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posted on 04 September 2017

Early Headlines: Asia Stocks Mixed, Dollar Flat, Oil Mixed, Gold Surges, Trump To Dump Dreamers, UK Inflation Fears, Irma Rises, UK EU Bill, Merkel Drops Support For Turkey In EU, N. Korea's H-Bomb, And More

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Early Bird Headlines 04 September 2017

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.

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Global

  • North Korea's nuclear test rattles Asian markets, driving gold and the yen higher (CNBC) Safe haven demand drove up gold and the yen while equities in Asia were pressured by elevated tensions on the Korean Peninsula early on Monday after North Korea said it tested a hydrogen bomb over the weekend. The dollar index was mostly flat at 92.688 at 12:09 p.m. HK/SIN. Brent crude futures declined 0.4% to trade at $52.54 a barrel. U.S. West Texas Intermediate tacked on 0.27% to trade at at $47.42. Meanwhile, U.S. gasoline futures extended losses made on Friday, falling 2.71% to trade at $1.7005 a gallon after September futures climbed above the $2 level before their expiry last week. Spot gold traded at $1,333.44 an ounce after rising to $1,336.79 earlier in the session for its highest levels in around 11 months. The yellow metal had traded at levels around $1,324 in the last session.

asia.pac.2017.sep.04

U.S.

  • Dems prep for major fight over Trump USDA science pick (The Hill) President Trump’s pick to be the U.S. Department of Agriculture’s (USDA) chief scientist is on track to face one of the rougher confirmation battles of the administration. Democrats are girding for an all-out battle against Sam Clovis’s nomination to be USDA’s under secretary for research, education and economics, a position that would see him overseeing billions of dollars in research spending and serving as a cross-departmental science czar.

Clovis, a close Trump ally from Iowa who served as a key campaign adviser on rural and agricultural issues, has set off Democrats’ alarms for a number of reasons.

Clovis has been criticized for lacking scientific credentials, and he disagrees with the scientific consensus on climate change. Further complicating Clovis’s confirmation process, CNN uncovered a number of objectionable statements he has made on topics like race and politics.

Clovis, an Air Force veteran, former economics professor and former radio host, once wrote that former President Obama was being “given a pass because he is Black," called former Attorney General Eric Holder a “racist black," declared that homosexuality is a choice, and called progressives both “race traitors" and “race traders," CNN reported.

  • President Donald Trump is set to scrap a program that protected people who entered the United States illegally as children, according to multiple reports
  • The Deferred Action for Childhood Arrivals (DACA) program protects nearly 800,000 young men and women from deportation
  • DACA enjoys bipartisan support and some notable GOP figures, including Paul Ryan, have urged Trump not to rescind the program

Sunday evening Irma was traversing the ocean as Category 3 hurricane, with winds of 115 mph (185 kmh). It is expected to pick up strength over the next 48 hours, the National Hurricane Center (NHC) said.

Irma's center was about 680 miles east of the Leeward Islands, a group of islands in the West Indies that start east of Puerto Rico, the NHC said.

irma.sunday.night

UK

  • Consumer inflation fears hit three-year high as confidence in UK economy wanes (City A.M.) Consumer anxiety over levels of inflation hit its highest level since 2014 in July, while confidence in the UK's economy was dented. More (sic)than two thirds (65%) of British adults said they were concerned by the levels of inflation, in a survey of 2,000 people conducted by Ipsos MORI for Lloyds Bank. This marks the highest level since January 2014. The proportion of those who felt negative about the country's financial situation as a whole also increased to 69%. The figures come even after UK inflation stayed flat at 2.6% in July.
  • MPs prepare for showdown over EU Withdrawal Bill (City A.M.) MPs will return to forging the UK's path to Brexit this week as the House of Commons returns from the summer recess to debate the EU Withdrawal Bill. With the second reading of the bill on Thursday, and the vote the following Monday, the government has been pressuring potential Tory rebels to support the legislation which will transfer EU law onto the UK's statute books. See also The Six Brexit Traps That Will Defeat Theresa May (by Yanis Varoufakis).

Turkey

  • In shift, Merkel backs end to EU-Turkey membership talks (Reuters) German Chancellor Angela Merkel said on Sunday she would seek an end to Turkey’s membership talks with the European Union in an apparent shift of her position during a televised debate weeks before a German election. Merkel said in the debate with her Social Democrat (SPD) challenger Martin Schulz:

“The fact is clear that Turkey should not become a member of the EU. I’ll speak to my (EU) colleagues to see if we can reach a joint position on this so that we can end these accession talks,"

India

we have seen the costs of demonetisation upfront, and they are substantial. Let us not mince words about it - GDP has suffered. The estimates I have seen range from 1 to 2 percentage points, and that's a lot of money - over Rs 2 lakh crore and maybe approaching Rs 2.5 lakh crore. Then there are the other costs - the hassle cost of people standing in line, the printing cost that the RBI says is close to Rs 8,000 crore, the cost to the banks of withdrawing the money, and the time spent by their clerks, by their managers and by their senior officers doing all this, and the interest being paid on all those deposits, which earlier were effectively an interest-free loan to the RBI.

  • The Flaws in India's Growth Model (Bloomberg) Hat tip to Sanjeev Kulkarni. (See also Currency, Newton & The Gardner from January 2011 - more than 6 years later not much has changed.) India has a way of confounding expectations. Analysts agreed that, months after Prime Minister Narendra Modi’s ill-fated decision to withdraw 86% of currency from circulation overnight, growth would bounce back. Economists polled by Bloomberg expected growth in the April to June quarter to be 6.5%; other estimates were even higher. So when the government’s official statisticians released the real number last week -- 5.7% higher than the equivalent quarter of the previous year -- there was general surprise, even shock.

In fact, no one should be shocked. India’s economy has been growing less and less healthy for awhile. GDP growth has now declined steadily for six straight quarters. This is a slowdown caused by factors deeper than the cash ban or any other temporary phenomenon. Something is broken in the Indian government’s policy mix.

Growth is unlikely to revive till it's fixed. It’s true there might be a bit of a dead cat bounce in the medium term: For example, manufacturers who were running down inventories in anticipation of India’s new indirect tax regime, the goods and services tax or GST, might expand output a bit more. Imports might fall a bit as a consequence of subdued domestic demand.

But none of that will change the fact that government spending and low oil prices have deceptively boosted the growth numbers, masking the true state of the economy. In fact, if public spending is excluded, growth in the past quarter barely topped 4 percent.

North Korea

  • North Korea conducts most powerful nuclear test yet (Al Jazeera) North Korea has carried out its sixth nuclear test - the most powerful blast to date - drawing the ire of the international community as the standoff with the United States continues to intensify. The official Korean Central News Agency (KCNA) said the hydrogen bomb test on Sunday morning, ordered by leader Kim Jong-un, was a "perfect success". It was Pyongyang's first nuclear test since US President Donald Trump took office, and marked a direct challenge to Trump, who hours earlier talked by phone with Japanese Prime Minister Shinzo Abe about the "escalating" nuclear crisis in the region. Later on Sunday reporters asked Trump whether he would attack North Korea in response. "We'll see," replied the US president.
  • Kim dares to make China lose face (Financial Times) For the second time in four months Kim Jong Un has dared to humiliate Chinese president Xi Jinping, the one foreign leader with the power to strangle North Korea’s economy with potentially fatal effects for the Pyongyang regime. Mr Kim not only conducted a nuclear test on Sunday knowing that it would enrage Beijing; he did so as his Chinese counterpart was preparing to receive the heads of Brazil, Russia, India and South Africa in the coastal city of Xiamen. The test set off a magnitude 6.3 quake that shook the ground in Yanbian, an area in China’s Jilin province near the North Korean border. On Sunday night China’s environment ministry said it would be monitoring border areas for radioactive fallout.

South Korea

  • Nuclear test drives wedge between US and South Korea (Financial Times) When news of North Korea’s sixth nuclear test reached Donald Trump, the US president responded in time-tested fashion by launching a Twitter broadside. Caught in the crossfire was an unlikely victim: South Korea - a longstanding US ally rebuked by Mr Trump for its “appeasement" of Pyongyang. Now experts warn that a dangerous divide appears to be opening between Washington and Seoul, a development that if not halted could hand Pyongyang and Beijing an easy but significant strategic victory.

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