Global Temperatures Continue to Rise as COP Leaders Gather in Azerbaijan

Macro Monday:

According to data from Munich Re, natural catastrophes – including extreme droughts, floods and wildfires – have generated around $120 billion of losses in the first six months of 2024.

Global Temperatures Continue to Rise as COP Leaders Gather in Azerbaijan

Today marks the start of COP29 in Baku, Azerbaijan, where world leaders will reconvene to discuss policies aimed at reducing carbon emissions and slowing climate change (or at least give off that impression).

Central to their framework for action is “delivering deep, rapid and sustained emission reductions now to keep temperatures under control and stay below 1.5°C, while leaving no one behind.”

The meeting in Baku – a country whose economy is dominated by oil and gas – comes against a backdrop of rising global temperatures and increasing frequency of extreme weather events.

For example, research from the EU's climate service has shown that October 2024 was the second-warmest October?on record.

Here, the Copernicus Climate Change Service identified that October was 0.74°C above the 1991-2020 average and was 1.65°C above the pre-industrial (1850-1900) average.

This comes against the target laid out during the Paris COP21 conference in 2015 which saw leaders around the world pledge to keep global warming within a 1.5C threshold of preindustrial levels.

While earlier this year, the UN’s World Meteorological Organization predicted that there was an 80% chance that such a threshold would be breached within the next five years, it is now a matter of “virtual certainty” that 2024 will the breach the 1.5C threshold, according to the survey.

Indeed, October marked the 15th month in a 16-month period where global-average surface air temperature exceeded 1.5°C above pre-industrial levels.

Speaking on this development, the Deputy Director of the Copernicus Climate Change Service said that “This marks a new milestone in global temperature records and should serve as a catalyst to raise ambition for the upcoming Climate Change Conference, COP29."

The survey also identified that the global average sea surface temperature came in just 0.1°C below the record high for the month of October at 20.68°C. When looking at sea ice extent, Arctic Sea ice was 19% below average while Antarctic Sea ice extent was 8% below average.

As such, the scale of the challenge facing world leaders is hard to understate and while COP 29 will no doubt bring these issues firmly into focus, the extent to which world leaders will be able to arrive at a consensus will of course be contingent on a myriad of political factors.

Controversy around the COP29 was also not helped by the BBC uncovering a senior official at COP29 appearing to “have used his role to arrange a meeting to discuss potential fossil fuel deals”.

Hence, with world leaders assembling in Baku, we’ll be keeping a close eye on any developments from the conference.

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Chinese Inflation Misses Expectations

Chinese inflation missed expectations this morning, with CPI hitting 0.3% on an annualised basis for the month of October against a consensus which was pointing to a 0.4% print. On a monthly basis, prices fell 0.3% a fall from 0% recorded last month, raising deflationary fears as the world’s second largest economy continues to grapple with economic headwinds.

This morning’s deflationary CPI print follows the PBoC’s decision at the back end of last month to cut their 1-year loan prime rate (LPR) to fresh lows, amid growth concerns. Here, the central bank cut the benchmark interest rate 25bps from 3.35% to 3.1% with five-year rate also being cut 25bps from 3.85% to 3.6%.

This comes as Beijing tries loose monetary conditions in an attempt to stimulate growth across the economy.

This morning’s fall in prices comes amid a downturn in consumption, fragility in local government debt and a precarious property sector. Chinese policy makers may also have growing concerns around the impact that Trump’s tariffs could have on the world’s largest manufacturer, given that the President Elect has voiced the idea of a 60% import tariff on goods coming from China.

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