“The Paris Climate Accord – United States withdraws…..”

The Paris Climate Accord – United States withdraws

The accord finalized in December 2015 and effective as of November 2016 has brought together the US and European Union, China, India and Brazil to pledge to slash fossil-fuel pollutions in order to ease the impact of global warming. The aim of the accord is to hold temperature increases below the 2 degrees celsius in order to avoid rising seas and superstorms.  Each nation who signed had set a goal to cut greenhouse gas emissions and pledged to review the goal every five years. Participation in the Paris Accord is on a voluntary basis and there are no penalties for failing to meet the agreement.  Academics gathered by the United Nations at the Intergovernmental Panel on Climate Change are concerned as the world is heading for extensive species extinctions, series crop damage and irreversible increases in sea levels.  The US is the second largest polluter besides China and hence has a role to play in mitigating rising temperatures. Scrapping the accord would pour billions of tons of carbon dioxide into the atmosphere and would speed up the warm up trend which is already taking place.  Furthermore, it would hamper a $100 billion a year stream of funds that industrial nations have pledged to persuade developing nations to cut back their own emissions. The US had also agreed to financially contribute towards helping poorer nations to invest in renewable energy.     On Thursday Trump announced the withdrawal of the US from the Paris agreement stated that he wanted to “renegotiate” a fairer deal that would not disadvantage the US business and workers which was a fundamental part of his run for presidency.  France, Germany and Italy put out a statement saying that the deal was “not renegotiable”.

Trump is back in the US

Way back in the US, President Donald Trump stuck to his traditional script in his first public appearance after returning from Europe and the Middle East.   He has to deal with a number of issues amongst which are a decision as to whether to withdraw from the Paris climate Accord, persistent rumours of a staff shakeup and reports about his son-in-law Kushner.  The latter carries the title of “senior adviser” and reports emerged that he set up a secret line of communication between the incoming administration and the Russian government, in order to discuss a resolution to the crisis in Syria.  Although President Trump has total confidence in him, the same view is not shared by everyone.  Trump’s trip outside the US has shown US allies the president’s approach to foreign policy.  German Chancellor Angela Merkel signaled in a conference in Berlin on Monday that the US and Europe are and will remain close partners, and she also added, “but we also know that we Europeans really must take our destiny into our own hands”.

Draghi’s speech at the quarterly European Parliament Hearing

According to European Central Bank President Mario Draghi, the euro area still needs expansive monetary stimulus to restore inflation even though the economy has been accelerating. Furthermore, while in Brussels, he stated that there is little urgency to start unwinding the Central bank balance sheet of EUR 2.3 trillion bond-purchase program at the next policy meeting on 8^th June.  In his opening statement Draghi said that “the economic upswing is becoming increasingly solid and continues to broaden across sectors and countries”.   He further stressed that “downside risks to the growth outlook are further diminishing”.  Although there has been higher performance in global equities the rally in the bonds gives an indication that traders are cautious.

Germany

As the biggest economy continued with its positive performance, unemployment fell to a new low level. The jobless rate fell from 5.8 percent to 5.7 percent according to Federal Labour Agency in Nuremberg. The German economy expanded in the first quarter by 0.6 percent as a result of strong domestic demand and firm global trade.  The Bundesbank is expecting this growth to continue in the coming months, strengthening employment and private spending.

UK

The UK manufacturing activity maintained its momentum in May and confidence climbed as strong demand increased orders. The IHS Markit Purchasing Managers Index in May was at 56.7 while in the previous month it stood at 57.3.  Manufacturing accounts for a small part of the economy and may not be enough to lift the overall growth which declined to 0.2 percent in quarter one.  Markit said growth is largely being driven by domestic demand and one important factor in the UK is the accelerating inflation which is hitting households.

China

Data on Wednesday showed that manufacturing in China expanded at a faster than expected pace this month. The manufacturing purchasing managers index (PMI) remained at 51.2 for a second straight month in May while non-manufacturing PMI rose to 54.5.  Figures over 50 indicate improving conditions.  While government’s growth target rate is at least 6.5 percent this year, economists forecast growth will meet or exceed this target.  Projections however point to a slowdown after the quarter one surprise acceleration to 6.9 percent.

Hong Kong Stocks

The Hang Seng Index is among the best performers in May advancing 4.3 percent. Rallies in technology and financial stocks lifted the Index. The Hong Kong benchmark stock index capped a fifth month of gains, with its longest run of monthly gains since 2013 due to improved earnings.

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