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Asia’s exports rebound

IT IS easy to be downcast about the state of global trade. It has faced stiff headwinds in recent years: in 2016, for the first time in 15 years, it grew more slowly than the world economy. Regional and global trade deals are going nowhere, slowly. And America’s new president has promised to protect his country from trade-inflicted “carnage”.

Amid all this gloom, optimism seems foolhardy. But in Asia’s export dynamos, trade is picking up steam. In January, Chinese exports rose year-on-year for the first time in ten months; South Korean shipments have increased for three months in a row. Surveys reveal strong export pipelines in Japan, Singapore and Taiwan. Healthy order books for Asia’s manufacturers normally bode well for global trade and indeed the global economy. It is too soon to declare a definitive upturn in global trade, but it looks like more than a blip (see chart).

The simplest explanation for the rebound is that global demand is itself on solid ground. Global growth is still slower than before the financial crisis of 2008, but is heading in the right direction. Both the IMF and the World Bank think it will…Continue reading

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New models for new media

Not watching Twitter

FOR months Twitter, the micro-blogging service, has received the kind of free attention of which most companies can only dream. Politicians, corporate bosses, activists and citizens turn to the platform to catch every tweet of America’s new president, who has become the service’s de facto spokesman. “The whole world is watching Twitter,” boasted Jack Dorsey (pictured), the company’s chief executive, as he presented its results on February 9th. He has little else to brag about.

But Donald Trump has not provided the kind of boost the struggling firm really needs. It reported slowing revenue growth and a loss of $167m. User growth has been sluggish, too: it added just 2m users in that period. Facebook added 72m. The day of the results, shares in Twitter dropped by 12%. Because news outlets around the world already report on Mr Trump’s most sensational tweets, many do not feel compelled to join the platform to discover them. Others are put off by mobs of trolls and reams of misinformation.

And not even Mr Trump could change the cold, hard truth about Twitter: that it can never be…Continue reading

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A bullish case for copper

DURING the commodity “supercycle”, prices largely marched up and down in unison, fuelled by the strength (or weakness) of demand in China. Since last year commodities have again been on a tear, but for more idiosyncratic reasons. In the case of copper, strikes and supply disruptions in two of the world’s largest mines have helped push prices this week to their highest level in 20 months. This fits into a narrative of longer-term potential supply shortages that has investors licking their lips over prospects for the red metal.

A strike that began on February 9th at Escondida in Chile, the world’s largest copper mine, has been compounded by a dispute between operators of Grasberg, another huge copper mine, located in the Indonesian province of Papua, and the government. That led to a halt in copper-concentrate production there, too, on February 10th. The two account for 9% of mined copper supply.

Robert…Continue reading

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Traditional media firms are enjoying a Trump bump

DONALD TRUMP calls it the “failing” New York Times in his tweets, but his presidency has breathed new life into the newspaper and other mainstream media outlets. The New York Times, the Washington Post and the Wall Street Journal have all received boosts in subscriptions and page views; cable news networks, such as CNN and the Fox News Channel, are getting huge increases in viewers at a time when most other channels are losing them; and even the long-suffering stocks of newspaper companies are rallying. Since the election shares in the New York Times Co have risen by 42%, outperforming even the mighty Goldman Sachs.

Why the boost? The unprecedented nature of political events has kept American eyeballs glued to pages and screens. The pace of change, especially since the election, compels Mr Trump’s fans and foes alike to stay abreast of developments. Many do so using Twitter (see article). But…Continue reading

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Planet’s satellites offer customers a new world view every day

BUILT by the Indian Space Research Organisation, the Polar Satellite Launch Vehicle threw itself into the sky at 3.58am GMT on February 15th. It took with it a record-breaking 104 satellites—88 of which belonged to a single company, Planet, a remote sensing business based in San Francisco. Planet now has 149 satellites in orbit—enough for it to provide its customers with new moderately detailed images of all the Earth’s land surface every single day.

The satellites Planet makes—it calls them “doves”—measure 10cm by 10cm by 30cm. The first doves, launched five years ago, could send back pictures of just 3,000 square kilometres a day. But the satellites have followed a trajectory of improvement much closer to that seen in cell-phones—from which they get some of their components—than the established satellite industry. The latest doves can cover 2.5m square kilometres a day.

The expanded fleet of satellites will send over 3 terabytes of data a day to more than 30 receiver stations spread around the Earth. After processing to remove distortions and to locate each image, the data will be in the cloud and ready for the company’s…Continue reading

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France’s PSA Group may plan to buy Opel, GM’s European operation

AFTER sweeping past a significant milestone, drivers rarely slam their vehicles into reverse. Yet General Motors (GM), which last year joined Toyota and Volkswagen in an elite group that sells over 10m vehicles a year, may be on the brink of such a manoeuvre. On February 14th the American firm and PSA Group, which makes Peugeots and Citroëns, sprang a surprise by confirming that they were in talks that could lead to the French carmaker buying GM’s European operation. GM’s decision to downsize has many merits, but the advantages of getting bigger are much less clear-cut for its European counterpart.

The two carmakers say a deal for Opel (which carries the Vauxhall brand in Britain) is only a possibility. But GM’s global might is not reflected at Opel, and it is probably keen to offload a carmaker that it has owned for nearly 90 years. Opel has done little other than disappoint in the recent past. Its 6% share of the European market puts it behind seven other brands and the business has lost money for years.

GM has considered offloading Opel before. In 2009, as it struggled in bankruptcy protection in the wake of the financial…Continue reading

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Sales of green vehicles are booming in Norway

TO JUDGE by the gleaming rows of Teslas, Nissan Leafs and other electric cars parked in the snow in central Oslo, Norwegians might already have given up on the internal combustion engine. Before long they probably will. Battery-powered cars and plug-in hybrids together accounted for 29% of all new car sales last year. The 100,000th battery-powered unit sold in December.

Norway first introduced tax perks to boost the electric-car market in the 1990s. But sales only sparked in the past five years or so after slicker vehicles with better batteries appeared. Now the country’s 5m citizens constitute the most developed national market for electric cars anywhere. Christina Bu, who heads the country’s association for electric cars, expects 400,000 electric-only vehicles on the roads by 2020, and predicts 70% of new sales will be of zero-emission cars. As range increases and price falls, demand will rise faster.

Though less than 5% of the total fleet of cars in Norway are electric, the country’s transport minister calls it “realistic” to expect an end to sales of new cars powered by fossil fuels by 2025. Fiscal incentives, not an outright ban, will bring this…Continue reading

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A new paper finds China more unequal than France but less so than America

JUST as China’s GDP has converged towards America’s, levels of inequality have also been catching up. That is one of the conclusions of research* from five authors, including Thomas Piketty, a French economist famous for his work on wealth and inequality. Their new paper compares the evolution of inequality in China, America and France over four decades.

Inequality has soared since China opened the door to private enterprise and growth took off. In 1978 the highest-earning tenth in China received just over a quarter of overall income before tax, significantly below the proportion in America and France at the time. By 2015, however, those top 10% of Chinese earners were paid two-fifths of total income—above the share in France, but still just below that in America (47%). Wealth, too, is concentrated in fewer hands: the richest 10% own nearly 70% of private wealth in China, up from 40% in 1995 (and not far below the American level of nearly 80%).

Rises at the top mean that the share of pre-tax income going to the poorest half of the Chinese population has shrunk dramatically and is now, at 15%, not much higher than the…Continue reading

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Electric cars are set to arrive far more speedily than anticipated

THE high-pitched whirr of an electric car may not stir the soul like the bellow and growl of an internal combustion engine (ICE). But to compensate, electric motors give even the humblest cars explosive acceleration. Electric cars are similarly set for rapid forward thrust. Improving technology and tightening regulations on emissions from ICEs is about to propel electric vehicles (EVs) from a niche to the mainstream. After more than a century of reliance on fossil fuels, however, the route from petrol power to volts will be a tough one for carmakers to navigate.

The change of gear is recent. One car in a hundred sold today is powered by electricity. The proportion of EVs on the world’s roads is still well below 1%. Most forecasters had reckoned that by 2025 that would rise to around 4%. Those estimates are undergoing a big overhaul as carmakers announce huge expansions in their production of EVs. Morgan Stanley, a bank, now says that by 2025 EV sales will hit 7m a year and make up 7% of vehicles on the road. Exane BNP Paribas, another bank, reckons that it could be more like 11% (see chart). But as carmakers plan for ever more battery power, even…Continue reading

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Carbon tariffs and the EU’s steel industry

Fuel for a dirty war

THE European Union wants to slash greenhouse-gas emissions to 80% below 1990 levels by 2050. It is on course to cut just half that amount. To get back on track, on February 15th, the European Parliament voted for a plan to raise the cost for firms to produce carbon. It has prompted growing calls for the bloc to tax the carbon emissions embodied in the EU’s imports. At best, such a levy will barely curb emissions. At worst, it could cause a trade war.

The EU’s latest reforms try to put up the price of carbon by cutting the emissions allowances firms are granted. They include the EU’s first border tax on carbon, levied on cement imports. Steel firms, also heavy users of carbon, say their exclusion from this scheme is unfair. This week Lakshmi Mittal, the CEO of ArcelorMittal, the world’s biggest steelmaker, offered his support for the tax. Similar proposals in America are also gaining support. This month a group including two Republican former treasury secretaries, James Baker and George Shultz, proposed a similar carbon tax on all imports at the border.

Boosters say such proposals remove…Continue reading

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European financial centres after Brexit

“WHEN the vote took place,” says Valérie Pécresse, “it was an opportunity for us to promote Île de France”, the region around Paris of which she is the elected head. Two advertising campaigns were prepared, depending on the result of Britain’s referendum last June on leaving the European Union. The unused copy ran: “You made one good decision. Make another. Choose Paris region.”

Brexit has made Paris bolder. Once Britain leaves Europe’s single market, the many international banks and other firms that have made London their EU home will lose the “passports” that allow them to serve clients in the other 27 states. Possibly, mutual recognition by Britain and the EU of each other’s regulatory regimes will persist. But no one can rely on the transition to Brexit being smooth, rather than a feared “cliff edge”. Best to assume the worst.

Britain is expected to start the two-year process of withdrawal next month. Given the time needed to get approval from regulators, find offices and move (or hire) staff, financial firms have long been weighing their options. London will remain Europe’s leading centre, but other cities…Continue reading

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Sovereign-bond issuers shrug off downgrades

ONCE upon a time, countries jealously guarded their credit ratings. Before the 2010 British election, George Osborne, soon to be the chancellor of the exchequer, emphasised the importance of cutting the budget deficit in order to maintain the country’s top AAA rating.

But despite the spending cuts and the tax increases he imposed, Britain was downgraded in 2013. There are only 11 countries with AAA status, according to Fitch, a rating agency, down from 16 in 2009. By value, only 40% of global sovereign debt has the highest rating, down from 48% a decade ago.

There has been an even more dramatic downward trend in corporate debt ratings. There were 99 AAA-rated American corporations in 1992, according to S&P Global, another ratings group; now there are just two. That trend is linked to the tax deductibility of interest: in terms of tax efficiency, it has made sense to increase the amount of debt, and reduce the equity, on the balance-sheet.

Clearly, at the sovereign level, the deterioration has been driven by the global financial crisis, which dented both economic growth and tax revenue. But with bond yields very…Continue reading

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