Written by Econintersect
Early Bird Headlines 01 August 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.
Asia trade mixed as traders digest weak China PMI data (CNBC) Asia markets traded mixed on Monday, with Chinese mainland shares falling behind their regional peers as traders digested a slowdown in manufacturing activity in China. See more on business survey results under China, later, below.
Morgan Stanley Warns Currency Traders Worst to Come for Dollar (Bloomberg) The dollar is set to fall 5% in the next few months, the Federal Reserve isn’t raising interest rates anytime soon and U.S. economic data is only going to get worse. That’s what Morgan Stanley chief global currency strategist Hans Redeker told clients in a note published Thursday, citing in-house indicators showing U.S. domestic demand is set to fade in the coming months. It didn’t take long for markets to prove him prescient. The greenback fell 1.3 percent Friday, capping its worst week since April, after the Commerce Department said U.S. second-quarter gross domestic product advanced at about half the rate economists had forecast.
Goldman Sachs Subpoenaed by U.S. Agencies for Documents Related to 1MDB (The Wall Street Journal) U.S. authorities have issued subpoenas to Goldman Sachs Group Inc.for documents related to the bank’s dealings with a Malaysian investment fund at the center of an international corruption scandal, a person familiar with the matter said. Goldman received the requests for information earlier this year from the U.S. Justice Department and the Securities and Exchange Commission, the person said. Investigators have also subpoenaed a Goldman banker who worked closely with the Malaysian fund, The Wall Street Journal reported in March.
Tesla, SolarCity set to announce merger on Monday: sources (Reuters) Tesla Motors Inc (TSLA.O) and SolarCity Corp (SCTY.O) could announce they have agreed to merge as early as Monday, people familiar with the matter said, setting the stage for a campaign to convince the two companies’ shareholders to back the deal. Combining the clean energy car maker with the solar panel installer is a major part of billionaire Elon Musk’s strategy, who earlier in July unveiled his master plan “part deux” that calls for the combined company to offer consumers a single source of hardware to power a low-carbon lifestyle.
Eurozone GDP growth halves as French economy stalls (BBC News) Eurozone economic growth halved in the second quarter, but the 19-nation single currency area moved away from deflation. GDP rose by 0.3% between April and June, in line with expectations but below 0.6% growth in the first quarter. France, the eurozone’s second-largest economy, saw no growth after expanding by 0.7% in the first quarter. Eurozone inflation rose to 0.2% in July from 0.1% in June as a result of higher food, alcohol and tobacco prices. Data also revealed that the eurozone jobless rate remained at 10.1% in June. The economic growth figures are the first to be published since Britain voted to leave the European Union (EU).
The Graduate Premium: manna, myth or plain mis-selling? (intergenerational foundation) This paper challenges the £100,000 ($132,000) lifetime graduate earnings premium so often used by politicians to justify increasing fees for university courses, changing the terms and conditions, or increasing interest rates. The paper concludes that the UK risks creating a self-perpetuating debt-generating engine that serves only those who run it, while leaving graduates from poorer background to pay an extra 9% graduate tax on earnings over £21,000 for the next 30 years.
UBS rogue trader: ‘It could happen again’ (BBC News) The London trader who lost the Swiss bank UBS £1.4 billion ($1.9 billion) has apologized and said that banking has not done enough to regain the public’s trust. In his first broadcast interview, Kweku Adoboli told the BBC that banking was still riven by conflicts of interest. He added that traders were pushed to make profits “no matter what“. Asked if the crimes he committed – booking fictitious trades to cover up gambles in the hunt for profits – could happen again, he said: “Absolutely“. Adoboli – the biggest rogue trader in British history and described by the prosecution at his trial as a “master fraudster” and “sophisticated liar” – now faces deportation to Ghana, where he was born.
UK and China regulators discuss framework for financial projects (Reuters) British and Chinese securities watchdogs are discussing an agreement that will pave the way for landmark financial services projects between the countries, sources said, easing fears that Britain could be a less attractive partner for such deals after last month’s vote to leave the European Union. Britain’s Financial Conduct Authority (FCA) and the China Securities Regulatory Commission (CSRC) are cooperating on a regulatory framework for a scheme for distributing fund products in each other’s jurisdiction and a proposed London-Shanghai link for trading shares.
Thousands march in Germany in support of Turkey’s President Erdogan (BBC News) Tens of thousands of people in Germany have turned out in support of Turkish President Recep Tayyip Erdogan, in a rally that raised diplomatic tensions. Mr Erdogan had planned to address the rally in the city of Cologne, held to denounce an attempted coup two weeks ago, by video link. But on Saturday, Germany’s Constitutional Court banned the speech from being broadcast. German media said at least 35,000 people turned out. An estimated three million people of Turkish origin live in Germany, the majority of whom voted for Mr Erdogan’s AKP party in the last Turkish election, according to the Turkish Communities in Germany organization.
GST to be simple with 1% additional tax removal, say experts (Business Standard) India’s government has agreed to modify and simplify the national sales tax, which would be uniform and not include a tax on interstate commerce. The GST is a crucial part of the government’s reform drive and would replace a complex array of taxes and levies across 29 states.
In pictures: Assam elephants swim for higher ground (BBC News) India has been hoping for a strong monsoon in 2016 and now they have it drought is receding into memory. But flooding is very much in the present. Wild elephants have been swimming away from a national park in the Indian state of Assam, which has been hit by floods. During floods, hundreds of animals in one of the world’s most important wildlife parks – including the highly endangered one-horned rhino along with elephants, swamp deer and tigers – move to the adjacent hills of Karbi Anglong for safety.
Helicopter money talk takes flight as Bank of Japan runs out of runway (Reuters) The Bank of Japan made a rather mundane policy move Friday, but already, just the next day, helicopter talk resurfaced. The Bank of Japan’s review of its monetary stimulus program promised for September has revived expectations it could adopt some form of “helicopter money“, printing money for government spending to spur inflation. Discussion in this article is for de facto perpetual bonds, 50-year bonds with a commitment from the BoJ to hold them for “a very long time“. This would put the money asset in circulation while keeping the bond liability on the central bank balance sheet. This is not quite ‘debt-free money’ technically, but it is that for all practical purposes (at least ‘for a very long time’).
China Caixin July manufacturing PMI at 50.6 versus 48.6 in June (CNBC) The Caixin-Markit Manufacturing PMI (Purchasing Managers’ Index) for small and mid-sized private companies moved onto expansion territory for the first time in 17 months. The government’s manufacturing Purchasing Managers’ Index (PMI), a survey that tracks the health of large and state-owned companies, came in at 49.9 in July, versus the 50.0 logged in June, slipping into contraction.
China’s July official services PMI rises to 53.9 from June’s 53.7 (Reuters) The services sectors of the Chinese economy continued to be strong in July. The official non-manufacturing Purchasing Managers’ Index (PMI) stood at 53.9 in July, compared with the previous month’s reading of 53.7 and well above the 50-point mark that separates growth from contraction on a monthly basis. China is counting on growth in services to offset persistent weakness in manufacturing that is dragging on the economy.
Supply-side reform ‘key’ to economy (China Daily) More efforts are needed to boost supply-side reform to fend off deflation in the second half of the year, economists and officials said on Friday. Wang Jun, a senior economist at the China Center for International Economic Exchanges, a government think tank, said heightened deflation pressure is more worrisome than inflation. Econintersect: We first started following wholesale deflation in China over 4 years ago. See Could Deflation Come to China? (GEI Opinion, June, 2012) and China: Economic Numbers Weaken, Inflation Slows. Does Deflation Await? (GEI News, June 2012).
Reimagining NSW: how the care economy could help unclog our cities (The Conversation) The author says that spreading economic activity out of New South Wales’ congested cities is an important objective to improve both the economy and livability. The fact that health care and social assistance are the fastest growing employment areas of the 21st century presents a good opportunity to develop some geographic diversity for economic activity within the state.