Dollar Edges Lower; Nonfarm Payrolls Key This Week

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Ruble Stays Flat, Oil on the Rise!

Good day,The price of the Russian ruble remains the same, following oil. We feel that the asset might jump away from the supporting zone formed between the levels 71.50 and 72.00.Gold went under the broken level of 1751.10, remaining still. In principle, gold has the potential to jump so let’s wait and see what is going to happen next.Oil remains at the broken resistance level of 77.82, showing signs of a potential rise. Thanks to the short-term uptrend and upcoming heating season, oil might eventually jump.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/ruble-stays-flat-oil-on-the-rise"
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Market Update – October 4 – USD Holds, Inflation & Evergrande worries persist

• USD (USDIndex 94.00) holds at highs but down from Thursday 94.50 high. Strong US data on Friday (ISM Manu PMI 61.1, PCE  4.3% & UoM 72.8. Its NFP Jobs and Pandora Papers week.
• Yields hold at recent highs (10yr closed 1.465%) now at 1.47% in Asian trades (huge spike to 1.567% last week cooled but Yields “on notice”) China closed until Thursday, HK Property group (Hopson) has offered $5bn for 50% of Evergrande Real Estate. Contagion still a worry.
• Equities rallied on Friday, (Merck +8.37%) anti-viral drug Covid drug) USA500 +49.0 (+1.5%) at 4357 (but remains weak) USA500.F lower 4330.  Asian equities mixed.  VIX closed at 21.20 Friday – trades at 22.15 now.  
• USOil holds at $75.20 ahead of today’s OPEC+ meeting which is expected to agree “gradual” production increases, amid supply bottlenecks and inventory drawdowns.
• Gold holds at $1760 following last weeks collapse to $1720 as yields rocketed. 20-day MA $1765.   
• FX markets USD bid – EURUSD 1.1600, Cable 1.3550, & USDJPY 111.00.

Week Ahead  – RBA Rate Decision – (less Dovish ? but with Covid cases still climbing) Jobs Week – RBNZ Rate Decision (delayed rate hike coming?), Jobs week NFP – (460k vs 235k), ADP 430k vs 374k & Claims 350K vs 362k. Plus more PMI data.

European Open – The December 10-year Bund future is up 8 ticks at 170.30,  Asian stock markets traded mixed, but DAX and FTSE 100 are up 0.4%, in catch up trade, after news from Merck lifted Wall Street on Friday. The boost, which also seemed to underpin the outperformance of the ASX in Asia seems to be waning though as China angst and mutterings of stagflation fears weigh on sentiment.

Today – EZ Sentix Index, US Factory Orders, ECB’s de Guindos, de Cos, Fed’s Bostic & Bullard, OPEC+ and Eurogroup meetings.

Biggest Mover @ (06:30 GMT) CADJPY (+0.24%) Continued Friday’s rally from 87.20 low to test resistance at 88.00 again. Faster MAs aligned higher, MACD signal line & histogram rallying higher, RSI 55.50 and neutral.  H1 ATR 0.157, Daily ATR 0.882.

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Daily Market Outlook, October 4th, 2021

Daily Market Outlook, October 4th, 2021 Overnight Headlines Progressive Lawmakers Offer To Cut Spending Short To Save Biden Plan House Speaker Pelosi Sets Revised Oct 31 Target To Pass Infrastructure Bill Jayapal Rejects Manchin's USD 1.5T Price Tag For Biden's Spending Plan US State Dept. Condemns 'Provocative' Chinese Activities Near Taiwan German Liberals And Social Democrats Hold "Constructive" Coalition Talks SPD Co-Leader: Three Way SPD-Led German Coalition Doable By Year End Britain Will Threaten To Scrap Some Of The Northern Ireland Brexit Terms Japan's Kishida Set To Take Office, Form Government; Elections On Oct 31 New Zealand Reveals Three-Step 'Roadmap' Out Of Lockdown In Auckland China Evergrande Trading Halt In Hong Kong Spurs Asset Sale Speculation Oil Prices Falls Ahead Of OPEC+ Policy Meeting; Gold Near Two-Week High Asian Shares Slip As Evergrande And Inflation Worries Sap Positive MoodThe Week Ahead Week Ahead-U.S. jobs report dominates, RBA and RBNZ to meet The U.S. labor report is a big focus for global markets this week as it could determine whether the Federal Reserve begins tapering asset purchases in November. Comments by Fed and other G7 central bank officials, an OPEC+ meeting, the progress of President Biden's infrastructure and social agenda and monetary policy bank decisions in Australia and New Zealand will also be watched. Ahead of Friday's September non-farm payrolls, key U.S. releases include factory orders, trade, ISM non-manufacturing, final Markit PMIs, ADP employment and weekly jobless claims. The euro zone has a lighter calendar dominated by final services PMIs, retail sales, German industrial orders, output and trade. The UK's main release is services PMI but fuel shortages remain a broader concern. In Japan, investors will watch incoming prime minister Fumio Kishida's cabinet announcements. The data calendar includes Tokyo CPI, services PMI, household spending, current account and trade data. Chinese markets are closed until Friday, when the Caixin services PMI is due, but investors will monitor developments in the Evergrande saga and the Biden administration's China trade review. Australia has trade data, but Tuesday's RBA meeting will dominate interest; no change in policy is expected. By contrast, the Reserve Bank of New Zealand is widely expected to raise rates by 25 basis points from a record low of 0.25% on Wednesday. Canada has trade and employment data dueCFTC Data The aggregate USD long position in the currencies that we track rose by nearly USD2bn in the week to Tuesday according to CFTC data published today. Net bullish positioning in the dollar now sits at USD16.1bn and is nearing the pandemic-shock high of USD18.2bn in February 2020. Just twelve weeks ago, accounts still held a USD short position. Speculative positioning in the EUR is quickly closing in on bearish as investors once again trimmed the shared currency’s net long. The weekly decline of USD1.65bn took the EUR’s aggregate position to USD127mn, its lowest point since March 2020. On the cutoff date for the CFTC’s data, the EUR closed in on its weakest level against the dollar since November. Yesterday, it fell to a new low since July 2020. The shift in sentiment in the EUR was the result of an increase in short contracts that was roughly three times as large as the increase in long contracts. The CHF and JPY short positions also saw notable increases over the week. The former’s rose by USD311mn to USD1.56bn while the latter climbed by USD843mn to USD7.26bn. While the JPY short is merely back to the levels seen a month ago, bearish positioning in the CHF has not been this large since late-2019. The move likely reflects these currencies high sensitivity to US interest rates as the yield on 10-yr Treasurys jumped by over 20bps in the week to Tuesday. Investors trimmed the aggregate CAD short by USD580mn, or about a quarter of its total, to USD1.6bn; outstanding shorts fell to a six-week low while longs held relatively steady. Among the currencies in this report, only the CAD and AUD appreciated versus the dollar over the week. The AUD short, however, increased slightly by USD62mn to USD6.25bn, which represents the largest bearish position on the AUD as far back as CFTC records go.. Four months ago, the AUD position was neutral. Elsewhere, adjustments were smaller with the GBP’s now net long rising by USD185mn to USD166mn and the NZD’s net long climbing by 145mn to USD713mn. The latter represents the largest bullish position of the currencies in this report as the NZD takes the EUR’s place at the top of the sentiment leaderboard.G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby) EUR/USD: 1.1535-40 (801M), 1.1560 (461M), 1.1570-75 (441M), 1.1600 (1BLN)1.1625 (315M), 1.1640-50 (1BLN) GBP/USD: 1.3490 (218M), 1.3650 (404M). EUR/GBP: 0.8525 (300M) AUD/USD: 0.7250 (1BLN). USD/CAD: 1.2650 (260M) USD/JPY: 110.80 (389M), 111.25-30 (710M), 111.45-50 (570M), 112.20 (450M) EUR/JPY: 129.60 (410M). AUD/JPY: 78.75 (410M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.17 Bullish above EUR/USD heavy in Asia again after early gains, 1.1590 to 1.1614 and back Support at 1.1563/64 double bottom September 30/October 1 Option expiries today - 1.1530-75 E1.7 bln, 1.1590-1.1600 E1.2 bln Option expiries to keep pair sandwiched for now? E1.6 bln more 1.1610-50 EUR/JPY 128.70-82 EBS, quiet and holding just above 128.57 low Friday EUR/CHF indicated 1.0792-93 and EUR/GBP 0.8562, very quiet China and Australia holidays today leaving market thinGBPUSD Bias: Bearish below 1.36 Bullish above. Two-day rebound out of a new 2021 low, 1.3412, now struggling Price pulling up just shy of 1.3590, 10DMA, and 1.3603 Fibo Retracement readings off 1.3913-1.3412: 38.2% 1.3603, 50% 1.3663 The minimum correction off the 1.4250 to 1.3412 drop just above at 1.3610 Frid-Mon highs of 1.3575-76 initial resistance To the downside and the 30DMA lower Bolli at 1.3494 Underlying bear run alive while below 1.3663, 50% Fibo 1.3913-1.3412USDJPY Bias: Bullish above 109 Bearish below USD/JPY and most JPY crosses steady after large JPY buy-backs Friday USD/JPY 110.87-111.11 EBS, lower US yields weigh, Tsy 10s @1.475% Holding above ascending 200-DMA at 110.86, 110.59/60 daily kijun/tenkan Fibo 38.2% retracement of 109.12-112.08 9/22-30 111.01, 50% at 110.64 Total $1.3 bln or so in option expiries today between 111.25-50 to help cap EUR/JPY 128.70-82 EBS, GBP/JPY 150.10-64 AUD/JPY 80.41-80, NZD/JPY 76.83-77.15, CAD/JPY best bid, 87.65-88.00 Nikkei -0.95% @28,497.57, disillusionment with Kishida regime?.AUDUSD Bias: Bearish below 0.75 Bullish above AUD/USD rally fizzles just as it begins, due to Evergrande AUD/USD stumbles to 0.7261, reversing initial spike to 0.7283 Evergrande shares in HK suspended without explanation... HSI dives as much as 2.7% on renewed fears for China property sector AUD/USD breakout from Bollinger downtrend channel looks shaky Mon closing below 0.7232 will reinstate bearish channel New South Wales among Australian states on holiday Monday

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-october-4th-2021"
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Dollar Down, But Near Previous Week’s Highs Over Evergrande Fears

from Forex News https://www.investing.com/news/forex-news/dollar-down-but-near-previous-weeks-highs-over-evergrande-fears-2633330
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Dollar firm as China Evergrande nerves resurface

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The content streaming industry is fast turning into a bubble

• SEE MORE Merck Mercuriadis: the mogul shaking up the music business
• SEE MORE Artists demand a fair share of the music industry pie

Only a few years ago,the music industry was being written off as a relic, with the slow death of the CD destroying its financial base, and with easy pirating making it impossible for anyone to make any money. And yet in the last couple of years it has come storming back.

Last week Universal, the company that skilfully used the downturn to acquire labels such as Britain’s EMI, listed its shares in Amsterdam. Other major music companies such as Warner and Sony are doing just as well. Indeed, shares in Warner are up by more than 50% in the last year and the business is now valued at more than $20bn. At this rate the Kajagoogoo catalogue will be changing hands for a few hundred million by the end of the year. 

And it’s not just the music labels. The songs themselves have become more valuable as well. Hipgnosis has built a £1.7bn company through acquiring the rights to works by 10cc, George Benson, Blondie and the Red Hot Chili Peppers along with many others. Competitors such as Round Hill Music are building just as fast. The craze has now spread to literary estates, with Netflix handing over a pricey $500m for the rights to the works of Ronald Dahl. The value of creative content has suddenly exploded. 

Expect the return of Miss Moneypenny

That makes some sense. The streaming market, whether it is for music or TV, has transformed the economics of catalogues. It turns out that stuff that used to languish at the back of the secondhand CD section of your local charity shop suddenly has lots of value after all.

The music industry in particular has become skilful at squeezing value out of its lists. Catalogues are endlessly split up and repackaged to push them back to the top of the playlists, and algorithms are tweaked endlessly to ensure the maximum number of plays. Payments per track from Spotify and Apple and the rest may be modest, yet when there are billions of them and you are collecting a few fractions of a cent each time, it adds up to a lot of money. 

Likewise the film and TV industry has become very good at recycling characters and storylines. Disney-Plus has been turned into a huge money-spinner on the basis of the Star Wars, Marvel and Pixar franchises, and Amazon may well be hoping to match that with its purchase of MGM and its James Bond franchise. Hardcore 007 fans will be appalled, but don’t be surprised if there is a series about the teenage Bond and a romcom about Miss Moneypenny’s love life. 

Yet there are two big problems with this content boom. Firstly, it has limited growth left. The last few years have seen a massive boom as paid-for streaming services moved from a niche to a mass-market product. But it is hard to see that lasting for much longer. Just about everyone who wants to has now signed up to Spotify or one of the other music services and is paying £9.99 a month for it. There are not many new customers left.

Even worse, it is hard to increase prices. We are used to the £9.99 figure, but it is difficult to see many people being persuaded to pay £14.99 next year, and £19.99 the year after that. The same is true of TV streaming. Netflix is no longer growing as quickly as it was and Disney Plus has taken a slice of its market. There are already signs the market is overcrowded – Apple has failed to make much headway with its hugely expensive streaming service.  

The times they are a-changin’

Secondly, prices are soaring out of control. Record labels and the new breed of song funds are crowding into the music sector, bidding up the prices of anything that comes onto the market. Bob Dylan, as smart a manager of his own career as he is a brilliant songwriter, sold his catalogue to Universal for $300m because he may well have realised that was far more than it was really worth.

In TV, studios are wildly bidding up the prices of properties as they compete for a share of the boom. But as we know from lots of different markets, once a bandwagon gets going companies end up overpaying for everything. There is value in content, and more than there used to be – but it is also fast turning into a bubble. 

from Moneyweek RSS Feed https://moneyweek.com/investments/stockmarkets/603909/the-content-streaming-industry-is-fast-turning-into-a-bubble
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The charts that matter: bond yields soar

Welcome back. 

On this week’s magazine cover we take a look at the legacy of Angela Merkel, Germany’s leader who is stepping down after 16 years. Her approval rating of 64% attests to her “steadying influence in an age of turbulence”, says Simon Wilson. But do her achievements live up to her ratings?

Our big investment feature this week is Stephen Connolly writing about cybersecurity. It’s fair to say that cybercriminals have never had it so good. The pandemic has pushed more of our lives online, and the internet has “never been a better hunting ground for data, money and weak access points in corporate networks”, he says. 

So there are plenty of opportunities for investors in combatting them, and Stephen picks some of the best bets to buy now. If you’re not already a subscriber to MoneyWeek magazine,  sign up here and get your first six issues free. 

This week’s “Too Embarrassed To Ask” video explains what “moral hazard” is. The term comes from the insurance industry in the 18th century. But what does it mean today – and why is it still so relevant? Find out exactly what it means here. 

And in this week’s podcast, Merryn talks to Gary Channon of Phoenix Asset Management about his investment style and the balance between diversification and performance. Plus, capital allocation and the firms that get it right – and the firms that don't. It’s a fascinating listen – hear what they have to say here.

Oh and John popped up on The Week Unwrapped podcast this week talking about gene editing, comedy copyright and “manifesting” – if you’re curious, have a listen here. 

Here are the links for this week’s editions of Money Morning and other web articles you may have missed:

• Monday Money Morning: The UK stockmarket is cheap – but is it cheap for good reasons?
• Tuesday Money Morning: Has passive investing created a stockmarket bubble?
• Merryn’s blog: Why we will be reliant on fossil fuels for a long time to come
• Web article: Why are people panicking about fuel shortages?
• Wednesday Money Morning: The investment landscape is getting messy – what should you own now?
• Web article: What do higher oil prices mean for investors? 
• Thursday Money Morning: Rising bond yields are unnerving markets and it could get worse before it gets better
• Web article: What is the US “debt ceiling” and what happens if it is not raised?
• Friday Money Morning: China’s energy crunch could export inflation around the globe
• Web article: Furlough is ending – will unemployment spike?
• Cryptocurrency roundup: Cryptocurrency roundup: bitcoin shrugs off China's ban

Now for the charts of the week. 

The charts that matter 

Gold fell further as concerns over tighter money continued, but it managed to rally towards the end of the week.

Gold price chart

(Gold: three months)

The US dollar index (DXY – a measure of the strength of the dollar against a basket of the currencies of its major trading partners) shot up, perhaps in a reaction to the US Federal Reserve taking on a more hawkish tone on monetary stimulus, which also helped to push bond yields higher.

US dollar index chart

(DXY: three months)

The Chinese yuan (or renminbi) continued to tread water (when the red line is rising, the dollar is strengthening while the yuan is weakening). 

USD/CNY currency chart

(Chinese yuan to the US dollar: since 25 Jun 2019)

The yield on the ten-year US government bond burst higher as the spectre of inflation (and higher interest rates) raises its head again. 

US Treasury bond yield chart

(Ten-year US Treasury yield: three months)

The yield on the Japanese ten-year bond saw a similar jump, tailing off towards the end of the week.

Japanese government bond yield chart

(Ten-year Japanese government bond yield: three months)

And even the yield on the ten-year German Bund joined in, though it’s still in negative territory, if only just.

German Bund yield chart

(Ten-year Bund yield: three months)

Copper dropped. 

Copper price chart

(Copper: nine months)

The closely-related Aussie dollar slid against the US dollar.

AUD/USD currency chart

(Aussie dollar vs US dollar exchange rate: three months)

Bitcoin defied China’s total ban on cryptocurrency transactions to register a near-7% rise on the week.

Bitcoin price chart

(Bitcoin: three months)

US weekly initial jobless claims rose by 11,000 to 362,000. The four-week moving average rose by 4,250 to 340,000. 

US initial weekly jobless claims

(US initial jobless claims, four-week moving average: since Jan 2020)

The oil price briefly hit over $80 a barrel – its highest in three years – as energy prices continued to dominate the headlines.

Brent crude oil price chart

(Brent crude oil: three months)

Amazon saw its share price slide as wider markets fell.

Amazon share price chart

(Amazon: three months)

Tesla, however, had another remarkably good week.

Tesla share price chart

(Tesla: three months)

Have a great weekend. 

from Moneyweek RSS Feed https://moneyweek.com/economy/global-economy/603934/the-charts-that-matter-bond-yields-soar
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The charts that matter: bond yields soar

Welcome back. 

On this week’s magazine cover we take a look at the legacy of Angela Merkel, Germany’s leader who is stepping down after 16 years. Her approval rating of 64% attests to her “steadying influence in an age of turbulence”, says Simon Wilson. But do her achievements live up to her ratings?

Our big investment feature this week is Stephen Connolly writing about cybersecurity. It’s fair to say that cybercriminals have never had it so good. The pandemic has pushed more of our lives online, and the internet has “never been a better hunting ground for data, money and weak access points in corporate networks”, he says. 

So there are plenty of opportunities for investors in combatting them, and Stephen picks some of the best bets to buy now. If you’re not already a subscriber to MoneyWeek magazine,  sign up here and get your first six issues free. 

This week’s “Too Embarrassed To Ask” video explains what “moral hazard” is. The term comes from the insurance industry in the 18th century. But what does it mean today – and why is it still so relevant? Find out exactly what it means here. 

And in this week’s podcast, Merryn talks to Gary Channon of Phoenix Asset Management about his investment style and the balance between diversification and performance. Plus, capital allocation and the firms that get it right – and the firms that don't. It’s a fascinating listen – hear what they have to say here.

Oh and John popped up on The Week Unwrapped podcast this week talking about gene editing, comedy copyright and “manifesting” – if you’re curious, have a listen here. 

Here are the links for this week’s editions of Money Morning and other web articles you may have missed:

• Monday Money Morning: The UK stockmarket is cheap – but is it cheap for good reasons?
• Tuesday Money Morning: Has passive investing created a stockmarket bubble?
• Merryn’s blog: Why we will be reliant on fossil fuels for a long time to come
• Web article: Why are people panicking about fuel shortages?
• Wednesday Money Morning: The investment landscape is getting messy – what should you own now?
• Web article: What do higher oil prices mean for investors? 
• Thursday Money Morning: Rising bond yields are unnerving markets and it could get worse before it gets better
• Web article: What is the US “debt ceiling” and what happens if it is not raised?
• Friday Money Morning: China’s energy crunch could export inflation around the globe
• Web article: Furlough is ending – will unemployment spike?
• Cryptocurrency roundup: Cryptocurrency roundup: bitcoin shrugs off China's ban

Now for the charts of the week. 

The charts that matter 

Gold fell further as concerns over tighter money continued, but it managed to rally towards the end of the week.

Gold price chart

(Gold: three months)

The US dollar index (DXY – a measure of the strength of the dollar against a basket of the currencies of its major trading partners) shot up, perhaps in a reaction to the US Federal Reserve taking on a more hawkish tone on monetary stimulus, which also helped to push bond yields higher.

US dollar index chart

(DXY: three months)

The Chinese yuan (or renminbi) continued to tread water (when the red line is rising, the dollar is strengthening while the yuan is weakening). 

USD/CNY currency chart

(Chinese yuan to the US dollar: since 25 Jun 2019)

The yield on the ten-year US government bond burst higher as the spectre of inflation (and higher interest rates) raises its head again. 

US Treasury bond yield chart

(Ten-year US Treasury yield: three months)

The yield on the Japanese ten-year bond saw a similar jump, tailing off towards the end of the week.

Japanese government bond yield chart

(Ten-year Japanese government bond yield: three months)

And even the yield on the ten-year German Bund joined in, though it’s still in negative territory, if only just.

German Bund yield chart

(Ten-year Bund yield: three months)

Copper dropped. 

Copper price chart

(Copper: nine months)

The closely-related Aussie dollar slid against the US dollar.

AUD/USD currency chart

(Aussie dollar vs US dollar exchange rate: three months)

Bitcoin defied China’s total ban on cryptocurrency transactions to register a near-7% rise on the week.

Bitcoin price chart

(Bitcoin: three months)

US weekly initial jobless claims rose by 11,000 to 362,000. The four-week moving average rose by 4,250 to 340,000. 

US initial weekly jobless claims

(US initial jobless claims, four-week moving average: since Jan 2020)

The oil price briefly hit over $80 a barrel – its highest in three years – as energy prices continued to dominate the headlines.

Brent crude oil price chart

(Brent crude oil: three months)

Amazon saw its share price slide as wider markets fell.

Amazon share price chart

(Amazon: three months)

Tesla, however, had another remarkably good week.

Tesla share price chart

(Tesla: three months)

Have a great weekend. 

from Moneyweek RSS Feed https://moneyweek.com/economy/global-economy/603933/the-charts-that-matter-bond-yields-soar
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Xu Jiayin: the tycoon behind Evergrande

In his heyday, Xu Jiayin was the poster boy of China’s “crazy rich” – the personification of the country’s uneasy transition to “freewheeling dealmaking” within an authoritarian system, says SupChina, a US-based news platform. In 2012, he rocked up to China’s annual legislative conference wearing a flashy gold-buckled Hermès belt – “the priciest belt for the largest Communist gathering in the world”. He soon acquired internet stardom and the catchy nickname “belt brother”. 

China’s Enron

The Evergrande founder currently has rather more to worry about than perfecting his “sartorial swagger”. Crippled by a record $300bn debt, China’s biggest property group is effectively bust and struggling to make interest payments. Evergrande may not be China’s “Lehman moment” as some in the market initially feared, but it’s “on a par with Enron”, says The Times – with profound implications for a country whose property sector accounts for 20%-25% of the economy. 

If Xu and his peers owe their ascent to the Party, their downfall has its roots in a “u-turn”, says SupChina. The once  cocksure “belt brother” (who has dropped a good $14bn personally in the past year) is now chief villain of President Xi Jinping’s “common prosperity” drive to crack down on tycoonery. A recent “purportedly leaked” document gave juicy details of Xu’s “hotel habits” – his insistence on having “a larger font on his toiletries, and only women in his proximity except for his own bodyguard and butler”. It’s the kind of character assault that “often precedes a fall from grace”. 

Xu’s rags-to-riches story is “emblematic of China’s economic miracle in the last three decades”, says The Observer. Born into a poor family in China’s central Henan province in 1958, Xu’s mother died when he was one, and he was brought up by his grandparents. In a 2017 speech, he recalled “how he ate just sweet potato and steamed bread throughout his school years”, says the Daily Sabah, a Turkish daily. “The clothes I wore were all covered with piles of patches.” After leaving school in 1976, at the end of the decade-long Cultural Revolution, Xu “struggled to find work”, but eventually landed a place at the Wuhan Iron and Steel institution. He wound up becoming general manager.

Like many other middle managers of state-owned companies, Xu was inspired to drop “the iron rice bowl” (a stable job) and make a leap into entrepreneurship by the reforming president Deng Xiaoping. In the early 1990s, he quit his job and moved to Shenzhen, “trying his luck as a salesman in a steel conglomerate”, says SupChina. In 1996, he founded Evergrande, “riding the commercial real-estate wave from the very beginning”. 

The go-go years

The company floated in Hong Kong in 2008, propelling Xu to the top pinnacle of China’s wealthy – at several points over the next decade “China’s richest man”. Puffed by leverage, and oiled by Xu’s matey relations with officials and politicians in the Party’s “Shanghai set”, Evergrande grew exponentially, eventually branching out as far afield as financial services, bottled water and football. At the height of the boom, the core property business was “taking deposits on homes that were little more than lines on an architect’s drawing board”, says The Times. Xu’s own expensive tastes extended to yachts, waterfront mansions in Sydney and the trophy acquisition of China’s largest football club, Guangzhou FC. 

Whatever happens to Evergrande, Beijing has got dirt on Xu. He’s easily painted as the most excessive of “China’s robber barons” –those who took advantage of “the muddled transition to capitalism by means of guanxi (‘connections’), bribery and fraud”, says SupChina. Many of Evergrande’s 1,300 developments are now ghost towns. Xu’s own fate doesn’t look any more promising.

from Moneyweek RSS Feed https://moneyweek.com/economy/people/603919/xu-jiayin-the-tycoon-behind-evergrande
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How investment funds’ “greenwashing” hurts the planet

• SEE MORE Climate activists are missing the point on big oil companies

Want to do your bit for the environment? Don’t invest in a climate change fund. That’s according to a new paper – Doing Good or Feeling Good? Detecting Greenwashing in Climate Investing – by researchers Noel Amenc, Felix Goltz and Victor Liu at French business school Edhec. As Steve Johnson notes in the Financial Times, not only do such funds not help, they may even be “undermining the fight against global warming”.

The authors looked at exchange-traded funds issued in Europe which track various climate-focused indices from major index providers. They found several problems. One is that climate data accounts for a very small portion (a maximum of 12%) of the rationale for including a given stock in an index. Market capitalisation matters far more. In other words, a fund manager can run a “closet business-as-usual” fund stuffed with big companies, but market it as a “green” fund. 

A second, related, issue is that a fund can earn a “green” badge by avoiding or even just “underweighting” the dirtiest sectors, such as the energy sector. However, as we’ve noted at MoneyWeek before, pushing listed oil firms to sell their oil fields doesn’t make the oil go away, it just moves it to a less transparent (and often less competent) operator. And as the authors point out, “it will be less easy to greenify the economy by doing away with electricity.” So just avoiding the energy sector won’t help the transition to a greener economy. 

This implies that “engagement” – owning shares so as to pressurise company managements to shift direction – is the best option. Yet the study finds that companies whose environmental impact deteriorates over time (by emitting more carbon dioxide, for example) often see their weightings in an index rise rather than fall, implying that these “strategies are basically indifferent to the evolution of climate performance”. As a result, “the investment industry... does little to reallocate capital in a direction and in a manner that could incentivise companies to contribute to the climate transition.”

The study backs what many have already noted about such funds: there is often little clarity or agreement on the methodology or rationale involved. With the sector growing in popularity (assets in sustainable funds tripled in the three years to mid-2021, reports Morningstar), “greenwashing” (sometimes inadvertent) is rife. If you’re still keen to invest in a manner compatible with your views on the environment, then get your hands dirty and build your own portfolio, or at least be sure you know what’s in the funds you choose to buy. For the rest of us, now looks a good time to buy cheap, high-yielding fossil fuel stocks while the wider market’s attention is elsewhere.

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Cryptocurrency roundup: bitcoin shrugs off China's ban

Welcome back, 

It was a mixed week for cryptocurrencies, with China’s ban on them still exerting a cloud of uncertainty on the market. 

Here are the top stories that caught our eye. 

Confusion persists after China cracks down on crypto

Last Friday, China ruled that all cryptocurrency transactions are illegal, which triggered much volatility in crypto markets. 

A statement by the People’s Bank of China said that all cryptocurrencies, including both tether and bitcoin, do not represent fiat currency and cannot be traded on the market. China’s government will “resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people’s properties and maintain economic, financial and social order,” it said.

Friday’s announcement is only the latest attempt to curb crypto activity. In recent months, China has banned cryptocurrency mining – China’s mining activities accounted for 65% of total global mining. 

A week later, firms are still scrambling to understand what this means for them. “For many companies that made big bets on crypto over the past several years – particularly companies in the tech industry – options may be limited for cashing in their holdings,” says Al Jazeera. 

Another source of uncertainty is “when the timeline for the literal cut-off date is”, New York University Professor Winston Ma told Al Jazeera. 

And Singapore is vying for any lost crypto business from China, reports the Financial Times: “The country of 5.5 million people has long relied on financial services to help power its $344bn economy, and it is now locked in an intensifying race with Hong Kong and Tokyo for the crown of global financial hub in Asia.” 

Since January 2020, crypto companies have been able to obtain an operating licence under Singapore’s Payment Services Act. 

Jerome Powell says he has “no intention” of completely banning crypto 

Jerome Powell, chair of the US Federal Reserve, said on Thursday that he has no plans to ban cryptocurrencies, but reiterated his stance that altcoins need to be subject to more regulatory oversight. 

The comments were made at the House Financial Services Committee meeting on Thursday. While the meeting’s principal purpose was to ask Powell and Janet Yellen, the Treasury secretary, about the Fed’s response to the pandemic, crypto was a dominant theme at the meeting. 

Powell’s comments come just two days after he asked for Congress to help to build the digital dollar. 

Powell likened stablecoins to market funds and bank deposits. “They’re to some extent outside the regulatory perimeter, and it’s appropriate that they be regulated. Same activity, same regulation,” he said. 

Morgan Stanley boosts bitcoin exposure 

US banking giant Morgan Stanley has actively been involved in cryptocurrencies this year, and it recently significantly boosted its exposure to bitcoin. 

A regulatory filing on Monday showed that it had increased its exposure via the Grayscale Bitcoin Trust (GBTC). 

According to the filing, the Morgan Stanley Europe Opportunity Fund owned 58,116 GBTC Shares worth $2.018m as of 31 July. This is more than double the 28,298 shares it owned at the end of April this year. 

Institutional interest in cryptocurrencies has risen this year, and greater participation by Wall Street is considered to be a key factor in propelling cryptocurrencies higher since the start of the year, helping bitcoin break an all-time high of $63,000 earlier this year. 

Morgan Stanley is not the only big player involved. Other prominent banks who have also capitalised on the crypto frenzy include JPMorgan and Goldman Sachs. 

El Salvador takes the first steps to build a “bitcoin volcano” 

El Salvador’s president, Nayik Bukele, said his country took its first steps this week to starting its “bitcoin volcano” project. 

The announcement, which was made through a Twitter post on Tuesday, shows bitcoin mining rigs being installed. 

Volcano and energy, sounds bizarre doesn’t it? Bukele first announced in June that he would ask LaGeo SA de V, El Salvador’s state-owned geothermal electric company, to come up with a plan to mine bitcoin using cheap renewable energy.

El Salvador became the first country to adopt bitcoin as legal tender last month. The move sparked mass protests, , reports the BBC. Demonstrators, fearing it would lead to “instability and inflation”, took to the streets, and set fire to a bitcoin ATM.

What initially began as a cryptocurrency experiment between two Americans at the beach town of El Zonte is now being closely watched by the world to see what happens when bitcoin becomes legal tender in a nation for the first time.

Bitcoin mining is the process by which bitcoins are created and added to the blockchain network. Cryptocurrency sceptics (often called “no-coiners”) note the high energy usage involved in mining. A study by the University of Cambridge, published earlier this year, shows the bitcoin network’s annual electricity usage exceeds that of Sweden’s, at around 121 terawatt hours

Cryptocurrency markets update

Here’s what happened in the cryptocurrency market in the last seven days:

• Bitcoin rose 6.8% to $47,291. 
• Ether rose 3.9% to $3,233.
• Dogecoin fell 3.1% to $0.22.
• Cardano fell 2.9% to $2.23.
• Solana rose 3.3% to $153.80. 

What you need to watch out for

Ethereum network’s long-planned upgrade 

Ether’s upgrade to a proof-of-stake upgrade is happening in October. The first part of the upgrade, called Altair, is scheduled to take place on 27 October, reports Cointelegraph.

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Furlough is ending – will unemployment spike?

Around one million Britons are expected to feel the pinch on their finances as the government’s furlough package came to an end yesterday.

The scheme – also known as the  coronavirus job retention scheme – was unveiled on 20 March last year after Covid-19 ravaged many parts of the UK economy. 

What was the furlough scheme? 

Since the furlough scheme was introduced, it is believed to have helped around 11.6 million people. Now that it has come to an end, the jobs of one million people on furlough at the end of September are in question. 

The scheme, which has so far has cost the taxpayer around £70bn, promised furloughed workers 80% of their wages up to £2,500, for the hours they cannot work. 

As of July this year, employers had to contribute 10% for hours their staff do not work, increasing to 20% in August and September. 

At the depths of the coronavirus crisis last year, more than 9.5 million people were on furlough. As a result, unemployment stood at just 4.6% in the three months to July, its lowest in 42 years. 

While the scheme put a cap on widespread unemployment, its high cost, among other things, has made it controversial. 

How damaging will the end of furlough be?

Commentators are divided as to what the end of furlough means for the UK economy. As AJ Bell’s financial analyst, Danni Hewson, points out, a true picture of the UK economy may only come to light now that furlough is coming to an end. “Furlough was a lifeline to many, but it acted like a curtain, hiding the real jobs picture. Now the curtain is being drawn back no one really knows how all the pieces of the jobs jigsaw will fit together.”

One of the reasons the Bank of England has held off raising interest rates despite higher inflation is the uncertainty over what the end of furlough may mean for the economy. 

Andrew Bailey, the Bank of England’s governor, said that it was a “big puzzle” to see how there can be such a high level of vacancies, even though 1.6 million people are estimated to have been furloughed by July. 

This may be because “employers have been hoarding labour, because they still expect demand to recover,” says the Financial Times. 

Samuel Tombs of Pantheon Macroeconomics thinks many could still be “underemployed” if their employers give them their old jobs back, albeit at shorter hours. 

But Julian Jessop, an economist and a fellow at the Institute of Economic Affairs, a think-tank, says some of the fears related to the end of the furlough scheme may be overdone: “There may be a short term bump in unemployment, but I think the level of unemployment will be a lot lower than many people feared at the beginning of the year,” he said. 

While the tourism and airlines industry may still be exposed to bouts of uncertainty, he said, most of the currently furloughed workers are partially rather than fully furloughed. 

This is also the view of the Resolution Foundation, another think tank, which concluded in its recent report that there are two main reasons one shouldn’t assume that many people will necessarily lose jobs once furlough ends. 

First is that employers have been paying contributions towards wages for three months now. “This ‘skin in the game’ suggests that they will not be making all of their fully-furloughed staff redundant when the scheme ends, even if they had not yet done so by early September,” Resolution Foundation said. 

Second is that the risk is much lower for those who are on partial furlough.

Will it affect investors? 

There is no reason to panic just yet. Policymakers are likely to hold off any tightening of monetary policy until the true effect of lifting furlough is known and ultimately how the unemployment rate fares in coming months.

UK unemployment is expected to rise to 5.2% according to HM Treasury estimates. 

And, as Jessop points out, many sectors of the economy have already rebounded sharply following the easing of Covid-19 restrictions, so it’s unlikely investors need to worry. But perhaps be cautious about hospitality sector stocks.

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Bitcoin jumps 9% to touch 12-day high

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