Yellen defended Powell's regulatory record, Brazil's inflation rose the most since 1995, and Moody's warned of "systemic risk" in the private credit sector

21st Century Business Herald reporter Hu Tianjiao comprehensive report

<h4>1. Global financial markets</h4>

<h4>Yellen defended Powell's regulatory record</h4>

U.S. Treasury Secretary Janet Yellen defended Fed Chairman Jerome Powell's record of regulating the financial system. Some people are currently trying to prevent Powell from re-election, and while Yellen has expressed some concerns in the past about rulemaking under Powell's helm, she said financial rules have "significantly strengthened" during Powell's tenure, as she did during the Fed and her Bernanke tenure. Yellen said that as the pandemic puts more pressure on financial markets, "the core of our financial system is performing well due to improved capital liquidity, risk management and stress testing." These improvements remained unchanged during the Powell era. ”

<h4>Inflation rose unexpectedly in Brazil, with investors betting on deeper rate hikes</h4>

Brazil's inflation in early October was higher than expected, which increased pressure on the central bank to raise interest rates sharply in tomorrow's policy decisions. Brazilian consumer prices rose 1.2 percent from the previous month, more than expected, the data showed. That was the biggest increase since mid-October 1995. Annual inflation accelerated to 10.34 per cent. Transportation and housing costs rose 2.06 percent and 1.87 percent, respectively, as the bureau said, as the main reason for the surge in house prices in mid-October.

<h4>Spain will control soaring house prices through rents</h4>

Spain approved a plan that would implement rent controls and raise taxes on some vacant homes to make housing costs lower after soaring home prices could have pushed low-income earners out of the market. Spain's Minister of Transport, Transport and Urban Issues, Raquel Sanchez, said the housing bill would limit the extent to which landlords who own multiple residential properties can raise their rents. It increases taxes on owners of vacant multiple homes and may require some new real estate developments to set aside some real estate for social security housing. The legislation, drafted by the ruling Socialist Party and its far-left coalition partner Unidas Podemos, is the government's response to soaring rents. Soaring rents have made it difficult for low-income Spaniards to afford housing. According to the real estate website Fotocasa, rents in Spain have risen by more than 40% in the last 5 years.

<h4>Moody's warned of "systemic risk" in the private credit industry</h4>

According to moody's, the private credit industry that lends to acquisition groups is booming, growing to about $1 trillion, but opaque, declining standards and the difficulty of trading these debts pose "systemic risks." In recent years, investors' money has poured into so-called private markets, hoping that venture capital, private equity, real estate and infrastructure will provide another option for the bleak return prospects of the mainstream public stock and bond markets. That's a good thing for many businesses at a time of bank austerity, but Moody's warned in a report this week that the "explosive" growth of private credit is accumulating risk in a hard-to-monitor corner of the financial system. The rating agency said: "More and more leverage is shifting to the 'grey area' where regulation is looser, and there is systemic risk." Risks beyond the attention of public investors and regulators may be difficult to quantify, even if they have broader economic consequences. ”

<h4>Pimco strategists say investors must remain flexible in a rapidly changing cycle</h4>

The current economic cycle is changing so fast that Anthony Crescenzi, a market strategist at Pacific Investment Management (Pimco), warned investors: Beware. Crescenzi said in an interview Tuesday that it is important to remain vigilant, proactively engage in portfolio management and think more about securities options and regional options. The key question is where the U.S. economy is in the growth cycle and how quickly the Fed needs to raise interest rates to curb inflation.

<h4>2. International Regulatory Developments</h4>

<h4>The UK has proposed legislation to increase investment in nuclear power plants</h4>

The UK government has introduced a bill to help increase investment in new nuclear power plants, a move that will help the UK reduce carbon emissions, and this part will be borne by consumers. The government said in a statement that the UK would rely on funding models previously used to pay for new airports and water projects, reducing its dependence on foreign capital. The so-called Regulated Asset Base (RAB) model aims to encourage private sector investment by diluting the construction risks borne by taxpayers and developers. Nuclear energy is an important part of the UK's strategy to achieve net-zero carbon emissions by mid-century. This cleaner energy source is a predictable complement to the UK's growing supply of variable wind power. The bill will give a much-needed boost to Britain's aging nuclear power fleet, with five of the UK's eight nuclear power plants set to be permanently shut down until 2024.

<h4>3. Green finance is related to ESG</h4>

<h4>Dutch pension giant ABP will sell 15 billion euros of fossil fuel assets</h4>

One of the world's largest pension funds, the Netherlands Headquarters Base Fund (ABP), will sell its entire holding in the fossil fuel company, worth more than 15 billion euros. Pension plans are under increasing pressure to protect long-term savings from catastrophic climate change. AbP, a pension fund for Dutch educators and civil servants, said on Tuesday that it expects to sell most of its investments in oil, gas and coal companies by the first quarter of 2023. Currently, ABP's holdings in about 80 companies account for nearly 3% of its €528 billion total assets. The divestment means that ABP will no longer hold a stake in oil giant Royal Dutch Shell. ABP said it does not expect the divestment to have a negative impact on long-term returns. It is one of the largest divestments announced by a leading pension fund to date.

<h4>Australia has committed to net-zero emissions by 2050, but remains committed to fossil fuels</h4>

Australia's prime minister unveiled plans to decarbonise the country's economy by 2050, while insisting that it would not phase out the production or use of polluting fossil fuels. Just days before the UN climate summit is about to take place in Glasgow, Australian Prime Minister Scott Morrison outlined a policy paper pledging australia to achieve net zero greenhouse gas emissions by mid-century, make concessions to international pressures and follow in the footsteps of many developed and emerging economies. However, the plan also made it clear that Australia would continue to rely on fossil fuels, which frustrated environmental groups, saying phasing out fossil fuels was key to achieving credible decarbonisation goals. According to government data, fossil fuels account for more than 90% of Australia's major energy mix in 2019-2020, while renewables account for just 7%. Morrison also insisted on refusing to update Australia's formal 2030 emissions reduction targets submitted to the United Nations under the Paris Agreement.

<h4>4. Fintech and virtual currency, etc</h4>

<h4>The decline in cryptocurrency trading has dragged down Robinhood's revenue</h4>

Cryptocurrency trading platform Robinhood shows some signs that the attitude of its once-booming retail investors toward the online brokerage firm is cooling, with the report saying that the company's user growth leveled off last quarter and cryptocurrency trading stalled. Despite analysts' previous forecasts for a slowdown in trading volumes, the sharp decline in cryptocurrency trading was unexpectedly severe, with trading revenue from the more volatile asset class falling 78 percent, from $233 million in the second quarter to $51 million in the third quarter. According to FactSet, the decline in cryptocurrency trading pulled Robinhood's total revenue per user down 42 percent, causing its stock price to fall 10 percent in after-hours trading. Transaction revenue fell 41 percent, from $451 million in the second quarter to $267 million in the third quarter.

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