Economics & Fundamentals :: Page 103

Archive for Economics & Fundamentals – Page 103

Hedge funds increase positions to sell the dollar. China may resort to additional stimulation of the economy

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.62%, while the S&P 500 Index (US500) added 0.24%. The NASDAQ Technology Index (US100) closed positive by 0.18% on Monday.

The US consumer credit growth slowed to a more than two-year low in May, reflecting the first decline in volume since the pandemic began. Total loans rose by $7.2 billion. This figure, which excludes inflation, was below all forecasts. While low unemployment and steady wage growth have allowed many consumers to continue spending, persistently high prices are forcing others to save.

Societe Generale’s top economist says Central Banks are at the “end of the road” in fighting inflation. A resilient labor market and the apparent strength of the economy mean the US Federal Reserve is likely to raise the interest rate by 0.25% in July. According to CME Group’s FedWatch tool, the market rates the probability of a rate hike at 90%. Nevertheless, hedge funds have shifted to an overall bearish bet on the dollar for the first time since March, believing the Federal Reserve is nearing the end of its interest rate hike cycle. Over the past week, credit investors opened a net short position in the US currency of 20,091 contracts. A week earlier, their long position totaled 5,196 contracts.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) rose by 0.45%, France’s CAC 40 (FR40) gained 0.45%, Spain’s IBEX 35 (ES35) added 0.04%, and the UK’s FTSE 100 (UK100) closed up by 0.23%.

The UK government and the Bank of England “will do whatever is necessary, for as long as it takes” to bring inflation back to the 2% target, Treasury Secretary Jeremy Hunt said on Monday, reinforcing signs that interest rates will remain high for some time to come. UK inflation hit a 41-year high of 11.1% in October and is falling at a slower pace than in other major economies. Last month, the Bank of England unexpectedly raised its key interest rate by 0.5% to 5% after inflation held at 8.7% in May. Markets expect rates to peak at 6.25% or 6.5% later this year or early 2024.

On Sunday, French Central Bank governor François Villeroy de Galhau opposed a proposal to raise the European Central Bank’s inflation target to 2%. Villeroy, who sits on the ECB’s governing council, also said that interest rate hikes are close to the maximum and that rates will be held at elevated levels long enough for their impact on the economy to be felt.

Oil prices rose in Asian trading on Tuesday on the prospect of supply cuts by the world’s biggest oil producers, while expectations of expanded stimulus measures in major importer China also boosted sentiment. The prospect of supply cuts (Saudi Arabia and Russia have pledged to cut production further) is also bullish for oil prices. Nevertheless, caution over upcoming US inflation data and speeches from the Federal Reserve are holding back gains as markets want more information regarding the US Fed’s future trajectory.

Asian markets traded flat on Monday. Japan’s Nikkei 225 (JP225) decreased by 0.49% for the day yesterday, China’s FTSE China A50 (CHA50) added 0.70%, Hong Kong’s Hang Seng (HK50) was up by 0.89% for the day, and Australia’s S&P/ASX 200 (AU200) closed negative by 0.55%. Most Asian stocks rose sharply on Tuesday amid expectations that the Federal Reserve is close to ending its interest rate hike cycle for this year, while the prospect of additional stimulus measures from China also contributed to sentiment.

A string of weak economic data from China has caused bets to rise that Beijing will take additional stimulus measures to help support the slowing economic recovery. Inflation data on Monday showed that consumer spending is on the verge of deflation, sending mostly bearish signals for Asia’s largest economy. Shares in China’s big real estate developers rose on Tuesday after the People’s Bank said it would extend financial support for the sector until the end of 2024. But despite a slew of stimulus measures, China’s economy is still struggling to recover from COVID-era lows, and weak economic data over the past three months supports that view.

S&P 500 (F) (US500) 4,409.53 +10.58 (+0.24%)

Dow Jones (US30) 33,944.40 +209.52 (+0.62%)

DAX (DE40) 15,673.16 +69.76 +(0.45%)

FTSE 100 (UK100) 7,273.79 +16.85 (+0.23%)

USD Index 101.75 −0.22 (−0.21%)

Important events for today:

– Australia NAB Business Confidence (m/m) at 04:30 (GMT+3);
– UK Average Earnings Index (m/m) at 09:00 (GMT+3);
– UK Claimant Count Change (m/m) at 09:00 (GMT+3);
– UK Unemployment Rate (m/m) at 09:00 (GMT+3);
– German Consumer Price Index (m/m) at 09:00 (GMT+3);
– German ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
– Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
– US FOMC Member Bullard Speaks at 16:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News

11 Jul

Markets Advance Ahead Of US CPI

By ForexTime

Asian markets rose on Tuesday after China strengthened support for its struggling property sector. European futures are pointing to a positive open as attention falls on the pending German ZEW Economic Sentiment Index report. In the currency arena, the dollar has weakened on the back of falling Treasury yields with investors digesting the remarks from numerous Fed speakers yesterday. Regarding commodities, oil is finding support as investors evaluate the demand outlook for China following some measures by Beijing to support its real-estate sector. Gold could push higher in the short term thanks to a weaker dollar and falling Treasury yields. Although the US inflation report is currently in the spotlight, earnings announcements by Wall Street banks on Friday could hijack investor attention.

US June CPI Report in Focus

All eyes will be on the latest US inflation report on Wednesday which has the potential to influence Fed hike expectations. Annual headline inflation is expected to slow to 3.1% in June, a noticeable decline from the 4% reading in May. However, annual core CPI, which strips out volatile energy and food prices, is expected to cool to 5% from 5.3% seen in the prior release. This remains above the Fed’s 2% target but ultimately, signs of cooling inflationary pressures will boost expectations around the Fed’s hiking cycle ending soon after July’s FOMC policy meeting. However, still stubborn inflation prints could fuel speculation around the Fed keeping rates higher for longer.

Commodity Spotlight – Gold

Gold bulls are likely to draw strength from a weaker dollar and falling US Treasury ahead of the US CPI report on Wednesday. Should the report show further signs of slowing inflation, this could fuel speculation around the Fed’s hiking cycle nearing an end. Such a development could boost attraction for zero-yielding gold, potentially pushing prices beyond the $1940 region and higher towards $1960. Should prices remain trapped below $1932, this could open a path back to $1910 and $1900, respectively.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Financial News

10 Jul

Inflation continues to fall in China. The US labor market remains strong

By JustMarkets

On Friday, at the close of the stock market Dow Jones Index (US30) decreased by 0.55% (-0.56% for the week), S&P 500 (US500) lost 0.29% (-0.53% for the week). NASDAQ Technology Index (US100) closed negative by 0.13% on Friday (-0.43% for the week).

The US labor market added 209,000 jobs in June, while the unemployment rate fell to 3.6% from 3.7%. This number is slightly below economists’ expectations of 225,000 jobs. It’s also a slowdown from the previous month’s reading, which was revised downward by 33,000 to 306,000. But overall, despite some cooling, the labor market remains resilient. The Fed is keeping a close eye on labor market indicators and is concerned that demand for workers will drive more robust wage growth and, in turn, inflation. Therefore, the Fed wants to see an increase in unemployment first to end the tightening cycle.

Another concern for the Fed today continues to be the strong growth shown by the US service sector, as reflected by the ISM Manufacturing PMI, which showed a strong side of the economy in June compared to May. This could keep the service sector relatively strong if the sector does not slow in the second half of the year.

Equity markets in Europe traded flat on Friday. German DAX (DE30) gained 0.48% (-3.61% for the week), French CAC 40 (FR40) added 0.42% on Friday (-4.09% for the week), Spanish IBEX 35 (ES35) decreased by 0.36% (-3.68% for the week), British FTSE 100 (UK100) closed negative by 0.32% (-3.65% for the week).

European Central Bank Vice President Luis de Guindos expressed some optimism that core inflation may peak. A decline in core price growth could lead to a potential pause in rate hikes. But the politician also added that incoming data will also guide the ECB. Yannis Stournaras, governor of the Bank of Greece and one of the ECB’s most dovish policymakers, echoed this view Friday. European Central Bank President Christine Lagarde said Friday that the bank would not “stand idly by” if there were simultaneous increases in profits and wages, given persistently high inflation in the region.

Oil prices fell in Asian trading Monday as investors are cautious ahead of important US economic data on inflation this week, although expected crude supply cuts from Saudi Arabia and Russia will keep oil from falling.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) decreased by 3.37% for the week, China’s FTSE China A50 (CHA50) lost 2.19%, Hong Kong’s Hang Seng (HK50) fell by 3.35%, and Australia’s S&P/ASX 200 (AU200) was negative by 2.24%.

China’s inflation data for June showed a decline. Over the last month, consumer prices declined by 0.2%, and the annual Consumer Price Index remained unchanged at 0.2%. The producer price index, which shows the rate of inflation between factories and plants, fell from minus 4.6% to minus 5.4%, adding to deflationary pressures. On the other hand, deflationary momentum from China may help offset service-driven inflation in developed countries over time.

S&P 500 (F) (US500) 4,398.95 −12.64 (−0.29%)

Dow Jones (US30) 33,734.88 −187.38 (−0.55%)

DAX (DE40) 15,603.40 +74.86 (+0.48%)

FTSE 100 (UK100) 7,256.94 −23.56 (−0.32%)

USD Index 102.27 −0.90 (−0.87%)

Important events for today:

– China Consumer Price Index (m/m) at 04:30 (GMT+3);
– China Producer Price Index (m/m) at 04:30 (GMT+3);
– US FOMC Member Daly Speaks at 17:30 (GMT+3);
– US FOMC Member Mester Speaks at 18:00 (GMT+3);
– US FOMC Member Bostic Speaks at 19:00 (GMT+3);
– UK BoE Gov Bailey Speaks at 22:00 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

07 Jul

The strong US labor market increased fears of further interest rate hikes by the Fed

By JustMarkets

Stronger-than-expected employment data from ADP reaffirmed fears of further interest rate hikes by Federal Reserve policymakers. At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 1.07%, and the S&P 500 Index (US500) was down by 0.79%. The NASDAQ Technology Index (US100) closed negative by 0.82% on Thursday.

US employers announced 40,709 layoffs in June, down 49% from the 80,089 layoffs announced in May. Private sector jobs rose to 497,000 in June, much higher than the gain of 267,000 in May and much better than the estimated 220,000. At this point, the labor market is showing no signs of easing, giving the US Fed room to tighten further. Today in the US, the Nonfarm report will be released. Economists forecast that the US economy will add 200,000 jobs in June. The unemployment rate is expected to be 3.6% (now 3.7%), and average hourly earnings will be 0.3%.

Federal Reserve Bank of Dallas President Lorie Logan said yesterday that further interest rate hikes would likely be needed to stimulate meaningful disinflation and return the rate of price growth to the Central Bank’s target level. She added that forecasts from Fed officials showed two more interest rate hikes this year.

Stock markets in Europe were down yesterday. Germany’s DAX (DE30) decreased by 2.57%, France’s CAC 40 (FR40) lost 3.13%, Spain’s IBEX 35 (ES35) was down by 2.21%, Britain’s FTSE 100 (UK100) closed negative by 2.17%.

Head of the German National Bank Nagel said yesterday that, at present, the ECB does not see a threat of excessive policy tightening but does not know yet where interest rates will peak. Nagel also added that rates will remain restrained for an extended period.

Traders are betting on a Bank of England interest rate hike to 6.5% by March 2023. Raising the cost of borrowing to that level would put mortgages further in the Bank of England’s pain zone, making credit less available to businesses and dealing a sharp blow to the economy. It will also exacerbate the difficulties facing the government of Prime Minister Rishi Sunak in the run-up to next year’s elections.

Oil continues to fall in price amid fears of a rate hike. But amid signs of tightening supply and improving demand, oil still has a good chance of going higher. Data on Thursday showed US inventories declined more than expected, with a larger-than-expected drop in gasoline inventories pointing to improved demand for fuel during summer.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) fell by 0.86%, China’s FTSE China A50 (CHA50) was down by 0.82%, Hong Kong’s Hang Seng (HK50) lost 2.44% for the day, and Australia’s S&P/ASX 200 (AU200) closed negative by 1.25%.

In Japan, the wage hikes triggered by this spring’s labor negotiations have begun to take effect. Base wages rose by 1.8% in May compared to last year’s period, the most significant increase since February 1995. Wage growth is one of the key trends under scrutiny by the Bank of Japan (BOJ) as the Central Bank considers whether and when it should roll back its super-soft monetary stimulus. BOJ Governor Kazuo Ueda has repeatedly stressed the need for an accommodative policy until wages rise enough to support sustained price growth of around 2%.

New Zealand’s Central Bank is likely to keep interest rates unchanged at 5.50% next Wednesday and leave that level for the rest of the year, marking the end of its 20-month cycle of increases that have already driven the economy into recession. The country’s biggest banks – ANZ, ASB, Bank of New Zealand, Kiwibank, and Westpac – are not forecasting any rate changes next week.

S&P 500 (F) (US500) 4,411.59 −35.23 (−0.79%)

Dow Jones (US30)33,922.26 −366.38 (−1.07%)

DAX (DE40) 15,528.54 −409.04 (−2.57%)

FTSE 100 (UK100) 7,280.50 −161.60 (−2.17%)

USD Index 103.36 +0.32 (−0.04%)

Important events for today:

– Switzerland Unemployment Rate (m/m) at 08:45 (GMT+3);
– German Industrial Production (m/m) at 09:00 (GMT+3);
– UK BoE Gov Bailey Speaks at 10:30 (GMT+3);
– US Nonfarm Payrolls (m/m) at 15:30 (GMT+3);
– US Unemployment Rate (m/m) at 15:30 (GMT+3);
– Canada Unemployment Rate (m/m) at 15:30 (GMT+3);
– US Natural Gas Storage (w/w) at 17:30 (GMT+3);
– Eurozone ECB President Lagarde Speaks at 19:45 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

06 Jul

The trade war between China and the US is worsening again. FOMC minutes point to further rate hikes

By JustMarkets

The US indices closed lower on Wednesday as minutes from the Federal Reserve’s June meeting showed appetite for policy tightening and interest rate hikes. At the close of the stock market yesterday, the Dow Jones Index (US30) decreased by 0.38%, while the S&P 500 Index (US500) was down by 0.20%. The NASDAQ Technology Index (US100) closed negative by 0.12% on Wednesday.

Highlights of the June FOMC minutes:

Nearly all participants said that inflation risks are prevalent at the moment and remain key to the outlook for the direction of monetary policy;
All Fed officials agreed that continued restrictive monetary policy would be appropriate;
The Fed expects further rate hikes but at a slower pace;
Fed policymakers believe a shallow recession at the end of the year is likely;
Some representatives favored raising rates rather than pausing at the June meeting, noting a “very tight” labor market that threatens to raise wages and inflation.

According to the FedWatch Tool, nearly 90% of traders expect the Fed to resume raising rates in July.

Stock markets in Europe were down yesterday. German DAX (DE30) was 0.63% lower, French CAC 40 (FR 40) decreased by 0.80%, Spanish IBEX 35 (ES35) fell by 1.06%, and British FTSE 100 (UK100) was 1.03% lower.

In the Eurozone, consumer inflation expectations for the next 12 months declined further, while inflation expectations for the three years ahead remained stable. Expectations for economic growth over the next 12 months have become less negative. Consumers expect lower growth in their home prices over the next 12 months.

Gold prices ended lower Wednesday as minutes from the Federal Reserve’s last meeting showed that some central bank officials pushed for an interest rate hike in June. Gold has an inverse correlation to the dollar index and to government bond yields, so a policy tightening is a negative for the precious metals.

The OPEC+ meeting proceeds without surprises. OPEC energy and oil ministers reviewed current oil market conditions and agreed to continue current production quotas for a stable and balanced oil market. Additional crude oil inventories will be released today.

Natural gas continues to be cheaper. The hot weather in Texas and other southern US states has eased slightly, prompting market participants to push gas prices down further to $2.5. Additional natural gas inventories will be released tomorrow.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) was down by 0.25%, China’s FTSE China A50 (CHA50) decreased by 1.08%, Hong Kong’s Hang Seng (HK50) lost 1.57% on the day, and Australia’s S&P/ASX 200 (AU200) close negative by 0.35%.

Janet Yellen is set to visit China in an effort to ease tensions between the two economic powers. Treasury Department officials say they don’t expect any diplomatic breakthroughs from Yellen’s trip. But the secretary of state hopes to forge closer ties with China’s new economic leaders to avoid a deeper deterioration in relations between the world’s two largest economies. This week, China announced new restrictions on exports of key minerals used in the manufacture of semiconductors and solar panels. This was China’s response to US export restrictions on China. The Biden administration has restricted the sale of advanced computer chips to China and is considering restricting China’s access to US cloud computing services.

S&P 500 (F) (US500) 4,446.82 −8.77 (−0.20%)

Dow Jones (US30)34,288.64 −129.83 (−0.38%)

DAX (DE40) 15,937.58 −101.59 (−0.63%)

FTSE 100 (UK100) 7,442.10 −77.62 (−1.03%)

USD Index 103.36 +0.32 (+0.31%)

Important events for today:

– Australia Trade Balance (m/m) at 04:30 (GMT+3);
– UK Construction PMI (m/m) at 11:30 (GMT+3);
– Eurozone Retail Sales (m/m) at 12:00 (GMT+3);
– US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
– US Unemployment Claims (w/w) at 15:30 (GMT+3);
– Canada Trade Balance (m/m) at 15:30 (GMT+3);
– US Trade Balance (m/m) at 15:30 (GMT+3);
– US ISM Services PMI (m/m) at 17:00 (GMT+3);
– US JOLTS Job Openings (m/m) at 17:00 (GMT+3);
– Canada Ivey PMI (m/m) at 17:00 (GMT+3);
– US Crude Oil Reserves (w/w) at 18:00 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

06 Jul

Right-to-charge laws bring the promise of EVs to apartments, condos and rentals

By Eleftheria Kontou, University of Illinois at Urbana-Champaign

More than 3.6 million electric cars are driving around the U.S., but if you live in an apartment, finding an available charger isn’t always easy. Grocery stores and shopping centers might have a few, but charging takes time and the spaces may be taken or inconvenient.

Several states and cities, aiming to expand EV use, are now trying to lift that barrier to ownership with “right to charge” laws.

Illinois’ governor signed the latest right-to-charge law in June 2023, requiring that all parking spots at new homes and multiunit dwellings be wired so they’re ready for EV chargers to be installed. Colorado, Florida, New York and other states have passed similar laws in recent years.

But having wiring in place for charging is only the first step to expanding EV use. Apartment building managers, condo associations and residents are now trying to figure out how to make charging efficient, affordable and available to everyone who needs it when they need it.

Electric cars can benefit urban dwellers

As a civil engineer who focuses on transportation, I study ways to make the shift to electric vehicles equitable, and I believe that planning for multiunit dwelling charging and accessibility is smart policy for cities.

Transitioning away from fossil-fueled vehicles to electric vehicles has benefits for the environment and the health of urban residents. It reduces tailpipe emissions, which can cause respiratory problems and warm the climate; it mitigates noise; and it improves urban air quality and quality of life.

Surveys show most EV drivers charge at home, where electricity rates are lower than at public chargers and there is less competition for charging spots. In California, the leading state for EVs, 88% of early adopters of battery electric cars said they were able to charge at home, and workplace and public charging represented just 24% and 17% of their charging sessions, respectively. Nationwide, about 50% to 80% of all battery electric car charging sessions take place at home.

Yet almost a quarter of all U.S. housing structures have more than one dwelling unit, according to the 2019 American Housing Survey. In California, 32.5% of urban dwellings have multiple units, and only a third of those units include access to a personal garage where a charger could be installed.

Even if installing a personal charger is an option, it can be expensive in a multiunit dwelling if wiring isn’t already in place. And it often comes with other obstacles, including the potential need for electrical upgrades or challenges from homeowner association rules and restrictions. Installing chargers can involve numerous stakeholders who can impede the process – lot owners, tenants, homeowners associations, property managers, electric utilities and local governments.

However, if a 240-volt outlet is already available, basic charger installation drops to a few hundred dollars.

Right-to-charge laws aims for ubiquitous home charging

Right-to-charge laws aim to streamline home charging access as new buildings go up.

Illinois’ new Electric Vehicle Charging Act requires that 100% of parking spaces at new homes and multiunit dwellings be ready for electric car charging, with a conduit and reserved capacity to easily install charging infrastructure. The new law also gives renters and condominium owners in new buildings a right to install chargers without unreasonable restriction from landlords and homeowner associations.

California, Colorado, Florida, Hawaii, Maryland, New Jersey, New York, Oregon and Virginia also have right-to-charge laws designed to make residential community charging deployment easier, as do several U.S. cities including Seattle and Washington, D.C. Most apply only to owner-occupied buildings, but a few, including California’s and Colorado’s, also apply to rental buildings.

Chicago officials have considered an ordinance that would include existing buildings, too.

Sharing chargers can reduce the cost

There are several steps communities can take to increase access to chargers and reduce the cost to residents.

In a new study, colleagues and I looked at how to design shared charging for an apartment building with scheduling that works for everyone. By sharing chargers, residential communities can reduce the costs associated with charger installation and use.

The biggest challenge to shared charging is often scheduling. We found that a centralized charging management system that suggests charging times for each electric car owner that aligns with the owner’s travel schedule and the amount of charge needed can work – with enough chargers.

In a typical multiunit dwelling in Chicago – with an average of 14 cars in the parking lot – a small community charging hub with two level 2 chargers, the type common in homes and office buildings, can cover daily residential recharging demand at a cost of about 15 cents per kilowatt-hour. But having only two chargers means residents are waiting on average 2.2 hours to charge.

A larger charging hub with eight level 2 chargers in the same city avoids the delay but increases the cost of charging to 21 cents per kWh because of upfront cost of purchasing and installing the chargers. To put that into context, the average electricity cost for Chicago residents is 16 cents per kWh.

The future of charging management at multiunit dwellings will be automated for efficiency, with a computer or artificial intelligence determining the most efficient schedule for charging. Optimized scheduling can be responsive to the times renewable electricity generation sources are producing the most power – midday for solar energy, for example – and to dynamic electricity pricing. Automation can also eliminate delays for drivers while saving money and reducing the burden on the electric grid.

The current limited access to home charging in many cities constrains electric vehicle adoption, slows down the decarbonization of U.S. transportation and exacerbates inequities in electric vehicle ownership. I believe efforts to expand charging in multidwelling buildings can help lift some of the biggest barriers and help reduce noise and pollution in urban cores at the same time.

About the Author:

Eleftheria Kontou, Assistant Professor of Civil and Environmental Engineering, University of Illinois at Urbana-Champaign

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions

05 Jul

Investors now have responsibility to consider ESG as global temps hit record high

By George Prior

As global temperatures hit a record high, every investor now has a responsibility to consider environmental, social and governance (ESG) investments, says the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The comments from Nigel Green of deVere Group come as it is revealed that Monday was the world’s hottest day on record, exceeding an average of 17 degrees Celsius (62.6 degrees Fahrenheit) for the first time, according to official measurements taken on Tuesday by US meteorologists.

“This is not a milestone we should be celebrating, it’s a death sentence for people and ecosystems,” said Friederike Otto, a senior lecturer at the Grantham Institute for Climate Change and the Environment.

The deVere CEO says: “The new record high shines a spotlight on the extreme temperatures engulfing the northern hemisphere this summer, and underscores the lack of global progress on tackling climate change – which is the biggest critical issue of our time.

“Monday, 3 July 2023, the hottest day ever recorded globally, must act as a wake-up call that more must urgently be done to battle the worst effect of human-driven environmental issues.

“As such, I believe that every investor now has a responsibility to consider ESG investments.”

But the enormously positive environmental and social impact you can have with ESG investments is not the only reason why you should consider them as part of your portfolio.

“Numerous studies have demonstrated that companies with strong ESG practices tend to outperform their peers over the long term.

“By incorporating ESG investments, investors have the opportunity to participate in the growth of companies that are well-positioned to navigate risks, capitalise on emerging opportunities, and drive sustainable innovation,” notes Nigel Green.

ESG factors provide valuable insights into a company’s resilience and risk management practices.

He continues: “By considering environmental risks, such as climate change and resource scarcity, social risks related to labor practices and community engagement, and governance risks such as board diversity and transparency, you can better assess the long-term viability of investments and reduce exposure to potential risks.”

The deVere CEO goes on to add: “The global regulatory landscape is evolving. Investors who proactively integrate ESG investments into their portfolios can navigate regulatory changes more effectively and position themselves for future market shifts.

“Plus, as ESG considerations become mainstream, investments in companies with strong ESG profiles are likely to attract more attention from institutional and individual investors.

“All of the reasons and all the evidence suggest that ESG-focused investors can achieve both profitability and positive impact.”

deVere Group practices what it preaches. In 2021, it became one of 18 founding signatories of the UN-backed Net Zero initiative, the international alliance of finance powerhouses that will help accelerate the transition to a net-zero financial system.

As a global organisation, it recognises the transformative potential of ESG investments and is committed to helping investors integrate these strategies into their portfolios.

With a team of experienced professionals and a comprehensive suite of ESG-focused investment solutions, deVere provides clients with tailored advice and cutting-edge research to optimise their financial goals while aligning their investments with their values.

“The hottest day ever recorded globally tells investors now is the time to consider putting your money to work for both profits and positive change. If not now, when?” concludes the deVere Group CEO.

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Opinions

05 Jul

China’s economic recovery is slowing. OPEC+ countries to agree on new oil production quotas today

By JustMarkets

The US stock indices did not trade yesterday due to a bank holiday.

According to the OECD, inflation in advanced economies has slowed to its lowest since December 2021. Inflation has slowed in almost all countries except the Netherlands, Norway and the United Kingdom. In the G7 countries, inflation is now at 4.6%, the lowest level since September 2021. The figures show that core inflation remains steady, even though monetary officials make some progress in controlling consumer prices. Policymakers in advanced economies are still in a tightening mode, with both the US Federal Reserve and the European Central Bank signaling another increase in borrowing costs this month.

The June FOMC minutes will be released today. Investors will be looking for clues as to how far the US Fed can go in terms of raising rates. More than 85% of traders believe the US Fed will raise interest rates this month, and only 37% think the rate will be raised again in September.

Stock markets in Europe were mostly down on Tuesday. German DAX (DE30) was 0.26% lower, French CAC 40 (FR40) decreased by 0.23%, Spanish IBEX 35 (ES35) lost 0.63%, and British FTSE 100 (UK100) was 0.10% lower yesterday.

The Bank of England is considering plans to force more international banks to create subsidiaries in the UK. Analysts believe the move would make it easier for the Bank of England to seize control of subsidiaries such as SVB in London in the event of a collapse.

After the latest inflation figures, British Prime Minister Rishi Sunak announced his full support for the Bank of England but criticized Governor Andrew Bailey. In his January speech, the prime minister said that the promise to halve inflation was his personal responsibility, but if the UK Consumer Price Index remains stubbornly high for the rest of the year, many expect that the Bank of England may see a change in leadership.

Ahead of the OPEC+ meeting, key export giant Saudi Arabia announced Monday that production cuts of one million barrels a day would be extended for another month. Meanwhile, Russia said it would cut exports by 500,000 BPD in August. Normally news of production cuts by two such important players would provide additional support to oil prices. Nevertheless, the demand side still looks weak for the global oil market. This week’s key economic data from manufacturing sectors around the world was disappointing from China, Europe and the United States. As central banks are raising interest rates almost across the board to combat high inflation, lower economic activity is now effectively the goal of monetary policy.

Asian markets mostly rose yesterday. Japan’s Nikkei 225 (JP225) was down by 0.97%, China’s FTSE China A50 (CHA50) gained 0.33%, Hong Kong’s Hang Seng (HK50) added 0.57% on the day, and Australia’s S&P/ASX 200 (AU200) closed positive by 0.45% on Tuesday.

China’s abrupt announcement on Monday that it will impose export controls on certain types of gallium and germanium, effective August 1, escalated a trade war with the US and could potentially lead to new disruptions in global supply chains. Analysts viewed the move, which the Chinese Commerce Ministry said was aimed at protecting national security, as a response to Washington’s escalating efforts to curb China’s technological advances. China is the world’s largest producer of rare earth elements, a group of metals used in electric vehicles and military technology.

A private survey showed Wednesday that China’s services sector grew less than expected in June, raising fears of a slowdown in the country’s economic recovery. The figure follows a weak reading on manufacturing activity and points to a slowdown in growth in the second quarter. Nevertheless, analysts believe China’s weak data could attract additional stimulus measures from Beijing after liquidity injections and interest rate cuts earlier this year.

S&P 500 (F) (US500) 4,455.59 0 (0%)

Dow Jones (US30)34,418.47 0 (0%)

DAX (DE40) 16,039.17 −41.87 (−0.26%)

FTSE 100 (UK100) 7,519.72 −7.54 (−0.10%)

USD Index 103.09 0 (0%)

Important events for today:

– Japan Services PMI (m/m) at 03:30 (GMT+3);
– Australia Retail Sales (m/m) at 04:30 (GMT+3);
– German Services PMI (m/m) at 10:55 (GMT+3);
– Eurozone Services PMI (m/m) at 11:00 (GMT+3);
– UK Services PMI (m/m) at 11:30 (GMT+3);
– OPEC Meetings at 13:00 (GMT+3);
– US FOMC Meeting Minutes at 21:00 (GMT+3);
– US FOMC Member Williams Speaks at 23:00 (GMT+3).

By JustMarkets

Economics & Fundamentals Financial News

05 Jul

South Korea has the lowest fertility rate in the world – and that doesn’t bode well for its economy

By Dudley L. Poston Jr., Texas A&M University

Around the world, nations are looking at the prospect of shrinking, aging populations – but none more so than South Korea.

Over the last 60 years, South Korea has undergone the most rapid fertility decline in recorded human history. In 1960, the nation’s total fertility rate – the number of children, on average, that a woman has during her reproductive years – stood at just under six children per woman. In 2022, that figure was 0.78. South Korea is the only country in the world to register a fertility rate of less than one child per woman, although others – Ukraine, China and Spain – are close.

As a demographer who over the past four decades has conducted extensive research on Asian populations, I know that this prolonged and steep decline will have huge impacts on South Korea. It may slow down economic growth, contributing to a shift that will see the country end up less rich and with a smaller population.

Older, poorer, more dependent

Countries need a total fertility rate of 2.1 children per woman to replace their population, when the effects of immigration and emigration aren’t considered. And South Korea’s fertility rate has been consistently below that number since 1984, when it dropped to 1.93, from 2.17 the year before.

What makes the South Korean fertility rate decline more astonishing is the relatively short period in which it has occurred.

Back in 1800, the U.S. total fertility rate was well over 6.0. But it took the U.S. around 170 years to consistently drop below the replacement level. Moreover, in the little over 60 years in which South Korea’s fertility rate fell from 6.0 to 0.8, the U.S. saw a more gradual decline from 3.0 to 1.7.

Fertility decline can have a positive effect in certain circumstances, via something demographers refer to as “the demographic dividend.” This dividend refers to accelerated increases in a country’s economy that follow a decline in birth rates and subsequent changes in its age composition that result in more working-age people and fewer dependent young children and elderly people.

And that is what happened in South Korea – a decline in fertility helped convert South Korea from a very poor country to a very rich one.

Behind the economic miracle

South Korea’s fertility decline began in the early 1960s when the government adopted an economic planning program and a population and family planning program.

By that time, South Korea was languishing, having seen its economy and society destroyed by the Korean War of 1950 to 1953. Indeed by the late-1950s, South Korea was one of the poorest countries in the world. In 1961, its annual per capita income was only about US$82.

But dramatic increases in economic growth began in 1962, when the South Korean government introduced a five-year economic development plan.

Crucially, the government also introduced a population planning program in a bid to bring down the nation’s fertility rate. This included a goal of getting 45% of married couples to use contraception – until then, very few Koreans used contraception.

This further contributed to the fertility reduction, as many couples realized that having fewer children would often lead to improvements in family living standards.

Both the economic and family planning programs were instrumental in moving South Korea from one with a high fertility rate to one with a low fertility rate.

As a result, the country’s dependent population – the young and the elderly – grew smaller in relation to its working-age population.

The demographic change kick-started economic growth that continued well into the mid-1990s. Increases in productivity, combined with an increasing labor force and a gradual reduction of unemployment, produced average annual growth rates in gross domestic product of between 6% and 10% for many years.

South Korea today is one of the richest countries
in the world with a per capita income of $35,000.

Losing people every year

Much of this transformation of South Korea from a poor country to a rich country has been due to the demographic dividend realized during the country’s fertility decline. But the demographic dividend only works in the short term. Long-term fertility declines are often disastrous for a nation’s economy.

With an extremely low fertility rate of 0.78, South Korea is losing population each year and experiencing more deaths than births. The once-vibrant nation is on the way to becoming a country with lots of elderly people and fewer workers.

The Korean Statistical Office reported recently that the country lost population in the past three years: It was down by 32,611 people in 2020, 57,118 in 2021 and 123,800 in 2022.

If this trend continues, and if the country doesn’t welcome millions of immigrants, South Korea’s present population of 51 million will drop to under 38 million in the next four or five decades.

And a growing proportion of the society will be over the age of 65.

South Korea’s population aged 65 and over comprised under 7% of the population in 2000. Today, nearly 17% of South Koreans are older people.

The older people population is projected to be 20% of the country by 2025 and could reach an unprecedented and astoundingly high 46% in 2067. South Korea’s working-age population will then be smaller in size than its population of people over the age of 65.

In a bid to avert a demographic nightmare, the South Korean government is providing financial incentives for couples to have children and is boosting the monthly allowance already in place for parents. President Yoon Suk Yeol has also established a new government team to establish policies to increase the birth rate.

But to date, programs to increase the low fertility rate have had little effect. Since 2006, the South Korean government has already spent over $200 billion in programs to increase the birth rate, with virtually no impact.

Opening the trapdoor

The South Korean fertility rate has not increased in the past 16 years. Rather, it has continued to decrease. This is due to what demographers refer to as the “low-fertility trap.” The principle, set forth by demographers in the early 2000s, states that once a country’s fertility rate drops below 1.5 or 1.4, it is difficult – if not impossible – to increase it significantly.

South Korea, along with many other countries – including France, Australia and Russia – have developed policies to encourage fertility rate increases, but with little to no success.

The only real way for South Korea to turn this around would be to rely heavily on immigration.

Migrants are typically young and productive and usually have more children than the native-born population. But South Korea has a very restrictive immigration policy with no path for immigrants to become citizens or permanent residents unless they marry South Koreans.

Indeed, the foreign-born population in 2022 was just over 1.6 million, which is around 3.1% of the population. In contrast, the U.S. has always relied on immigration to bolster its working population, with foreign-born residents now comprising over 14% of the population.

For immigration to offset South Korea’s declining fertility rate, the number of foreign workers would likely need to rise almost tenfold.

Without that, South Korea’s demographic destiny will have the nation continuing to lose population every year and becoming one of the oldest – if not the oldest – country in the world.

About the Author:

Dudley L. Poston Jr., Professor of Sociology, Texas A&M University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions

03 Jul

Africa needs its own credit rating agency: here’s how it could work

By Misheck Mutize, University of Cape Town

The credit rating industry in Africa is dominated by the three international agencies: Moody’s, S&P and Fitch. Together they control an estimated 95% of the credit rating business globally.

Credit rating agencies are institutions that assess a borrower’s creditworthiness in general terms, or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, a corporation, a state or provincial authority, or a sovereign government. Investors use a credit rating to make decisions about risk and return. So the rating is required if an institution wants to raise funds on financial markets.

South Africa was the first African country to receive a sovereign rating, in 1994. To date, 32 African countries have received a sovereign rating from at least one of the “big three” agencies.

But policy makers are increasingly dissatisfied with their approach and methodology. Some of the criticisms are that agencies are quick to downgrade African countries but slow when upgrades are due; that they fail to accurately account for risk perception; that they don’t consult adequately with stakeholders; and that they lack independence and objectivity.

A recent study by the UN showed that subjective biases in credit ratings had cost African countries a combined US$74.5 billion. This was through funding opportunities lost and excess interest paid on public debt.

Conditions are therefore ripe to advance the idea of establishing an African credit rating agency as a partial solution. China has its own state-owned rating agency, Dagong Global Credit Rating Company. The Arab countries are also calling for their own rating agency.

As a lead expert with the African Union on ratings agencies, I can explain the framework this agency would operate in and why it makes business sense.

African Union official decisions

In March 2019, African Union (AU) ministers of finance and economy officially adopted a declaration that such an institution was needed. The AU also developed a proposal for the legal, financial and structural aspects of the rating agency. What’s not yet agreed is how the sustainability, credibility and independence of the agency will be achieved. But there is a way this could be achieved as I set out below.

The need for an African Rating agency has been reiterated by the current Chair of the AU, President Macky Sall of Senegal, and the Champion of the AU financial institutions, President Nana Akufo-Addo of Ghana. They highlighted it as an important step towards intra-continental integration. It would also enable AU member states to access capital and integrate the continent with global financial markets.

Institutional model

When the AU establishes a new institution, it can be either:

an organ of the union funded by its member states’ contributions, or
a self-funded autonomous specialised agency of the union.

Because the credit rating business requires credibility and independence, the best option is the specialised agency. Examples already in operation are the African Export-Import Bank and Africa Risk Capacity agency.

As an independent specialised agency of the AU, the agency would have diverse classes of shareholders. African governments could own it either directly or through their designated public institutions. Shareholding could include other smaller African-owned rating agencies, multilateral finance institutions and African national financial institutions.

As a financing structure, the agency would adopt the “issuer-pay” business model. The issuers of debt will pay the agency for rating its entity and products.

It would be fully funded by its shareholders and through loans from pan-African financial institutions. Multilateral development banks would either encourage or make it mandatory for their clients to have a rating from the African rating agency. Once this is done it should be able to sustain itself through revenue generated from its services.

As is the process in the AU, the African rating agency would be established through an agreement, signed by at least 10 member states.

The business case

There are still 22 African countries that have no credit ratings from the “big three” agencies. This will be a clear niche for the AU rating agency.

There is also tremendous value in the alternative rating sector, which cannot afford the cost of maintaining a rating from the “big three”. This includes small to medium enterprises, initial bond offerings and initial public offerings. The agency could also provide environmental, social and governance scores and foreign direct investment ratings. These rating services are urgently needed on the continent to complement governments’ efforts to support the development of domestic financial markets.

With the backing that comes from affiliation to the AU, the rating agency could secure substantial business in the ratings of domestic instruments that are aligned with the continent’s goals.

It would have the advantage of understanding the domestic context of Africa. So it could issue more informative and detailed ratings than those issued by the “big three”.

Way forward

The African Union is forging ahead with its plans to establish an African rating agency to complement the three dominant international agencies, and support the development of domestic financial markets in Africa. Although it will have to overcome challenges to gain investors’ support, there is a huge appetite for an alternative and complementary credit rating institution in Africa. Its success will be in developing a comprehensive methodology adapted to the African context, and resident analysts that understand the continent’s dynamics.

About the Author:

Misheck Mutize, Post Doctoral Researcher, Graduate School of Business (GSB), University of Cape Town

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions

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