🥵 Global warming could fry hardware

What’s going on here?

Global average temperatures breached a key climate threshold for a full year.

What does this mean?

At the 2015 Paris Accord, nearly 200 nations agreed to limit global temperature rises to “well below” 2°C and “ideally” to 1.5°C, compared to pre-industrial levels. But if the number of private jets in the sky and plastic bottles in the ocean hadn’t suggested slow progress, the thermometers might. June marked the 13th consecutive month that average temperatures were the hottest on record. And over the past year, the global average temperature was 1.64°C above the pre-industrial baseline, according to the Copernicus Climate Change Service. That doesn’t mean the Paris Accord is out the window, though. The agreement’s based on a longer-term measurement of more than a decade. But it does imply that the time between now and when the Paris agreement limit is breached is shrinking, and that’s making folk call for quicker and more forceful action to tackle rising temperatures.

Why should I care?

For markets: Crossing the line.

Businesses are already being battered by extreme weather events, and climate change is driving up their costs. That’s only expected to take a turn for the worse, unless climate pledges become real effective, real fast. In fact, without adaptation measures, these annual costs will be worth around 3% of the value of physical assets held by companies in the S&P 500 by the 2050s. That’s no small beans: those charges add up every year, representing a huge financial risk for many companies.

Zooming in: Danger for data.

According to S&P Global, the communication services sector would suffer the most from extreme weather. The impact would hit firms that own and operate data centers especially hard. That’s because the hardware – which is proving essential for the increasingly digital economy – is very sensitive to extreme temperatures, and its hefty cooling systems would cut out without proper access to water.

What’s going on here?

In an unexpected change of direction, the French leftist alliance came in first in the second round of parliamentary elections, leaving the government in a deadlock.

What does this mean?

French President Emmanuel Macron called a snap election recently, after his party suffered a crushing defeat in the European parliamentary elections last month. And after the first round of voting, it looked like a rival far-right party was cruising toward victory. But instead, a new left-wing alliance drew a massive voter turnout. That said, no single group won enough votes to form a majority government, which means Macron may have to negotiate a coalition or set up a technocratic government – one led by experts like senior civil servants and economists. And without a clear leader for the next government, this election could usher in a period of political turbulence in France.

Why should I care?

For markets: Holding fire.

The leftist alliance plans to plow money into the economy, potentially outspending the money made from taxes by even more than today’s standards. Yet, the market seemed fairly nonplussed. French stocks, the euro, and bonds stayed stable. That’s mainly because the political deadlock may make it harder to pass policies – including plans for a spending spree.

The bigger picture: Let's talk politics.

Two billion voters are heading to the polls this year, giving investors plenty to worry about. Political extremes could exacerbate countries’ fiscal burdens, as well as fueling tensions around the world. But the French election is a timely reminder that it’s easier to talk a big game than it is to implement radical policies. See, a clear majority is a difficult thing to come by. And without one, parties will find it difficult to have everything on their own terms.