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.
Asian stocks firm as Fed decision looms, yuan slips (Reuters) Asian shares edged up on Tuesday, but moved off their session highs amid caution about volatile crude oil prices and ahead of this week's widely anticipated U.S. interest rate increase. European shares were expected to rebound in early trading from the previous session's sell-off in which they marked their lowest levels in 2-1/2 months. Financial spreadbetters at IG expected Britain's FTSE 100 to open 1.2% higher. Germany's DAX was seen up by 1.5 percent, while France's CAC 40 was also seen 1.5% higher. China's yuan, meanwhile, weakened further against the dollar after the People's Bank of China (PBOC) set its official midpoint rate at its lowest level in more than four years for a second day. MSCI's broadest index of Asia-Pacific shares outside Japan was up about 0.2% in afternoon trade. But Japan's Nikkei stock index ended down 1.7% at a 7-1/2-week low
How emissions trading at Paris climate talks has set us up for failure (The Conversation) The main tool indicated for keeping us within the 2℃ global warming target is a massive expansion of carbon trading, including offsetting, which allows the market exchange of credits between companies and nations to achieve an overall emissions reduction. That's despite plenty of evidence that markets haven't worked well enough, or quickly enough, to actually keep the planet safe. This author (Steffen Böhm, Professor in Management and Sustainability, and Director, Essex Sustainability Institute, University of Essex) presents arguments that carbon markets create more problems than they solve, especially because of association with fraud and corruption. He says further that "the price for carbon is so low that nobody cares". See also next article which makes a more positivr=e assessment.
How will carbon markets help the Paris climate agreement?(The Conversation) While the agreement doesn't mention "carbon markets," it allows parties to pursue "co-operative approaches" and voluntarily use "international transferred mitigation outcomes" to help meet their reduction targets, while ensuring that transparency and the environmental integrity of the regime is maintained. Article 6 of the agreement establishes a new mechanism to "contribute to the mitigation of greenhouse gas emissions and support sustainable development". The mechanism allows for the participation of both the public and private sectors, and, significantly, it aims to deliver an overall reduction in global emissions. This author (Katherine Lake, Research Associate at the Centre for Resources, Energy and Environmental Law, University of Melbourne) says the agreement strictly prohibits a country counting reduced emissions for themselves if another country has bought those emissions reductions.
Oil tumbles towards crisis-era lows (Financial Times) Oil slipped to a new seven-year low in Asian trading on Tuesday after a Monday drop that took it close to levels hit during the financial crisis amid increased expectations of persistent global oversupply. The renewed pressure on the oil price comes amid widespread expectations that the US Federal Reserve will on Wednesday raise rates for the first time in nearly a decade. Oil has been trading within 10% of the December 2008 low of $32 a barrall for U.S. WTI, but has rebounded early Tuesday in Asia to $36.34 from a Monday low of $34.53.
Thinking about the Third Avenue fund freeze as BNP Paribas from 2007 (Credit Writedowns Pro) Edward Harrison (who has contributed to GEI) says the halting of withdrawals from the Third Avenue Focus Credit fund reminds him of the similar handling of illiquidity of holdings by three BNP Paribas funds in August 2007. HeI believes one should think of energy high yield as the equivalent in this credit cycle of residential MBS in the last cycle. He wants to put what's happening in a broader context and make some conclusions about what it says about the credit cycle. He expresses the thesis that the worsening picture for energy high yield would prove fatal for many in the sector and that this would 'infect' other lower quality credits via lower risk tolerance and fund redemptions - with funds "selling what they can, not what they must". Eventually, the lower prices and risk-off sentiment would snowball to where a general aversion to credit risk would cause the end of this credit cycle. Se also next article.
Now, the Third Avenue fund freeze is very much in line with that thesis. And yes, I think we should be worried enough to take this as a signal to lower risk. Eventual market losses could be significant - and not just in high yield. However, from a macro economy perspective, we aren't quite at the end of the cycle. There has been no sudden stop of credit to Ponzi energy credits yet. When the sudden stop does occur, I believe it will mark the top of the cycle and that is when the real economy impact will begin in earnest.
Banks have a duty to regain public trust - and it may take a generation (City A.M.) Trust in the financial services sector remains stubbornly low. According to the Edelman Trust Barometer, only half of the countries surveyed put their faith in financial services. And the picture is even worse for banks. From 2014 to 2015, trust in banks declined in two thirds of the countries covered, with the highest levels of distrust seen in the EU where only 34% of the informed public say they trust banks.
London rents cool off as tenant demand softens (City A.M.) Even as sale prices continue to escalate, London rents dropped in November as the market was hit by a seasonal slowdown. Figures published this morning by peer-to-peer mortgage lender Landbay show rents dropping 0.6% compared with October. The monthly drop took annual London rental growth down to 3.1% in November from 4.3% a month earlier. The dip in rental growth brings it more in line with pay growth. The biggest annual rises have been in one-bedroom flats, with average monthly rents up 4.2% to £1,547 (U.S.$2,320), followed by three beds which have gone up 4.2%. They compared with Studio flat rental prices which have risen just 1.9% over the past year, with average monthly rents now at £1,161 (U.S.$1,742).
Merkel tells her party Germany will reduce refugee influx (Al Jazeera) Germany will reduce its refugee influx, Chancellor Angela Merkel promised her conservative party on Monday, insisting that she's still confident her diplomatic efforts will work and Europe will pass the "historic test" posed by the refugee crisis. Germany has seen about a million asylum seekers arrive this year. She has declared that "we will manage it", but some in her conservative bloc have urged a tougher approach. Merkel was greeted with a standing ovation when she said this to her Christian Democratic Union:.
"We want to and will appreciably reduce the number of refugees, because it's in everyone's interest."
Russia is bracing for $30 oil in 2016 (CNN) Within the last two days we had an article with Russia talking about how they would deal with $40 a barrel oil in 2016. Showing just how fast prices are falling, they now are planning for $30.
Canada trumpets Syrian refugee policy as contrast to Trump's (Financial Times) Canada has trumpeted its plans to take in 25,000 Syrian refugees as a "sharp contrast to its neighbor to the south", declaring as refugees began to arrive in larger numbers that its approach would bring long-term economic benefits. John McCallum, immigration, refugees and citizenship minister who has been charged with hitting the target by the end of February, told the FT that "refugees would become hardworking Canadians before long and contribute to the country". He said his country's policy was "a good example to the rest of the world". Based on population, the U.S. would have to accept more than 220,000 refugees to match the number entering Canada.
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