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The recent protests in London by climate activists were a reminder, if one were required, that we need to tackle global warming.
Scientists at Cambridge are setting up a research centre to develop new ways to repair the Earth’s climate because they feel that current approaches will not be sufficient and governments appear more focused on debate than seeking solutions.
Amongst the more interesting, or promising ideas is to refreeze the poles by ‘brightening’ the clouds above them to reflect sun rays. This would involve deploying unmanned vessels equipped with special jets and nozzles. These would pump seawater into the sky, so that tiny particles of salt are injected into the clouds. This would make them more reflective and so cool the areas below them.
Other ideas being explored are ‘greening the oceans’ which would involve fertilising the sea with iron salts to promote the growth of plankton. This should absorb more CO2. Another is to utilise carbon capture and storage facilities by using the hydrogen, carbon dioxide and heat to make synthetic fuels.
European politicians seem to be waking up to the dangers of climate change, albeit more slowly than many environmentalists would like. However, despite the recent environmental protests and the strong showing in the EU elections by the Green parties, it is China and the USA that need to take action. Unfortunately, President Trump is in denial, speculating it to be a hoax and that global warming was invented by the Chinese to attack US manufacturing. Given the current trade tariff situation between the US and China, Earth’s climate may come a poor second.
What have we been watching?
A deterioration in relations between the US and China over Huawei, the decline of centre right and centre left political parties in the EU elections, including a drubbing for the Conservatives and Labour parties and the start of a Conservative leadership race with PM Theresa May announcing her departure.
Global technology stocks were rocked by the US government decision to block all business transactions with Huawei and other companies that could pose a national security threat. This is having a ripple affect globally, with ARM in the UK and Panasonic in Japan amongst the latest technology companies who are halting business with Huawei to comply with US restrictions. This is likely to complicate the US and Chinese trade situation and American firms with business in China now have real concerns over how Beijing may respond to action taken against Huawei. US Treasury Secretary Steve Mnuchin has said he had no plans to go to China and continue trade talks, while the Chinese media accused the US of trying to start a technology cold war. President Trump’s visit to Japan has done little to clarify the state of progress in trade discussions. The Japanese government has played down his comments which appeared to suggest that an agreement could be reached in August.
On a more positive note, the US has agreed a steel and aluminium deal with Canada and Mexico and it looks as if a NAFTA deal may be back on. Is there ‘method in the madness’ with President Trump’s trade war policy? As the screw is turned on China, which could hit trade, it has been loosened with Canada and Mexico. Trump has also ‘kicked the can down the road’ on European and Japanese car tariffs.
The Organisation for Economic Co-operation and Development (OECD) warned that an escalation of the trade dispute between Washington and Beijing could knock 0.7% off global economic growth by 2021/2022. The OECD is currently forecasting global economic growth of 3.2% in 2019, compared with 3.5% in 2018 but expects a pick-up in growth to 3.4% in 2020.
Sterling continued sliding towards $1.26. As widely expected, Theresa May yielded to pressure from her own party and will step down as party leader on 7th June. A Conservative leadership contest is now underway, with Boris Johnson the bookies’ favourite to be the new PM by mid-July. However, whoever wins will still face the same challenges. The EU elections have further complicated the situation with a drubbing for both the Conservatives and Labour parties. The recently formed Brexit party has placed fresh pressure on the Conservatives to deliver Brexit. Meanwhile, Labour’s loss to the Liberal and other remain parties is applying pressure on Jeremy Corbyn to shift Labour’s stance to hold a second EU referendum. Jeremy Corbyn has already said he will call a no confidence vote in the new PM, but if it was Boris Johnson would some Conservative MPs vote with Labour to avert a no deal Brexit and risk a general election?
In the UK, inflation reached its highest level so far this year in April due to higher fuel and energy bills. The Consumer Price Index was 2.1% in April, above the Bank of England’s target, but was less than the market expected. British Steel entered compulsory liquidation, threatening 5,000 jobs directly and some 20,000 sub-contractors.
In Europe, the centre right and centre left parties, lost ground in the EU elections with a particularly strong performance by the pro- EU, Green parties particularly in Germany. Despite the strong performance of the far-right in France and Italy it was not as strong as some had feared. In summary, with so many traditional centre ground parties under pressure, many may have greater problems at home than Brexit.
In the US, Federal Reserve (Fed) Chair Jerome Powell said the build-up in US company debt requires monitoring but downplayed comparisons with sub-prime debt of the last financial crisis. While Fed officials continue to push back against interest rate cut speculation, the fixed interest futures markets are currently pricing in a rate cut by the year-end and more than two by the end of 2020. US and China trade talks remain the key event. Meanwhile, US durable goods orders gave another indication that investment activity is slowing down.
The Japanese economy remains especially vulnerable to US and China trade tensions with exports dropping again in April, with shipments to China particularly weak. Manufacturing activity indicators also slipped from expansion into contraction territory.
Brent oil dropped to $70 following an unexpected build in US oil inventories raised concerns that the US/China trade dispute could dent longer-term demand.
Finally, it looks as if any bad news is being blamed on Brexit these days. Even, the UK’s last place in the Eurovision Song Contest is being attributed to European voter’s dim view of Brexit. To add salt to the wound, Michael Rice had his last place score lowered. What would Theresa May sing if she entered Eurovision? ‘Farewell’ by Rihanna? Or ‘One More Day’ by Diamond Rio?
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