“Hurricane Irma…..”

Hurricane Irma

After tearing through a chain of Caribbean islands hurricane Irma was on track to wreak havoc in Florida last week.  Leaving at least 21 people dead and thousands homeless across the Caribbean the damage bill forecast is as much as $200 billion.   Mandatory evacuations were issued across Florida with around 650,000 people fleeing Miami-Dade as part of the largest evacuation the county has experienced.  Irma is one of the three hurricanes that hit the Atlantic Basin, with Jose and Katia.   The last time there were three active hurricanes in the Atlantic was seven years ago according to Philip Klotzbach a meteorologist at Colorado State University.   Katia loomed off the coastline of Mexico as a Category 1 storm, Jose in the middle of the Atlantic and Category 5 Irma hit South Florida.  Investors are bracing for the financial impact of the storms that have affected the second and third most populous states in the US and forced retailers to shut stores.  The surge in spending before the storm in Florida was mostly towards gas, groceries and building materials.

Mexico’s Earthquake

A huge earthquake has hit Mexico’s southern state city with an 8.1 magnitude and killed 61 people, shaking buildings in the capital and triggering a tsunami warning.  Mexico’s president Enrique Pena Nieto met with residents amid the debris while touring the city.  He declared three days of national mourning and vowed that the government would help rebuild and called for solidarity.

China and Bitcoin

China is planning to ban trading of the bitcoin and other virtual currencies on the domestic exchanges.  The country accounts for about 23 percent of bitcoin trades and is home to many of the world’s biggest bitcoin miners. Bitcoin has climbed about 600 percent in dollar terms over the past year raising concerns of a bubble.

China and Inflation

China’s producer – price inflation has accelerated to 6.3 percent in August from a year earlier.  The authorities in China have been closing mills and smelters to cut excessive industrial capacity and help reduce pollution.  This has in turn strained production of metals such as aluminium and steel.  Metal prices globally have soared last month as the demand from China remained strong from robust investment and construction amid government reforms.    China is embarking on an environmental campaign. Inspections that had started in Hebei, which surrounds Beijing and is the biggest steel-producing province have been extended to more cities and provinces resulting in the closure of some businesses and factories. This is increasing producer inflation.  Released data on saturday showed a pickup in the consumer price index which has exceeded estimates with a 1.8 percent increase after rising 1.4 percent in July.  In a statement the National Bureau of Statistics said that prices rose from the prior month due to increases for eggs and vegetables amid hot weather and rain.

North Korea

North Korea has warned of retaliation if the United Nations Security Council approves a US proposal for harsher sanctions after Pyongyang conducted its sixth and most powerful nuclear test.  The warning came as the US called for a vote on Monday on a draft resolution to tighten sanctions on North Korea, which has repeatedly tested bombs and missles.  The US, South Korea and Japan want the Security Council to implement stronger measures against North Korea, amongst which are bans on oil imports, exports of textiles and the freezing the assets of Kim Jong Un the North Korean leader.  The resolution drafted by the US is said to drop a proposed oil embargo and instead cap shipments of refined petroleum products at 2 million barrels a year and limit crude oil exports to North Korea to current levels according to reports from Reuters.  It is unclear whether the proposal will pass.   China and Russia have expressed scepticism that tough sanctions will stop North Korea’s nuclear push and have pushed for peace talks.

UK – Inflation

Inflation in the UK is again on the rise accelerating more than it was forecasted in August due to the biggest increase in clothes prices in almost thirty years.  Furthermore since the referendum the pound has fallen by 11 percent against the dollar increasing the cost of imports and the prices of household items.  The annual inflation rate has never been higher since 2012 and has jumped to 2.9 percent from 2.6 percent in July.  This could put pressure on the Bank of England policy makers who have to deal with a price growth higher than the 2 percent target.  On Tuesday data from the Office for National Statistics showed that core inflation has accelerated more than economists expected last month reaching the most since 2011.    The pickup in the prices is affecting consumers and is dragging the economy.  The economy expanded just 0.3 percent in the second quarter leaving growth the slowest among the G7 nations.

UK – Employment and Wages

Basic wages rose an annual 2.1 percent in the three months through July, figures showed on Wednesday.  Pay fell 0.4 percent when adjusted for inflation, which is now running just shy of 3 percent.  According to Bank of England Governor Mark Carney “an element of Brexit” uncertainty is preventing firms from awarding bigger wage increases.  Other factors are poor productivity and companies suppressing pay to offset rising import costs.  Public sector workers are being hit by pressure on real incomes who have had pay increases capped at 1 percent since 2013.  This followed a two year freeze as the government tried to bring down the budget deficit.  This week Prime Minister Theresa May said that the government will relax the cap for police and prison officers but Frances O’Grady who is the General Secretary of Trades Union Congress replied by asking for a pay rise across the board for the 5 million public sector British workers. Furthermore, ONS data showed that the jobless rate fell to 4.3 percent in the latest three months which is the lowest since 1975 and which is below the Bank of England’s equilibrium rate.

OPEC

OPEC and other oil producers including Russia, Mexico and Kazakhstan pledged to reduce output by about 1.8 million barrels a day to eliminate a global surplus that was effecting prices.   The deal which was reached in 2016 was initially for a six month period.  It was later extended for another nine months up to March 2018.  Despite these efforts, oil prices have struggled to break above the $ 50 a barrel after being weighed down by the US Shale production.  Now OPEC and its allies are discussing ahead of a ministerial meeting which is scheduled for late November in Vienna to extend by more than three months in order to boost prices.  The duration depends on factors amongst which are the level of compliance by OPEC and its allies, oil output in Libya and Nigeria, US shale supply and global demand of oil.  With the news of considering an extension beyond March 2018 the price of oil has edged higher.

Oil

According to the International Energy Agency, global oil demand will climb this year the most since 2015 amid stronger than expected consumption in Europe and the US.  The agency increased its estimate for demand growth in 2017 by 100,000 barrels a day to 1.6 million a day.  It also said that OPEC supplies have fallen for the first time in five months and the inventory of refined fuels in developed nations are moving towards average levels.

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