewtown Podcast
Rourke went to a hospital in Kent, Rhode Island, on Saturday for a CT scan, a campaign spokesman told CNBC.
The Providence Police Department tweeted Saturday that it is “criminally investigating the behavior of an off-duty officer last evening during a protest where a female was assaulted.”
The officer, who is not identified by name in the tweet, has been placed on paid administrative leave pending the outcome of the review, the department said. A spokesperson for the department did not immediately respond to CNBC’s requests for comment.
Before dropping out of the state Senate race, Lugo sent a statement to CNBC appearing to defend his actions without denying that he punched Rourke.
“As an officer that swore to protect and serve our communities, I, unfortunately, saw myself in a situation that no individual should see themselves in. I stepped in to protect someone that a group of agitators was attacking,” Lugo’s statement said. “At this moment, there’s a pending internal investigation, and as the facts of the incident come to light, I request that my family and I have privacy.”
Bartholomew, in an interview with CNBC, said that about 1,000 people had attended the rally to protest the Supreme Court’s ruling, which on Friday morning struck down the legal precedents that had protected federal abortion rights for nearly 50 years.
About 10 members of a right-wing group known as the Freedom Fighters also showed up to the event, Bartholomew said. One of those members, who was filming, appeared to be goading some members of the crowd. After being asked to leave, the person at first refused, then started to walk away — but when he turned back toward the crowd, someone punched him in the face and stomped on him, Bartholomew said. “A melee ensued,” the local journalist said, at which point he saw Rourke getting hit in the face.
Neither Lugo nor other members of the crowd who allegedly engaged in violence were arrested at that time, Bartholomew said.
Rourke, in a statement to CNBC from her campaign, said she was “deescalating the situation and the counter-protestor was leaving when the altercation started.”
“I was assaulted as a result of that,” she said.
“This is what it is to be a Black woman running for office. All across this country, people like me are threatened or attacked when they run. I’m not going to stop fighting – for reproductive rights, for the people in my district, or for people like me who want to run for office,” Rourke said.
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