The U.K.’s Economic Outlook Is Getting Rosier
Bank of England officials aren’t the only ones feeling a bit more bullish about the U.K. economy. The Centre for Economics and Business Research upgraded its outlook for the nation’s economy Monday, citing a pickup in manufacturing and a view that the worst of the consumer-spending squeeze has passed. The group now expects U.K. growth of 1.6 percent this year and 1.4 percent in 2018, an increase from 1.3 percent and 1.2 percent, previously. The revision comes after BOE policy makers said last week that they’re headed toward raising interest rates for the first time in more than a decade, noting that while Brexit still poses a risk, data since their last decision points to a “slightly stronger picture than anticipated.” Gertjan Vlieghe, regarded as one of the more dovish members of the Monetary Policy Committee, doubled down a day later, saying that data suggested “we are approaching the moment when bank rate may need to rise.” By the end of the week, the pound had climbed about 3 percent, markets were fully pricing in a rate increase by February — a year earlier than previously seen — and Barclays, Deutsche Bank and Scotiabank were among those forecasting a hike in November.
TREASURIES-Yields rise as investors focus on Fed meeting this week
U.S. Treasury prices fell on Monday as investors focused on the Federal Reserve’s two-day policy meeting this week for signals on whether an additional interest rate hike is likely this year. The U.S. central bank is widely expected to announce at the conclusion of its meeting on Wednesday that it will begin paring its massive portfolio of Treasuries and mortgage-backed securities, with the reductions likely to start this year. Less certain is whether the policy setting Federal Open Market Committee will raise rates again by the end of the year. Interest rate futures traders are pricing in a 57 percent chance of a hike at the December meeting, according to CME Group’s FedWatch Tool. “The key market moving event for this week is the FOMC,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. “The debate in the market is whether the Fed will be able to raise rates at the December meeting, given the trajectory of inflation.” Treasury yields have jumped since data on Thursday showed that U.S. consumer prices accelerated in August, easing concerns that inflation would disappoint with another weak print. The Consumer Price Index (CPI) rose 0.4 percent last month, the largest rise in seven months.
China home price growth cools further in August as curbs bear down
China’s new home prices rose in August at the slowest pace in seven months and fell or leveled off in more cities as government cooling measures dampened speculation, though there were no signs of a sharper correction that could damage the economy. Signs of a more stable and less frothy housing market, which is a key driver of economic growth, will be good news for the Communist Party as it prepares for a key meeting next month. Average new home prices in China’s 70 major cities rose 0.2 percent in August, half the pace of the previous month, National Bureau of Statistics (NBS) data showed on Monday. It’s the first time in three years that prices in the 15 hottest markets singled out by the NBS – mostly mega-cities and provincial capitals – have all stopped rising on a monthly basis after nearly six months of intensified controls, analysts noted. “The turning point for Tier-1 and Tier-2 cities has emerged,” Zhang Dawei, a Beijing-based senior analyst at property agency Centaline, wrote in a note. The Hong Kong-listed shares of Chinese property developers jumped after the news.