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"It's a dress rehearsal for the climate transition": What does the oil slump mean for green investment?
May 1, 2020--What's the impact of the fall on investment themes, carbon prices and stewardship?
When the United States Oil Fund began offloading its short-term contracts earlier this week, it sent another shock to an already devastated market.
Having just recovered from a tumble into negative prices the week before, US oil benchmark the West Texas Intermediate plunged 27.7% to $12.25 on Monday.
Brent Crude fell below $20 a barrel. Records were broken, share prices nosedived and yet more oil companies filed for bankruptcy.
Things have rebounded slightly in recent days, but-in a sign of just how profound the damage is-Shell yesterday stunned the stock markets by slashing its dividend payments for the first time since the Second World War.
ETFs have proved critics wrong during the crisis
April 30, 2020--Popular funds have survived a period of intense market stress
In the decade since a 2008 crisis exacerbated by newfangled credit derivatives, exchange traded funds have often been flagged as the next area that would demonstrate the destructive power of financial innovation gone wrong.
Many pointed to the potential for a liquidity mismatch in funds that offer equity-like ease of price discovery but may contain bundles of illiquid assets such as junk bonds. However, when placed under enormous strain over the past few months, ETFs have mostly managed to prove their critics wrong.
Basel Committee publishes stocktake report on climate-related financial risk initiatives
April 30, 2020--First report by high-level Task Force on Climate-related Financial Risks.
Most BCBS members are undertaking regulatory and supervisory initiatives on climate-related financial risks.
Future work includes analytical reports and developing effective supervisory practices.
The Basel Committee on Banking Supervision is today publishing a stocktake report on its members' existing regulatory and supervisory initiatives on climate-related financial risks. The report was prepared by the Committee's high-level Task Force on Climate-related Financial Risks (TFCR). The TFCR is co-chaired by Frank Elderson (Executive Director of Supervision at the Netherlands Bank) and Kevin Stiroh (Executive Vice President of the Federal Reserve Bank of New York and head of the Supervision Group).
World Gold Council-Gold Demand Trends Q1 2020 report-Q1 gold demand marginally firmer at 1,083.8t
April 30, 2020--The global COVID-19 pandemic fuelled safe-haven investment demand for gold, offsetting marked weakness in consumer-focused sectors of the market.
Key highlights
Gold ETFs saw the highest quarterly inflows for four years amid global uncertainty and financial market volatility.
Holdings of these products reached a record high of 3,185t by the end of Q1.
The pandemic slashed jewellery demand as governments across the globe imposed lockdown measures.
Demand fell to its lowest on record, led by a 65% decline in China-the largest jewellery consumer and the first market to succumb to the outbreak.
Bassanese Bites: Oil slick
April 27, 2020--Global Markets
Not much has been able to roil the US stockmarket of late, but last week's negative print on the front month WTI oil futures contract finally did the trick. The S&P 500 dropped almost 5% over two days but then staged a feisty comeback to end the week down only 1.3% - helped by an equally admirable fight back in oil prices.
US bonds and gold benefited from the risk-off shift.
Why did oil prices go negative? Because the U.S., in particular, is awash in oil, and those left holding the nearest-term futures contract at expiration-and therefore required to take delivery of physical oil-would face very expensive US storage costs. Until the supply glut is removed, that means there's a risk the current nearest-term June contract price could also go negative as it approaches expiry. [By the way, to reduce this risk, the BetaShares OOO ETF-which ordinarily would have exposure to the nearest-term WTI futures contract, has shifted its exposure to the longer-dated September contract for the time being.]
Managing COVID-19: How the pandemic disrupts global value chains
April 27, 2020--COVID-19 has struck at the core of global value chain hub regions, including China, Europe and the US.
Industrial production in China has fallen by 13.5% in January and February combined, compared with the previous year.
The pandemic has severe implications for international production networks and may leave its legacy for years to come.
Over the past four decades, much of manufacturing production world-wide has been organized in what has become known as global value chains (GVCs). Raw materials and intermediate goods are shipped around the globe multiple times and then assembled in yet another location. The final output is re-exported to final consumers located in both developed and developing markets. For many goods, China is at the heart of such GVCs-for example, as a primary producer of high-value products and components, as a large customer of global commodities and industrial products, and as a major consumer marketplace.
World Bank-A Shock Like No Other: Coronavirus Rattles Commodity Markets
April 23, 2020--STORY HIGHLIGHTS
The coronavirus (COVID-19) pandemic has impacted both demand for and supply of commodities: direct effects from shutdowns and disruptions to supply chains, indirect effects as economic growth stalls. Effects have already been dramatic, particularly for commodities related to transportation.
Oil prices have plunged and demand is expected to fall by an unprecedented amount in 2020.
While most food markets are well supplied, concerns about food security have risen as countries announce trade restrictions and engage in excess buying.
view the World Bank Commodity Markets Outlook April 2020 Implications of COVID-19 for Commodities
Investors with US$5 trillion call on governments to institute mandatory human rights due diligence measures for companies
April 21, 2020--Legal & General Investment Management, Federated Hermes International, Aberdeen Standard Investments, Aviva Investors, BMO Global Asset Management, Robeco, and Achmea Investment Management among list of signatories
A group of 105 international investors representing US$5 trillion in assets under management have joined forces to call on governments to put in place regulatory measures requiring companies to conduct ongoing risk management regarding risks to people associated with their business activities.
Known as "human rights due diligence," this process involves a company assessing and addressing harms to people in connection with its business, and publicly disclosing these efforts.
All that drama about fixed-income ETFs was overplayed
April 21, 2020--Exchange traded funds holding bonds played a key role in easing March turmoil
Everyone loves a crisis that confirms biases. And in the case of exchange traded funds, this has been a good period for their legions of detractors.
But what if ETFs actually eased, rather than exacerbated, the market mayhem that broke out last month?
Many investors have for years argued that ETFs distort markets and fuel bubbles. Much of that consternation was overblown- bubbles existed long before the index fund was invented.
Sub-zero oil prices threaten big losses for ETF investors
April 20, 2020--Those betting on crude recovery using exchange traded funds face 'high risks'
Investors who have flooded into the oil markets to bet on a rebound in crude prices are risking big losses, say commodity specialists, as the exchange traded funds they use are swept up in the current market turmoil.
The United States Oil fund, the largest oil ETF known as USO, saw inflows of about $1.5bn last week, as US crude prices hit their lowest levels since the early 2000s on plunging demand.