Monday, November 30, 2015

BBC News - China's yuan set for IMF reserve status

Piles of Chinese bank notesImage copyrightGetty Images
The International Monetary Fund (IMF) is expected to announce on Monday that China's currency, the yuan, will join the fund's group of international reserve currencies.
Just the US dollar, the euro, Japan's yen and the British pound are currently part of this select band.
Earlier this month, IMF head Christine Lagarde backed the yuan's inclusion.
If the decision is made, the yuan is likely to join the basket next year, experts said.
China is the world's second largest economy behind the US, and asked for its currency to become a reserve currency last year.
Concerns about Beijing keeping the yuan artificially low to help exporters is one reason why the currency has previously failed to meet the criteria for reserve currencies set out by the IMF.
However, Chinese officials have a made a concerted effort to build support for the yuan's inclusion, and a recent IMF staff report endorsed such a move.
Initially, the currency's inclusion would be largely a symbolic gesture, analysts said.

Friday, November 27, 2015

Bloomberg News - CEO Wants More Than $60 Million for Biggest Diamond in a Century

How much does the head of the company that unearthed the second-biggest everdiamond want for the gem? More than $60 million, that’s all he’ll say.
“I haven’t even told my wife,” said William Lamb, chief executive officer of Lucara Diamond Corp., which last week announced the discovery of the 1,111 carat gem-quality diamond. It’s “higher than the current estimates that people are putting out there, which are north of $60 million.”
Biggest Diamond in a Century

Biggest Diamond in a Century
Source: Portland Communications

The discovery sent shockwaves through the $80-billion diamond industry. The type-IIa stone, just smaller than a tennis ball, is the biggest unearthed since the 3,106-carat Cullinan gem found in South Africa in 1905. That was cut into pieces, which are set in the Crown Jewels of Britain.
Exceptionally large rough diamonds can sell for about $60,000 per carat, though Lamb hopes that its status will boost its value. The first Lucara worker to touch the stone was at the time the only person still alive who’s handled a 1,000-carat diamond, he said.
“A lot of people will use use $60,000 a carat as the basis,” Lamb said. “On top of that, you have to look at the size of the final polished diamond as well as the historical context. That’s going to play into it too.”

Rejected Offer

The CEO, who has already turned down an offer of more than $40 million, said the company has been approached by London’s Natural History Museum about displaying the stone and the Discovery Channel who are interested in making a documentary about it. The Vancouver-based company isn’t in a rush to sell because it has no debt.
“The diamond sector is not full of opportunities, so for us to run out and sell it now doesn’t really make sense,” Lamb said. “We have the time to look at what is the best way to sell it. Not selling it is actually an option.”
Lucara’s Karowe mine in Botswana rivals Gem Diamonds Ltd.’s Letseng operation in Lesotho as the place to find the biggest and best stones. Gem Diamonds previously held the record for the largest stone discovered this century with the 603-carat Lesotho Promise. Lucara in July sold a 341.9-carat diamond and a 269.7-carat gem for just more than $60,000 a carat. Gem Diamonds offloaded a 357-carat stone for $19.3 million in September.

Valuable Offcuts

As well as one “significant” single polished stone, there’ll be other offcut pieces as large as 20 to 30 carats each worth millions of dollars, Lamb said. The Lesotho Promise produced 26 flawless diamonds, including a 76.4-carat pear-shaped gem.
Luck also played a role. The company may never have caught the diamond if it didn’t recently increase the size of the holes at its plant that lets gems drop through instead of being smashed along with rock dug from the ground. Lucara can now catch gems as big as 1,800 carats and needs to decide whether its worth investing in expanding the capacity to 3,000 carats.
Will there be more 1,000-carat-plus stones?
“There’s no real statistical numbers you can run on this,” said Lamb. “It’s an absolute anomaly. It’s too far off the curve.

Thursday, November 26, 2015

BBC News - COP21: World Bank chief wants $16bn to help Africa on climate change

Dr Kim Jim of the World Bank
The World Bank wants to raise $16bn to help Africa adapt to climate change.
By boosting the continent's resilience to global warming and increasing renewable energy it hopes the scheme will prevent millions of people from sliding into extreme poverty.
The Africa Climate Business Plan will be presented at COP21, the global climate talks in Paris.
They are aimed at reaching agreement on how to limit global temperature increases to 2 degrees celsius.
"The thing that we wanted to make sure was that Africa wasn't forgotten in the midst of these conversations," Dr Jim Yong Kim, the president of the World Bank told the BBC.
When talks begin, he wants to make sure the conversation is not just about reducing emissions but also about taking steps to cope with the consequences of warming.


And here's why.
The continent emits just 3% of the world's greenhouse gas emissions. Yet even the smallest rise in global temperatures could have far-reaching consequences in sub-Saharan Africa.
Research by the Bank found that without measures to help countries prepare for climate change, 43 million people, mostly in Ethiopia, Nigeria, Tanzania, Angola, and Uganda could fall into extreme poverty by 2030. This will be due to droughts, increasing food prices, and stunting children's growth.
The World Bank is committing a third of the money ($5.7bn) from the International Development Association (IDA), the arm of the World Bank Group that supports the poorest countries.

Road to Paris

Looking ahead to climate negotiations in Paris, the World Bank chief acknowledged that reaching a deal won't be simple or easy.
And yet he remained optimistic.
Unlike in 2009, when climate talks in Copenhagen ended in anger and recriminations this time, Dr Kim insisted, would be different: "The resolve of leaders is at an entirely different level to what it was back then.
"There's not a single country in the world that wants to be the stumbling block to getting to an agreement."
And the tricky question of who will pay for any deal? "We think that there is a path to get there."
But if previous climate summits are any guide, Dr Kim's optimism may be sorely tested next week in Paris.

Wednesday, November 25, 2015

Bloomberg News - If China Killed Commodities Super Cycle, Fed Is About to Bury It

This photo taken on November 15, 2010 sh
For commodities, it’s like the 21st century never happened.
The last time the Bloomberg Commodity Index of investor returns was this low, Apple Inc.’s best-selling product was a desktop computer, and you could pay for it with francs and deutsche marks.
The gauge tracking the performance of 22 natural resources has plunged two-thirds from its peak, to the lowest level since 1999. That shows it’s back to square one for the so-called commodity super cycle, a hunger for coal, oil and metals from Chinese manufacturers that powered a bull market for about a decade until 2011.
“In China, you had 1.3 billion people industrializing -- something on that scale has never been seen before,” said Andrew Lapping, deputy chief investment officer at Allan Gray Ltd., a manager of $33 billion of assets in Cape Town. “But there’s just no way that can continue indefinitely. You can only consume so much.”
If slowing Chinese growth, now headed for its weakest pace in 25 years, put the first nail in the coffin of the super cycle, the Federal Reserve is about to hammer in the last.
The first U.S. interest rate increase since 2006 is expected next month by a majority of investors, helping push the dollar up by about 9 percent against a basket of 10 major currencies this year. That only adds to the woes of commodities, mostly priced in dollars, by cutting the spending power of global raw-materials buyers and making other assets that generate yields such as bonds and equities more attractive for investors.

Horrendous Capital

The Bloomberg Commodity Index takes into account roll costs and gains in investing in futures markets to reflect the actual returns. By comparison, a spot index that tracks raw materials prices fell to a more than six-year low Monday, and a gauge of industry shares to the weakest since 2008 on Sept. 29. The biggest decliners in the mining index, which is down 31 percent this year, are copper producers First Quantum Minerals Ltd., Glencore Plc and Freeport-McMoran Inc.
With record demand through the 2000s, commodity producers such as Total SA, Rio Tinto Group and Anglo American Plc invested billions in long-term capital projects that have left the world awash with oil, natural gas, iron ore and copper just as Chinese growth wanes.
"Without fail, every single industrial commodity company allocated capital horrendously over the last 10 years,” Lapping said.

Drowning in Oil

Oil is among the most oversupplied. Even as prices sank 60 percent from June 2014, stockpiles have swollen to an all-time high of almost 3 billion barrels, according to the International Energy Agency. That’s due to record output in the U.S. and a decision by the Organization of Petroleum Exporting Countries to keep pumping above its target of 30 million barrels a day to maintain market share and squeeze out higher-cost producers.
A Fed move on rates and accompanying gains in the dollar will make it harder to mop up excesses in raw-materials supply. Mining and drilling costs often paid in other currencies will shrink relative to the dollars earned from selling oil and metals in global markets as the U.S. exchange rate appreciates. Russia’s ruble is down more than 30 percent against the dollar in the past year, helping to maintain the profitability of the country’s steel and nickel producers and allowing them to maintain output levels.
"The problem with lower currencies is operations that were under water a year ago are all of a sudden profitable on a cash basis," said Charl Malan, who helps manage $31 billion at Van Eck Global in New York. "Why would you shut them?"
While some world-class operators such as Glencore plan to cut copper and zinc output, others like iron-ore producers BHP Billiton Ltd., Vale SA and Rio Tinto are locked in a "rush to the bottom" as they seek to drive out competitors by maintaining supply even as prices slump, according to David Wilson, director of metals research at Citigroup Inc.
“With the momentum on the downside, it’s very difficult to say that we’re reaching a bottom,” Wilson said.

Tuesday, November 24, 2015

BBC News - Mark Carney: UK rates to remain low 'for some time'

Mark CarneyImage copyrightGetty Images
Bank of England governor Mark Carney has said that UK interest rates are likely to remain low "for some time".
His comments came as he spoke to MPs on the Treasury Committee.
UK rates have been held at 0.5% since March 2009. Most economists are not expecting the Bank to raise rates until mid-2016 at the earliest.
Mr Carney said that "even with limited and gradual rate increases it still will be a relatively low interest rate environment".

'Solid recovery'

He remained vague on when a rate rise might be coming, and added: "The question in my mind is when the appropriate time for interests to increase and that is strongly consistent with the strength of the domestic economy."
Mr Carney also said that he did not see any need for negative interest rates.
Meanwhile, he said the Bank was monitoring groups of households to find out what impact any rate hike would have.
Kirstin Forbes, an external member of the Bank of England's Monetary Policy Committee, who was also giving evidence at the same hearing, said that the next interest rate move would be upwards.
"Given the state of the UK economy, a solid recovery, I still believe certainly the next move in interest rates will be up, we will not require loosening," she said.

'Balance of risks'

Mr Carney also said productivity was more likely to exceed than undershoot the Bank's latest forecasts, reducing the pressure on inflation.
Meanwhile, sterling fell after the Bank's chief economist Andy Haldane said he saw more downside risks to growth and inflation than had been indicated by the Bank's latest economic outlook.
He also reiterated his view that the Bank's next move might actually be a rate cut.
"I see the balance of risks around UK GDP growth and inflation as skewed materially to the downside, more so than embodied in the November 2015 Inflation Report," he told the Treasury Committee.
In late morning trade sterling fell by 0.03% against the US dollar, to $1.5120, and by 0.15% against the euro, to 1.4198 euros.

Monday, November 23, 2015

BBC News - Government borrowing worst October figure in six years

CashImage copyrightGetty Images
Public sector net borrowing (PSNB) rose £1.1bn in October compared with the same month a year ago to £8.2bn, official figures show.
That is the highest level of borrowing in October in six years.
The government has borrowed £54.3bn so far this year and is making slow progress on meeting the Office for Budget Responsibility's (OBR) forecast.
These figures mean Chancellor George Osborne will need to restrict borrowing to just £15bn between now and April.
While not impossible - January usually sees a surplus thanks to an influx of self-assessment income tax receipts - it remains unlikely that the chancellor will meet the £69.5bn OBR forecast without severe cuts at next week's Autumn Statement.
The previous annual borrowing figure was £90.1bn.
The Treasury said the figures showed the job of rebalancing the economy was "not yet done".
It added that "government borrowing remains too high".
The Institute for Fiscal Studies (IFS) said the chancellor faces "two big challenges" to meet cuts plans and achieve a surplus by 2019-20.
"The first is to divide up the shrinking budget for day-to-day spending by departments, while continuing to protect many areas of spending.
"The second is to remain within his welfare cap while taking on board the recent House of Lords motion that he must reconsider the tax credit cuts he announced in July," said IFS.

Analysis: BBC economics correspondent Andy Verity
So you thought we were living in a time of austerity. Yet the question is increasingly - austerity for whom?
The Treasury's acknowledged that government borrowing "remains too high".
Even ignoring the fact that it was the worst October for the public finances since 2009 (which could be down to statistical blips) the government had to borrow £54.3bn from April to October to plug the gap between its income and its spending.
If George Osborne is to achieve his goal of borrowing no more than £69.5bn for the whole financial year, there isn't much headroom left for the remaining five months.
It's highly likely that the Office for Budget Responsibility will have to relax its forecast at next week's Autumn Statement.
The fact that the budget deficit is falling at all is not because of reduced spending but because of increased tax receipts.
From April to October central government spending rose by 1.1% to £402.6bn.
A big part of the reason for that was that the government has exempted the health budget from austerity.
It is also raising the basic state pension by a minimum of 2.5% a year - even when inflation is negative.
Overwhelmingly, the beneficiaries of those exemptions are members of the older generation.
By contrast, those who bear the brunt of the planned tax credit and benefit cuts will be people of working age.

Borrowing warnings

Many economists say the Treasury has no hope of meeting the OBR's forecast for this year.
Howard Archer chief UK and European economist at IHS Global Insight said: "George Osborne now has an almighty task to meet his fiscal targets for 2015/16.
"Indeed, if the pattern of the first seven months of the fiscal year continued, PSNB would amount to £80.3bn in 2015/16, which would mean that Mr Osborne would overshoot by some £11bn the target of £69.5 billion contained in his July budget."
Ruth Miller, UK economist at Capital Economics, is also forecasting borrowing this year of £80.3bn and says today's figures leave the Chancellor "with less room for manoeuvre" in next week's Autumn Statement.
Government borrowing in the 12 months to October stood at £70bn taking the total national debt now to £1.5 trillion, or 80.5% of the UK's annual economic output.
John Hawksworth, PwC's chief economist, said the borrowing figures were "a little disappointing for the Chancellor".
"Our estimates based on simple extrapolation from these data suggest that public borrowing could overshoot the OBR target by around £5bn this year," he said.
But British Chambers of Commerce economist David Kern was a little more upbeat, saying: "This financial year so far the government is making progress in cutting the deficit, and there is still a realistic chance that they will achieve the target set in the July budget."

Friday, November 20, 2015

Bloomberg News - U.K. Fund Management Industry Swells to Record $11 Trillion

Assets overseen by U.K. fund managers swelled to a record 7.1 trillion pounds ($11 trillion) in the first half of 2015, according to TheCityUK.
U.K. funds under management increased as much as 5 percent in the period and are on track to rise more than 9 percent by the year end, the financial-services lobby group estimated in a report on Thursday. That compares with a 9.7 percent gain to a 6.8 trillion pounds in 2014. London-based firms accounted for about 80 percent of the funds followed by those in Edinburgh and Glasgow, the data shows.
The figures come as the U.K. Financial Conduct Authority conducts a market study into competition within the asset management industry to see whether firms deliver value for clients and are motivated to control costs.
Institutional investors, which include insurers, pension funds and sovereign wealth funds, accounted for about two thirds of U.K. assets under management at the end of 2014. Retail clients’ assets accounted for 1.1 trillion pounds and 700 billion pounds came from alternative funds, including hedge funds and private-equity funds, according to the study.

Thursday, November 19, 2015

BBC News - US Federal Reserve signals December rate rise more likely

Federal Reserve chairwoman Janet Yellen and eight colleagues voted to keep rates where they areImage copyrightReuters
Image captionFederal Reserve chairwoman Janet Yellen had indicated that an interest rate rise this year was possible

US Federal Reserve officials appear more confident that the economic conditions needed to trigger an interest rates rise are near.
Minutes of the Fed's October meeting showed that the conditions may "well be met" by the next gathering in December.
Fed officials saw the jobs market improving and inflation starting to move towards their 2% annual target.
The US looks to have weathered turbulence in global markets without signs of stress, the minutes said.
Wall Street rallied following the release of the minutes, with the Dow Jones, S&P 500, and Nasdaq indexes closing well above 1% higher.
"The market today is just reinforcing the view that most likely the Fed is going to move in December, and that's not necessarily a bad thing," said Jeremy Zirin, chief equities strategist at UBS Wealth Management Americas.
The Fed has kept its benchmark for short-term rates near zero since late 2008, but there has been increasing speculation about the timing of a rise.
Earlier this year, many economists thought that a rate rise might come in September or October, but US market volatility and worries about economic growth in China put this on the back burner.
However, the Fed minutes indicated that officials felt the US had come through these difficulties.
"The US financial system appeared to have weathered the turbulence in global financial markets without any sign of systemic stress," the minutes said.

'Live date'

"Most [officials] saw the downside risks arising from economic and financial developments abroad as having diminished and judged the risks to the outlook for domestic economic activity and the labor market to be nearly balanced."
The October meeting came after the release of disappointing September jobs data, which was noted in the minutes. But since then, the jobs market surged in October.
Chris Rupkey, chief financial economist at MUFG Union Bank, in New York, said: "December is a very, very live date for action, and frankly, given the stellar 271,000 jobs report since the October meeting, we would be astounded if they don't raise rates finally."
Speculation about an imminent interest rate rise has in the past unsettled financial markets. But some analysts believe markets are now prepared for a normalisation of policy.
"I think the market is ready and comfortable for an increase," said Alan Rechtschaffen, portfolio manager at UBS Wealth Management Americas.
"We just have to turn this aircraft carrier around, get out of this zombie-like economy which is being fed on an elixir of low interest rates and get to a process of normalisation," he said.

Wednesday, November 18, 2015

BBC News - UK's coal plants to be phased out within 10 years

The UK's remaining coal-fired power stations will be shut by 2025 with their use restricted by 2023, Energy Secretary Amber Rudd has announced.
Image copyrightPA

Image captionAmber RuddAmber Rudd said the government was "tackling a legacy of underinvestment and ageing power stations"

Unveiling the government's new energy strategy, Ms Rudd said that relying on "polluting" coal is "perverse".
In a speech later today it is expected she will announce gas will become "central" to the UK's energy supply.
Environmental groups welcomed the move away from coal but criticised plans to focus on gas instead of renewables.

'Safe and reliable'

Currently, coal provides almost a third (28%) of the UK's electricity, but Ms Rudd said "We are tackling a legacy of underinvestment and ageing power stations which we need to replace with alternatives that are reliable, good value for money and help to reduce emissions."

Sun setting over wind turbines near Faringdon, OxfordshireImage copyrightPA

Ms Rudd is also expected to say that investment in nuclear power is vital to the government's policy.
She believes that plans for new nuclear power stations, including at Wylfa in Wales and Moorside in Cumbria, could provide almost a third of the low carbon electricity the UK needs for the next 15 years.
"Opponents of nuclear misread the science. It is safe and reliable," Ms Rudd will say.
The speech comes amid concerns that the UK could suffer from blackouts as a result of short supplies, brought about in large part from the closure of a number of power stations that have come to the end of their working lives.
However, National Grid and many experts have dismissed these concerns.

Analysis: John Moylan, BBC industry correspondent

Successive governments have highlighted our energy dilemma - the need to keep the lights on, while cutting greenhouse gases and ensuring energy is affordable for consumers.
Today the Energy Secretary Amber Rudd will focus on energy security and keeping prices as low as possible.
But for the world's first industrialised nation to end coal-powered generation sends a strong signal ahead of the UN Climate summit in Paris.
All the major parties had signed up to phasing out coal. The previous government's projections saw it falling to 1% by 2025.
The big question is how to ensure gas plants are built to replace it. Only one large plant is under construction today. Another, which secured a subsidy last year, is struggling to find investors.

energy bills
Image captionThe new energy system will be "competition-focused", according to Amber Rudd

Concerns have also been raised about the costs to consumers of transforming the energy system to help tackle climate change.
The government cut renewable energy subsidies earlier this year, which led some to question the government's commitment to tackle climate change.
However, the BBC understands that the government is not planning to revise its climate change targets.
And on renewables, Ms Rudd will warn that subsidies must be carefully focused on technologies that offer the best value for money, fitting into a "consumer-led, competition-focused energy system".
Ms Rudd's speech comes ahead of the UN summit on climate change in Paris in December, aimed at securing a new climate change agreement, which is expected to include pressure for targets to eliminate global emissions and phase out fossil fuels.

'Like an alcoholic'

Environmental group Friends of the Earth welcomed the phasing out of coal, but criticised the new emphasis on gas.
"Switching from coal to gas is like an alcoholic switching from two bottles of whisky a day to two bottles of port," senior energy campaigner Simon Bullock said.
Greenpeace's head of energy Daisy Sands also criticised the new strategy.
"Launching a new dash for gas and new nuclear is not the solution as it will only lock in more dirty power than we actually need for a low-carbon transition," she said.
The GMB union's national secretary for energy Brian Strutton welcomed Ms Rudd's statement but added: "Government needs to get on with addressing the urgent need for nuclear power stations and gas-fired stations to supply reliable power.
"The investment will only happen when the framework is right, which it is not now."

Tuesday, November 17, 2015

Bloomberg News - Pound Slips as Paris Attacks Cloud Europe's Economic Outlook

The pound fell for the first time in six days against the dollar as consumer-price and retail-sales data due this week may show declines, further bolstering the view the Bank of England will wait until 2017 before it tightens monetary policy.
Sterling also strengthened versus the euro, which fell against most of its major peers amid the fallout from the Paris terror attacks. Dovish comments from policy makers last week prompted investors to push back the forecast timing of when the BOE would tighten monetary policy to more than a year after the U.S. Federal Reserve.
“This week we are a little bit cautious” on sterling, said Michael Sneyd, a foreign-exchange strategist at BNP Paribas SA in London. “We are expecting a slight disappointment in the retail sales and CPI data.” He said currency moves “at the open were due to the Paris attack, they were typical risk-off moves,” but would be “short-lived.”
The pound fell 0.2 percent to $1.5207 as of 5:05 p.m. in London after climbing 1.2 percent in the previous five sessions. The British currency strengthened 0.4 percent to 70.41 pence per euro, after touching 70.23 pence, its strongest level since Aug. 7.

Time Lag

While markets signal that the BOE may become the second major central bank after the Fed to tighten policy, recent policy makers’ comments have widened the time lag forecast between the two rate increases to more than a year. The pound might remain under pressure before the minutes of the Fed’s Oct. 27-28 meeting due Wednesday, which may clarify whether officials are leaning toward an interest-rate increase in December.
“The Federal Reserve seems to be moving toward rate hikes,” said Steve Barrow, head of Group-of-10 strategy at Standard Bank Group Ltd. in London. “In the U.K., I’m not sure the momentum is quite as robust after comments last week were somewhat dovish.”
He added that for sterling this week “the emphasis would be more on the downside. Sterling/dollar is in a steady range of around $1.50-$1.55. We are going to head down to the lower end of that range.”

No Inflation

Data due Nov. 17 will show that U.K. consumer prices decreased 0.1 percent in October from a year earlier, according to a Bloomberg survey of economists. This is far from the 2 percent inflation that the BOE targets. Figures releasing Thursday will likely show weaker monthly retail sales, other surveys signaled.
Forward contracts based on the sterling overnight index average, or Sonia, aren’t pricing in any BOE interest-rate increase until after January 2017. Futures pointed to a 64 percent chance of the Fed increasing rates next month.
U.K. government bonds climbed, with the 10-year yield sinking four basis points, or 0.04 percentage point, to 1.94 percent. The 2 percent gilt due September 2025 rose 0.365 or 3.65 pounds per 1,000-pound face amount to 100.54. The Debt Management Office is scheduled to sell 3.25 billion pounds of the benchmark 10-year securities on Nov. 18.