Written by John Lounsbury
Early Bird Headlines 21 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.
Global
How China’s slowdown weighs on global economy and markets (Associated Press) Those affected by the world’s second-biggest economy range from South African coal miners and Canadian oil-field workers to Australian gas producers and Americans saving for retirement. Beijing said Monday that the nation’s economic growth dipped to 6.9% from July through September from a year earlier – its slowest pace in more than six years. The news was a bit better than economists had expected. But it nevertheless added to evidence that China continues to slow as investors, executives and policymakers watch with concern. Growth in China’s gross domestic product has decelerated for four straight years and will likely keep slowing through 2017, according to the International Monetary Fund.
U.S.
OPEC Is About to Crush the U.S. Oil Boom (Bloomberg) After a year suffering the economic consequences of the oil price slump, OPEC is finally on the cusp of choking off growth in U.S. crude output. The nation’s production is almost back down to the level pumped in November, when the Organization of Petroleum Exporting Countries switched its strategy to focus on battering competitors and reclaiming market share. As the U.S. wilts, demand for OPEC’s crude will grow in 2015, ending two years of retreat, the International Energy Agency estimates.
EU
Draghi May Lack What It Takes to Do Whatever It Takes on Prices (Bloomberg) Having once saved the euro with his 2012 pledge to do “whatever it takes,” the European Central Bank president is now signaling a willingness to boost his 1.1 trillion-euro ($1.3 trillion) quantitative-easing program in response to a negative inflation rate. The problem is that the ECB risks running into political and technical limits on just what bonds it can purchase. Those constraints mean investors are already starting to question just how much more the euro area’s policy makers can do to revive inflation.
UK
London elites are also being priced out of their homes – here’s why it matters (The Conversation) As London’s elites cash out of their inflated value homes, selling to hot “new” money – often from abroad, they take their windfalls to other formerly less expensive areas and drive out the existing residents to disperse further into the countryside. What is happening is “the breakdown of communities and displacement – chosen by the few who can sell, and imposed upon the many who cannot“.
Saudi Arabia
Saudis Risk Draining Financial Assets in Five Years, IMF Says (Bloomberg) Saudi Arabia may run out of financial assets needed to support spending within five years amid the drop in oil prices if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to cut the nation’s budget deficit. See also next article.
The Reports of Saudi Arabia’s Death Have Been Greatly Exaggerated (Foreign Policy) The kingdom’s economy isn’t teetering on collapse; in fact, it’s healthier than it has been in decades. See also preceding article.
India
Growth will exceed 7.5%: Finance Ministry (The Hindu) Dismissing Standard and Poor’s cautious remarks on the Indian economy as a mere “point of view”, the Finance Ministry on Tuesday said GDP will expand by over 7.5% in the current fiscal year and more reforms measures would be taken by the government to push growth.
Higher growth needs more work: Raghuram Rajan (Business Standard) A faster rate of growth isn’t going to happen soon in India, said Reserve Bank of India (RBI) Governor Raghuram Rajan. For that to happen, various things have to be done on improvement in supply and a better environment for doing business. Rajan spoke recently at event organized by Gateway House, an institution focusing on global relations:
“Can (India) go to high level of growth (nine per cent yearly) without inflation? The answer is no. We have to create underlying supply conditions that would allow us to have much higher demand. What we need to do is not only boost the demand but also supply.”
Japan
Here’s Why Japanese Investors Have Gone Ga-ga Over That Leveraged ETF (Bloomberg) The NEXT FUNDS Nikkei 225 Leveraged Index ETF – which uses derivatives to provide twice the daily performance of the Nikkei 225 Index – is up 260% since launching less than 3 years ago. That gain is despite a big dip over the past two months. That’s actually more than two times the return of the index, a phenomenon in leveraged ETFs known as the compounding effect.
South Korea
S. Korea`s Sept. producer prices hit 5-year low (Pulse News) South Korea’s producer prices fell to the lowest level in five years, reflecting a big drop in prices of industrial goods caused by the protracted oil price plunge. The producer price index stood at 100.47 in September, down 4.5% from the same month a year ago, according to the Bank of Korea data released Tuesday.
China
BOC launches RMB bond trading index (The Business Times) Bank of China (BOC) on Tuesday launched its RMB (renminbi) Bond Trading Index – a move that comes amid gradual internationalization of China’s capital markets and its currency. The index will allow overseas investors to understand the interbank bond market, track market prices, and raise the efficiency of trading. Unlike other broad-based indices, the BOC Bond Trading index is built on the most liquid bonds available, which makes it a better guide of market movements, the bank said. This index return is also more easily replicated, which is important for index products to be created and sold by fund managers.
The Boom Is Back in China Stocks, Depending Where You Look (Bloomberg) The Shenzhen ChiNext Composite Index , dominated by small technology companies, is up 34% from its 15 Sept. low. Traders have borrowed extra debt to buy the city’s stocks for seven days straight. The resurgence in appetite for China’s smallest, most volatile and most expensive equities contrasts with an almost-dead futures market and a more muted rebound in Shanghai, where volume remains less than half its peak.
Australia
Government considers more power for ASIC to stop poor financial products (The Age) Complex financial instruments explained with barely decipherable language and flogged to mum and dad investors by big banks and other groups could be banned from sale by the corporate regulator under new powers being considered by the federal government.
Canada
How a Liberal ‘Red Wave’ Swept Canada Last Night (Foreign Policy) A red wave swept Canada Monday night, propelling Justin Trudeau and his Liberal Party to a parliamentary majority and ending the nine-year reign of Prime Minister Stephen Harper and his Conservative Party. And while the comeback victory caught many off guard, the Liberals’ return to dominance has as much to do with anti-Harper opinion as it does with a well-strategized campaign.
Canada’s new prime minister: who is Justin Trudeau, and how did he win? (The Conversation) This is a good summary of the man who is Canada’s new prime minister. Most of his early years were not indicating a possible political career but he came into the public eye with a eu;ogy to his father in 2000.
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