Sunday, January 15, 2017

Eight men as rich as half the world; Pound sinks on Brexit anxiety; Crude oil faces slippery road

1 Eight men as rich as half the world (Larry Elliott in The Guardian) The world’s eight richest billionaires control the same wealth between them as the poorest half of the globe’s population, according to a charity warning of an ever-increasing and dangerous concentration of wealth.

In a report published to coincide with the start of the week-long World Economic Forum in Davos, Switzerland, Oxfam said it was “beyond grotesque” that a handful of rich men headed by the Microsoft founder Bill Gates are worth $426bn, equivalent to the wealth of 3.6 billion people.

The development charity called for a new economic model to reverse an inequality trend that it said helped to explain Brexit and Donald Trump’s victory in the US presidential election. Oxfam blamed rising inequality on aggressive wage restraint, tax dodging and the squeezing of producers by companies, adding that businesses were too focused on delivering ever-higher returns to wealthy owners and top executives.

The World Economic Forum (WEF) said last week that rising inequality and social polarisation posed two of the biggest risks to the global economy in 2017 and could result in the rolling back of globalisation.

Oxfam said the world’s poorest 50% owned the same in assets as the $426bn owned by a group headed by Gates, Amancio Ortega, the founder of the Spanish fashion chain Zara, and Warren Buffett, the renowned investor and chief executive of Berkshire Hathaway.

The others are Carlos Slim Helú: the Mexican telecoms tycoon and owner of conglomerate Grupo Carso; Jeff Bezos: the founder of Amazon; Mark Zuckerberg: the founder of Facebook; Larry Ellison, chief executive of US tech firm Oracle; and Michael Bloomberg; a former mayor of New York and founder and owner of the Bloomberg news and financial information service.

Last year, Oxfam said the world’s 62 richest billionaires were as wealthy as half the world’s population. However, the number has dropped to eight in 2017 because new information shows that poverty in China and India is worse than previously thought, making the bottom 50% even worse off and widening the gap between rich and poor.

2 Pound sinks on Brexit anxiety (Straits Times) Sterling slid to three-month lows in Asia on Monday with investors again spooked by concerns over Britain's exit from the European Union, while US policy uncertainty lingered ahead of President-elect Donald Trump's inauguration.

All the early action was in currencies where the pound sank as low as $1.1983, depths not seen since the flash crash of October, having finished around $1.2175 in New York on Friday. It was last down 1.1 per cent at $1.2044.

Dealers said the market was reacting in part to a report in the Sunday Times that UK Prime Minister Theresa May will use a speech on Tuesday to signal plans for a "hard Brexit", quitting the EU's single market to regain control of Britain's borders. Investors have been worried such a decisive break from the single market would hurt British exports and drive foreign investment out of the country.

3 Crude oil faces slippery road (Dharmesh Bhatia in Khaleej Times) Crude oil recorded lucrative gains in 2016 as prices rebounded from decade-low levels of $26 per barrel in February of last year. Soaring over 50 per cent, this marked the first annual gain for Brent crude oil in four years.

The over 45 per cent rally in WTI crude oil also marked the first yearly increase, following the sell-off, totalling -76 per cent, over the previous two years (crude oil peak prices were in 2014 - $107; 2015 - $62 and 2016 - $54).

Apart from the low base, the rally was driven by ongoing speculations that Opec and non-Opec producers would freeze or cut output. Such hopes culminated in the deal, announced in December 2016, that Opec decided to cut its crude production by 1.2 million barrels, effective January 1, 2017, while non-Opec producers, including Russia but not the US, would reduce output by around 0.6 million barrels per day (bpd).

Opec produces a third of global oil, or around 33.6 million bpd, and under the new deal has said it would reduce output by around 1.2 million bpd from January 2017. That would take its output to January 2016 levels, when prices fell to over 10-year lows amid ballooning supply.

The path ahead for the oil market, however, is expected to be volatile, as those who positioned for a rally unwind their trades to book profits. The possibility that Opec will be unable to meet its commitment to cut production could also undermine prices. That makes the long-term path for oil more uncertain, but few expect the commodity to reach $60 a barrel soon.

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