Archive for Economics & Fundamentals

New Zealand companies lag behind others in their reporting on climate change, and that’s a risk to their reputation

By Jagadish Thaker, Massey University

New Zealand’s top 30 corporations do a poor job reporting on climate change compared with similar Australian and Fortune Global 500 companies, according to our research.

The fact that most big businesses in New Zealand provide limited or no information on climate change was one of the drivers for a proposed policy to introduce mandatory reporting of climate risk across the financial system.

The policy’s focus on large financial institutions will have knock-on effects on the private business sector as banks and insurers will require companies to assess their own climate risk and improve reporting.

This will create a more accurate, consistent and transparent climate change reporting infrastructure.

Corporations ignore climate change

Top businesses in New Zealand, Australia and those in the Fortune Global 500 group generally don’t report well on climate change. Our study shows a minority report on observed or future patterns of greenhouse gas emissions (17%), business greenhouse gas contributions (25%) or business responsibility to respond to climate change (32%) and whether their emission reduction targets are aligned with science (14%).

We studied New Zealand’s top 30 corporations — including Fonterra, Air New Zealand, The Warehouse, Fletcher Building — and found they use key terms such as climate change, carbon, greenhouse gas and global warming 13 times on average, compared with an average of 48 times by Australian and Fortune Global 500 companies. The low frequency is an indication that climate change is not a priority for New Zealand businesses.

A previous study also shows only 5–16% of the 200 largest corporations in New Zealand report climate risks, emission-reduction targets or climate-related initiatives in their annual reports or financial statements.

This suggests a gap between the scientific evidence and business planning and a lack of strategic alignment between corporations’ pledges and performance.

One of the most important factors that shapes corporate action on climate change is regulatory uncertainty. Chief executives who want to introduce measures to reduce emissions are discouraged because their efforts are not rewarded internally or by external stakeholders.

What’s in it for businesses

Last month, New Zealand’s first national climate change risk assessment identified ten areas that need urgent action.

The risk assessment provides an overview of how New Zealand may be affected by climate change hazards. The three risk areas most significant to the business sector are:

  • risks to the financial system from instability caused by extreme weather events and ongoing, gradual changes
  • risks to governments from economic costs associated with lost productivity, disaster relief expenditure and unfunded contingent liabilities
  • risks of maladaptation due to practices, processes and tools that do not account for uncertainty and change over long time frames.

We rightly focus on physical and transitional risks associated with climate change for businesses, but reputational risks are equally important.

Consumer activism on climate change is on the rise, particularly among a new generation of consumers and investors.

Litigation risks associated with inaction are likely to become more prominent in the future.

Public support for climate action

Our recent national survey shows most New Zealanders support a green COVID-19 economic recovery. More than 70% agree industries receiving substantial emergency financial assistance should be required to lower their carbon emissions.

More than half of New Zealanders say they are likely to shift to more environmentally friendly behaviours in the next 12 months, even if it costs more or is inconvenient. A majority also say they are confident people like them, working together, can affect business and government action on climate change.

Another survey conducted by the IAG insurance company shows most New Zealanders want businesses to talk about risks climate change poses to their business and customers. Many believe corporations are responsible for climate action.

Only ten out of 90 top corporations we analysed reported on the scientific consensus about climate change. Of the New Zealand corporations, only 3% did so, compared to 13% of Australian companies and 17% of those among the Fortune Global 500.

This lack of acknowledgement is a missed opportunity to instil public confidence, manage stakeholder expectations and institutionalise corporate social responsibility.

Communicating the fact that experts agree on climate change increases public support for mitigation policies. Businesses can reinforce this message to increase consumer support for ambitious, even costly, climate actions.

Reporting on climate risks is important but not sufficient. Traditionally, businesses have highlighted climate risks more than their responsibilities, thereby portraying themselves as victims fighting to protect the economy.

Between 1990 and 2018, New Zealand’s net emissions increased by 57%. The Zero Carbon Act aims to reduce net emissions from all greenhouse gases to zero by 2050, except for methane from animals, which it aims to reduce by 24-47% (below 2017 levels).

Communication is a commitment to act. New Zealand corporations have a long road ahead to match the “clean” image of the country with their own communication on climate change.The Conversation

About the Author:

Jagadish Thaker, Senior Lecturer, School of Communication, Journalism and Marketing, Massey University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Pelosi Assembles Multi-Trillion Stimulus Plan

By Orbex

Renewed Stimulus Talks Spurs on Stocks

The US index hinted at exhaustion at it closed 0.10% lower yesterday, after gaining 2.4% over the month.

The 7-week high led to a pullback as US jobless claims were disappointing. Claims crept higher as the pace of the economic rebound showed signs of stagnating.

US stocks reacted positively to news of efforts to enact further stimulus in Washington. This led to indices closing higher on Thursday.

Apple, Amazon, Facebook and Tesla all managed gains as the session came to a close.

Democrats in the House of Representatives are working on a $2.2 trillion coronavirus stimulus package that could be voted on next week.

The Euro Turns Positive but for How Long?

The euro closed 0.08% higher yesterday, as it managed to turn around an unpleasant week against the dollar.

This was despite PMI figures signaling a stalling economy as the rebound from COVID-19 fades.

However, Germany and France, the eurozone’s two biggest economies, saw manufacturing rise in September.

As we move into the winter months, will COVID bite back against the frail economy?

New UK Job Scheme Cannot Save Every Business

The pound was able to claw back a bit of ground to end a 4-day decline against the dollar.

The GBPUSD pair ended 0.21% higher after the UK chancellor announced his post-furlough plan. Rishi Sunak stated that the scheme would benefit large numbers, but warned the government can’t save every job.

However, employers have spoken out against the new measures, saying that it is unviable for all businesses.

Fears of mass unemployment were heightened for when the job support scheme comes into place in November.

Geo-Politics Look to Spur Gold Back to $1900

Gold took a breather on Thursday, closing 0.21% higher as it attempts to regain the $1900 handle.

After dropping to a 2-month low this week, the shift in risk sentiment could spur the yellow metal as we move closer to the presidential elections.

Oil Bounces Off Weakened Demand Headlines

WTI closed 1.80% higher as it once again closed above the $40 handle.

The recent announcement of Libya’s oil production has seen three ports opening for shipping crude. This could lead to an oversupply which could see oil prices turn lower in the long term.

By Orbex

Egypt cuts rate 2nd time in 2020, inflation below target


Egypt’s central bank cut its key interest rates for the second time this year, saying recent data showed inflation expectations were declining so a reduction in the policy rate would support economic activity while still remaining consistent with achieving price stability.

     The Central Bank of Egypt (CBE) cut its overnight deposit rate, its overnight lending rate and the rate on its main operation by 50 basis points each to 8.75 percent, 9.75 percent and 9.25 percent, respectively.
     The discount rate was cut 50 basis points to 9.25 percent.
     It is CBE’s second rate cut this year after a 300 basis-point cut at an unscheduled monetary policy meeting on March 16 with the result that rates have been cut by a total of 350 basis points this year.
     Since February 2018, when CBE began easing its monetary policy stance in response to lower inflationary pressures, key interest rates have been cut by a total of 10 percentage points.
     Egypt’s inflation rate dropped to 3.4 percent in August, the second lowest rate seen in almost 14 years after October 2019 and down from 4.2 percent in July, with CBE saying this continues to reflect “muted” inflationary pressures.
     This month annual core inflation is expected to be affected by unfavorable base effects due to the change in the consumer price index but CBE confirmed it still it expects average annual inflation to hover around the lower bound of its inflation target of 9 percent, plus/minus 3 percentage points in the fourth quarter of this year.
     Preliminary data shows that Egypt’s economy expanded 3.5 percent in the 2019/20 fiscal year, which ended June 30, down from 5.6 percent in the previous year while the unemployment rate jumped to 9.6 percent in the second calendar quarter from 7.7 percent in the first quarter due to the impact of COVID-19 on the economy.
     “However, the stability of some leading indicators in August and July after signs of improvement in June point to a gradual recovery in economic activity,” CBE said.
      The Central Bank of Egypt issued the following statement:

“The Monetary Policy Committee (MPC) decided to cut the Central Bank of Egypt’s (CBE) overnight deposit rate, overnight lending rate, and the rate of the main operation by 50 basis points to 8.75 percent, 9.75 percent, and 9.25 percent, respectively. The discount rate was also cut by 50 basis points to 9.25 percent.

Annual headline urban inflation declined to 3.4 percent in August from 4.2 percent in July 2020, the second lowest rate recorded in almost 14 years, after October 2019’s figure. Annual headline inflation continued to reflect muted inflationary pressures registering below 6 percent since February 2020. The decline in annual headline urban inflation was driven by lower annual contribution of food items, which more than offset slightly higher annual contribution of non- food items. This came as prices of fresh vegetables came against their seasonal pattern for the second consecutive month. Hence, monthly headline inflation continued to reflect lower food prices and higher nonfood prices for the fourth consecutive month. In the meantime, annual core inflation rate recorded 0.8 percent in August 2020, compared to 0.7 percent in July 2020. In September 2020, annual core inflation is expected to be affected by unfavorable base effect, given the release of the 10th CPI series as well as its linking methodology with the 9th CPI series starting with September 2019 data.

Preliminary figures announced recently show that real GDP growth for FY19/20 recorded 3.5 percent, down from 5.6 percent in the previous fiscal year. Meanwhile, the unemployment rate recorded 9.6 percent in 2020 Q2 up from 7.7 percent in 2020 Q1. These developments reflect COVID-19’s impact on the real economy. However, the stability of some leading indicators in August and July after signs of improvement in June point to a gradual recovery in economic activity.

Globally, economic activity remained subdued despite some recovery, international oil prices broadly stabilized, and global financial conditions continued to improve, supported mainly by policy-measures despite the ongoing uncertainty.

As incoming data continues to confirm the moderation of inflation expectations, the reduction of policy rates in today’s MPC meeting provides appropriate support to economic activity, while remaining consistent with achieving price stability over the medium-term. In 2020 Q4, average annual headline inflation is expected to hover around the lower band of the inflation target 9 percent (±3 percentage points).

The MPC closely monitors all economic developments and will not hesitate to utilize all available tools to support the recovery of economic activity, within its price stability mandate.”

Mixed market mood continues

By Lukman Otunuga, Research Analyst, ForexTime

European stocks have hit three-month lows as worries about the prolonged economic damage from coronavirus will not go away, while US markets are volatile, with the Nasdaq on course for its worst month since March. The tech-heavy index touched official ‘correction’ territory just after the open, but this comes after a rampant 65% gain from April to the August highs. It certainly seems like markets are working it out now that fiscal action in the US will be limited to damage control rather than any significant spending package if it comes before the Presidential elections.

One asset which is liking all this uncertainty and disappointment from a Fed waving the white flag in the last few days, is the Dollar. The greenback has added to its gains through the week as it sits on track for its strongest weekly performance since early-April. The shorts are definitely trimming their positions and running to the ‘close position’ door in quick fashion ahead of the depressing increases in virus contagions.

Fed speakers are again on tap this afternoon after yesterday’s continued line that they will remain on hold for a long time and are unwilling to go the extra mile. While they are not able or willing to inject more momentum into the reflation trade, pushing the onus increasingly on to the fiscal policymakers and Government, markets are in a sombre mood.

Sunak giving a boost to Sterling

The pound is the top performing major currency today, as it makes back some of the 4.5% drop it has suffered since the start of September. The UK Chancellor unveiled support measures this afternoon for jobs and businesses, as the Government strives to ‘protect jobs though the winter’. Unemployment would have risen sharply in the coming months as the furlough scheme ends in October, but the new scheme is less generous.  More importantly for the Treasury, it will cost alot less which matters when the size of UK public debt was equivalent to UK GDP at the end of July.

Cable is just about bouncing off the crossing of the 100- and 200-day Moving Averages at 1.2703 and 1.2722 respectively. Prices need to get back above the mid-September lows around 1.2762 to have a chance of building any bullish momentum. Allowing for the current pause in recent selling, indicators looks quite bearish with 1.2650 opening up, if the Moving Averages prove to be feeble in their support.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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Turkey raises rate 1st time in 2 years to contain inflation


      Turkey’s central bank raised its key interest rate for the first time in two years, saying inflation has been tracking higher than expected due to the country’s fast economic recovery and it “assessed that the tightening steps taken since August should be reinforced in order to contain inflation expectations and risks to the inflation outlook.”
The Central Bank of the Republic of Turkey (CBRT) raised its one-week repo rate by 200 basis points to 10.25 percent, unwinding some of the 375 points of rate cuts earlier in the year. This leaves the one-week repo rate 175 basis points below its level at the start of the year.
      The last time CBRT raised its rate was in September 2018 when it was raised to 24.0 percent as part of three rapid rate hikes in 5 months to contain inflation in response to a fall in the lira and capital outflows.
      But since July 2019, when the current governor, Murat Uysal, was installed, the central bank had been on an easing cycle and cut rates 9 times in a row and by a total of 15.75 percentage points, with the latest cut in May.
      CBRT is the 8th central bank to raise rates this year but 3 of those hikes (Tajikistan, Czech Republic and Kazakhstan) took place before global monetary policy took a sharp U-turn in the face of the economic damage from the COVID-19 pandemic. These three hikes were later reversed by rate cuts.
       It is the first central bank among the Group of Twenty (G20) major economies that represent some 85 percent of the global economy to have raised its rates since the outbreak of the COVID-19 pandemic earlier this year and the first emerging market central bank since March to raise its rates in response to inflationary pressures.
      CBRT said maintaining a sustained process of disinflation was key to lower long-term interest rates, a stronger economic recovery and lower sovereign risk and this requires a continuation of a “cautious monetary stance” that takes into account the underlying trend of inflation.
     “Accordingly, the Committee decided to increase the policy rate by 200 basis points to restore the disinflation process and support price stability,” CBRT said.
      Although Turkey’s headline inflation rate was stable at 11.77 percent in August from 11.76 percent in July, the lira has been weakening steadily for the last decade – putting upward pressure on import prices and thus inflation – and has plunged 23 percent since Aug. 1 on negative real interest rates, concern over the central bank’s low foreign exchange reserves and tensions with the European Union over the east Mediterranean.
      Instead of outright rate hikes to its benchmark interest rate, CBRT has resorted to other tightening measures, including directing lenders to borrow at higher rates and in August raised reserve ratios to drain liquidity from the market and boost reserves.
      In response to the rate hike, the lira jumped 1.3 percent to 7.59 to the U.S. dollar but remains down almost 22 percent since the start of this year.
      CRBT said the rise in inflation from pandemic-related supply-side factors was expected to gradually phase out as weak demand curbs price rises.
     “Yet, as a result of fast economic recovery with strong credit momentum, and financial market developments, inflation followed a higher-than-envisaged path,” CRBR said.
      Turkey’s economy shrank an annual 9.9 percent in the second quarter of this year, and by a quarterly 11 percent, but CBRT said economic activity was recovering markedly in the third quarter as commercial loans have begun to normalize and tourism has begun to improve.
     “The recovery in exports of goods, relatively low levels of commodity prices and the level of the real exchange rate will support the current account balance in the upcoming periods,” CBRT added.
     The Central Bank of the Republic of Turkey issued the following press release:

“Participating Committee Members

Murat Uysal (Governor), Murat Çetinkaya, Uğur Namık Küçük, Oğuzhan Özbaş, Emrah Şener, Abdullah Yavaş.

The Monetary Policy Committee (the Committee) has decided to increase the policy rate (one-week repo auction rate) from 8.25 percent to 10.25 percent.

While global economic activity has shown signs of partial recovery in the third quarter following the normalization steps taken by several countries, uncertainties on global economic recovery remain high. Advanced and emerging economies continue to maintain expansionary monetary and fiscal stances. The pandemic disease is closely monitored for its evolving global impact on capital flows, financial conditions, international trade and commodity prices.

Economic activity is recovering markedly in the third quarter owing to gradual steps towards normalization and the strong credit impulse. Recent monetary and fiscal measures that aim to contain negative effects of the pandemic on the Turkish economy contributed to financial stability and economic recovery by supporting the potential output of the economy. The normalization trend recently observed in commercial loans has started in consumer loans as well. The recent upturn in imports, which has resulted from deferred demand as well as pandemic-related liquidity and credit policies, is expected to moderate with the phasing out of these policy measures. Although tourism revenues declined due to the pandemic, easing of travel restrictions has started to contribute to a partial improvement. The recovery in exports of goods, relatively low levels of commodity prices and the level of the real exchange rate will support the current account balance in the upcoming periods.

Pandemic-related supply-side inflationary factors were expected to gradually phase out during the normalization process and demand-driven disinflationary effects were expected to become more prevalent. Yet, as a result of fast economic recovery with strong credit momentum, and financial market developments, inflation followed a higher-than-envisaged path. The Committee assessed that the tightening steps taken since August should be reinforced in order to contain inflation expectations and risks to the inflation outlook. Accordingly, the Committee decided to increase the policy rate by 200 basis points to restore the disinflation process and support price stability.

The Committee assesses that maintaining a sustained disinflation process is a key factor for achieving lower sovereign risk, lower long-term interest rates, and stronger economic recovery. Keeping the disinflation process in track with the targeted path requires the continuation of a cautious monetary stance. In this respect, monetary stance will be determined by considering the indicators of the underlying inflation trend to ensure the continuation of the disinflation process. The Central Bank will continue to use all available instruments in pursuit of the price stability and financial stability objectives.

It should be emphasized that any new data or information may lead the Committee to revise its stance.

The summary of the Monetary Policy Committee Meeting will be released within five working days.”

Eurozone On The Brink As Infections Spike

By Orbex

Beaten Down Dollar Back with a Vengeance

The US index capped its fourth positive session as it closed 0.45% higher yesterday. The main significance is that it remained above the psychological 94 handle.

Investors have turned to the currency as a haven during periods of rising financial market volatility.

The US manufacturing sector continued to show signs of recovery in September. It notched the best reading since January 2019.

However, the political instability ahead of this November’s presidential election could mean the greenback is not out of the woods just yet.

Donald Trump yesterday stated that he would refuse to commit to a peaceful transfer of power if he loses the election.

Eurozone Faces the Harsh Truth

The previously surging EURUSD continued its descent on Wednesday, closing 0.38% down.

The pair had earlier this month tested the $1.20 level for the first time in over two years.

Renewed lockdown measures in reaction to rising COVID-19 cases in several European countries have undercut ideas that Europe was handling the pandemic better than the US.

EU PMI figures showed that eurozone economies barely grew in September.

There was a plus side to the story, however, as a solution to the slowdown could spur new stimulus measures.

All Eyes On the Chancellor’s Emergency Job Scheme.

The pound closed 0.10% lower on Wednesday, its fourth decline in a row.

The UK was also feeling the effects of a spike in infections, as it recorded its third-highest daily increase since the pandemic began.

The Chancellor Rishi Sunak will unveil a plan aimed at minimizing unemployment, as the latest PMI survey showed that growth is weakening. He is looking to replace the furlough scheme which expires next month.

Economists warned that the latest restrictions could mean the economy is likely to flatline over the next few months. A full national lockdown could put Britain back into a recession.

September Sell-off Resumes

The US indices ended lower yesterday as the markets failed to capitalize on the momentum of previous sessions.

The Nasdaq was the main loser as it closed 3% lower. The S&P dropped by 2.4%, whilst the Dow fell 1.9%.

Tesla’s ripple effect from its ‘battery day’ was still felt across the markets.

Worries over a second wave of the coronavirus and an increasingly contentious US presidential election contributed to the sell-off.

Gold Continues to Lose its Shine

A strong US dollar has contributed to Gold falling to its lowest levels since July as the sell-off on the safe-haven continues.

The yellow metal closed almost 2% down to its lowest level since July.

The shift in risk appetite continues as we wait for further COVID-19 vaccination news.

Oil Unable to Maintain $40 Handle

Oil closed down for a third consecutive day, as it finished yesterday’s session 0.18% lower.

The fall under the $40 was seen as significant, despite the EIA reporting a crude draw of 1.6 million barrels for last week. This compares with a draw of 4.4 million from the previous week.

As US oil refineries try to get back to business, we await the next tropical storm to batter the American coastline.

By Orbex

Friday’s US Durable Goods: A Negative Sign For Recovery?

By Orbex

Yesterday’s Flash PMIs for September marginally disappointed analysts, lending credence to worries that there might be a slowing in the pace of the recovery.

The figures also affirmed a trend among developed nations, with manufacturing surveys outperforming expectations while services missed.

The explanation seems logical at first.

The retail sector is most affected by COVID. But that is also being taken into account by analysts.

The implication is that forecasts for economic growth for this year might be overestimating how much recovery there will be in the service sector.

On the plus side, the industry remains resilient despite the pandemic. And we ought to see that reflected in the durable goods orders.

The Swoosh is On

The drop in the stocks at the start of the week showed that the recovery is still subject to revaluations.

A Bloomberg article early on Tuesday issued a warning sign, showing a record outflow of funds from the market during the latest correction.

This, very often, precipitated underperformance in the stock market (and a stronger dollar) over the next several months, with tech-heavy Nasdaq the most affected.

After the Fed boosted their projections for growth next year, an adjustment to their bond-buying program is becoming increasingly imminent.

The Fed’s balance sheet peaked at $7.17T on June 9th and has remained generally stable at the $7.0T mark since.

Wed expect the slowing flow of liquidity in the markets to put the brakes on tech stocks in particular.

Does that Mean Buying is Slowing Down?

The Durable Good Orders data we are expecting is from August, which is important to situate in context.

July marked the peak of the “second wave” of new COVID cases, with several states re-issuing containment rules. It would be logical to have a slow down in expectations in the industry, as they put major investment on hold until there was more certainty about the outlook.

Towards the end of the month, it became clear the peak had passed, which would encourage a return to buying.

Also, we got more clarity on the vaccine progress, with expectations that at least one vaccine will be available before the end of the year.

Durable goods as their definition says, are for long-term investments, and many wouldn’t be delivered this year. So, it’s a more accurate representation of business expectations.

What Goes Up Must Come Down

Durable goods orders spiked in June and July, recovering lost ground from the prior months.

At this point, it would be expected for it to “normalize”, and return to a growth range in the single digits. Thus, a significant drop from prior months’ growth is likely not to affect the markets too much.

Durable Goods Orders are expected to show a growth of just 1.5% compared to 11.2% in the prior month.

Excluding defense, they are expected to only have grown 0.1% compared to 9.9% in July. A drop into negative territory might shake up the markets a bit, strengthening the dollar and hurting the stock market.

By Orbex

US-China fight over fishing is really about world domination

By Blake Earle, Texas A&M University

China’s aggressive, sometimes illegal fishing practices are the latest source of conflict with the United States.

China has the world’s largest fishing fleet. Beijing claims to send around 2,600 vessels out to fish across the globe, but some maritime experts say this distant-water fishing fleet may number nearly 17,000. The United States has fewer than 300 distant-water ships.

According to the 1982 United Nations Convention on the Law of the Sea, nations control marine resources within a 200-mile “exclusive economic zone”; beyond that are international waters. While the U.S. never signed the treaty, it has declared a 200-mile offshore exclusive economic zone.

Bolstered by generous subsidies and at times protected by armed coast guard cutters, Chinese fishermen have been illegally fishing near the Korean Peninsula and in the South China Sea, a hotly contested area claimed by six countries. By exploiting these waters China has come to dominate the international squid market. Nearly half of this catch is exported to other Asian nations, Europe and the United States.

Chinese ships have even pushed as far as Africa and South America, where fishermen have been known to remove their identifying flags to avoid detection. In 2017 Ecuador caught 20 Chinese fishermen in the environmentally protected Galapagos Marine Reserve and sentenced them to four years in prison for capturing thousands of sharks, the primary ingredient in a Chinese delicacy, shark fin soup.

In August, U.S. Secretary of State Mike Pompeo criticized China for “predatory fishing practices” that violate “the sovereign rights and jurisdiction of coastal states.”

China’s Foreign Ministry said Pompeo was just trying “stir up trouble for other countries.”

But Pompeo’s rebuke is about more than fish. Governments often use the fishing industry to advance their diplomatic agenda, as my work as a historian of fishing and American foreign relations shows. The United States used fishing, directly and indirectly, to build its international empire from its founding through the 20th century. Now China’s doing it, too.

Fishing its way from independence to imperialism

Before the 1800s, when international law began to define maritime rights, restrictions on fishing depended wholly on what a given nation could enforce.

That’s why, at the Paris negotiation to end the Revolutionary War in 1783, future president John Adams insisted that Great Britain recognize the right of Americans to fish the North Atlantic. Its rich waters were full of cod and mackerel, but that’s not all: The fishing rights Adams won in 1783 extended the young country’s presence well into the sea.

Because American fishing rights were recognized alongside American statehood, my research shows, generations of U.S. diplomats associated the two. In 1797, Secretary of State Timothy Pickering called American fisheries “the fairest fruits of independence.”

Even so, for decades after independence, the U.S. and Great Britain quarreled over international fishing, leading to many new and renegotiated treaties. At each turn, the Americans uniformly defended their right to fish the North Atlantic, even threatening war to do so.

Black and white drawing of a ship at sea
North Atlantic fisheries were closely tied to American independence.
George Brown Goode, The Fisheries and Fishery Industry of the United States

By the 1860s, international fishing had become a key component of America’s newly expansionist foreign policy. Between 1850 and 1898, the U.S. annexed numerous overseas territories, among them Alaska, Puerto Rico, Hawaii, Guam and the Philippines. Today this empire gives both American fishing vessels and the U.S. military a global reach.

Secretary of State William Henry Seward, who purchased Alaska and its rich North Pacific waters under Andrew Johnson in 1867, also tried unsuccessfully to buy Greenland and Iceland, hoping to further extend American fishing claims across the North Atlantic. During archival research I learned that Seward’s like-minded successor, Hamilton Fish, toyed with the idea of purchasing the Canary Islands, near northwest Africa, as a naval depot and a base for American fishermen.

Cold War fish

For a time around the turn of the 20th century, fishing took a back seat to military might in the U.S.‘s international power plays.

After World War II, though, Washington again turned to marine resources to serve its foreign policy agenda. This time the government used what I call “fish diplomacy” to help build a more America-friendly world order.

American diplomats of the 1940s used the notion of “maximum sustainable yield” – that is, the idea that there is a level of fishing that maximizes the number of fish caught without damaging the long-term health of fisheries – to expand American maritime influence.

The idea was more political tool than scientific discovery, as historian Carmel Finley has thoroughly explored. But the U.S. used this faux sustainability argument to pass laws and agreements that limited foreign incursions into American waters while giving American fishermen freer reign over the world’s oceans.

Citing maximum sustainable yield, the Truman administration declared conservation zones to protect certain fisheries in 1945. This move essentially barred Japanese salmon fishermen from Alaska’s Bristol Bay. Just a few years later the State Department cited maximum sustainable yield to argue against restricting U.S. tuna fishing in Latin American waters.

As the Cold War developed in the 1950s, fish diplomacy helped the U.S. shore up allies to counter the Soviet Union.

Washington gave generous subsidies to expand the fishing fleets of various countries – most notably Japan, whose war-ravaged economy was revived in part by the U.S. boat-building subsidies that resurrected its own once vital empire-building fishing industry. The U.S. also lowered tariffs for strategically located fishing nations like Iceland, making their main export, cod, cheaper for Americans to buy.

Of course, the U.S. also fought communism with mutual defense alliances, arms sales to friendly nations and direct military interventions. But fishery politics was part of its Cold War plan.

This history helps explain why the U.S. now sees China’s enormous fishing fleet and international trawling as threat. In sending its fishermen far and wide, Beijing has, wittingly or not, followed America’s lead.The Conversation

About the Author:

Blake Earle, Assistant Professor of History, Texas A&M University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Two-speed economy seen in PMIs

By Lukman Otunuga, Research Analyst, ForexTime

Stock markets are striving to claw back Monday’s sharp selloff after yesterday’s price action stalled the bears with the printing of an ‘inside day’ candle. This is when the trading day’s high and low lies within the boundaries of the previous day’s high and lows, and indicates indecision in the market. The Dollar has hit two-month highs this morning as US fiscal uncertainty and increasing Covid worries dominate price action.

Investors appear to have shrugged off the earlier PMI data showing that European economies were recovering at a slower pace than expected from restrictions and lockdowns. The composite reading – covering both manufacturing and services – printed at 50.1 for September, below the 51.7 expected.

Digging deeper into the surveys reveals a two-speed economy with encouraging signs of recovery buoyed by rising demand in manufacturing, from export markets and the reopening of retail. But the larger services sector has fallen back into decline, sinking from 50.5 to 47.6, as businesses revealed that the resurgence of new virus cases was an important driver of weakening activity. The UK PMI data also showed that the economy had lost some of its bounce with the initial rebound from lockdowns now fading.

RBNZ takes a step towards negative rates

The Kiwi is the weakest major on the board today even as the RBNZ kept rates and new policy measures on hold as expected. The highlight in the statement was a pledge to adopt a Funding for Lending Programme by year-end which would represent one more push towards negative rates, with more stimulus announced ahead of this before the end of the year.

NZD/USD is currently trading at the bottom of a ‘double top’ pattern on the daily chart with momentum looking good for more downside. The weekly chart too is significant as bulls have recently been capped three times at the 200-week Moving Average, an indicator that has been fairly reliable historically in pushing the pair lower.  If this does happen, the August low at 0.6488 will be the next target which coincides with the 100-day MA.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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PMI day for Europe, UK & United States

By Lukman Otunuga, Research Analyst, ForexTime

Grab your popcorn and find a cosy seat ahead of the latest Purchasing Manager Index (PMI) data from Europe, United Kingdom and the US which could spark volatility in the FX space.

The PMI is a leading indicator of economic health which essentially surveys purchasing managers at businesses that make up a given sector. Digging deeper, the headline PMI is a number from 0 to 100. Anything above 50 represents an expansion when compared with the previous month while under 50 represents a contraction.

It is worth keeping in mind that the direction of the PMI tends to precede changes in the trend of estimates such as gross domestic product and employment. If the PMI is painting an unpleasant picture, this could be an early warning sign for the economy and currency. Alternatively, a positive print has the potential to boost sentiment and raise confidence over the economic outlook.

All eyes on the Euro PMI 

European investors will be keeping a very close eye on the latest eurozone purchasing manager’s index (PMI) data for September.

It will be released at 9 am London time and could offer some insight into the health of the region’s services and manufacturing industries in the face of Brexit related uncertainty and second wave of COVID-19 cases. Manufacturing PMI is expected to jump 51.9 in September from the 51.7 in the previous month while services PMI are projected to remain unchanged at 50.5.

What does this mean for the EURUSD?

The Euro has been punished by a resurgent Dollar this week with prices slipping to a two-month low under 1.1675.

A positive set of PMI figures from Europe could inject Euro bulls with enough inspiration to fight back, potentially pushing prices back towards 1.1750. However, if the data fails to meet expectations, the EURUSD could end up sinking to a fresh two month low around 1.1600.

Will pending PMI compound to Pounds woes?

Sterling has woken up on the wrong side of the bed today, weakening against the Dollar and most G10 currencies thanks to Brexit related drama and rising coronavirus cases. Fears over a second lockdown crippling the UK economy remain rife, and this continues to be seen in not only the Pound’s valuation but FTSE100.

The Pounds outlook this week may be influenced by the pending manufacturing and services PMI data due to be released this morning. 

Manufacturing activity is projected to slip to 54.1 compared to the 55.2 in the previous month while services are forecast to decline to 56 from the 58.8 in August. A figure that fails to meet expectations is likely to compound to the Pound’s woes and provide permission for anxious investors to drag the currency lower.

Looking at the technicals, the GBPUSD is approaching 1.2650. A breakdown below this level could open the doors towards 1.2500.

Dollar Index breaks above key resistance 

It took a four-letter word to push the Dollar Index higher, will the pending IHS Markit’s ‘flash’ Purchasing Managers’ Indices for US manufacturing and services in September support the upside? 

Talking technicals, the Dollar Index is turning bullish on the daily timeframe. The solid daily close above 94.00 could encourage a move towards 94.65 and potentially 96.00. Should 94.00 prove to be reliable resistance, the DXY may decline back towards 92.70.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12