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18/08/2016

KB Weekly News Bites: Yen in Black

Yen in Black: The Japanese yen continues to strengthen, with the US dollar falling below the psychologically significant 100-level yesterday. This will be extremely frustrating to Japanese policymakers who are throwing everything at weakening their currency and stimulating their economy. And by everything, we mean everything: the Bank of Japan is buying so many domestic assets, it on course to become the top shareholder in 25% of the companies in the Nikkei 225 index by next year. (17/08)

Just a minute: Minutes from the Federal Reserve’s July meeting showed US policymakers largely sanguine, with some poised to raise rates "soon", but others wanting to wait until there was some more economic data supporting a rate rise. One optimistic member of the committee even wanted to raise rates there and then. In any event, with little new information regarding the actual timing of what is to come, markets were left none the wiser, but free to speculate. (18/08)

Long-winded: The Hornsea Project Two, the world's biggest planned offshore wind farm, has received UK government approval to be built off the coast of Yorkshire; upon completion it will produce 1.8 gigawatts of electricity, meeting about 5% of average UK demand. Wind already contributes 12.5% of the UK’s energy mix, but as costs continue to come down due to technology and economies of scale, the government expects installed offshore wind capacity to double from 5 GW now to 10 GW by the end of this decade, and then double again to 20 GW in the 2020’s. (17/08)

It’s going to take ages: In perhaps the most obvious solution to the looming pensions crisis in a number of ageing countries, Germany’s central bank advocates raising the legal retirement age to 69 by 2060; the Bundesbank believes current plans to raise the retirement age to 67 by 2030 do not go far enough. In the UK – where life expectancy has increased from 75 to 82 in the past 25 years – the state pension age is due to rise to 68 by 2046. (16/08)

Feeling Gilty: The post-"Brexit" rally in UK Gilts enters its fifth week today as fear of the unknown continues to combine headily with the Bank of England's stimulus measures (i.e. rate cut, bond buying). In the days leading up to the referendum, 10-year Gilts were yielding about 1.4%; today they are hovering just above 0.5%. Of course, that wafer thin yield continues to make the FTSE 100, with a dividend yield of about 3.6%, look super attractive by comparison. (15/08)

The Empire Strikes Back: For the first time in 40 years, cotton yarn will be produced by a British spinning mill (i.e. English Fine Cottons). The company will produce 500 tonnes a year, with Marks & Spencer already contracted to purchase the entire output. The Chinese and other Asian powers that have wrested the industry away from its traditional home will probably not notice at this stage, they still dominate with output of 35 million tons per year of cotton yarn. (15/08)   

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