UK COVID Regulations- Over the weekend, reports emerged that six in every ten members of Cabinet would support a reduced five-day isolation period in order to address the UK’s increasingly problematic workforce shortages which are causing issues for the both the private and public sector. There are also murmurings from within Westminster that the UK’s prevailing coronavirus policy will move from ‘pandemic to endemic’. In other words, we – the individual, nation and presumably the global community will learn to live with coronavirus rather than attempt to stamp it out completely. Of course, such a policy would not absolve the fact that covid’s global presence would still make it a pandemic.
ECB- Officials within the ECB are also indicating that the continent’s pivot to green energy will, in the short and medium term, induce a rise in cost for energy which will add inflationary pressures. Isabel Schnabel, the German economist currently serving as an executive board member for the ECB maintains that “The green transition poses upside risks to medium-term inflation”. Germany’s denuclearisation in the decade following Fukushima and efforts to decarbonise energy sources has placed additional energy supply side issues on the country. With the ongoing controversy and wider geopolitical turmoil of Nord Stream 2, gas prices have skyrocketed in Germany. Hence, on Saturday the SDP’s general secretary, Kevin Kuehnert renewed calls for Nord Stream’s authorisation – which is indicative of the wider party’s views on the project. Nevertheless, Germany’s energy regulator, The Bundesnetzagentur are currently reviewing the pipeline, and this bureaucratic undertaking is expected to last for at least several more months.
Russia & US- Russia and the US are talking in a bid to get Russia to actively de-escalate it’s build-up of troops along the Ukrainian border. The US has indicated the sort of sanctions it would impose, which would be far more extreme than just hitting individuals with wealth freezes and travel bans – they would look to potentially bar the country from dollar settlements and ban the import of any products with any US components within them. These actions would be incredibly damaging to Russia but may in turn harm European nations who would fall fowl of such prohibitions and in turn could be open to punishment as a result.
Gulf Cooperation Council (GCC)- Sticking with energy fears, China is to host a five-day summit of the Gulf Cooperation Council (GCC). Top of the list for issues that China will want to consult these oil-rich gulf states on is issues over potential oil shortages in the wake of Kazakhstan’s worsening situation. With China and Kazakhstan sharing a border, the former is a large importer of the latter’s oil output with Kazakhstan churning out some 1.6 million b/d of production (or around 2% of daily global consumption), and thus is increasingly concerned over the stability of this source. For example, over the weekend Chevron were reporting that they had to limit production in its Tengiz oilfields owing to Kazakh protests there. However, the Gulf Cooperation Council (which consists of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) will be keen to address Beijing’s increasingly close relationship with Tehran and Iran’s oil. This follows the GCC’s being unsettled when in March last year Beijing announced a $400Bn deal, wherein China agreed to invest $400 billion in Iran over 25 years in exchange for a steady and reliable oil supply to quench China’s insatiable thirst for energy.
China- Nevertheless, it is worth considering how the potential slowing down of China’s growth – particularly in its construction space – may affect the CCP’s wider energy policy. For example, this morning we learnt that the Chinese developer Shimao is putting all of its property projects on sale in an attempt to raise cash to meet nearly ¥35bn yuan worth of outstanding asset-backed securities. Shimao’s situation further raises concerns over whether Evergrande’s ongoing troubles will cause a domino effect in the Chinese property market.
Looking Ahead- Today is light on primary economic data – as is this week. However this morning will see unemployment figures out of the Eurozone where the market is expecting a slight decrease from 7.3% to 7.2% and on Wednesday we have the all important US CPI figures.
Have a great day