Written by Econintersect
Early Bird Headlines 26 January 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
China rout, oil gloom deepen losses in Asian shares (Reuters) A plunge in Chinese share markets (see later, below) capped a miserable day for Asian equities on Tuesday, with a renewed slide in oil prices giving investors few reasons to reassess a darkening outlook for the global economy. Japan’s Nikkei fell 2.4% while Hong Kong’s Hang Seng Index declined 2.3%, with MSCI’s broadest index of Asia-Pacific shares outside Japan falling 1.5% after two days of gains since late last week. European shares are expected to follow suit. Spreadbetters are expecting Britain’s FTSE and France’s CAC 40 to fall by as much as 0.8% and Germany’s DAX to drop 0.7%.
Oil prices in reverse amid Opec call (BBC News) Oil prices tumbled again on Monday, eroding last week’s gains, as Opec called for co-operation from oil-producing nations outside the cartel. Brent crude fell 6.3% to $30.15 a barrel following a 10% rise on Friday, while US oil shed 7.1% to $29.90. The slide came as the head of Opec called for all oil-producing nations to work together. Abdullah al-Badri said both Opec and non-Opec oil producers needed to tackle oversupply to help prices rise. According to Financial Times, a leading Russian oil executive has said he would not oppose joining output cuts if they received political backing in Moscow.
So Yes, the Oil Crash Looks a Lot Like Subprime (Bloomberg) The price of crude has been tracking an infamous subprime mortgage index. Bank of America Merrill Lynch analysts recently drew attention to Markit’s ABX Index, better known as the mother of all synthetic subprime credit indexes. Created in January 2006 and consisting of a basket of credit default swaps (CDS) tied to the welfare of subprime mortgages, it allowed a bevy of investors to bet on the future direction of riskier home loans and helped inflate the massive amounts of leverage tied to the U.S. housing bubble. Fast-forward to today and the BofAML analysts provide an update to their previous thesis, which was that the downward spiral in the price of oil was shaping up to look a lot like the negative trend that engulfed the subprime space circa the year 2007.
U.S.
Key to Surviving the Oil Bust: Beware Bankers Bearing Cheap Debt (Bloomberg) The few independent oil companies that are still strong in the face of collapsing oil prices are the ones who avoided leveraging with cheap debt. Three examples are shown in the graphic compared to the Bloomberg Intelligence North America Independent explorers and producers index.
Anti-abortion activists indicted in Texas for Planned Parenthood video (Reuters) Two anti-abortion activists behind the filming of videos on alleged fetal tissue procurement by Planned Parenthood were indicted by a Texas grand jury on Monday, while clearing the women’s health group following a state-ordered probe. The videos released last summer led Texas and several other Republican-controlled states to try to halt funding for local Planned Parenthood operations, with Republicans in the U.S. Congress also pushing for a funding cut. The grand jury reviewed the case for more than two months and its decision was a result of the probe launched last year under Texas Governor Greg Abbott, a Republican, who accused Planned Parenthood of the “gruesome harvesting of baby body parts.”
The U.S. Could Make a Fast, Cheap Switch to Clean Energy (Yahoo! News) Coal-fired power plants are the biggest emitters of greenhouse gases in the United States, but new research finds that existing technology could cheaply slash the nation’s carbon spew nearly 80% by 2030. How? By transporting renewable energy from where the sun is shining and the wind is blowing to where it is not, according to the study, which was published on Monday in the journal Nature Climate Change by scientists from the National Oceanic and Atmospheric Administration and the University of Colorado Boulder. NOAA’s highly detailed weather data shows there’s nearly always someplace in the 48 contiguous states where electricity can be generated by solar power stations and wind farms, even if it happens to be hundreds or thousands of miles away from where it’s needed. The quandary: How to move electricity generated by that sun or wind over long distances without losing too much of it in the process. The solution: A proven technology, called high-voltage direct current, already exists and can carry power across long distances more efficiently than alternating current, the standard power transmission mode in the U.S. Utilities could add direct-current infrastructure to alternating-current transmission lines over the next 15 years as part of planned updates and upgrades
Russia
The U.S. Is Point-Blank Accusing Vladimir Putin of Corruption (Time) Hat tip to Roger Erickson. The US Treasury has told a BBC investigation that it considers Russian President Vladimir Putin to be corrupt. The US government has already imposed sanctions on Mr Putin’s aides, but it is thought to be the first time it has directly accused him of corruption. His spokesman told the BBC that “none of these questions or issues needs to be answered, as they are pure fiction“. A Russian journalist claims that Putin is “the richest man in Europe” and “one of the richest men in the world“, worth an estimated $40 billion. See also ‘Putin is corrupt’ says US Treasury (BBC News).
Vietnam
Vietnam PM Makes Last-Minute Comeback in Leadership Battle (ABC News) Vietnam’s pro-business prime minister, who last week appeared to have lost a power struggle in the ruling Communist Party, has made a last-minute comeback and will know Monday if he can re-enter the contest for the top job in the country. Using a loophole in party rules, supporters of Prime Minister Nguyen Tan Dung on Sunday proposed that his name be added to the list of candidates who can contest for membership to the Central Committee, one of the two pillars of the ruling establishment. If Dung makes it, he will stand a good chance to be elected to the committee, and then would be in a position to challenge his rival, General Secretary Nguyen Phu Trong, for his job. The party general secretary is the de facto No. 1 leader in the collective leadership that governs Vietnam.
China
China Stocks Plunge to 13-Month Low Amid Capital Outflow Concern (Bloomberg) China’s stocks tumbled to the lowest levels in 13 months amid concern capital outflows will accelerate as the economy slows and support for the yuan eats into the nation’s foreign reserves. The Shanghai Composite Index plunged 6.4% to 2,749.79 at the close. Econintersect: A manifestation of a currency war? Watch video.
China Energy Giant Signals Nation’s Fuel Oversupply Is Worsening (Bloomberg) China’s biggest energy company predicted the nation’s refineries will increase output in 2016, exacerbating a fuel glut and boosting exports of the surplus to regional markets. Net export of oil products — which strips out imports — will rise by 31% this year to 25 million metric tons, China National Petroleum Corp. said in its annual research report. The country’s refineries will increase oil processing by 5.3% while net crude imports will rise 7.3% to 357 million tons. Jean Zuo, an analyst at ICIS China, told Bloomberg by phone from Guangzhou:
“China is set to ship record oil products overseas amid its slowing domestic demand. The country will remain enthusiastic for crude imports this year amid low prices and as strategic crude stockpile facilities are due to come online.”
Soros: China Hard Landing Is Practically Unavoidable (Bloomberg) Billionaire George Soros was interviewed in Davos last week. He says we are entering another financial crisis, this time a hard landing in China is the proximate cause instead of the U.S. mortgage debt crisis of 2008. He says we are in a global deflation produced by excessive debt, with China being the biggest example with debt at 300% or more of GDP.
