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The article focuses on how weather can have macroeconomic effects on the global economy. In particular, the fallout of El Niño on local economies, where rising temperatures can effect profitability of nations such as Indonesia, India and Australia, caused by droughts and reduced working hours.

It can have the opposite effect on other economies, with GDP growth usually seen in the same period in nations such as the US AND Thailand. The weather is associated with fewer hurricanes and more wet weather in drought hit areas such as US state California.

More energy is demanded from coal and oil as less can be produced from thermal plants and hydroelectric dams. After a large El Niño event has occurred, oil usually sees a surge in prices.

The article ends by mentioning that nations will be affected by short-term inflation volatility.

#elnino #globalgdp

The economic case for Germany to welcome migrants is more powerful than for the UK - although Britain could pay a price if the more talented migrants go to Germany

The report focuses on Germany’s acceptance of Syrian and Iraqi migrants over the past few days.The two main points to this are:

the UK's population is rising fast, estimated to grow 16 million over the next 15 years, caused by increased fertility and net migration. Germany's is expected to go in the other direction and drop by 10 million over the next 10 years.

The dependency ratio (i.e the proportion of expensive older people in the population relative to able-bodied, tax-generating workers) is rising much quicker in Germany than in the UK.It is expected to rise from 32% currently to 59% in 2060. This would mean by 2060 there would be less than one German of working age able to work any pay taxes to support a German over the age of 65. The UK dependency rate in contrast is expected to rise much slower.

Good read on the state of dividends in Japan and generally on Japanese corporate profitability.

Historically, there has been a lack of dividend culture in Japan due to shareholders having less power than in the west. Change has come through Abenomics, Prime Minister Abe’s economic revitalization plan. It follows his ‘three arrows’ approach- monetary easing, fiscal stimulus and structural reform. The first two have been seen as successful based on the exchange rate and corporate profitability. There was a belief that the third arrow has thus far been ineffective, but recent changes have seen a change in attitudes towards shareholder returns and an increase in dividends, signifying that structural reform is taking place. Dividend payments are rising, as are share buybacks.

Balance sheets have historically been under-leveraged, with huge amounts of cash holdings. However, they have rarely paid out dividends until now. However, in the past year 55% of the Topix has decided to do so - a new record.

How has the government fostered this change? Japanese culture places emphasis on the “consensual approach”, which means change is needed on a large scale to break down long standing cultural barriers. Abe has done this by directly encouraging companies to issue dividends and share wealth among the workforce. This seems to have had the desired effect as real wages have grown for the first time in two years.

This has also come from the recent adoption of the Stewardship code, which encourages investors to act and vote as owners of businesses, and the recent launch of the Nikkei 400 index, which has an explicit Return on Equity threshold. This index is invested in by the GPIF, (the largest pension fund in the world) for passively managed equities.

However, the article states that this is just the beginning of reforms with dividends having the potential to go higher. Moreover, the ageing population of the country and the prospect of inflation means that domestic demand for income from equities will increase rapidly.

Japan has also introduced Nippon ISAs (NISAs), similar to the UK’s ISA, last year.

#japan #abenomics #Topix #Abe #Threearrows #inflation #GPIF

China devalued the yuan by the most in two decades, a move that rippled through global markets as policy makers stepped up efforts to support exporters and boost the role of market pricing in Asia’s largest economy.

China devalued the yuan by the most in two decades, causing instability in global financial markets.

The rate was cut by 1.9% as an effort to curb the steep slowdown and lower the governments grip over the economy. They had previously been maintaining the currency to stop capital outflows, this latest move may be a sign that they are moving away from this. The Yuan slid 2.6% in response.

Chinese airline shares fell on concerns debt costs in dollars will rise.

The yuan’s real effective exchange rate had climbed 13% in the past year. The PBOC argued that the strong yuan put pressure on exports, citing this as a reason for the devaluation.

There could be a risk of deflation as a result of these measures. More measures, will be put in place, such as lowering reserve limits.

#yuan #china #currencywar #chineseexports #globalmarkets

London’s swankiest neighborhoods of Knightsbridge and Belgravia are becoming no-go areas for even the wealthiest property investors.

The luxury housing market in London is in decline due to increases in Stamp Duty, meaning the duty related with buying an expensive home can rise to about 12% of the total value.

Investors are instead still spending the same amount of money, but are splitting it across many homes worth -£1,000,000. Investors buying many homes at around £500,000 are seeing yields of about 4-5% according to research, whereas more expensive properties are seeing yields barely over 2%.

#london #housingmarket #stampduty #budget #osborne

Remember when the U.S. and Japan dominated trade in the Pacific? It wasn’t so long ago, and the memory is front and center as officials from Washington and Tokyo work on a trade agreement that could give their countries a shot at clawing back some of the trade they lost to China in recent decades.

A quick read about ways in which the US and Japan are trying to increase their presence in the pacific and challenge the might of China, who have reigned over the region for the past few decades.

To regain ground the two nations are working with 10 other nations (Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam) to create the Trans-Pacific Partnership (TPP) to boost trade through duty-free transactions. Note the absence of China in the above list.

There are still issues to resolve, such as protecting dairy farmers and automobile tariff cuts, but talks are scheduled to resume in the coming months. Thee is also criticism in the US that American manufacturing jobs could be sent to Vietnam, leading to an increase in imports to America, not exports.

The article ends by noting that China is welcome to join someday, while Beijing has expressed an interest in being part of TPP.

#TPP #Transpacificpartnership #USA #Japan #China #Trade

Steve Gutmann used to have a basement that he never used. His Honda Civic sat idle in front of his Portland, Ore. house. Now strangers use Getaround.com to book Gutmann’s $6-an-hour car for errands

An interesting examination of the ‘sharing economy’ and its effects on productivity and inflation figures in the US.

Sharing economy statistics do not tend to figure in US economic data, productivity data has only grown 1.25% a year since 08/09 according to official figures. Economists argue that true growth is much higher. If this is the case it builds into the argument that the federal reserve should feel more comfortable raising interest rates.

However, better productivity also lowers business costs, which means a reduction in inflation, meaning reported inflation is currently overstated. This could cancel out the effects of the stronger productivity mentioned above.

Many economists argue that technology is regularly underestimated in terms of impact by government data.

Economist David Wilcox believes that the drop in productivity seen in 07-09 is reversible and start-ups and tech firms will begin to see greater funding as a result.

Source: Reuters, 4th August 2015, ANN SAPHIR

#US #techstartup #inflation #sharingeconomy

The BBC has reported that Greek shares have dropped for a second day in a row - down 4% as at 10:30, with most of the losses being attributed to banks in the country. However, there could be a bright spot in all of the mess.

1 million debit cards have been issued since the crisis began, in an effort to minimise damage brought about by tough capital controls the country has enforced. Although there is a limit on 420 euros a person can withdraw a day, there is no such limit on how much they could spend with their debit cards.

This could have positive impact on the economy, with more transactions taking place electronically, there is less place for those paying for with cash in the country’s shadow economy to hide (the part of the economy where goods and services are paid for with cash to avoid paying taxes). Up until now Greece had lagged behind other economies in their use of debit card transactions.

With more goods and services transactions being recorded, and from traditionally cash-based professions such as medication and Dentistry

Source: Bloomberg, August 4th 2015

Source: BBC Business Live, August 4th 2015, 09:30 am

#greece #shadoweconomy

The price of Brent crude oil fell below $50 per barrel to the lowest level since January on Monday.

With the price of oil falling, there could be a knock-on effect from the fate of the Russian economy.

The economy is already in a contraction, with estimates of a 3.2% loss of GDP already considered too conservative. This has seen a rise in options traders betting on a slide in ruble bonds.

The poor outlook - which is usual for this time of year in Russia - looks particularly troubling this time around, as the prospect of Iran becoming a major exporter and China seeing a manufacturing slow has hit Russia hard.

Source: FT Adiviser, 4th August 2015, Kathleen Gallagher

Source: Bloomberg, 4th August 2015, Ksenia Galouchko

http://www.bloomberg.com/news/articles/2015-08-03/curse-of-august-shakes-ruble-as-oil-signals-another-losing-month

#russia #crisis #oilprice

FT Adviser Article on China

Chinese market volatility has raised economists concerns of a financial crisis.

The SSE fell 8.5% last week - its second biggest fall.

The methods the government used - including a ban on short selling and extending loans to brokerages - could create problems down the line

Many commentators likening it to the subprime crisis seen in the US.

IPOs have been frozen, while the government has been investing in shares and tracker funds.

JPM note this stability is only temporary, the government has only funded the buying up to certain levels (not a blank cheque).

If selling is not over once those levels are reached, there could be another bout of downward pressure.

Market should reconnect with its fundamentals.

There could also be a risk to banks, which could slow credit growth.

The government will not back down on its reforms now though - the aim is to introduce more institutional investors, moving away from the naivety of private domestic investors. This could be a good thing as it means the contagion to the rest of the Chinese economy is low, and could be minimal.

Rounded of with a statement that trading partners like Korea will suffer.

Source: FT Adviser, August 3 2015, Kathleen Gallagher

#china #sse #economy

Lloyds has announced an interim dividend payment of 0.75p per share in its half year results, but the banking giant said it would also consider special dividends...

As Lloyd’s raise interest rate and report a 38% jump in profits, it will be interesting to see how the market reacts today

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