COVID
Health leaders have urged the government to bring back some covid restrictions to help slow the pace of infection and lessen the risk that the NHS will be overwhelmed this winter. The ‘plan B’ calls for the reintroduction of mandatory face masks in crowded and enclosed spaces and if that doesn’t curb the R number then the reintroduction of working from home and bringing in vaccine passports should also be introduced. Daily deaths are at their highest since March, though hospitalisations are on a much shallower curve, though also heading up slowly towards the 1,000 per day. The government have said that they are monitoring the data closely, but they have no plans to introduce restrictions yet.
Net Zero Plans
The government laid out its net zero strategy yesterday, with the main headline grabber that the government will offer £5,00 grants to help people switch to heat pumps from gas or oil burning boilers – though the money they’ve allocated to this will only be enough for about 90,000 homes, the hope is that the big upfront funding brings down the cost of the technology, which in turn makes it a more generally compelling proposition without subsidies. They’re also going to continue to spend on incentives for consumers to switch to electric vehicles, with the vision that by 2035 all cars must be fully zero emissions capable. They’ve also got some big ideas on energy, wanting to get at least one new nuclear power station in play and also spending £120m on R&D within this space, in the hope that more can be made out of it. Hydrogen ambitions are in there too, with the hope of having 5GW of hydrogen generating capacity by 2030. There are a host of other initiatives included in the plan, but there are also some pretty glaring omissions too, such as home insulation, no targets around meat and dairy farming and consumption and that they’re still issuing licenses for fossil fuel exploration with no plans to phase this out.
And the Issue… Fossil Fuels
The latter point is an issue, as a UN report has said that the amount of fossil fuels the world is going to extract and consume over the next twenty years is about double the amount of what we could consumer and stay within the 2015 Paris climate accord’s 1.5 degree warming target. The report says that CO2 output needs to reduce to about 17 gigatons per annum by 2030 if we’re to be on track to stay at 1.5 degrees, down from the current 33 gigatons today. However, the plans and projections on fossil fuel production made by countries combine to forecast CO2 output increasing to more than 35 gigatons. Quite incredibly, government investment in the fossil fuels sector since the start of the pandemic has been more than $300bn, which is more than they’ve invested in renewables!
There could be a world where fossil fuels don’t exist if Mark Zuckerberg gets his way. It will be a virtual world, or metaverse, where people will log on/plug in and live their lives within a virtual reality that is presumably more appealing that risking going out into the real world. The project sounds farfetched but is being backed up by 10,000 developers being hired to build the Zuckerverse and is likely to become (virtually)real over the next ten years. As an aside, it’s being reported that Facebook are looking at changing their name to reflect this future – and presumably hope that they can shake off some of the negative PR that is synonymous with the current one.
Supply Chain Problems
In the real world: Supply chain problems could be here until 2023, according to numerous business leaders. MPs were briefed yesterday by industry body leaders, with the CEO of the Food and Drink Federation telling MP’s “six months ago our businesses all thought this [labour shortages, price increases] was transitory, now every business I know expects this to last into 2023 and 2024. Every single one.” The CEO of Manufacturing body Make UK told MP’s “what we have seen in the last quarter is companies starting to pass these costs on… which does imply that inflation is now more or less baked in”. He also warned that in the next six months we’re going to see businesses failing as a result of the squeeze, which he in turn warned would hit the government’s levelling up agenda.
The Markets
Despite all the risks, markets seem reasonably risk on and are being buoyed by reasonable numbers coming out of US companies throughout the current ‘earnings season’. Darling of the markets, Tesla, is set to announce today and analysts are expecting big things for the company, despite chip shortages and supply chain woes that are hurting the sector – VW even praised Tesla for being able to be so nimble because they use their own software, which allowed them to reprogramme it to use different (and readily available) chipsets within three weeks, something that traditional manufacturers could only dream of.
Currencies
In currencies, Brazil’s central bank was forced to intervene in the FX market yesterday as the Real hit six-month lows over fears the government is going to open its chequebook with a new welfare programme, ahead of next years’ election, in a bid to make up for president Bolsonaro’s abysmally poor public opinion. The increased public spending would add pressure to inflation, which is currently being reigned in with interest rates that have risen by more than 4% already this year, with another percent expected to be added next month – no wonder investors are quite happy to short the currency.
Looking at Today
This morning we’ve had UK inflation data for September, which showed a 0.1% dip from August – though this is being treated as entirely temporary and the market has bid Sterling higher on the reinforcement that the central bank will have to act and quickly. Later today, as well as Tesla numbers, we’ll get European and Canadian inflation numbers, as well as more oil inventory data, which is likely to move that market.
Have a great day.
