Written by Econintersect
Early Bird Headlines 03 April 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
Asia markets higher, Trump’s NKorea comments weigh (CNBC) Asian shares were higher on Monday, with Chinese markets closed for holiday, on the first trading day of the new quarter, as traders eye news ahead of Chinese President Xi Jinping’s visit to the U.S. U.S. President Donald Trump told the Financial Times Sunday that the U.S. will take unilateral action to eliminate nuclear threats from North Korea, unless China, one of the hermit state’s closest ally, intensifies pressure on Pyongyang. The dollar index was trading steady at 100.49 against a basket of currencies. Global benchmark Brent crude was down 0.24% at $53.40 a barrel during Asian trade, and U.S. crude slipped 0.16% to $50.52. Spot gold was mostly unchanged at $1,248.21 per ounce at 0329 GMT, while U.S. gold futures were also flat at $1,250.60.
The world’s most dangerous cities (The Economist)
U.S.
Window closing for Congress to roll back Obama-era regulations (The Hill) The window for Republicans to roll back Obama-era rules is closing. Under the Congressional Review Act, Congress has a brief period of time to quickly revoke regulations passed in the final months of Barack Obama’s administration. The deadline to introduce resolutions of disapproval on Obama rules elapsed Thursday, according to regulatory experts and a post on the Senate Republican Policy Committee’s website. The GOP now has about five weeks to vote on the regulations previously introduced for repeal under CRA. Since the start of the new Congress, Republicans have used this obscure law from 1996 to repeal 13 regulations that were finalized between June 13, 2016 and January 3, 2017.
Flynn did not initially disclose income from Russia-linked companies (Reuters) Michael Flynn, President Donald Trump’s former national security adviser, failed to disclose payments from a Russian television network and two other firms linked to Russia in a February financial disclosure form, according to documents released by the White House. In a form signed by Flynn on March 31, the former White House official listed speaking engagements to Russian entities, including the Kremlin-funded RT TV, Volga-Dnepr Airlines and Kaspersky Government Security Solutions Inc, a U.S. subsidiary of Russian cybersecurity firm Kaspersky Lab. The form, released on Saturday, does not say how much Flynn was paid but the speeches are in a section titled “sources of compensation exceeding $5,000 in a year“. The speeches were not included in a form that Flynn signed electronically on Feb. 11, which the White House also released.
IRS chief is unexpected survivor in Trump era (The Hill) One of Republicans’ least favorite Obama administration officials remains in his position: IRS Commissioner John Koskinen. Some Republicans lawmakers have asked President Trump to ask for Koskinen’s resignation. The commissioner’s term expires in November, but he has said he would step aside sooner if asked by the president. But more than two months into Trump’s presidency, Koskinen is still in office, and the White House has not given a definitive answer about his future.
Germany
DAX Nears All-Time High (Twitter)
China
China Has Its Worst-Ever Start to a Year For Defaults (Bloomberg) China’s deleveraging push has racked up the most defaults on corporate bonds ever for a first quarter, and the identity of the debtors is pretty revealing. Seven companies have defaulted on a total of nine bonds onshore so far in 2017, versus 29 for all of last year, according to data compiled by Bloomberg. In a sign of the struggles facing China’s old economic model, most of them depend on heavy industry and construction. While it’s still far from a crisis point, the defaults shows how policy makers’ efforts to reduce the liquiditythat had propelled the bond market until late last year is exacting casualties.
China’s Plan to Create New Shenzhen Triggers Speculative Rampage (Bloomberg) Within 24 hours of Saturday’s announcement that the government would create the Xiongan area in Hebei province — in the same spirit that Shenzhen and Shanghai’s Pudong was built — hordes of prospective buyers had thronged to the region. Highways were clogged as they came to purchase real estate, with some camping outside property agent offices overnight, according to local media reports. On Sunday the government banned all property sales in the zone to stem speculation, according to the National Business Daily.
On Monday, shares of Chinese cement, building and port-related stocks surged in Hong Kong amid optimism the decision will spark a flurry of construction activity. The move by President Xi Jinping, which evokes memories of the rise of Shenzhen since it was declared a special economic zone more than three decades ago, is seen as a historic milestone to power China’s growth for a “millennium to come,” the official Xinhua News Agency reported. The new zone is expected to eventually cover about 2,000 square kilometers (772 square miles) and jump-start China’s economic growth.
Australia
Coal’s Dirty Secret (Bloomberg) Australia, the world’s biggest coal exporter has a problem. Demand for the dirtiest fuel is on the wane. The International Energy Agency — which has tended to overestimate coal production, and underestimate renewables — doesn’t expect consumption to regain its 2014 levels until 2021. Investment in new mines is “drying up,” according to its latest market forecast.
More low-paid work is part of the problem, not the solution (The Conversation)
Employer organisations such as the Australian Retailers Association, supported by the federal government, have recently argued that wages for Australia’s lowest-paid workers should be increased by less than inflation. This would mean a cut in real wages. But none of their assertions are sustained by evidence or research.
Three arguments have been put forward to cut the minimum wage. First, that the cut will ensure employers create more low-paid jobs, thereby reducing unemployment. Second, that low wages are not a problem anyway, as low-paid workers are “often found in high-income households“. Finally, that there have not been sufficient productivity improvements to support wage increases for the low-paid.
This is counter to the current thinking on wages. After advocating for decades that Australia needed more (downward) “wage flexibility” to solve unemployment, key international agencies – including the World Bank, IMF and the OECD – now recognise this misses the point. Australia’s award wages for our lowest-paid workers are among the highest in the world and this is now recognised as a good thing.
Australia Home Prices Rise Most in 7 Years Amid Bubble Concern (Bloomberg) Australian house prices rose the most in almost seven years in March as the country’s housing boom accelerated. Average home values in Australia’s eight state and territory capitals rose 12.9% in the 12 months through March, the fastest pace since May 2010, according to data from CoreLogic Inc. released Monday. The boom is being led by Sydney, where average house values surged 18.9% in the past 12 months, the most since November 2002. Sydney home values climbed 5% in the first three months of the year.
Comparing Australia’s electricity charges to other countries shows why competition isn’t working (The Conversation) Australia’s residential electricity prices are amongst the highest in the world so it’s not hard to see why customers have been up in arms about high prices. Residential electricity prices in Canada and the United States are typically less than half those in Australia. Lack of competition and a complex menu of charges are key factors. The graphic below compares EU electrical costs with thoe in Australia’s New South Wales (NSW).
Social services organisations, customer advocates and some independent energy economists have long voiced concerns about retail energy markets. Their concerns centre on the amount that the retailers’ charge, that customers are not happy and that electricity is becoming increasingly unaffordable.
The Grattan Institute recently published a blunt critique that went one step further. It suggested that not only are retailers charging a great deal, but that this is explained not by high costs but by excessive profits.
Mexico
American Jobs Are Headed to Mexico Once Again (Bloomberg) After Donald Trump’s election, the flow of manufacturers setting up shop south of the border dwindled to a trickle. Ford Motor Co. and Carrier Corp., caught in Trump’s Twitter crosshairs, scrapped plans to move jobs to Mexico in two very public examples of the slowdown.
But now the pace is picking back up. Illinois Tool Works Inc. will close an auto-parts plant in Mazon, Illinois, this month and head to Ciudad Juarez. Triumph Group Inc. is reducing the Spokane, Washington, workforce that makes fiber-composite parts for Boeing Co. aircraft and moving production to Zacatecas and Baja California. TE Connectivity Ltd. is shuttering a pressure-sensor plant in Pennsauken, New Jersey, in favor of a facility in Hermosillo.
