Bloomberg - Evening Briefing - Fear of contagion

If you had never heard of Silicon Valley Bank before this week, you likely have by now. SVB was home to cash belonging to half of all venture-backed startups in the US. So it came as a bit of a surprise when the bank suffered an $1.8 billion loss on securities sales and made plans to raise money by selling shares. Surprise turned into panic, which turned into a run on the bank. On Friday, SVB became the biggest US bank to fail in more than a decade. But that’s not all. SVB’s implosion came shortly after crypto lender Silvergate Capital said it planned to shut down. For both, part of the problem was an unusually fickle depositor base. But perhaps the bigger issue—and the threat to the broader financial sector—was rising interest rates. Those rates have left banks laden with low-interest bonds that can’t be sold in a hurry without incurring big losses. If too many customers want their cash, and a bank needs to sell bonds to pay up, it risks a vicious cycle like the one that befell SVB. California state regulators took possession of the lender, and some observers say the meltdown shouldn’t pose a risk of contagion as long as depositors are made whole. But Robert Burgess writes in Bloomberg Opinion that the debacle should nevertheless scare us all. 

Jerome Powell told lawmakers this week that the central bank was ready to speed up the pace of monetary tightening should inflation keep running hot. The US job market is too strong for the Fed Chair’s taste, keeping wage-growth elevated. But while US payrolls rose in February by more than expected, cracks are emerging, including a spike in initial jobless claims last week as tech layoffs showed up in the data. Facebook-parent Meta is planning a new round of mass-firings as terminations announced by US employers quintupled in February from a year earlier. But still, US unemployment is at its lowest since Richard Nixon’s first term in office.

China’s annual National Peoples Party Congress legislative meeting, not normally a place for surprises, did startle investors on one front: it targeted growth at around 5%, the lowest ever. Some analysts chalked it up to China’s caution exiting its “Covid zero” policy. It could also signal crackdowns as Premier Li Keqiang said Beijing would curb expansion in the troubled property sector. At the meeting, Chinese leader Xi Jinping also called on the military to make breakthroughs in securing technological advantages, underscoring his effort to stop the US from cutting it off from advanced semiconductors.

Xi Jinping during the National People’s Congress on March 7 in Beijing. Photographer: Greg Baker/AFP

US President Joe Biden unveiled a budget that has a series of tax increases on investors and the richest Americans, including a near doubling of the rate for capital gains, as he seeks to stabilize the Medicare safety net. The budget has no chance of passing as is, given GOP control of the House, but marked an opening salvo in high-stakes negotiations over the debt ceiling. Though the budget touted the Biden administration strategy to shrink the deficit in the long term, for now the arithmetic indicates things will get worse.

It was a week of progress and grim reality when it comes to the environment. The Biden administration said it will offer $6 billion in funding to decarbonize industrial manufacturing, which accounts for almost one quarter of the country’s greenhouse gas emissions. Meanwhile, a new study found there are 170 trillion tiny plastic particles floating on the surface of the ocean, with the buildup rapidly increasing since 2005. And while the parched Rocky Mountains have gotten above-average snowfall in recent months, the Colorado River, which provides agriculture and hydropower to millions, will still run dry before reaching its natural outlet in the Gulf of California.

Glenwood Canyon follows the path of the Colorado River Photographer: RJ Sangosti/MediaNews Group/The Denver Post/Getty Images

Island vacations have staying power, and Bloomberg Pursuits looks at seven stunning hotels opening around the world this year from Corfu to Kangaroo Island. What’s the best phone wallet? The Australian accessories company Bellroy has a $99 version. And while the seller says they need some sprucing up, this trio of historic homes in Austin, Texas, are up for sale as a package—for $20 million. 

• Daylight Saving Time starts in the US—maybe for good. 
• Academy Awards on Sunday could bring big wins for this surprise hit.
• US inflation data arrives, and the ECB is expected to hike rates. 
• China data dump includes jobless rate, retail sales, industrial production.
• Jeremy Hunt outlines the UK’s annual budget plans.

Have cities become more livable in the three years since Covid-19 struck? Not for everyone, Bloomberg Opinion and Bloomberg CityLab found in a survey of the world’s top urban areas. London has become a better city—for the rich. Hong Kong’s new normal isn’t really about the pandemic. Nor is it in New Delhi, where the delta variant killed hundreds of thousands but these days heat waves and pollution are front-of-mind. And in New York City? A still-elevated mortality rate shows that—like everywhere else—the pandemic isn’t over.

In New York, mortality rates remained 10% above normal due to the coronavirus pandemic.  Photographer: Andrew Lichtenstein/Corbis News

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The Bloomberg Invest series returns to London on March 22, gathering leading thinkers in investing to identify the biggest risks and greatest opportunities facing those in the region. Join in London or online to hear from executives from Blackstone, QuantumLight, and Sotheby’s. Register here.