Here are this mornings headlines:
The Bank of England
The Bank of England should stop the final £50bn of quantitative easing that it has planned and give a clear signal that it is taking inflation seriously, according to the Times’ shadow MPC. The Bank are meeting tomorrow to discuss monetary policy and it is likely that there could well be some dissent in the ranks, with a couple of policy makers probably starting to er on the side of caution. Since the MPC’s last sit down at the end of June, we’ve seen a full social unlocking, with accompanying economic growth and inflation still knocking on the door of multi-year highs (however transitory they profess it to be). With the chances of further lockdowns now seeming more remote, the argument to keep conditions ultra-supportive does seem to have diminished and though spending an extra £50bn on buying government bonds would keep the Treasury happy because it would keep a lid on borrowing costs, it probably doesn’t do much good elsewhere and just leaves the bank with a bigger hole to dig themselves out of when the Bank does try to unwind their balance sheet further down the line.
The world has passed 200 million Covid cases in the last 24 hours, with the official death toll at 4.25 million. Both of those figures are much lower than the reality though and studies that have compared and collated excess mortality rates from more than 100 countries suggest that the actual number of deaths could be several times higher than this. The UK is now about to rollout the vaccine to 16 and 17 year olds in a bid to stop a back to school surge in cases here this autumn. They’ve got enough doses to do this because the take up in the 18-25 year old bracket has been slower than hoped which has actually led to the NHS sitting on 170,000 doses of the Moderna jab that are a couple of weeks away from their expiry date. Only two weeks ago the JCVI were talking about not going down this path, despite Europe and America vaccinating those aged 12 and above, but the change in tone seems sensible.
Gulf of Oman
There’s been a strange turn of events in the Gulf of Oman overnight, with a ship that was reported as having been hijacked yesterday evening is now no longer under threat. The British Navy have said that the group of armed men that boarded the ship have now left it, but have not elaborated further.
Chinese authorities sent shivers through the share price of gaming companies yesterday as they likened online gaming to “spiritual opium worth hundreds of billions”. Chinese tech giant Tencent, who derive about a third of their revenues from online gaming, saw their share price shed more than 10% on the news and have subsequently announced greater restrictions on the duration that minors can play games on their platforms. This is the latest in a string of state interventions in technology sectors, where the government sees long term risks to their overall plans and is intervening now whilst no company is too big to be above their influence. As the FT puts it “in recent weeks, Beijing has called for a new overseas listing regime, imposed data security reviews on companies looking to sell shares abroad and outlawed the country’s $100bn private tutoring industry from making profits.”
Rio Tinto- Kryptonite Extraction
There’s an interesting story on the future of mining and Rio Tinto’s $2.4bn planned investment in a Serbian mine that extracts kryptonite (that’s a true story – as the chemical formula of what they’re extracting matches that of the mineral that was the only thing that could stop Superman!) annoyingly they’ve named the mineral Jadarite owing to it being discovered in Serbia’s Jadar valley, but this is potentially Europe’s answer to the shortcomings and production concentration of lithium, the major component in electric vehicle batteries. The mine could produce enough lithium to make more than a million batteries a year when it’s fully up to speed, but it’s facing local opposition and environmental concerns ahead of full-scale construction getting underway. This produces a bit of an ethical dilemma for Europe, who would love to get this much supply chain certainty so close to home, but in doing so will have to ensure it meets its green credentials.
It’s a year today since the massive port explosion in Beirut drove Lebanon from a bad situation to an even worse one. The blast, caused by 2,750 tonnes of poorly stored ammonium nitrate, destroyed much of the city centre, killed more than 200 people and injured thousands, and in the year that has passed the situation there has seen the economy collapse, the currency fall by 90% and inflation top 100% (222% for food), with around half of the population now living below the poverty line. The investigation into the cause of the blast is being stonewalled by politicians and judges hiding behind their own closed ranks to protect themselves and little more is known now than it was a year ago.
Looking Ahead Today
Markets will get a decent clip of data, with UK and European Services PMIS’s and European retail sales all coming out in quick succession, followed by this afternoon’s US ADP employment numbers and service sector data. Markets have been pretty range bound so far this week, but this data could be enough to move things out of those ranges if it comes in way outside of expectations and the news flow hits quiet trading desks.
Have a great day