Connect with us

Markets

US stocks close flat as European equities erase pandemic woes

Published

on


US equities slid modestly on Tuesday, following an all-time high hit a day earlier, while a market rotation into value stocks propelled Europe’s benchmark index to a fresh record.

The technology-heavy Nasdaq Composite and Wall Street’s S&P 500 both closed 0.1 per cent lower, following a record close for the blue-chip index on Monday after jobs and service sector data showed the US economic recovery was accelerating.

In the US Treasury market, the yield on the benchmark 10-year note fell 4.8 basis points to 1.65 per cent, continuing its retreat from a 14-month high hit at the end of March. The dollar, measured against a basket of currencies, weakened 0.3 per cent.

“When you see the yield curve get a little less steep, even in the face of good economic data, it tends to be a pretty benign trading day,” said Brian Nick, chief investment strategist at Nuveen. He added that, overall, “things are just moving in the right direction and investors get that”.

The region-wide Stoxx Europe 600 index closed up 0.7 per cent, exceeding the previous record set in February last year before the coronavirus crisis triggered a heavy slide in global markets.

Line chart of Stoxx Europe 600 index showing European stocks wipe out pandemic losses to close at record high

Stocks across Europe rallied on Tuesday, with the UK’s FTSE 100 climbing 1.3 per cent, France’s CAC 40 gaining 0.5 per cent and Germany’s Xetra Dax up 0.7 per cent to another all-time high.

European stock markets have taken longer to recover than their Wall Street rivals because the region has a greater proportion of cyclical companies whose prospects are more closely aligned with the economic outlook. The US, by contrast, is home to the world’s largest growth companies, particularly in technology, which were able to sustain rapid sales increases during the pandemic.

The Stoxx 600 has gained 9 per cent this year after crashing almost 40 per cent last spring and ending 2020 down 4 per cent. The US benchmark S&P 500 has risen by a similar margin in 2021, but it rallied more than 16 per cent last year.

Europe’s biggest gainers this year have been sectors such as carmakers, travel and leisure companies, and banks — all of which are up at least 20 per cent since the end of 2020.

Bar chart of Stoxx 600 industries (% change) showing Europe’s top-performing sectors in 2021

In the latest sign of how global economies are recovering from the pandemic, UK prime minister Boris Johnson announced on Monday that England would move to step two of its “road map” for lifting the lockdown on Monday, when premises including outdoor pubs, non-essential shops, hairdressers and indoor gyms will be able to reopen.

The outlook was muddier in parts of continental Europe, where several countries have reintroduced social restrictions as a result of a wave of infections and slower vaccine rollouts.

Still, economists expect the eurozone economy to grow 4.2 per cent this year, after a 6.6 per cent drop in 2020. The UK is forecast to expand at a slightly more rapid rate of 4.7 per cent following last year’s 9.8 per cent fall, according to economists polled by Bloomberg.



Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets

Further reading

Published

on

By



Andrew Yang; Facebook; WallStreet Bets and much more . . . 



Source link

Continue Reading

Markets

A carbon registry leaves polluters with nowhere left to hide

Published

on

By


The writer is the founder and executive chair of the Carbon Tracker Initiative, a think-tank

No one yet knows which countries will extract the last barrel of oil, therm of gas or seam of coal. But the jostling has started. Every nation has reasons to believe it has the “right” to continue fossil fuel extraction, leaving others to deal with the climate crisis.

In the Middle East, oil producers can argue that the cost of extraction is low. In Canada, they market their human rights record. Norwegians trumpet the low-carbon intensity of their operations. And in the US under Donald Trump, they touted the virtues of “freedom gas” and called exports of liquefied natural gas “molecules of freedom”.

The dilemma for governments is that if one country stops producing fossil fuels domestically, others will step in to take market share. And so the obligation to contain emissions set out in the Paris Agreement risks being undermined by special pleading.

In the UK, the furore over plans for a new coal mine in Cumbria the year that the country is hosting the UN’s climate summit is indicative of the contrary positions many countries hold. Facing one way the government says it is addressing climate change. But looking the other, it consents not just to continued extraction, but to support and subsidise the expansion of production.

Climate Capital

Where climate change meets business, markets and politics. Explore the FT’s coverage here 

To keep warming under the Paris Agreement limit of 1.5C, countries need to decrease production of oil, gas and coal by 6 per cent a year for the next decade. Worryingly, they are instead planning increases of 2 per cent annually, the UN says. On this course, by 2030 production will be too high to keep temperature rises below 1.5C. The climate maths just doesn’t work.

One of the problems in attempting to track fossil-fuel production is the lack of transparency by both governments and corporations over how much CO2 is embedded in reserves likely to be developed. This makes it difficult to determine how to use the last of the world’s “carbon budget” before temperature thresholds such as 1.5C are exceeded.

Governments need a tool that establishes the extent to which business as usual overshoots their “allowance” of carbon. There needs to be a corrective because the cost competitiveness of renewable energy, and the risk of stranded energy assets, has not stopped governments heavily subsidising fossil fuels. During the pandemic, stimulus dollars have been dumped into the fossil-fuel sector regardless of its steady financial decline, staggering mounds of debt and falling job count. 

This is why my initiative and Global Energy Monitor, a non-profit group, are developing a global registry of fossil fuels, a publicly available database of all reserves in the ground and in production. This will allow governments, investors, researchers and civil society organisations, including the public, to assess the amount of embedded CO2 in coal, oil and gas projects globally. It will be a standalone tool and can provide a model for a potential UN-hosted registry.

With it, producer nations will have nowhere left to hide. It will help counter the absence of mechanisms in the UN’s climate change convention to restrain national beggar-thy-neighbour expansion of fossil-fuel production.

No country, community or company can go it alone. But governments can draw from the lessons of nuclear non-proliferation. First, they must stop adding to the problem; exploration and expansion into new reserves must end. This must be accompanied by “global disarmament” — using up stockpiles and ceasing production. Finally, access to renewable energy and low-carbon solutions must be developed in comprehensive and equitable transition plans.

The choice is between phasing out fossil fuels and fast-tracking low-carbon solutions, or locking-in economic, health and climate catastrophe. A fossil-fuel registry will help governments and international organisations plan for the low-carbon world ahead.

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.



Source link

Continue Reading

Markets

Hasty, imperfect ESG is not the path for business

Published

on

By


The writer is a global economist. Her book ‘How Boards Work’ will be published in May

Good environmental, social and governance practices take a company from financial shareholder maximisation to multiple stakeholder optimisation: society, community, employees. But if done poorly, not only does ESG miss its sustainability goals, it can make things worse and let down the very stakeholders it should help.

To be sure, the ESG agenda should be pursued with determination. But there are a number of reasons why it threatens to create bad outcomes. The agenda is putting companies on the defensive. From boardrooms, I have seen organisations worry about meeting the demands of environmental and social justice activists, leading to risk aversion in allocating capital. Yet innovation is the most important tool to address many of the challenges of climate change, inequality and social discord.

Pursued by $45tn of investments, using the broadest classification, ESG is weighed down by inconsistent, blurry metrics. Investors and lobbyists use different evaluation standards and goals, which focus on varied issues such as CO2 emissions and diversity. Metrics also depend on business models.

Without a clear, unified compass, companies that measure themselves against today’s standards risk seeming off base once a more consistent regulator-led direction emerges (for example, from worker audits, the COP26 summit and the Paris Club lender nations).

ESG is not without cost and the best hope for long-term success lies with business leaders’ ability to stay attuned to its impact and unintended consequences. For example, while the case for diversity is incontrovertible, efforts at inclusion should account for the possible casualties of positive discrimination.

Furthermore, despite ESG advocates setting a strong and singular direction for governance, organisations have to maintain their operations and value while managing assets and people in a world where cultural and ethical values are far from universal. While laudable, a heightened focus on ethics (such as human rights, environmental concerns, gender and racial parity, data privacy and worker advocacy) places additional stress on global companies.

It is often asked if advocates appreciate that ESG is largely viewed from the west’s narrow and wealthy economic perspective. To be truly sustainable, ESG demands global solutions to global problems. Proposals need to be scalable, exportable and palatable to emerging countries like India and China, or no effort will truly move the needle.

Much of the agenda is too rigid, requires aggressive timelines and lacks the spirit of innovation to achieve long-term societal progress. Stakeholders’ interests differ, so ESG solutions must be nuanced, balanced and trade off speed of implementation against the breadth and depth of change.

Business leaders are aware of the need for greater focus and prioritisation of ESG. We also understand that deadlines can provide important levers for senior managers to spur their organisations into action. After all, in the face of pressure for a solution to the global pandemic, vaccines were produced in months instead of the usual 10 years.

I live at the crossroads of these tensions every day. Raised in Africa, I have lived in energy poverty, and seen how it continues to impede living standards globally. As a board member of a global energy company, I have seen much investment in the energy transition. Yet from my role with a university endowment, I have also been under pressure to divest from energy corporations. 

Business leaders must solve ESG concerns in ways that do not set corporations on a path to failure in the long term. They must have the boldness to adopt a flexible, measured and experimental agenda for lasting change. In this sense, they must push back against the politically led narrative that wants imperfect ESG changes at any cost.



Source link

Continue Reading

Trending