- Gocompare.com Energy investigate how Trump’s election could affect the energy market in the UK
- UK fossil fuel industries, energy research, renewables industry and consumer energy costs set to feel impact of President Trump
Less than an hour after the inauguration of President Donald Trump, the new administration outlined its energy policy*, which aims to focus on gas and oil, and reviving the coal industry, whilst also indicating the Climate Action Plan will be scrapped.
Gocompare.com Energy has highlighted four major areas which could feel the greatest impact from President Trump:
- The UK fossil fuel industry
- UK energy research
- The UK renewables industry
- UK consumer energy costs
The first area which could be affected is the UK fossil fuel industry. Trump has said that he wants to ramp up oil and gas production under an ‘America First Energy Plan’, going after un-tapped shale, oil and natural gas reserves, pressing ahead with fracking and drilling as environmental regulation is cast away.
An increase in production could mean that global prices drop due to a glut of supply, which could hurt UK oil and gas firms operating in the North Sea, who are seeing*1 increasing costs and decreasing investment*2 due to having to drill deeper and in more complex places.
While the industry is striving to improve efficiencies, the high profits enjoyed when oil was expensive have disappeared, and if they drop further due to an American energy boom, jobs could be lost and wages cut.
Also in the firing line is UK energy research. During his campaign Trump said that global warming was a hoax, and that he would scrap the US’s obligations to the Paris Climate Change Agreement and NASA’s lauded climate research programme. His new team are of a similar mind-set, being comprised of climate change deniers and those with ties to the fossil fuel industry.
While this is bad news for the climate, it could mean good things for UK energy researchers. This month 100 important UK researchers and climate scientists penned a letter*3 to Theresa May asking her to be tough on Trump over the climate and encourage him to continue research, but that the UK science community stood ready to welcome scientists from the US who had seen their funding cut.
If President Trump cuts climate research programmes, the UK’s science community, and it’s world-leading climate research institutions, could pick up the slack, and this could be good news for the renewable energy research community.
With increased investment in the fossil fuel industry and a reduction in environmental regulation and research, the US renewables industry looks set to take a hit, and it could potentially be the same for the UK.
On a global level it’s anticipated that the incoming Republican government will only likely slow, not reverse, action on climate change.
If fossil fuel prices drop due to a big increase in US fossil fuel production, then this could hurt renewables due to them having to compete with cheaper oil and gas. If the US were to pull out of the Paris Agreement, it could also cause other countries to drop out, hampering the process.
Because of Brexit, the upcoming UK-US trade negotiations are also a point of contention. If the US holds firm on slapping high tariffs on renewable energy goods made in the UK, this could hit British industry.
But what does Trump’s election mean for the consumer? If his policies and actions cause oil prices to lower globally, fuel and energy prices in the UK could fall.
In terms of renewable energy – if you wanted to purchase solar panels for your home, the issue is very much up in the air. Lower investment could mean a stall in lowering costs, but if renewables are able to weather the storm, solar and wind prices could continue to fall.
It’s also important to think about the impact of the US dollar. Since lots of the world’s energy is priced in USD, a strong dollar will increase import prices, which in turn could raise household energy prices.
Ben Wilson, Energy & Home Services Product Manager at Gocompare.com said: “Although the news over the past few months here in the UK has been focused on Trump, there has been little mention of how he could make an impact on the everyday consumer in the UK. It’s really important for the British public to understand just how President Trump’s term in office could affect the UK energy market.
“With the world’s eyes fixed firmly on the incoming administration, all sorts of questions are being asked, but ultimately, we’ll all have to wait to see what the Trump effect really means.”
To read the report in full, please visit: http://www.gocompare.com/gas-and-electricity/the-trump-effect/
Not company earnings, not data but vaccines now steering investor sentiment
By Marc Jones and Dhara Ranasinghe
LONDON (Reuters) – Forget economic data releases and corporate trading statements — vaccine rollout progress is what fund managers and analysts are watching to gauge which markets may recover quickest from the COVID-19 devastation and to guide their investment decisions.
Consensus is for world economic growth to rebound this year above 5%, while Refinitiv I/B/E/S forecasts that 2021 earnings will expand 38% and 21% in Europe and the United States respectively.
Yet those projections and investment themes hinge almost entirely on how quickly inoculation campaigns progress; new COVID-19 strains and fresh lockdown extensions make official data releases and company profit-loss statements hopelessly out of date for anyone who uses them to guide investment decisions.
“The vaccine race remains the major wild card here. It will shape the outlook and perceptions of global growth leadership in 2021,” said Mark McCormick, head of currency strategy at TD Securities.
“While vaccines could reinforce a more synchronized recovery in the second half (2021), the early numbers reinforce the shifting fundamental between the United States, euro zone and others.”
The question is which country will be first to vaccinate 60%-70% of its population — the threshold generally seen as conferring herd immunity, where factories, bars and hotels can safely reopen. Delays could necessitate more stimulus from governments and central banks.
Patchy vaccine progress has forced some to push back initial estimates of when herd immunity could be reached. Deutsche Bank says late autumn is now more realistic than summer, though it expects the northern hemisphere spring to be a turning point, with 20%-25% of people vaccinated and restrictions slowly being lifted.
But race winners are already becoming evident, above all Israel, where a speedy immunisation campaign has brought a torrent of investment into its markets and pushed the shekel to quarter-century highs.
(Graphic: Vaccinations per 100 people by country, https://fingfx.thomsonreuters.com/gfx/mkt/azgvolalapd/Pasted%20image%201611247476583.png)
SHOT IN THE ARM
Others such as South Africa and Brazil, slower to get off the ground, have been punished by markets.
Britain’s pound meanwhile is at eight-month highs versus the euro which analysts attribute partly to better vaccination prospects; about 5 million people have had their first shot with numbers doubling in the past week.
Shamik Dhar, chief economist at BNY Mellon Investment Management expects double-digit GDP bouncebacks in Britain and the United States but noted sluggish euro zone progress.
“It is harder in the euro zone, the outlook is a bit more cloudy there as it looks like it will take longer to get herd immunity (due to slower vaccine programmes),” he added.
The euro bloc currently lags the likes of Britain and Israel in terms of per capita coverage, leading Germany to extend a hard lockdown until Feb. 14, while France and Netherlands are moving to impose night-time curfews.
Jack Allen-Reynolds, senior European economist at Capital Economics, said the slow vaccine progress and lockdowns had led him to revise down his euro zone 2021 GDP forecasts by a whole percentage point to 4%.
“We assume GDP gets back to pre-pandemic levels around 2022…the general story is that we think the euro zone will recover more slowly than US and UK.”
The United States, which started vaccinating its population last month, is also ahead of most other major economies with its vaccination rollout running at a rate of about 5 per 100.
Deutsche said at current rates 70 million Americans would have been immunised around April, the threshold for protecting the most vulnerable.
Some such as Eric Baurmeister, head of emerging markets fixed income at Morgan Stanley Investment Management, highlight risks to the vaccine trade, noting that markets appear to have more or less priced normality being restored, leaving room for disappointment.
Broadly though the view is that eventually consumers will channel pent-up savings into travel, shopping and entertainment, against a backdrop of abundant stimulus. In the meantime, investors are just trying to capture market moves when lockdowns are eased, said Hans Peterson global head of asset allocation at SEB Investment Management.
“All (market) moves depend now on the lower pace of infections,” Peterson said. “If that reverts, we have to go back to investing in the FAANGS (U.S. tech stocks) for good or for bad.”
(GRAPHIC: Renewed surge in COVID-19 across Europe – https://fingfx.thomsonreuters.com/gfx/mkt/xegvbejqwpq/COVID2101.PNG)
(Reporting by Dhara Ranasinghe and Marc Jones; Additional reporting by Karin Strohecker; Writing by Sujata Rao; Editing by Hugh Lawson)
BlackRock to add bitcoin as eligible investment to two funds
By David Randall
(Reuters) – BlackRock Inc, the world’s largest asset manager, is adding bitcoin futures as an eligible investment to two funds, a company filing showed.
The company said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.
The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.
A BlackRock representative declined to comment beyond the filings when contacted by Reuters.
Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.
Bitcoin tumbled 10.6% in midday U.S. trading Thursday.
Other U.S.-based asset managers will likely follow BlackRock’s lead and add exposure to bitcoin in some form to their go-anywhere or macro strategies as the cryptocurrency market becomes more liquid and developed, said Todd Rosenbluth, director of mutual fund research at CFRA.
“It’s easy to see how strong the performance has been of late and look at a historical asset allocation strategy that would have included a slice of crypto and how returns would have been enhanced as a result,” he said. “Large institutional investors are going to be able to tap into the futures market in a way that a retail investor could not do.”
There is currently no U.S.-based exchange-traded fund that owns bitcoin, limiting the ability of most fund managers to own the cryptocurrency in their portfolios.
BlackRock Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing giant moves every day and could possibly evolve into a global market. (https://bit.ly/2XXFHrB)
(Reporting by David Randall; Additional reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker)
Bitcoin slumps 10% as pullback from record continues
LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.
The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.
Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.
(Reporting by Julien Ponthus; editing by Tom Wilson)
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