January 2016 marked the beginning of Japan’s most recent two-year term as an elected, non-permanent member of the United Nations Security Council (UNSC). This is Japan’s 11th term, the most of any nation in the world. Japan’s dream is to become a permanent member of the UNSC. However, can this dream really come true?
On Wednesday, the World Trade Organization (WTO) announced its ruling in a case brought by the United States against India. In the case, the U.S. argued that India imposed unfair trade restrictions designed to deny foreign manufacturers from equal access to Indian markets in contradiction of WTO rules.
The US S&P 500 closed above 1950 for the first time since January 6. Global equity markets are broadly higher in response. At the same time, ahead of the G20 meeting, the world’s second and third-largest economies have signaled additional stimulus will be forthcoming.
The G20 finance ministers and central bankers will meet in Shanghai starting tomorrow. From some quarters, there is a sense of urgency. The IMF, for example, is likely to cut its world GDP forecast of 3.4% this year.
That forecast is not even two months old. The tightening of global financial conditions, exemplified by the sharp drop in share prices over the last six weeks is heightening anxiety among policymakers and investors alike.
A confluence of factors is raising anxiety levels among investors, expressed in heightened volatility. The S&P 500 was turned back yesterday from the key 1945 level, and global equities are falling today. The over-production of oil is set to continue. Saudi Arabia denies intentions to cut output and the Iranians scoffed at suggestions of freezing output.
API reported another large rise in US crude stocks. This points to upside risks on the 2.4 mln barrel-build consensus estimate in today’s official Department of Defense report.
Anybody who has seen a convertible caught in a rainstorm understands the importance of weather forecasts. In addition, the expectation is that the forecast is in fact accurate and reliable. Economies, like weather systems, are complex. Instead of having a foundation based on predictable laws of physics, they are built on human behaviour. Some would argue predictable human behaviour.
Let’s consider a scenario. On leaving the European Union, Britain will make a Free Trade Agreement with the EU, or trade with it under World Trade Organisation most-favoured-nation (MFN) rules. It will also regain its WTO seat and make trade deals with other countries to replace those it enjoys via the EU, with a particular focus on the Commonwealth. In this way, sovereignty will be regained.
Most prospective prime ministers would be mildly embarrassed if a boost to their chances made financial markets plunge. However, Boris Johnson is doubtless gratified that his backing for Brexit led to the pound’s biggest one-day fall since the aftermath of the financial crisis. Sterling had barely flinched when cabinet ministers including Michael Gove and Iain Duncan Smith made their own interventions a day earlier.
The US dollar and yen remain firm. The ramifications of Brexit continue to weigh on sterling and the euro. After nearing $1.4050 yesterday, sterling could not move much above $1.4150 before sellers re-emerged. The euro, which came close to $1.10 yesterday, was sold into about half a cent bounce. It marginally extended yesterday’s decline, slipping to almost $1.0990.
As the European Union grew, the unanimity in decision-making increasingly gave way to qualified majority voting. This development took away an important weapon the UK deployed to pursue its national interest. The use often frustrates the collectivist decision-making in Brussels and exerts its will for a broad union that preserved national sovereignty.
