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Bassanese Bites: We're done-The Fed's dovish tilt fails to fire stocks.
March 26, 2019--Week in Review
Global equity markets nervously retreated on the back foot last week and bond yields dropped further-reflecting soft US and European manufacturing data, a surprisingly dovish turn by the Federal Reserve, and inversion of part of the US yield curve.
The Fed's latest set of "dot points" completely removed the two projected interest rate increases for this year-in a surprise for markets which had expected either no change or the removal of only one rate hike. While markets initially rejoiced, a nagging concern over "what the Fed might know" about the economy soon crept back into market thinking.
IMF Working Paper-The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy
March 26, 2019--Summary:
Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition for developing economies. Yet the success of the Asian Miracles with industrial policy stands as an uncomfortable story that many ignore or claim it cannot be replicated.
Using a theory and empirical evidence, we argue that one can learn more from miracles than failures. We suggest three key principles behind their success: (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability.
IMF Working Paper-Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries
March 25, 2019--Summary:
This paper contributes to the literature by looking at the possible relevance of the structure of the financial system-whether financial intermediation is performed through banks or markets-for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience.
With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates.
IEA-Global Energy & CO2 Status Report
The latest trends in energy and emissions in 2018
March 25, 2019--Global trends
Global energy consumption in 2018 increased at nearly twice the average rate of growth since 2010, driven by a robust global economy and higher heating and cooling needs in some parts of the world. Demand for all fuels increased, led by natural gas, even as solar and wind posted double digit growth.
Higher electricity demand was responsible for over half of the growth in energy needs. Energy efficiency saw lacklustre improvement. As a result of higher energy consumption, CO2 emissions rose 1.7% last year and hit a new record.
CO2 emissions
Driven by higher energy demand in 2018, global energy-related CO2 emissions rose 1.7% to a historic high of 33.1 Gt CO2. While emissions from all fossil fuels increased, the power sector accounted for nearly two-thirds of emissions growth. Coal use in power alone surpassed 10 Gt CO2, mostly in Asia. China, India, and the United States accounted for 85% of the net increase in emissions, while emissions declined for Germany, Japan, Mexico, France and the United Kingdom.
IMF Working Paper-Costs of Sovereign Defaults: Restructuring Strategies, Bank Distress and the Capital Inflow-Credit Channel
March 25, 2019--Summary:
Sovereign debt restructurings are associated with declines in GDP, investment, bank credit, and capital flows. The transmission channels and associated output and banking sector costs depend on whether the restructuring takes place preemptively, without missing payments to creditors, or whether it takes place after a default has occurred.
Post-default restructurings are associated with larger declines in bank credit, an increase in lending interest rates, and a higher likelihood of triggering a banking crisis than pre-emptive restructurings. Our local projection estimates show large declines in GDP, investment, and credit amplified by severe sudden stops and transmitted through a "capital inflow-credit channel".
World Economic Forum-World's Energy Transition in Doubt as Progress on Affordability, Sustainability Stalls
March 25, 2019--The world's transition to secure, affordable and sustainable energy has stagnated, with little or no progress achieved in the past five years
Across 115 economies, more people than ever before now have access to energy. However, this is offset by reduced affordability and almost no progress in making energy systems environmentally sustainable
The World Economic Forum's Fostering Effective Energy Transition report calls for urgent action on the part of policy-makers and business to safeguard energy development for future generations
The world's energy systems have become less affordable and are no more environmentally sustainable than they were five years ago. While access to energy has substantially improved, with less than one billion people now living without access to electricity, concerns over affordability and equity of energy transition are increasing. These are the findings of latest edition of the World Economic Forum's Fostering Effective Energy Transition report, which was published today.
view the Fostering Effective Energy Transition 2019 report
Basel Committee publishes follow-up reports on Basel III implementation assessments
March 25, 2019--The Basel Committee on Banking Supervision has published overviews of follow-up actions taken or planned by member jurisdictions as of end-2018 to address deviations from the Basel standards identified as part of the Committee's Regulatory Consistency Assessment Programme (RCAP).
The follow-up actions pertain to assessments of risk-based capital and Liquidity Coverage Ratio (LCR) regulations that were completed and published as of end-2017.
Commodity Trading Goes Back To The Future
March 25, 2019--As trading margins continue to decline, proprietary intelligence is once again determining which traders will thrive.
The combination of unprecedented political uncertainty, trade wars, and rapidly evolving technologies is making commodity markets almost as unpredictable as they were during the financial crisis.
But the chances of repeating the industry's most profitable year to date are remote.
Hedge Fund Launches Hit 18-Year Low
March 22, 2019--Blame declining investor risk tolerance for fewer fund launches in 2018, according to Hedge Fund Research.
New hedge fund launches hit an 18-year low during 2018, new data from data provider Hedge Fund Research shows.
But 2018 was not all bad for the industry: fund liquidations also declined during the year, hitting their lowest point since 2007, according to the report released by HFR on Friday.
Global IPO momentum slows but Q2 2019 is set to rebound
March 21, 2019--Global IPO activity falls following ongoing geopolitical and trade uncertainty
Technology, health care and industrials were the most active sectors in Q1 2019
Rebounding IPO activity will bloom in Q2 2019 once fog of uncertainty has lifted
Despite positive performance of main stock indices and a decrease of volatility in many markets, ongoing geopolitical uncertainties and trade issues continue to dampen investor enthusiasm, resulting in the number of IPOs in the first three months of 2019 (YTD 2019) falling to 199 globally and US$13.1b in proceeds. This is a 41% decrease in deals and a 74% decrease in proceeds from YTD 2018. The technology, health care and industrials sectors were the most prolific producers of IPOs globally in YTD 2019, together accounting for 101 IPOs (51% of global IPO by deal numbers) and raising US$5.4b altogether (42% of global proceeds).