24 Oct

Warning: The anti-ESG movement could hit your wealth

By George Prior 

The backlash against ESG – the use of environmental, social, and governance factors in investing – could hit your wealth, warns the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

The warning from Nigel Green of deVere Group comes as the IEA’s World Energy Outlook for 2023 published on Tuesday reveals that demand for oil, coal and natural gas is set to peak by 2030.

It also follows findings from a separate report published in the journal Nature Communications that damage from the global climate crisis has amounted to $391 million per day over the past two decades.

The deVere CEO says: “The International Energy Agency’s World Energy Outlook shows that there’s a major evolution taking place in how the planet is powered. From 2030, oil, coal and natural gas will play a significantly less dominant role.

“The unprecedented rise of clean energy technologies, including wind, solar, heat pumps and electric cars, will play a vital role.

“Yet despite this evidence that cleaner energy is the future – and, therefore ,should be uncontroversially appealing to investors – the anti-ESG movement is real and is growing.”

In a recent survey by The Conference Board of more than 100 large US companies, almost half said they have already “experienced ESG backlash”, and 61% anticipate it to continue or intensify over the next two years.

“Much of this has been focused on the financial industry, and large asset managers in particular, which means that your investments could be being repositioned away from ESG.  This, we believe, could have a longer-term, detrimental impact on your wealth.”

Nigel Green continues: “Anti-ESG proponents, including some financial advisors, often argue that ESG investing is just a trend that will eventually fizzle out. However, the data suggests otherwise.

“The growing emphasis on ESG factors is not just a fleeting fashion, but rather a reflection of changing market dynamics and consumer preferences. Ignoring these shifts would put a company’s stock performance at risk – and therefore, potentially, your investments.”

“Anti-ESG proponents may encourage you to miss out on profitable investment opportunities. Numerous studies have shown that companies with strong ESG performance often outperform their peers. Ignoring this data may lead to missed opportunities for portfolio growth,” he notes.

One of the primary drivers of ESG investing is risk mitigation. “Companies that perform well in ESG criteria tend to be better prepared to navigate a range of challenges, from environmental disasters to social controversies.  Again, if you overlook these considerations, you may find your investment portfolio vulnerable to unforeseen risks that can lead to financial losses.”

An undeniable fact is that governments and regulatory bodies are increasingly recognising the importance of ESG factors. Ignoring ESG criteria can expose companies – and therefore their investors – to regulatory risks, including fines and legal liabilities associated with non-compliance with evolving ESG regulations.

Nigel Green concludes: “The anti-ESG movement – which is alive and well and becoming increasingly powerful – fails to see the bigger, longer-term picture.

“Our concern is that people will be coerced into this narrow, backward-looking view and miss out on major opportunities that could negatively affect their prospects for growing and safeguarding their wealth.”

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 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Opinions
24 Oct

Trade Of The Week: Will gold conquer $2000 again?

By ForexTime 

  • Gold up roughly 8% since Hamas attack on Israel
  • Precious metal influenced by geopolitical risk and Fed hike bets
  • Watch out for key US data, including September PCE report
  • Gold heavily bullish but RSI overbought on daily charts
  • Key level of interest found at $2000

Gold has been an unstoppable force this month as mounting geopolitical tensions rocked global markets.

The precious metal is up roughly 8% since the Hamas attacks on Israel (October 7th) with prices approaching the key psychological $2000 level – a level not seen since mid-May.

Despite prices retreating last Friday, bulls have entered the new week with renewed vigor as investors closely monitor the developments in the Middle East. It is worth noting that gold has gained 7% month-to-date, its best month since March 2023 thus far. More volatility could be on the horizon for gold thanks to not only geopolitical tensions but Fed hike expectations.

Given the key technical and fundamental forces at play, it will be wise to keep a close eye on gold.

Here are 3 key factors to watch out for:

  1. Heightened geopolitical risks

It is worth noting that gold is a safe-haven asset that investors sprint towards in times of uncertainty.

Mounting tensions in the Middle East represent a major element of uncertainty. This has rattled financial markets, clouded sentiment, and left investors on edge. Concerns remain elevated over the spectre of a wider conflict in the region, especially after the U.S. announced it was sending more military resources. With this development representing a threat to the global economy, markets remain uneasy and gloomy.

  • Should rising tensions between Israel and Hamas spill over into other regions, this could keep gold prices buoyed – pushing the precious metal beyond $2000.
  • Any fresh signs of easing geopolitical tensions may dampen appetite for the precious metal, pulling prices away from the psychological $2000 point.

  1. Fed hike expectations

This will be a week packed with key US economic reports that have the potential to shape Fed rate expectations. Gold remains highly sensitive to monetary policy speculation due to its zero-yielding nature.

It would be wise to keep an eye on the latest US GDP and September PCE report. Real GDP in the third quarter of 2023 is expected to jump to 4.3% up from the 2.1% in the previous quarter. The real mover for gold may be the Fed’s preferred inflation gauge, the Core Personal Consumption which could offer key clues on the Fed’s next move. Fed Chair Jerome Powell is also due to give remarks mid-week which has the potential to move gold, especially if any fresh clues are offered on interest rates.

As of writing, traders are currently pricing in a 1 in 4 chance of a 25 basis point Fed hike by the end of 2023.

  • Gold could push higher if US economic data disappoints and there are signs of cooling inflationary pressures.
  • Should overall US data print and inflation print above market expectations, gold could fall as rate hike expectations jump.

  1. Technical forces

Gold is heavily bullish on the daily charts as there have been consistently higher highs and higher lows. Prices are trading above the 50, 100, and 200-day SMA while the MACD trades to the upside. However, the Relative Strength Index (RSI) signals that prices are heavily overbought – suggesting a potential technical throwback down the road.

A technical throwback is when prices break above a resistance level, but re-tests the resistance before resuming its uptrend.

  • Should the upside momentum hold, bulls could target the psychological $2000 with $2018 acting as the next key point of interest.
  • Sustained weakness below $2000 may encourage a decline back towards $1945 and potentially $1930 – where the 200-day SMA resides.

Currently, Bloomberg’s FX model points to a 75% chance that Gold will trade within the $1931.97 –  $2025.82 range this week.

Forex-Time-LogoArticle by ForexTime

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

Metals Opinions
17 Oct

Lego’s ESG dilemma: Why an abandoned plan to use recycled plastic bottles is a wake-up call for supply chain sustainability

By Tinglong Dai, Johns Hopkins University; Christopher S. Tang, University of California, Los Angeles, and Hau L. Lee, Stanford University 

Lego, the world’s largest toy manufacturer, has built a reputation not only for the durability of its bricks, designed to last for decades, but also for its substantial investment in sustainability. The company has pledged US$1.4 billion to reduce carbon emissions by 2025, despite netting annual profits of just over $2 billion in 2022.

This commitment isn’t just for show. Lego sees its core customers as children and their parents, and sustainability is fundamentally about ensuring that future generations inherit a planet as hospitable as the one we enjoy today.

So it was surprising when the Financial Times reported on Sept. 25, 2023, that Lego had pulled out of its widely publicized “Bottles to Bricks” initiative.

This ambitious project aimed to replace traditional Lego plastic with a new material made from recycled plastic bottles. However, when Lego assessed the project’s environmental impact throughout its supply chain, it found that producing bricks with the recycled plastic would require extra materials and energy to make them durable enough. Because this conversion process would result in higher carbon emissions, the company decided to stick with its current fossil fuel-based materials while continuing to search for more sustainable alternatives.

As experts in global supply chains and sustainability, we believe Lego’s pivot is the beginning of a larger trend toward developing sustainable solutions for entire supply chains in a circular economy. New regulations in the European Union – and expected in California – are about to speed things up.

Examining all the emissions, cradle to grave

Business leaders are increasingly integrating environmental, social and governance factors, commonly known as ESG, into their operational and strategic frameworks. But the pursuit of sustainability requires attention to the entire life cycle of a product, from its materials and manufacturing processes to its use and ultimate disposal.

The results can lead to counterintuitive outcomes, as Lego discovered.

Understanding a company’s entire carbon footprint requires looking at three types of emissions: Scope 1 emissions are generated directly by a company’s internal operations. Scope 2 emissions are caused by generating the electricity, steam, heat or cooling a company consumes. And scope 3 emissions are generated by a company’s supply chain, from upstream suppliers to downstream distributors and end customers.

Lists of examples of sope 1, 2, 3 emissions sources with an illustration of a factory in the center
What scope 1, 2 and 3 emissions involve.
Chester Hawkins/Center for American Progress

Currently, fewer than 30% of companies report meaningful scope 3 emissions, in part because these emissions are difficult to track. Yet, companies’ scope 3 emissions are on average 11.4 times greater than their scope 1 emissions, data from corporate disclosures reported to the nonprofit CDP show.

Lego is a case study of this lopsided distribution and the importance of tracking scope 3 emissions. A staggering 98% of Lego’s carbon emissions are categorized as scope 3.

From 2020 to 2021, the company’s total emissions increased by 30%, amid surging demand for Lego sets during the COVID-19 lockdowns – even though the company’s scope 2 emissions related to purchased energy such as electricity decreased by 40%. The increase was almost entirely in its scope 3 emissions.

Lego’s tour of how its toy bricks are made doesn’t address the supply chain, where most of Lego’s greenhouse gas emissions originate.

As more companies follow in Lego’s footsteps and begin reporting scope 3 emissions, they will likely find themselves in the same position, realizing that efforts to reduce carbon emissions often boil down to supply chain and consumer-use emissions. And the results may force them to make some tough choices.

Policy and disclosure: The next frontier

New regulations in the European Union and pending in California are designed to increase corporate emissions transparency by including supply chain emissions.

The EU in June 2023 adopted the first set of European Sustainability Reporting Standards, which will require publicly traded companies in the EU to disclose their scope 3 emissions, starting in their reports for fiscal year 2024.

California’s legislature passed similar legislation requiring companies with revenues of more than $1 billion to disclose their scope 3 emissions. California’s governor has until Oct. 14, 2023, to consider the bill and is expected to sign it.

At the federal level, the U.S. Securities and Exchange Commission released a proposal in March 2022 that, if finalized, would require all public companies to report climate-related risk and emissions data, including scope 3 emissions. After receiving significant pushback, the SEC began reconsidering the scope 3 reporting rule. But SEC Chairman Gary Gensler suggested during a congressional hearing in late September 2023 that California’s move could influence federal regulators’ decision.

SEC Chairman Gary Gensler explains the importance of climate-related risk disclosures.

This increased focus on disclosure of scope 3 emissions will undoubtedly increase pressure on companies.

Because scope 3 emissions are significant, yet often not measured or reported, consumers are rightly concerned that companies that claim to have low emissions may be greenwashing without taking action to reduce emissions in their supply chains to combat climate change.

At the same time, we suspect that as more investors support sustainable investing, they may prefer to invest in companies that are transparent in disclosing all areas of emissions. Ultimately, we believe consumers, investors and governments will demand more than lip service from companies. Instead, they’ll expect companies to take actionable steps to reduce the most significant part of a company’s carbon footprint – scope 3 emissions.

A journey, not a destination

The Lego example serves as a cautionary tale in the complex ESG landscape for which most companies are not well prepared. As more companies come under scrutiny for their entire carbon footprint, we may see more instances where well-intentioned sustainability efforts run into uncomfortable truths.

This calls for a nuanced understanding of sustainability, not as a checklist of good deeds, but as a complex, ongoing process that requires vigilance, transparency and, above all, a commitment to the benefit of future generations.The Conversation

About the Author:

Tinglong Dai, Professor of Operations Management & Business Analytics, Carey Business School, Johns Hopkins University; Christopher S. Tang, Professor of Supply Chain Management, University of California, Los Angeles, and Hau L. Lee, Professor of Operations, Information & Technology, Stanford University

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

Economics & Fundamentals Opinions
13 Oct

Cocoa prices are surging: west African countries should seize the moment to negotiate a better deal for farmers

By Michael E Odijie, UCL 

The global price of cocoa is spiking, a direct response to dwindling cocoa output in west Africa. In September, cocoa futures reached a 44-year price peak due to mounting concerns over reduced supplies from the region.

The price surge could prove to be a critical moment for cocoa farming and policy in west Africa.

The cocoa-producing belt of west Africa is responsible for generating over 80% of the total global output. Between them, Ghana and Côte d’Ivoire contribute more than 60% to the global output. Ghana is the second-biggest producer in the world and cocoa is a vital component of the country’s economy.

The global price spike has led west African governments to increase the guaranteed producer prices to farmers. Ghana recently raised the state-guaranteed cocoa price paid to farmers by two thirds. The announcement means that Ghana’s cocoa farmers will be paid 20,943 cedis (US$1,837) per tonne for the upcoming 2023-2024 season, up from 12,800 cedis.

Cameroon, the world’s fourth-largest cocoa producer, raised the price cocoa farmers get to 1,500 CFA francs (US$2.50) per kilogram, a 25% jump from the previous rate of 1,200 CFA francs. This increase is even more significant than Ghana’s when factoring in Cameroon’s single-digit inflation. Additionally, the Cote d’Ivoire government has announced a rise in the producer price.

As an economics researcher who has extensively studied and written about cocoa production in west Africa, I contend that the recent shortages can be harnessed to strengthen the position of cocoa producers. This will enable them to address the structural challenges ingrained in the cocoa production value chain. Rising production costs have not been recognised in the value of cocoa beans. Farmers therefore haven’t been able to earn enough income and this has led to unsustainable farming practices.

In my view, west African countries should use the cocoa shortage as negotiating leverage against multinational corporations to address these structural issues. Both Ghana and Côte d’Ivoire must recognise this pivotal moment. They must take the lead, and frame the current production challenges as deep-seated structural problems requiring solutions, rather than as short-term issues.

What’s driving the change?

Ghana’s cocoa regulator recently indicated that its farmers might not be able to meet some cocoa contract obligations for another season. Ghana’s projected cocoa yield for the 2022/23 planting season was the lowest in 13 years, falling 24% short of the initial estimates of 850,000 metric tonnes.

This trend has been repeated across the region, with production falling in Côte d’Ivoire and Cameroon.

Reduced output means demand can’t be met and global prices rise.

The reduction in cocoa output is attributed to short-term and long-term factors.

Commentators typically emphasise the short-term factors:

  • poor weather conditions
  • black pod disease, which causes cocoa pods to rot
  • the decline in the number of cocoa farmers, some of them selling their land to illegal miners
  • a shortage of fertilisers and pesticides, especially since the conflict in Ukraine has curtailed Russia’s export of potash and other fertilisers.

A number of long-term structural issues have beset cocoa farming in west Africa for decades. They shouldn’t be overshadowed by concerns with short-term problems.

The first is the declining availability of forest land and its connection to increasing production costs.

Over the last two decades, depletion of forest land has led farmers to turn to grasslands for replanting cocoa plants. This requires extensive land preparation, regular weeding around the cocoa trees, pruning, and the application of fertilisers and pesticides. What’s more, the plants are highly susceptible to disease. All these things result in increased labour costs.

None of these additional burdens have been incorporated into the pricing for sustainable cocoa production. In light of the new cost structure, cocoa beans have been undervalued for decades. Farmers have become poorer and are exploring alternative sources of livelihood.

The cost of sustainably cultivating cocoa in grasslands must be reflected in the price that farmers receive. Relying solely on market forces will not achieve this. For instance, every year, typically in September, the Ghana Cocoa Board announces the official producer price for cocoa beans for the upcoming cocoa season on behalf of the government. This official price is based on the anticipated export market price, with an understanding in Ghana that farmers should receive approximately 70% of it. However, the resulting market price, and consequently the producer price derived from it, often falls short of covering the costs of sustainable cocoa cultivation.

A path forward

What would it cost for cocoa farmers to cultivate cocoa beans sustainably, and ensure a living income, without contributing to deforestation or resorting to child labour?

If the market price falls below this cost (which isn’t static), then the farmers face exploitation, giving rise to many of the problems that plague the industry.

A few years ago, Ghana and Côte d’Ivoire pioneered the introduction of the “living income differential” – a premium that cocoa buyers would pay on top of the market price to ensure that farmers earned a sustainable income from their produce. Despite its noble intent, the initiative faltered. It was not well thought through. And it came at a time when these countries had diminished bargaining clout in a saturated market. Now is a favourable moment.

The crisis in the sector puts cocoa producers in a stronger negotiating position.

Ghana and Côte d’Ivoire could collaborate with other regional countries, such as Nigeria and Cameroon, to negotiate a better position for their cocoa farmers, ensuring sustainable cultivation. There are many strategies these countries can explore, including supply management (such as buffer stocks, export controls, or quotas), price premiums and value addition.The Conversation

About the Author:

Michael E Odijie, Research associate, UCL

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

Opinions Soft Commodities
13 Oct

Technical Analysis & Forecast 13.10.2023

By RoboForex.com

EURUSD, “Euro vs US Dollar”

EURUSD has completed a wave of growth to 1.0638. The market has formed a consolidation range under this level and, escaping it downwards, continues developing the declining wave to 1.0470. After the price hits this level, a link of growth to 1.0550 is not excluded (with a test from below), followed by a decline to 1.0424.

EURUSD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

GBPUSD, “Great Britain Pound vs US Dollar”

GBPUSD has completed a wave of growth to 1.2337. By now, the market has formed a consolidation range under this level. Breaking the range downwards, the market completed a declining wave to 1.2171. A link of correction to 1.2222 is not excluded (with a test from below), followed by a decline to 1.2121. This is a local target.

GBPUSD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

USDJPY, “US Dollar vs Japanese Yen”

USDJPY has completed a wave of growth to 149.81. A link of decline to 149.00 is expected (with a test from above). Next, a link of growth to 150.75 might follow.

USDJPY
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

USDCHF, “US Dollar vs Swiss Franc”

USDCHF has completed a wave of decline to 0.8989. By now, the market has formed a consolidation range above this level and is forming a growing impulse to 0.9122, escaping the range upwards. This is the first target.

USDCHF
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

AUDUSD, “Australian Dollar vs US Dollar”

AUDUSD has completed a rising link to 0.6444. Practically, the market demonstrates the wave of growth as complete. By now, a consolidation range has formed under 0.6444 and, escaping it downwards, the market develops an impulse of decline to 0.6262. This is a local target.

AUDUSD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

BRENT

Brent continues forming a consolidation range around 86.00. A link of decline to 84.00 is not excluded, followed by a rising link to 89.00. This is the first target.

BRENT
Risk Warning: the result of previous trading operations do not guarantee the same results in the future
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

XAUUSD, “Gold vs US Dollar”

Gold has completed a wave of growth to 1884.80. Today the market has performed a declining impulse to 1867.00 and a rising link to 1876.55. Practically, a consolidation range has formed which the price might later break downwards to 1847.77. This is the first target.

GOLD
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

S&P 500

The stock index is forming a declining impulse to 4310.0. Next, the quotes might rise to 4355.0 (with a test from below). Next, a new wave of decline to 4200.0 might begin. This is a local target.

S&P 500

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Financial News Forex and Currency News
13 Oct

The situation in the Middle East is heating up. Inflation data in China disappointed investors

By JustMarkets

At Wednesday’s stock market close, the Dow Jones Index (US30) decreased by 0.51%, while the S&P 500 Index (US500) lost 0.62%. The NASDAQ Technology Index (US100) closed yesterday negative by 0.63%. Stocks posted moderate losses on Thursday amid a stronger-than-expected US CPI report for September. In addition, weekly US initial jobless claims remained unchanged, which was hawkish for Fed policy. Thursday’s hawkish reports keep the likelihood of another Fed rate hike this year alive. Stocks continued to lose ground Thursday afternoon as T-bond yields rose further amid weak demand at the $20 billion auction of 30-year Treasury bonds.

Concerns that the conflict between Israel and Hamas will spread to the Middle East was another negative factor for stocks amid reports that Israel launched airstrikes on major airports in Damascus and Aleppo in Syria. In turn, Iran has begun moving military equipment to its western border. Whether this equipment will travel further through Iraq toward Israel is still unknown, but the geopolitical risks of another major war have increased significantly in recent days.

The US Consumer Price Index for September came in at 3.7% y/y, unchanged from August and stronger than the 3.6% y/y decline. The core CPI excluding food and energy for September declined to 4.1% y/y from 4.3% y/y in August, which was in line with expectations. US weekly initial jobless claims were unchanged at 209,000, indicating a slight strengthening of the labor market compared to expectations of a rise to 210,000.

FRB Boston President Collins commented that she favors a pause in Fed rate hikes.

Equity markets in Europe traded lower yesterday. Germany’s DAX (DE40) decreased by 0.23%, France’s CAC 40 (FR40) lost 0.37% on Thursday, Spain’s IBEX 35 (ES35) was 0.26% cheaper, and the UK’s FTSE 100 (UK100) closed positive by 0.32%.

ECB Governing Council spokesperson Centeno said yesterday, “At the current level of interest rates, we will make a significant contribution to the 2% inflation target. We will achieve this target by continuing with this monetary policy stance, holding it for some time until we are fully confident that inflation is falling.” Another representative of the ECB Governing Council, Wunsch, said, “If we continue to see inflation figures in line with the forecast, we will not need to raise interest rates again.” Minutes from the ECB’s September 13-14 meeting showed that the risks of too much tightening and too little tightening have become more balanced and the ECB will hold off on raising interest rates.

Crude oil prices gave up early gains on Thursday amid a stronger dollar and after the EIA’s weekly crude oil inventories report showed an unexpected rise in crude stockpiles and US crude production hit a record high. Oil initially opened higher on Thursday on concerns over the escalating conflict between Israel and Hamas. Oil was also supported by comments from Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, who said oil producers will continue to work together and be proactive to keep the oil market balanced.

Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) rose by 1.75%, China’s FTSE China A50 (CHA50) gained 0.85%, Hong Kong’s Hang Seng (HK50) rose by 1.93% and Australia’s ASX 200 (AU200) ended the day positive by 0.04%.

In China, the Consumer Price Index (CPI) was unchanged in September, missing forecasts for a 0.2% y/y rise. In August, the CPI rose by 0.1% y/y. On an annualized basis, core inflation, excluding food and fuel prices, was up by 0.8%, the same as in August. The Producer Price Index (PPI) fell to 2.5% y/y, marking the 12th consecutive negative month, although the rate of decline slowed from August. Economists had forecast a drop to 2.4% y/y. CPI inflation at zero indicates that deflationary pressures in China remain a real threat to the economy. The recovery in domestic demand will not be strong without significant stimulus from the government.

S&P 500 (F)(US500) 4,349.61 −27.34 (−0.62%)

Dow Jones (US30) 33,631.14 −173.73 (−0.51%)

DAX (DE40)  15,425.03 −34.98 (−0.23%)

FTSE 100 (UK100) 7,644.78 +24.75 (+0.32%)

USD Index  106.58 +0.76 (+0.72%)

News feed for 2023.10.13:
  • – Singapore GDP (q/q) at 03:00 (GMT+3);
  • – China Consumer Price Index (m/m) at 04:30 (GMT+3);
  • – China Producer Price Index (m/m) at 04:30 (GMT+3);
  • – China Trade Balance (m/m) at 06:00 (GMT+3);
  • – Sweden Consumer Price Index (m/m) at 09:00 (GMT+3);
  • – Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
  • – UK BoE Gov Bailey Speaks at 11:00 (GMT+3);
  • – Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
  • – US FOMC Member Harker Speaks at 16:00 (GMT+3);
  • – Eurozone ECB President Lagarde Speaks (m/m) at 16:00 (GMT+3);
  • – US Michigan Consumer Sentiment (m/m) at 17:00 (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
13 Oct

Week Ahead: Looming “death cross” teases GBPUSD bears

By ForexTime 

  • GBPUSD set to be driven by technical and fundamental forces
  • Keep eye on UK CPI report, US data dump and Fed speeches
  • Looming “death cross” formation points to further declines
  • GBPUSD remains bearish despite recent bounce
  • Key levels of interest found at 1.2310 and 1.2050

The combination of geopolitical risk and Fed rate expectations injected markets with explosive levels of volatility this week. We could see more action later today due to earnings announcements by Wall Street banks.

And even before things settle down, volatility is likely to intensify in the week ahead thanks to top-tier economic reports and speeches from policymakers among other key risk events:

Monday, October 16

  • CNH: China medium-term lending facility rate
  • JPY: Japan industrial production
  • GBP: BOE chief economist Huw Pill speech
  • USD: US Empire Manufacturing index, Philadelphia Fed President Patrick Harker speech

Tuesday, October 17

  • CAD: Canada housing starts, CPI
  • EUR: Germany ZEW survey expectations
  • GBP: UK jobless claims, unemployment
  • USD: US retail sales, industrial production, New York Fed President John Williams, Richmond Fed President Tom Barkin speech
  • SPX500_m: Goldman Sachs, Bank of America earnings

Wednesday, October 18

  • CNH: China GDP, retail sales, industrial production
  • EUR: Eurozone CPI
  • GBP: UK September CPI
  • USD: US housing starts, Philadelphia Fed President Patrick Harker, New York Fed President John Williams speech
  • NQ100_m: Netflix, Tesla earnings

Thursday, October 19

  • CNH: China property prices
  • AUD: Australia unemployment
  • JPY: Japan trade
  • USD: US initial jobless claims, existing home sales,
  • USD: Fed speak – Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlantia Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan

Friday, October 20

  • CAD: Canada retail sales
  • CNH: China loan prime rates
  • NZD: New Zealand trade
  • JPY: Japan CPI
  • USD: Philadelphia Fed President Patrick Harker speech

Our focus falls on the GBPUSD which is forming a “death cross” pattern on the daily timeframe.

A death cross happens when an asset’s 50-day simple moving average (SMA) moves below its 200-day SMA. This technical pattern is widely viewed as a signal that prices may continue to fall further in the medium to longer term.

After initially kicking off the week on a positive note amid a weaker dollar, the GBPUSD tumbled aggressively on Thursday thanks to the stronger-than-expected US inflation figures. With the dollar drawing strength from renewed Fed hike bets, the GBPUSD could resume its downtrend.

Here are 3 reasons why GBPUSD could be gearing up for a major move:

  1. UK September Consumer Price Index (CPI)

The latest UK inflation data published on Wednesday, 18th October is likely to influence expectations around the BoE’s next move. Before this key report, the UK will release its latest batch of labour market data on Tuesday, October 17th. Any further signs of the UK jobs market’s cooling may support the argument around the BoE keeping rates on hold for the rest of 2023.

Markets are forecasting:

  • CPI year-on-year (September 2023 vs. September 2022) to cool 6.5% from 6.7% in the prior month.
  • Core CPI year-on-year to cool 6.5% from 6.7% seen in August.
  • CPI month-on-month (September 2023 vs August 2023) to rise 0.5% from 0.3% in the prior month.

As of writing, traders are pricing in a 45% probability of a 25 basis point BoE hike by the end of 2023.

  • Signs of still stubborn inflation may boost bets around the BoE hiking rates one more time before the end of 2023, pushing the GBPUSD towards 1.2310.
  • Should September’s CPI report show signs of cooling inflationary pressures, this could fuel hopes around the BoE keeping rates on hold – dragging the GBPUSD lower as a result.

  1. US data dump + Fed speeches

Dollar volatility could be the name of the game next week due to key US economic data and speeches by a host of Fed officials. After receiving a boost from stronger-than-expected US inflation data, dollar bulls could switch into higher gear if the incoming economic releases support the case for another Fed hike in 2023.

The US Empire manufacturing will be in focus on Monday, with key US retail sales and industrial production figures published on Tuesday and US initial jobless claims on Thursday. These reports will be complemented by speeches from various Fed officials including Fed chair Jerome Powell.

  • If US economic data misses expectations and Fed officials reiterate their dovish remarks, this could hit the dollar as bets rise over the Fed pausing hikes for the rest of 2023.
  • A strong set of economic releases may fuel speculation around the Fed raising rates one more time this year. This may boost the dollar, pulling the GBPUSD lower as a result.

  1. Bearish technical force: Death cross pending

The GBPUSD remains under pressure on the daily charts with the looming “death cross” formation signalling a steeper decline down the road. Although the currency pair experienced a technical bounce from seven-month lows, prices are still trading below the 50, 100, and 200-day SMA while the MACD trades to the downside.

  • Sustained weakness below 1.2310 may keep bears control with the downside momentum opening a path towards 1.2050. A breakdown below this point could trigger a selloff towards 1.1920.
  • Should prices push back above 1.2310, could see prices test 1.2430 – where the 200-day SMA resides.

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Forex and Currency News Opinions
13 Oct

Exxon, Apple and other corporate giants will have to disclose all their emissions under California’s new climate laws – that will have a global impact

By Lily Hsueh, Arizona State University 

Many of the world’s largest public and private companies will soon be required to track and report almost all of their greenhouse gas emissions if they do business in California – including emissions from their supply chains, business travel, employees’ commutes and the way customers use their products.

That means oil and gas companies like Chevron will likely have to account for emissions from vehicles that use their gasoline, and Apple will have to account for materials that go into iPhones.

It’s a huge leap from current federal and state reporting requirements, which require reporting of only certain emissions from companies’ direct operations. And it will have global ramifications.

California Gov. Gavin Newsom signed two new rules into law on Oct. 7, 2023. Under the new Climate Corporate Data Accountability Act, U.S. companies with annual revenues of US$1 billion or more will have to report both their direct and indirect greenhouse gas emissions starting in 2026 and 2027. The California Chamber of Commerce opposed the regulation, arguing it would increase companies’ costs. But more than a dozen major corporations endorsed the rule, including Microsoft, Apple, Salesforce and Patagonia.

The second law, the Climate-Related Financial Risk Act, requires companies generating $500 million or more to report their financial risks related to climate change and their plans for risk mitigation.

As a professor of economics and public policy, I study corporate environmental behavior and public policy, including whether disclosure laws like these work to reduce emissions. I believe California’s new rules represent a significant step toward mainstreaming corporate climate disclosures and potentially meaningful corporate climate actions.

Many big corporations are already reporting

Most of the companies covered by California’s climate disclosure rules are multinational corporations. They include technology companies such as Apple, Google and Microsoft; giant retailers like Walmart and Costco; and oil and gas companies such as ExxonMobil and Chevron.

Many of these large corporations have been preparing for mandatory disclosure rules for several years.

Close to two-thirds of the companies listed in the S&P 500 index voluntarily report to CDP, formerly called the Carbon Disclosure Project. CDP is a nonprofit that surveys companies on behalf of institutional investors about their carbon management and plans to reduce carbon emissions.

Many of them also face reporting requirements elsewhere, including in the European Union, the United Kingdom, New Zealand, Singapore and cities like Hong Kong.

Moreover, some of the same U.S. companies, notably banks and asset managers that operate or sell products in Europe, have already started to comply with the EU’s Sustainable Finance Disclosure Regulation. Those regulations require companies to report how sustainability risks are integrated into investment decision-making.

While California isn’t the first place to mandate climate disclosures, it is the fifth-largest economy in the world. So, the state’s new laws are poised to have substantial influence worldwide. Subsidiaries of companies that didn’t have to report their emissions before will now be subject to disclosure requirements. California is in effect exercising its immense market leverage to establish climate disclosures as standard practice in the U.S. and beyond.

California also has a history of being a test bed for future federal U.S. policies. The U.S. government is considering broader emissions reporting requirements. But California’s new rules go further than either the U.S. Securities and Exchange Commission’s proposed corporate climate disclosure rules or President Joe Biden’s proposed disclosure rules for federal contractors.

A chart shows the differences between California's new climate disclosure laws and carbon disclosure and reporting proposals by the SEC and Biden Administration.

The most controversial part of the new disclosure rules involves scope 3 emissions. These are emissions from a company’s suppliers and its consumers’ use of its products, and they are notoriously difficult to track accurately.

California’s new emissions reporting law directs the California Air Resources Board, which will develop the regulations and administer them, to allow some leeway in scope 3 reporting as long as the reports are made with a reasonable basis and disclosed in good faith. It’s also important to note that at this point the disclosure laws don’t require companies to cut these emissions, only to report them. But tracking scope 3 emissions does highlight where companies could pressure suppliers to make changes.

What can disclosures achieve?

The plethora of climate disclosure mandates globally suggest that policymakers and investors around the world perceive climate disclosures as driving actions that protect the environment. The big question is: Do disclosure rules actually work to reduce emissions?

My research shows that voluntary carbon disclosure systems like CDP’s that focus on reporting corporate sustainability outputs, such as having science-based emissions targets, tend not to be as effective as those that focus on outcomes, such as a company’s actual carbon emissions.

For example, a company could earn an A or B grade from CDP and still increase its entitywide carbon emissions, notably when it does not face regulatory pressure.

In contrast, a recent study of the U.K.’s 2013 disclosure mandate for U.K.-incorporated listed firms found that companies reduced their operational emissions by about 8% relative to a control group, with no significant changes to their profitability. When companies report their emissions, they can gain important knowledge about inefficiencies in their operations and supply chains that weren’t evident before.

Ultimately, a well-designed disclosure program, whether voluntary or mandatory, needs to focus on consistency, comparability and accountability. Those traits allow companies to demonstrate that their climate pledges and actions are real and not just a front for greenwashing.The Conversation

About the Author:

Lily Hsueh, Associate Professor of Economics and Public Policy, Arizona State University

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

Energy Opinions
12 Oct

US CPI comes in above expectations – what should you do with investments?

By George Prior 

US Consumer Price Index (CPI) data published Thursday supports the case that the Federal Reserve will likely implement one more interest rate hike, says the CEO of one of the world’s leading financial advisory, asset management and fintech organizations.

The prediction from Nigel Green of deVere Group comes as September CPI inflation rises 3.7%, above expectations of 3.6%. US CPI is now up for four consecutive months. Core CPI inflation fell to 4.1%, in line with expectations.

He comments: “Taking into account the latest US CPI data, and the minutes from the most recent Federal Reserve meeting, which were published on Monday, we expect there to be one last 25 basis point hike at its two-day meeting beginning October 31.

“The Fed will be conscious of growing uncertainty of the trajectory of the world’s largest economy and the risks of overtightening – especially in times of growing geopolitical uncertainty; while at the same time, want to avoid complacency in the continuing battle against inflation.”

The deVere CEO continues: “As a result, we expect that interest rates will still continue to remain higher for longer.”

Based on the assertion that interest rate hikes are likely to be nearing an end, and high-interest rates are expected to continue, investors may want to consider rebalancing their portfolios.

“Financial institutions, such as banks and insurance companies, tend to benefit from higher interest rates as they can charge more for loans and earn higher yields on their investments. A portfolio allocation to financial services stocks or exchange-traded funds (ETFs) may be considered,” says Nigel Green.

“The energy sector also benefits from a robust economy and high interest rates. It’s typically positively correlated with economic growth and tends to perform well in such environments.

“Certain segments of the consumer discretionary sector, such as automotive, housing, and luxury goods, can perform well when interest rates are high. Consumer spending can remain strong, particularly if the economy is healthy, and these industries can benefit.

“Industrial companies often benefit from increased infrastructure spending and a robust economy. With expectations of continued high interest rates, these companies are likely to see growth opportunities in construction, manufacturing, and transportation.”

He goes on to add: “While technology stocks can be sensitive to interest rate changes, some tech companies continue to thrive in a high-interest rate environment, especially those with strong fundamentals and growth potential.

“Meanwhile, the healthcare sector is typically less sensitive to interest rate changes, making it a relatively stable option for a portfolio, as will essential goods, such as food, beverages, and household products.”

As ever, an investor’s best tool for mitigating risk and seizing opportunities is to remain properly diversified and by working with an independent financial advisor.

The FOMC since March 2022 has raised its key interest rate 11 times, taking it to a targeted range of 5.25%-5.5%, the highest level in 22 years.

Nigel Green concludes: “We don’t think we’re at the end of the hiking cycle just yet, even though we’re close, and rates will continue to be high, potentially impacting your investment portfolio.”

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 offices across the world, over 80,000 clients and $12bn under advisement.

Economics & Fundamentals Financial News
12 Oct

Uranium Prices, Demand Continue Rising in Tight Market

Source: Streetwise Reports  (10/11/23)

Uranium prices and demand are forecast to keep rising through late 2023 amid tight supply, increasing the appeal of uranium stocks, say analysts.

Uranium prices and demand should continue their upward trajectory through the remainder of 2023, according to a recent industry report. Analysts attribute the positive momentum to sustained uranium supply deficits. With inventory levels low and global nuclear capacity expanding, the structurally undersupplied market continues tightening.

In the report, analysts increased their uranium demand estimates through 2030 and 2035. Total nuclear capacity is projected to grow at a 3.6% compound annual rate through 2030. This translates into a 30% rise in annual uranium requirements. New reactor construction in China and India, coupled with plant life extensions in the West, drive the demand growth.

Source: Trading Economics

While primary mine output increases, risks remain regarding achieving targeted production rates. Ongoing supply chain constraints and labor shortages could hinder bringing new capacity online. Even current mine supply faces challenges like coup d’etats, restart delays, and reduced guidance. Analysts emphasize that permitting, technical, and financing risks persist for essential greenfield projects.

With demand climbing and supply challenged, the uranium market will likely stay in a significant deficit for years. Spot prices have already hit 12-year highs of around US$70 per pound. Analysts boosted their long-term outlook to US$75, reflecting inflationary impacts on production costs. They expect an effective Western premium price of US$80 for most miners.

In fact, earlier this month, Katusa Research released a report on uranium, saying, “Today, more nuclear reactors are being built than any year since 1992. All of that has increased demand for uranium, but it’s also accidentally created something much bigger: a source of demand That NEVER EXISTED Before . . . It’s one that’s going to completely change how the uranium market works. The prospect of unquenchable global thirst for uranium has invited speculators into the uranium market.”

These dynamics prompted analysts in the above report to recommend adding leverage by increasing positions in uranium developers and miners.

 

Important Disclosures:

  1. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

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