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posted on 31 October 2015

Early Headlines: Global Steel Glut, No Baby Boom For China, Japan Still Fights Deflation, London Housing Bubble And More

Written by Econintersect

Early Bird Headlines 31 October 2015

Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.

early-bird-301-180

Global

  • China signs up, but Russia again thwarts bid to create Antarctic ocean sanctuary(South China Morning Post) Russia is now the only country opposing the protection of a vast swathe of rich waters from fishing.

  • Steel demand 'evaporating at unprecedented speed' (CNBC) The steel industry's dire straits are in the spotlight this week, with both China and the U.K. warning about the hit from the dramatic slump in demand, particularly from the world's second-biggest economy. Steel prices have held at $170 per ton since October 8, having fallen sharply (nearly 60%) over the last year from above $400 per ton. The World Steel Association forecasts that global steel demand will decrease by 1.7% in 2015, before growing by 0.7% in 2016. However Chinese demand is seen falling both this year and next, by 3.5% and 2% respectively, following a demand peak in 2013. On Wednesday, the deputy head of the China Iron and Steel Association warned that demand for the ferrous metal was waning fast.

U.S.

  • Want to See Who's Happy About Low Oil Prices? Look at Refiners (Bloomberg) While oil drillers cut spending to the bone, U.S. refiners are reaping a windfall from low oil prices. Tesoro Corp. reported record profit in the third quarter, while Valero Energy Corp., Phillips 66 and Marathon Petroleum Corp. posted their best quarter in at least three years. Crude prices are down by more than half from their 2014 peak, while American drivers are on pace to set a record for miles driven. See also Oil Climbs Most in Eight Weeks as Refiners Boost Operating Rate (Bloomberg)

  • Resurrecting Glass-Steagall (Simon Johnson) A major shift in American politics has taken place. All three of the remaining mainstream Democratic presidential candidates now agree that the existing state of the financial sector is not satisfactory and that more change is needed. President Barack Obama has long regarded the 2010 Dodd-Frank financial-reform legislation as bringing about sufficient change. Former Secretary of State Hillary Clinton, Senator Bernie Sanders, and former Governor Martin O'Malley want to do even more. The three leading Democratic candidates disagree, however, on whether there should be legislation to re-erect a wall between the rather dull business of ordinary commercial banking and other kinds of finance (such as issuing and trading securities, commonly known as investment banking). This issue is sometimes referred to as "reinstating Glass-Steagall," a reference to the Depression-era legislation - the Banking Act of 1933 - that separated commercial and investment banking. This is a slight misnomer: the most credible bipartisan proposal on the table takes a much-modernized approach to distinguishing and making more transparent different kinds of finance activities. Sanders and O'Malley are in favor of this general idea; Clinton is not (yet). Econintersect: Will a leading GOP candidate emerge who will consider such action?

EU

  • Europe Prolongs Its Diesel Problem (Bloomberg Editorial Board) Responding to public outrage over the Volkswagen diesel emissions scandal, the European Union rightly pledged to toughen emissions testing and enforce limits on nitrogen oxides (NOx), a hazardous type of diesel pollutant. But those moves amount to very little, now that the EU is giving the auto industry until 2020 to comply, and then only partially. The delay will just prolong the shift away from diesel.

UK

  • Steel crisis claims more jobs as Caparo axes 450 positions (The Telegraph) The global steel glut may originate in China (see article under China, below) but the effects are felt in Britain. The steel crisis has claimed more jobs with 450 redundancies being announced at Caparo Industries following its collapse into administration almost a fortnight ago.

  • Bubble bubble housing trouble: London's property market is scarily close to a crash (City A.M.) London's housing market is teetering on the brink of a crash after two years of "explosive" growth that has turned it into one of the most overvalued cities in the world, economists at UBS have warned. The news comes as research released today from YourMove and Reeds Rains shows that record numbers of aspiring homeowners believe that buying a property is now out of reach. Soaring prices have been blamed on supply failing to keep up with the capital's expanding population, attractive yields on buy-to-let, and overseas investors piling into the market. But economists at UBS now believe that market fundamentals do not justify the extent of the rocketing prices, and are warning of a bubble that could go pop.

Japan

  • Kuroda's march to 2% bogs down in stagnant wages (Nikkei Asian Review) The Bank of Japan is caught in a dilemma. The central bank has fallen behind in its pursuit of inflation, but speeding up asset purchases could produce the wrong kind of price growth even as wages remain sluggish. The trend in prices has been one of steady improvement, BOJ Gov. Haruhiko Kuroda stressed to reporters Friday. He and the rest of the bank's policy board had just pushed back the target date for reaching its 2% price growth target by six months, but they did not increase monetary easing. But even the normally upbeat Kuroda had to acknowledge the unfavorable macroeconomic conditions. The country faces "somewhat large downside risks to economic growth and prices," he told reporters.

China

  • China has created a steel monster and now must tame it: Andy Home (Reuters) China exported 11.25 million tonnes of steel last month. It was an all-time high and, expressed in annualized terms, was equivalent to 80 percent of the entire steel output of the 28-member European Union last year. This wave of Chinese steel is creating a global steel-making crisis. But the biggest crisis of all may yet turn out to be in China itself. Not only is China producing far too much steel relative to what it needs, but years of rapid expansion have left a legacy of huge excess capacity. And, as a general rule, the bigger the boom, the bigger the bust.

  • Why many families in China won't want more than one kid even if they can have them (The Washington Post) It has become very costly to have kids in China. To prepare a child to succeed in the country's competitive schools and workplaces, parents must invest lots of time and money in a child -- for schooling, extracurricular activities, and outside tutoring, often for college-entrance and English proficiency exams. In a 2011 survey, around 35% of parents in Shanghai said raising a child was a heavy burden for them, and 45.3% said they wouldn't have a second child, even if policy allowed.

Australia

  • Labor will look at dropping voting age to 16, says Bill Shorten (The Age) They can serve in the army, get a gun license, drive a car, fly a plane and even leave home, but there's one thing no 16 or 17-year-old in Australia can do - yet - and that's vote in a federal election. But Opposition Leader Bill Shorten wants that to change that and in a speech on Saturday to a young Labor Party conference in Sydney, he will outline a plan to enfranchise an estimated half a million voters if the ALP is elected.

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