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    Despite climate concerns, demand for dirty fuels is surging

    GREEN TYPES had hoped that the recovery from the pandemic might jump-start the world’s decarbonisation efforts. Governments say they want to build back better and greener, and have announced ambitious plans to kick the fossil-fuel habit. In Europe, officials have unveiled policies to achieve a 55% reduction in greenhouse-gas emissions, compared with their level in 1990, by the end of this decade. On July 21st Japan announced plans for fossil fuels to fall from 76% of its power-generation mix in 2019 to 41% by 2030.Despite the grand talk, though, fossil fuels are resurgent. A recent report from the International Energy Agency makes for sobering reading. Global electricity demand is forecast to grow by nearly 5% in 2021 and by 4% in 2022. Fossil-fuel-based power will probably make up 45% of the extra demand this year and 40% next year. (By contrast, it made up about a quarter of new power generation in 2019.)The revival of the American economy has led to strong demand for natural gas from industrial firms. In Asia and Europe, a hot summer has boosted demand for imports of liquefied natural gas. Citigroup, a bank, calculates that European gas-storage levels, an indicator of the tightness of the global market, are below those seen in the past five years. S&P Global Platts, a research firm, reckons that demand in parts of Asia and Europe partly reflects the need to replenish stores ahead of the winter.Coal markets are heating up, too: the price of one benchmark has nearly trebled so far this year. Chinese electricity demand, which relies heavily on the sooty stuff, shot up to a record in mid-July. Production bottlenecks in South Africa and Colombia have not helped. Anastacia Dialynas of Bloomberg NEF, a data outfit, reckons that high natural-gas prices may encourage power producers to favour coal-burning plants over gas-fired generators. America’s Energy Information Administration forecasts that coal’s share of domestic electricity production will rise to 26% this year, from 22% in 2020. Steelmaking, which uses a lot of coal, provides another boost. Commerzbank, a German lender, predicts that global steel output could hit a record high this year.Politics has added fuel to the fire. In October China banned coal imports from Australia. Some 70% of its usual imports of seaborne metallurgical coal (used to make steel) became off-limits, says Jim Truman of Wood Mackenzie, a consultancy. Steel mills along China’s coast rushed to find alternatives. But local sources proved insufficient, and imports from Mongolia were curtailed by covid-related border closures.The price spike may ease over time. In May China’s central government ordered provinces to curb electricity use, which should reduce the demand for fuel. Supply bottlenecks will be overcome. An expected boost to American gas production should eventually refill storage units worldwide.Even so, the fossil-fuel surge offers a warning. Hopes that the world would permanently lower its energy use after the global financial crisis of 2007-09 came to nothing. In late July this year a gathering of environment ministers from the G20 group of countries in Italy turned into farce, with officials from China, India, Russia and Saudi Arabia blocking an agreement to end fossil-fuel subsidies and phase out the use of coal. Build back better, come back greener may be an admirable goal, observes David Fyfe of Argus Media, an industry publisher, but unless it is accompanied by serious policies, “coal will remain the default fuel for base-load power in many countries.” ■This article appeared in the Finance & economics section of the print edition under the headline “Fired up” More

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    Why have some places suffered more covid-19 deaths than others?

    SEVENTEEN MONTHS into the covid-19 pandemic, plenty of questions about the catastrophe remain unanswered. It is still unclear how SARS-CoV-2 originated, for instance. Another puzzle is why some areas have had less destructive epidemics than others. Why has Florida had fewer deaths per person from covid-19 than the American average, even though restrictions there have been looser for longer? But researchers are getting closer to the “magic” variable: the factor that does most to explain variance in deaths from the virus. It turns out that this has little to do with health measures, climate or geography. Instead it relates to economics.The huge literature on the determinants of covid-19 infections and deaths finds that many widely assumed relationships do not always hold in the real world. Everyone knows that the old are most at risk; but Japan, where 28% of people are over the age of 65 compared with 9% globally, has seen remarkably few deaths so far. Some studies suggest that places that had bad flu seasons before the pandemic suffered less since; but other researchers have called that conclusion into question. There is no consistent correlation between the toughness of lockdowns and cases or deaths.Faced with these surprising results, a hunt has begun that is as morbid as it is nerdy. Wonks are searching for less obvious variables that do more to explain variation in deaths from covid-19. And so far the most powerful of them all is inequality—usually measured as the Gini coefficient of income, where zero represents perfect equality and one represents perfect inequality.In a recent exercise Youyang Gu, a data scientist, ran multiple versions of a model that seeks to find correlations between 41 different variables and American state-level deaths from covid-19. Only three variables “consistently have non-zero coefficients”, he finds: inequality, population density and nursing-home residents per person. And of those three, inequality has the biggest effect.Look around the world, and it seems that Mr Gu may be on to something. Deaths from covid-19 have been lower in egalitarian Scandinavia (even in Sweden, which imposed few restrictions) than for Europe as a whole. France, where the Gini is 0.29, has seen far fewer excess deaths than neighbouring Britain, where it is 0.34. New York state has both extremely high inequality and a huge covid-19 death toll; Florida is less exceptional on both counts.Few other researchers rank the variables in the way that Mr Gu does. Yet our survey of the dozens of papers investigating the determinants of the toll from covid-19 finds that inequality has consistently high explanatory power. A recent study by Frank Elgar of McGill University and colleagues, looking at 84 countries, finds that a 1% increase in the Gini coefficient is associated with a 0.67% increase in the mortality rate from covid-19. Another, by Annabel Tan, Jessica Hinman and Hoda Abdel Magid of Stanford University, looks at American counties. They find that the association between income inequality and covid-19 cases and deaths varied over 2020 but was generally positive; higher inequality tends to lead to more suffering.There is a lot less research on the potential reasons behind this intriguing relationship. Three sound plausible. The first relates to pre-existing health. A study in 2016 by Beth Truesdale and Chris topher Jencks of Harvard University found “modest evidence” of a link between higher income inequality and lower life expectancy. This may be because of what economists call a “concave” relationship between health and income: giving a rich woman an extra dollar in income probably improves her health by less than removing a dollar from a poor man harms his. People in worse health tend to suffer more from covid-19 (and indeed some other research has drawn links between inequality and pre-existing conditions that may aggravate the disease, such as obesity).The second potential factor is workplace relations. Workers in relatively egalitarian countries tend to have more bargaining power, and may therefore find it easier to air and redress concerns with employers. This can have its disadvantages, but it may help stop practices that aid the spread of covid-19. In Sweden, a country with strong workers’ rights, frontline (or “essential”) workers, such as meat-packers and police officers, have not on average faced a higher risk of dying from covid-19 than others, potentially limiting the overall number of deaths. This is in contrast to results from America, Britain and Canada, which are more lightly regulated. One study in California found that people in some jobs were much more likely to die of covid-19 than those in other occupations. Chefs and taxi drivers saw among the biggest increases in excess deaths in 2020.The third factor relates to social capital. In areas of high inequality people are more likely to say they distrust strangers or to have little interest in civic engagement. Research published by the IMF in 2016 suggests why: in places where people have very different lifestyles, they see little in common with each other. Weak social capital almost certainly reduces people’s willingness to comply with virus-control measures, such as self-isolation or mask mandates, for which the private incentives to obey are weak.Equal opportunityThere were already good reasons to think that inequality, at least in some countries, was too high. This is another. Yet turning around the income-distribution supertanker can hardly be done overnight, and some solutions to income inequality, such as raising taxes, bring trade-offs of their own. In the meantime, governments need to tailor their pandemic response to take account of inequalities. That could include, for instance, changing the economic incentives to stay at home if infectious—say, by using self-isolation payments—or investing more in poor children’s health to make them healthier adults. Without these improvements, high inequality is likely to continue to mean greater vulnerability to pandemics. ■This article appeared in the Finance & economics section of the print edition under the headline “Establishing the cause of death” More

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    The case for a further narrowing of euro-zone bond spreads

    IT WAS BUSINESS as usual at the European Central Bank (ECB). At the press conference on July 22nd that followed its regular monetary-policy meeting, Christine Lagarde, the bank’s boss, might have been hoping for a few plaudits. The ECB had recently announced that it was changing to a symmetric inflation target, bringing it into line with practice everywhere else. No such luck. Many of the questions were critical in nature. Why is the ECB not doing more? How split are its members? And so on.As dispiriting as this was for Ms Lagarde, the focus on issues of fine-tuning is rather cheering. Mario Draghi, her predecessor as ECB president, spent a lot of time fighting to keep the euro zone together. These days it looks a lot more solid, a lot more normal. The new inflation target is only one sign of this. Another is that the active use of fiscal policy is no longer anathema. The next-generation EU fund (NGEU), which will disburse €750bn ($880bn) to member states, affords a degree of burden-sharing between countries. And the politics of “Europe” are notably less ugly. Populists in France and Italy no longer talk about leaving the euro or the EU.This is progress. Only a few years ago a common opinion among American investors was that the euro would break up. If the euro zone is to become truly normal, though, a corollary is that the bonds issued by its members’ governments should be almost interchangeable. For some countries, the spread (or excess yield) over German bunds has already narrowed considerably. France trades at 30 basis points (0.3 percentage points) over ten-year bunds. Ireland’s spread is 45 basis points. The widest spreads are found on Italy’s government bonds, or BTPs. A ten-year BTP has a spread of around 110 basis points over the equivalent bund. But a case can be made that these will narrow further.It begins with the changes at the ECB. After the completion of a recent strategy review, the central bank tweaked its inflation goal. Instead of “below, but close to, 2%”, it will aim at a symmetric target. Inflation below 2% will be as undesirable as inflation above it. Reasonable people might have expected the bank to further relax monetary policy as a consequence. Its most recent forecast, made in June, was for sub-2% inflation over much of the next few years.What the bank offered instead was a fresh dose of “forward guidance”—a pledge that it would keep interest rates at their present level, or lower, until it saw durable 2% inflation on the horizon. This did not imply that interest rates would be “lower for longer”, said Ms Lagarde. Rather, it was a commitment that they would not be increased prematurely. Any expansion of its various bond-buying schemes would have to wait until fresh inflation forecasts were made in September.Perhaps it is prudent to wait. After all, the reopening of America’s economy has brought with it a string of big upside surprises to inflation. But the betting is that things will be different in the euro zone. Fiscal support there has been in the form of job subsidies rather than the cash transfers that fuelled a surge of spending in America. And there has been nothing quite on the scale of the $1.9trn package that Congress passed in March. A reasonable bet, then, is that the ECB will extend its bond purchases to meet the new target, or at least not curtail them abruptly.If it does, spreads are likely to narrow. Italy’s have the furthest to go. Its bonds have been an outlier for a reason. Italy is a big, sluggish economy with a heavy public-debt burden. A wider spread is justified by the greater risk of default.Yet a state of affairs in which euro-zone bonds, bar Italy’s, look more like bunds would be an odd one. It would imply that the euro could survive a default or exit by Italy. That is a bold assumption. If Italy blows up, other countries would be at risk, too. Indeed if you believe the euro is doomed, the last bonds you should sell are BTPs, because at least you’ll get a higher yield while you wait. And there are lots of investors who are obliged to own Italy. For those that track a benchmark euro index, being underweight Italy is costly.Moreover, Italy is coming into the fold. It is a big beneficiary of the NGEU fund. Mr Draghi is now the prime minister, and is trusted in Brussels and in Berlin to use the money well. But what about after that? Well, here’s a thought. Every year the euro survives, it becomes harder to imagine an alternative. The longer it lasts, the longer-lasting it appears to be.This article appeared in the Finance & economics section of the print edition under the headline “Pulling tight” More

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    Real Treasury yields plumb the depths

    INVESTORS RUSH to American Treasuries when they get anxious. In spring 2020, as the severity of the pandemic became clear, yields on ten-year Treasuries sank. That comprised a fall in both expected inflation and real yields, as investors became gloomy about both price and GDP growth. In recent weeks yields have drifted down again, reflecting worries about the strength of the economic recovery. On July 26th the real yield fell to a record low. Investors’ expectations of inflation, though, have held up.This article appeared in the Finance & economics section of the print edition under the headline “Real bond yields fall” More

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    Stocks making the biggest moves premarket: Comcast, Merck, Tempur Sealy, Yum and others

    In this articleNOCTAPYUMTPXMRKCMCSACheck out the companies making headlines before the bell:Comcast (CMCSA) – Comcast rose 1.9% in the premarket after reporting adjusted quarterly earnings of 84 cents per share, beating the consensus estimate of 67 cents. The NBCUniversal parent also reported better-than-expected revenue, helped by a rebound in ad sales and a reopening of theme parks.Merck (MRK) – The drug maker matched estimates with adjusted quarterly profit of $1.31 per share, with revenue beating Street forecasts. Sales of cancer drug Keytruda jumped 23%, in line with expectations. Merck fell 1.8% in premarket trading.Tempur Sealy (TPX) – The mattress maker earned an adjusted 79 cents per share for its latest quarter, 22 cents above estimates, with revenue topping forecasts as well. Tempur Sealy also raised its full-year outlook, and the stock jumped 4.9% in premarket action.Yum Brands (YUM) – The parent of KFC, Taco Bell and Pizza Hut came in 20 cents ahead of estimates with adjusted quarterly earnings of 1.16 per share, and revenue also beating analyst projections. Results got a boost from restaurant reopenings as well as continued strong demand in online orders. Yum rallied 2.3% in premarket trading.Molson Coors (TAP) – Molson Coors added 1.8% in the premarket after its adjusted quarterly earnings of $1.58 per share beat the consensus estimate of $1.34. The beer brewer’s revenue was above Wall Street forecasts as well.Northrup Grumman (NOC) – The defense contractor reported adjusted quarterly earnings of $6.42 per share, beating the $5.84 consensus estimate, with revenue also topping estimates. The company was helped by continued strength in its satellite and missile-making units, and the stock rose 1.1% in premarket trading.Facebook (FB) – Facebook shares fell 3.7% in premarket trading after the company said revenue growth will slow during the second half of the year as a change in Apple’s (AAPL) privacy policies will hurt Facebook’s ability to target ads. For the second quarter, Facebook reported earnings of $3.61 per share compared to a consensus estimate of $3.03, with revenue also topping Wall Street forecasts.Ford (F) – Ford surprised analysts with an adjusted quarterly profit of 13 cents per share. The automaker had been expected to report a second-quarter loss of 3 cents per share, due in large part to a chip shortage crimping production. However, Ford said it expected that situation to improve in the second half, and it raised its full-year outlook. Ford jumped 4% in the premarket.PayPal (PYPL) – PayPal beat estimates by 3 cents with adjusted quarterly earnings of $1.15 per share, with the payment service’s revenue essentially in line with analyst projections. However, shares came under pressure after it gave a lower-than-expected outlook, as former PayPal parent eBay (EBAY) continues its transition to its own payment platform. The stock slid 5.6% in premarket trading.Qualcomm (QCOM) – Qualcomm reported adjusted quarterly earnings of $1.92 per share, beating the $1.68 consensus estimate, with the chip maker’s revenue also exceeding Street forecasts. Qualcomm also gave an upbeat forecast as it expects supply chain disruptions to ease. Qualcomm added 3.2% in the premarket.Uber Technologies (UBER) – Uber dropped 5.1% in premarket trading after sources told CNBC that Japanese investment giant Softbank is selling a chunk of its stake in Uber to cover losses related to its investment in another ride-hailing company, Didi Global (DIDI). Didi itself is in the news, denying an earlier Wall Street Journal report that it was considering going private. Didi had been up well over 30% in the premarket before that denial, before trimming that still-large gain to 17.5%.iRobot (IRBT) – iRobot shares plunged 11.5% in premarket trading after it reported a second-quarter loss and cut its full-year outlook. The maker of the Roomba robotic vacuum cleaner said the worldwide chip shortage would continue to hurt its ability to fulfill orders during the second half of the year. More

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    China will still allow IPOs in the United States, securities regulator tells brokerages

    A vehicle from electric car maker NIO sits outside of the New York Stock Exchange (NYSE), September 12, 2018 in New York City.Drew Angerer | Getty Images News | Getty ImagesChina will continue to allow Chinese companies to go public in the U.S. as long as they meet listing requirements, China’s securities regulator told brokerages late Wednesday, according to a source familiar with the matter.A series of regulatory actions in the last few weeks has heightened investor concerns that Beijing is trying to block foreign capital flows into Chinese assets.The cross-border stock listings can also occur using the variable interest entity structure, the source said, citing the regulator. It refers to a legal structure which allows international investors to access shares of Chinese companies in the U.S.The regulator recognized the structure is a vital way for companies to attract foreign capital, but said it would have to be adjusted if there were national security concerns, said the source, who requested anonymity due to the sensitivity of the matter.China Securities Regulatory Commission Vice Chairman Fang Xinghai made the comment during a virtual meeting with major investment banks on Wednesday, the source said. It followed days of sharp selling in Chinese stocks on fears of increased regulatory crackdown by Beijing.Bloomberg first reported news of the meeting.The securities regulator has stopped short of making an official public statement. The commission did not immediately respond to a CNBC request for comment.Chinese stocks listed in Asia and the U.S. — including big names like Alibaba and Tencent — plunged in the last several days as Chinese authorities increased scrutiny on tech companies over monopolistic practices and data security.A policy document that began circulating widely Friday called for Chinese after-school tutoring companies to become non-profits, sending the stocks plunging by double-digits in Hong Kong and the U.S.Read more about China from CNBC ProTencent and more: Investment firm names ‘high quality’ Chinese stocks trading at a discountArk Invest’s Cathie Wood dumps more Chinese stocks amid crackdownGoldman Sachs downgrades Chinese education stocks on prediction market will ‘shrink significantly’The policy specifically banned tutoring companies from raising money through the stock market or having foreign investors, particularly through the variable interest entity legal structure that allows international investors to access Chinese shares.The speed and breadth of the policy surprised many. Goldman Sachs on Monday downgraded Chinese education stocks on expectations the after-school tutoring market would “shrink significantly” — to less than one-fourth its current $106 billion size.However, the securities commission’s Fang said the policy was intended to reduce the burden on parents — not shut off foreign investment — and the education companies will have as much time as needed to restructure, according to the source.The education policy in question was issued by the State Council — China’s top executive body — and the Chinese Communist Party’s central committee. More

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    Shares of Singapore's top banks jump after regulator lifts cap on dividend payouts

    In this articleOCBC-SGUOBH-SGDBSM-SGAutomated teller machines of the three Singapore-listed banks: OCBC, DBS and UOB.Munshi Ahmed | Bloomberg | Getty ImagesSINGAPORE — Shares of Singapore’s top three banks rose Thursday after the country’s financial regulator lifted a cap on dividend payouts that was implemented following the Covid-19 pandemic.Singapore’s largest bank DBS Group Holdings climbed around 0.6% in early trade, while smaller peers Oversea-Chinese Banking Corp and United Overseas Bank were up by around 1%.The three banks make up around one-third of the benchmark Straits Times Index, which rose 0.5%.The Southeast Asian city-state’s financial regulator and central bank, the Monetary Authority of Singapore, said Wednesday that restrictions on bank dividend payments “will not be extended.”MAS had last year urged banks to cap their total dividends per share for 2020 to 60% of the previous year’s amount in light of economic uncertainties due in part to the pandemic.”The global economic outlook has since improved. While some uncertainties remain, Singapore’s economy is expected to continue on its recovery path, given strengthening global demand and progress in our vaccination programme,” the regulator said in a statement.Stock picks and investing trends from CNBC Pro:BlackRock’s Rieder says the Fed could begin tapering bond purchases in NovemberMorgan Stanley names 4 global stocks that are about to surprise markets to the upsideHere are Wall Street’s favorite value stocks that should benefit from the economic reopeningBefore MAS’ move, the European Central Bank and U.S. Federal Reserve made similar decisions to relax restrictions on dividend payouts by banks.Eugene Tarzimanov, vice president and senior credit officer at Moody’s Investors Service, said in a note he expects the three large Singapore banks to increase dividend payments to pre-pandemic levels of around 50% of their net income.He noted that Moody’s had changed its outlook on the Singapore banking system from negative to stable in March, in recognition of the improving economy, potential for bank earnings to grow and broadly stable asset quality.DBS, OCBC and UOB are scheduled to report second-quarter earnings next week. More

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    Robinhood valued at $32 billion after selling shares in IPO at $38 per share

    Robinhood, whose stock trading app has surged in popularity among retail investors, sold shares in its IPO at $38 a piece, valuing the company at about $32 billion.Ahead of its Nasdaq debut on Thursday, Robinhood priced shares at the low end of the $38 and $42 range. The company, which will trade under ticker symbol HOOD, sold 52.4 million shares, raising close to $2 billion. Co-founders Vlad Tenev and Baiju Bhatt each sold about $50 million worth of stock.Robinhood has become a central gateway to the markets for young and first-time investors. The app, which offers equity, cryptocurrency and options trading, as well as cash management accounts, experienced record trading levels during the pandemic and amid the meme stock craze of early 2021.Robinhood estimates it has 22.5 million funded accounts (those tied to a bank account) as of the second quarter. That’s up from 18 million in the first quarter of 2021, which was an increase of 151% from a year earlier. The company was last valued in the private markets at $11.7 billion in September.Goldman Sachs and JPMorgan Chase are the lead investment banks on the deal. Underwriters will have an option to buy an additional 5.5 million shares. In its updated prospectus, Robinhood estimated second quarter revenue of $546 million to $574 million, up from $244 million in the second quarter of 2020. Revenue jumped 309% in the first quarter to $522 million from $128 million a year prior.However, Robinhood expects to swing to a net loss of $487 million to $537 million in the second quarter after turning a profit in the same quarter last year.Robinhood collected $331 million in payment for order flow – the money brokerage firms receive for directing clients’ trades to market makers – in the first quarter. Payment for order flow has received scrutiny from regulators in 2021.Options trading accounts for about 38% of revenue while equities and crypto are 25% and 17% of revenues, respectively. But Robinhood warned that the brokerage could see a slowdown in its trading revenue and account growth as the retail trading boom cools.Competitors of Robinhood include Fidelity, Charles Schwab, Interactive Brokers and newer services like Webull and SoFi. Charles Schwab has a market capitalization of $130 billion and Interactive Brokers has a market valuation of $26 billion.DST Global, Index Ventures, NEA and Ribbit Capital are some of Robinhood’s biggest investors.WATCH: Here’s why short selling does more harm than good for U.S. economy More