Early Headlines: Asia Stocks Surge, Portugal Shocks France, Oil Glut Returns, Global Investment Down, Euro Banks Zombies, UK To Dissolve?, Abe Wins Landslide, China Struggles With Growth, Currency And More

Written by Econintersect

Early Bird Headlines 11 July 2016

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

• Asia markets jump; Nikkei surges after Abe’s election landslide (CNBC) Asia markets traded higher on Monday, bolstered by election results in Japan and Australia and shrugging off concerns a strong U.S. jobs report might push the Federal Reserve closer to hiking rates.

• Oil’s rebound is over, so expect a third-quarter slide: Barclays (CNBC) A massive global stockpile of oil could mean trouble ahead for the global crude market, according to Barclays. Crude oil prices dropped to a two month low on Thursday, after the Energy Information Administration reported a smaller-than-expected decrease in oil stockpiles. That may be a canary in the coalmine, a top energy market watcher explained.

• G-20 trade ministers see global investment falling up to 15% (The Business Times) Global cross-border investment will probably decline by as much as 15% this year as trade remains sluggish, China’s commerce minister said after a Group of 20 trade ministers meeting on Sunday. The G-20 representatives pledged to increase their efforts to facilitate trade and urged other World Trade Organization member nations to do likewise to enable global commerce, Gao Hucheng said at Sunday’s briefing. The ministers had met in China’s financial capital for two days of talks on how to boost investment cooperation before heads of state convene for a Sept 4-5 leaders summit in the eastern city of Hangzhou.

• ‘Brexit’ said adding to Asia’s sheen (Business World Online) Britain’s vote to leave the European Union (EU) and simmering discontent in other Western countries are seen as hastening the arrival of an “Asian Century,” analysts say, led by the rise of China and India. By 2050, Asia will account for over half the world’s gross domestic product (GDP) — almost double that of 2011 — according to the Asian Development Bank, with three billion newly affluent citizens.

U.S.

• Five things to watch for in GOP platform, rules meetings (The Hill) Scores of GOP party leaders and delegates are descending on Cleveland this week to hammer out the party’s platform a week before Donald Trump is named the Republican presidential nominee. Opponents of the unconventional candidate will also be making a last-ditch effort to deny Trump the crown, or to at least loudly highlight opposition to him within the party. This article highlights the things to watch for this week to see which side is gaining the upper hand in the platform and convention rules.

EU

• Portugal 1 France 0, Euro 2016 final: Underdogs recover from Ronaldo injury as Eder wins it in extra-time (The Telegraph) The superstar was carried off the field on a stretcher. All hope seemed lost. Then Portugal defeated hosts and overwhelming favorites France, defeated the odds, defeated the fact they were without their captain and talisman, with “Cristiano Ronaldo stretchered off injured“, to win their first ever major tournament.

• EU Banks Need $166 Billion, Deutsche Bank Economist Tells Welt (Bloomberg) The underbellies of European banks are becoming visible and there are numerous worries that some could soon be facing skyward. Italian banks alone have €360 billion in “soured loans“. See also Zombies In Europe. Deutsche Bank AG’s chief economist David Folkerts-Landau said in an interview with Welt am Sonntag:

“Europe is extremely sick and must start dealing with its problems extremely quickly, or else there may be an accident. I’m no doomsday prophet, I am a realist.”

UK

• Brexit vote paves way for federal union to save UK, says all-party group (The Guardian) The governance of England, Scotland, Wales and Northern Ireland should be reinvented within a new voluntary union in a bid to save the UK from disintegration, an independent all-party group of experts will argue this week. Econintersect: Add the ‘District of London’ to that list. What is proposed is somewhat analogous to turning the UK into an organization like NAFTA in North America.

• Bank of England considers curbs on property funds (The Business Times) The Bank of England is considering curbs on withdrawals from property investment funds after Britain’s vote to leave the European Union roiled the sector, the Sunday Telegraph newspaper said late on Saturday. The paper said it understood that the BoE was considering “enforced notice periods before redemptions, slashing the price for investors who rush to the door, or additional liquidity requirements for funds“. A spokeswoman for the central bank declined to comment on the report, and the newspaper did not give a source for its information.

Japan

• Japan Prime Minister Shinzo Abe’s coalition appears headed for election victory despite doubts over his policies (CNBC) Prime Minister Shinzo Abe’s ruling coalition won a landslide victory on Sunday in an election for parliament’s upper house, media exit polls showed, despite concerns about his economic policies and a goal to revise the pacifist constitution. Some of the exit polls also showed Abe’s coalition and like-minded parties had won the two-thirds “super majority” needed to try to revise the post-war constitution for the first time, though others only said the threshold was within reach. Abe’s Liberal Democratic Party (LDP) won a simple majority for the first time since 1989, according to the voter surveys, a victory that will bolster the premier’s grip over the conservative party that he led back to power in 2012 after three years in opposition. See also (from yesterday’s ‘What We Read Today‘): The Religious Cult Secretly Running Japan (Business Insider)

China

• China’s yuan slips, central bank seen controlling pace of depreciation (The Business Times) The yuan inched lower against the dollar on Monday, but further weakness was capped as the central bank was suspected of intervention to offset massive dollar demand from banks’ clients, traders said. The People’s Bank of China set the midpoint rate at 6.6843 per dollar prior to the market open, only 0.01% firmer than the previous fix 6.6853. The offshore yuan was trading 0.18% softer than the onshore spot at 6.6993 per dollar.

• China inflation up 1.9% in June, slowest in 6 months (Business Standard) Chinese government data showed consumer prices in June rose at the slowest pace in six months, suggesting the world’s second-largest economy is still experiencing weak consumer demand amid a broad downturn. The statistics bureau also said Sunday that the producer price index (PPI), another inflation metric that gauges prices that businesses receive for goods and services, fell 2.6% from a year prior. The rate of decline, however, continued to decelerate from previous months. The PPI has been in deflation for more than four years.

• Beijing’s South China Sea Options, From Benign to Belligerent (Bloomberg) An international tribunal will rule Tuesday on a Philippine challenge to China’s assertion to more than 80 percent of the South China Sea, one of the world’s busiest waterways. The Philippines contests China’s “historic rights” claim based on a 1940s map that shows a dashed line covering around 1.4 million square miles (3.6 million square kilometers). These claims overlap the territorial waters for other countries (the “200-mile limit”). China has said it doesn’t recognize the jurisdiction of the tribunal in The Hague and will ignore its findings, which will binding on both countries as signatories to the United Nations Convention on the Law of the Sea but lacks a mechanism for enforcement.

• China central bank says to keep reasonable growth in credit, social financing (Reuters)

China’s central bank reaffirmed on Friday that it will maintain reasonable growth in bank credit and social financing as the economy still faces downward pressure.

Some Chinese provinces and municipalities “have relatively big reliance on real estate and infrastructure investment”, the central bank said in a report on regional financial operations.

Debt levels were rising rapidly in some regions, it said.

The authorities will take steps to ward off regional and systemic financial risks, the central bank added.

Australia

• Election 2016 reveals the end of the rusted-on voter and the death of the two-party system (The Conversation)

As long as preferences flow to the two major parties the current system can provide majority governments. But the past few elections have shown the capacity of strong locally based independents to defeat the major parties. Interestingly they come from a range of electorates, from inner-city Hobart (Andrew Wilkie) to outback Queensland (Bob Katter).

This year’s results also suggest that the Greens in Victoria and the Nick Xenophon Team (NXT) in South Australia might increase their representation by several seats at the next poll. The increased number of independents in the Senate is partly due to Turnbull’s remarkably ill-judged decision to force a double-dissolution election. But even in a half-Senate election, Pauline Hanson, Nick Xenophon and Derryn Hinch would probably have been elected.

• Coalition scrapes through but Turnbull needs to alter course (The Conversation) The Coalition has – finally – fallen over the line and will form government following the 2016 election, though it is still unclear whether it has secured a majority in its own right. The challenges Prime Minister Malcolm Turnbull now faces are formidable. Although first-term governments often suffer a swing against them, the closeness of the result means the Coalition needs to reflect on what went wrong during its first term in office. Austerity must be moderated, according to this author.

“… adopting a more moderate approach to cuts in its second term is likely to be politically advantageous for the Coalition, as well as necessary if it is to avoid deadlock in the Senate.”