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posted on 17 December 2015

Early Headlines: Asia Stocks Jump Higher, Yuan Slips Lower, Easy Money Lives On, More On Fed Hike, Record UK Employment, China Worker Unrest And More

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Early Bird Headlines 17 December 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

  • Asian stocks, dollar, climb as Fed takes a first step (Reuters) Asian stock markets jumped on Thursday as investors chose to take an historic hike in U.S. interest rates as a mark of confidence in the world's largest economy, lifting the dollar and piling on the pain for oil prices. European shares were expected to follow with Britain's FTSE 100 .FTSE set to open 1.1% higher according to IG. Germany's DAX .GDAXI was seen rising 1.2% and France's CAC 40 .FCHI 1.4%. China also allowed its currency CNY=CFXS slip for a 10th straight session to hit its lowest since June 2011. This steady decline puts pressure in turn on other Asian currencies to depreciate to stay competitive.

  • Era of Easy Money Lives On in World Economy Even After Fed Shift (Bloomberg) The era of easy money in the world's major economies isn't close to being over. Even after Federal Reserve Chair Janet Yellen and colleagues raised the target range for the federal funds rate to 0.25% to 0.5%, that's still way below its 2% average since 2000 and the 3.2% of 2000 to 2007. It also means JPMorgan Chase & Co.'s average rate for eight developed nations and the euro-area weighted by size is on course to end 2016 at just 0.36%. That's a full 3% below the average of 2005 to 2007.

  • What Japan and Australia can tell us about low US interest rates (Vox Business & Finance) There is a correlation between population growth and interest rates:

japan.us.oz.interestrates

U.S.

  • The Federal Reserve may be jumping the gun (Financial Times) Some are saying just because it seems inevitable does not mean it is a good idea. The Federal Reserve's Open Market Committee, which on Wednesday announces its decision on interest rates, has widely telegraphed that it will raise borrowing costs for the first time since 2006 after seven years on hold.

  • Fed Removes Reverse Repo Cap to Ensure Control Over Rates (Bloomberg) The Federal Reserve removed the daily limit on aggregate borrowings through its overnight reverse repurchase facility, previously set at $300 billion, in a step designed to make sure the benchmark interest rate stays inside its new target range. The size of the facility will be "limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day."

  • What Happens When the Fed Raises Rates, In One Rube Goldberg Machine (The New York Times) This is a short video of a Rube Goldberg-esque "machine" and a longer text explanation of what it represents. Quite amusing.

  • The Evidence Is Piling Up That Higher Minimum Wages Kill Jobs (The Wall Street Journal) This article is of somewhat more use than the one we cited in What We Read Today yesterday which argued that higher minimum wage was good for the economy. See Column: Why raising the minimum wage is good economics (PBS News Hour). In this case, the article cites a variety of research that equivocates on the question of "job killing" and then finds reasons to discredit those papers which found no "job killing". Early on he gives central billing to theory:

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning - that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired.

Dr. Larycia Hawkins wrote on the social media site on Dec. 10 that she was donning the hijab head scarf during the period of advent before Christmas as a sign of solidarity with Muslims. In her post she said "we worship the same God."

UK

  • Labour Market Statistics, December 2015 (Office for National Statistics) For August to October 2015, 73.9% of people aged from 16 to 64 were in work, the highest employment rate since comparable records began in 1971. The unemployment rate for August to October 2015 was 5.2%, down from 6.0% for a year earlier.

Russia

  • Russia defense spending hits 10-year high (CNBC) Russia's defense spending increased at its fastest rate in a decade in 2015, a year of tense diplomatic relations with the West and fighting in Syria. The Kremlin boosted its military spending by 21% this year to $54.1 billion, making it the fifth largest military budget the world, second only to U.S., China, the U.K. and France, an IHS Jane's Defense Budgets Annual Report showed. That's about three times the amount spent by Moscow since 2007 in nominal terms, with its defense budget now accounting for 4.3 percent of GDP (gross domestic product).

China

  • China's Workers Are Fighting Back as Economic Dream Fades (The Wall Street Journal) For many workers who have moved from rural areas to cities, factory closings represent a failed promise of a better life earned far from home. As a result a new wave of labor strife hitting China, one that is larger and angrier than previous rounds, labor experts say.

  • Shipping Index Plunges to Fresh Record Amid China Steel Slump (Bloomberg) The Baltic Dry Index (BDI) is widely watched as an indicator of global economic activity. It fell 4.7% percent to 484 points, the lowest in the history of Baltic Exchange data which started in January 1985. Rates for three of the four ship types tracked by the exchange retreated. China, which makes about half the world's steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence. After a strong bounce off the previous 30-year low in March, the BDI has dropped even lower this month.

baltic.dry.2015.dec.15

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