Good morning.
The two-day FOMC meeting kicks off today, and that’s putting the chill on equities. Stocks are flat on both sides of the Atlantic, and down in Asia. Ahead of Jerome Powell’s press conference tomorrow, investors are diving into bonds. That’s pushing yields down. For now.
The risk-off mood can also be seen in the crypto market. Bitcoin, Dogecoin, Shiba Inu are all down. Another high-flier, Tesla, is sinking after Elon Musk took to Twitter to clarify where its supply deal with Hertz stands.
In today’s essay, I look at the economics of saving the planet.
But first, let’s see what else is going on.
Markets update
Asia
- The Asian markets are mostly lower with the Shanghai Composite down 1.1% in afternoon trading.
- The eyes of the world are on Glasgow this week, site of the COP26 climate talks. Indian prime minister Narendra Modi got big headlines on day 1 when he declared this nation of 1.3 billion would achieve net-zero by 2070, which is, [checks notes], half a century away.
- We hit a grim COVID milestone yesterday: the global death toll has topped 5 million.
Europe
- The European bourses were lower out of the gates, with the Stoxx Europe 600 off nearly 0.2% an hour into the trading day. Retail and auto stocks led the way higher at the start.
- BP got a boost from soaring energy prices to deliver a big Q3 beat this morning. Despite that, shares tumbled more than 2.7% mid-morning as the oil-and-gas giant announced it’s buying back a further $1.25 billion of its shares.
- Speaking of buybacks… A.P. Moller-Maersk will earmark a further $5 billion this month to purchase company stock. The shipping giant said operating profits nearly quintupled as shipping rates soared.
U.S.
- U.S. Futures are under pressure this morning, but off their lows. On Monday, all three major averages climbed to fresh highs to start off the month. The Dow briefly topped 36,000 in the opening minutes yesterday, before slipping. Upon hitting that milestone, all manner of markets commentators recalled one of the worst markets predictions of all time. Yep, you remember the book “Dow 36,000.” It was written in 1999.
- Wall Street is bracing for a week of high trading volume. “The November FOMC meeting, October payrolls … and a host of earnings updates sets up a catalyst heavy week of trading ahead,” Goldman Sachs’ Chris Hussey said in a note, according to CNBC.
- Speaking of trading action… Tesla shares topped $1,200 yesterday, but have dropped 5% in pre-market. That’s after Elon Musk divulged on Twitter—where else?—the EV maker has not yet signed a contract with Hertz despite all the hoopla last week around a big supply deal. (Oh, and he also tweeted an ancient Chinese poem.) TSLA is up more than 30% over the past six trading sessions.
Elsewhere
- Gold is off slightly, trading below $1,800/ounce.
- The dollar is flat.
- Brent ticked below $85/barrel this morning.
- Bitcoin is flat, hovering near $62,000.
***
The $150 trillion conundrum
Spoiler: Politicians, heads of state, world leaders—whatever you want to call them—won’t save the planet all by themselves.
Instead, in Glasgow, we’ll get frustratingly unaccountable net-zero targets from the world’s biggest polluters—see India: 2070 . Not to crack on Modi; the emissions giants China and America have committed zilch so far.
But that’s not to say on Day 2 that COP26 is one big hot-air affair. If there’s any hope to draw from the climate summit it could come down to corporates and the ESG crowd.
“The main market focus from COP26 is likely to be on corporate and investor action,” writes UBS chief economist Paul Donovan in an investor note this morning, “with an outpouring of genuine corporate sustainability commitments (and less genuine greenwashing).”
A recap: if we are to make any meaningful progress on climate change we’ll need to reduce emissions by a significant margin (and do so soon) and spend significantly on the transition to greener energy sources. How much will we have to spend?
BofA Securities calculates it will cost us somewhere in the neighborhood of $150 trillion—that’s $5 trillion over 30 years. Why 30 years? That gets us to a kind of global net-zero target of 2050. Sorry, India—2070 won’t cut it.
Five trillion dollars sounds like a Dr. Evil-style ransom demand. But, compared to what G20 nations have already spent on COVID stimulus programs, it’s a drop in the bucket.
“It can be done,” writes BofA’s managing director of research, Haim Israel, “but everyone will need to chip in: governments, central banks, capital markets, ESG, private sectors and consumers.”
And there’s an added bonus from this $5 trillion outlay. It’s likely to provide a big boost to global GDP growth and to the labor market, BofA notes. I’ll go a step further: if we can limit climate-related extreme weather events, that will save lives, restore greater food security and make the planet a more livable place.
Where do I sign up for that?
***
Bernhard Warner
@BernhardWarner
[email protected]
As always, you can write to [email protected] or reply to this email with suggestions and feedback.
Today's reads
Chinese tech CEOs just keep quitting—Coins2Day
It’s not just Bitcoin and Shiba Inu: crypto’s amazing run in 4 charts—Coins2Day
Corporate boards are suffering from ESG burnout. Here are 4 ways they can fix it—Coins2Day
Banks Tried to Kill Crypto and Failed. Now They’re Embracing It (Slowly)—The New York Times
Can the U.S. Keep Adding Debt Forever?—Wall Street Journal
Market candy
Quiz time
After October's impressive run, the S&P 500 was, as of yesterday's close, up 22.8% on the year. That's impressive, but still trails which of these emerging-market stock indexes?
- A. Micex (Moscow)
- B. Bovespa (Brazil)
- C. Nifty (India)
- D. Shanghai Composite
The answer is A, Russia's Micex, which is up more than 33% so far this year. Russian stocks tend to live and die with energy prices.
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