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The US has recently suffered the worst cyber-attack to date on its critical infrastructure from cyber-criminals ‘DarkSide’.
The US government was forced to issue emergency legislation after the largest fuel pipeline in the US was hit by a ransomware cyber-attack. The Colonial Pipeline carries 2.5million barrels a day – 45% of the East Coast’s supply of diesel, gasoline and jet fuel. The emergency legislation relaxed rules on working hours for drivers of fuel tankers to help in moving fuel up to New York. Gasoline prices jumped on news of the cyber-attack reaching the highest level since 2014. Over the weekend Colonial Pipeline officials said they had returned the system to normal operations. After reports that the company had paid a $5m ransom, it appears that the hackers might have also been hacked! DarkSide has lost access to the infrastructure it uses to run its operations as a result of a counter-attack rumoured to be from US law-enforcement.
‘DarkSide’ are believed to have infiltrated the Colonial Pipeline network and to have taken almost 100GB of data ‘hostage’. President Joe Biden said ‘So far there is no evidence from our intelligence people that Russia is involved, although there is evidence that actor’s, ransomware is in Russia. They have a responsibility to deal with this.’
On Friday, Toshiba said its European division in France had been hit by the same cyber-criminals. Government departments are historically vulnerable while Ireland’s health service said it had shut down its IT systems after what it described as a “significant” ransomware attack.
The attack on the Colonial Pipeline is a reminder that the risk of cyber-attack is as great as ever and that as the economy and profits recover that cyber security should be top of the spending list. This may also be necessary if workers opt for flexible working in future, mixing a balance of time in the office and working from home.
What have we been watching?
Concerns about inflation rattled equity markets and US tech stocks suffered another wobble early last week. Despite comments from central bankers, markets have become hyper-sensitive to inflation data and there was a seismic shock from the US inflation data. A jump in Chinese factory gate prices added to inflationary concerns. In addition, German economist Isabel Schabnel, a member of the European Central Bank (ECB) said inflation in Germany could climb above 3% as the economy recovers from the pandemic although this would be transitory. Officials from the US Federal Reserve (Fed) made it clear that a patient approach to the tapering of asset purchases will not be de-railed by some predictably volatile headline inflation readings.
Global manufacturing has shifted to a ‘just in time’ delivery basis in recent decades and was never designed for a pandemic driven global lockdown and then a subsequent, immediate re-start across numerous regions. With manufacturing activity picking-up rapidly and given a further boost by government fiscal stimulus, it perhaps should come as no surprise that commodity prices have leapt and more companies are reporting supply chain issues and inflationary pressures. Hopefully central bankers are right and the current tick-up in inflation proves transitory but keep an eye on wage growth! Curve balls like the cyber-attack on Colonial Pipeline and jump in US fuel prices are not helpful either.
The World Health Organisation (WHO) has classified the Covid-19 variant first found in India last year as a ‘variant of global concern’ and is believed to have already spread to 30 countries.
Meanwhile, the outbreak in India appears far worse than officially recognised with the death rate materially higher than reported. In the UK, a member of Sage said it is ‘possible’ that the final lifting of lockdown in the UK could be delayed beyond 21st June, due to the threat of the highly transmissible Indian variant. However, an Oxford University laboratory study gives a ‘high degree of confidence’ that the current vaccines work against the Indian variant. Over 36.6million people in the UK have had one dose while over 20million have now had two doses. Elsewhere, Japan has widened its state of emergency to cover one-third of the country’s population.
Sterling moved above $1.40 reflecting the further lifting of lockdown restrictions as of today, as well as the SNP’s failure to win an outright majority, albeit ‘Scoxit’ has not gone away. Sterling was also supported by UK consumer spending data which showed retail sales in April grew by almost 40% on the same lockdown impacted month last year. More significantly, retail sales were 7.5% higher than in April 2019. The UK economy shrank by 1.5% in the first quarter of 2021 but the economy grew by 2.1% in March as lockdown measures started to ease -a promising sign.
In the US, April CPI came in significantly ahead of expectation at 0.8% for the month but 4.2% on an annualised basis. Forward inflation indicators from US bonds have been signalling CPI hitting 2.6%-2.7% over the next couple of years but the latest data has sailed through that level. US interest rate futures are now pricing in a US interest rate hike from the Federal Reserve (Fed) in 2022, way before the Fed has signalled this is likely to happen! The Fed appears to be taking the view that the inflation spike will be transitory but will now face questions about being behind the curve and dangers of the US economy overheating.
China’s factory gate prices grew at their fastest pace in nearly four years in April with the producer price index increasing by 6.8% on the same time last year. Steel prices have risen to a new high as Chinese steel mills look to pass on higher iron ore prices. Meanwhile, some mixed activity data was a reminder that even China is not fully through the effects of the Covid-19 pandemic. Industrial production growth slowed to 9.8% and retail sales by 17.7% in April but both were short of expectations.
Finally, the re-opening of the UK economy is mainly due to the NHS and volunteers who have done a fantastic job with the UK’s Covid-19 vaccination programme. Everything from football stadiums and race courses, to museums and cathedrals, have been used as vaccination centres. However, we may have been outdone by Romania which is using the 14th-century Bran Castle as a vaccination centre – the castle is believed to have inspired the vampire’s lair in Bram Stoker’s novel Dracula. Wonder if the possible side effects leaflet lists neck puncture wounds as well as the risk of a sore arm?
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