Europe:
ECB still concerned about existing stock of bank bad loans: Mersch
The European Central Bank is still concerned with the stock of bad loans clogging up bank balance sheets in the euro zone, ECB Executive Board member Yves Mersch said on Monday. The ECB last week issued new proposals that will force banks from 2018 to set aside more cash to cover newly classified bad debts and may also present additional measures to tackle the sector’s huge stock of soured debt. Italy – whose banks hold nearly 30 percent of the euro zone’s 915 billion euros of bad loans – has reacted angrily to the new measures, asking the ECB to soften them following a public consultation that will be held until Dec. 8. “Since we have found already a solution for non-performing loans going forward we are still concerned we have to deal with the existing stock,” Mersch told a conference in Milan when asked about Italy’s concerns over the new measures and whether they will apply only to new NPLs. “If we have rules in Europe, we cannot always put forward cultural exceptions, especially if these cultural exceptions are … home-made,” he said. Mersch said the proposed rules were not aimed at a particular country. He acknowledged bad loans were a bigger problem for some countries, but said this was for domestic reasons.
Asia:
China services sector growth falls to 21-month low in September
Business activity in China’s services sector grew at its slowest pace in 21 months in September as the pace of new business cooled, a private survey showed. The survey was in sharp contrast to an official gauge of the non-manufacturing sector that showed the services sector expanded at the fastest clip since 2014 in September, blurring the picture on how a key part of the economy is performing. The Caixin/Markit services purchasing managers’ index (PMI) fell to 50.6 in September, the lowest reading since December 2015 and one of the weakest since the survey began in 2005. A reading above 50 indicates growth, and any lower than that signals contraction. The index had hit a three month high of 52.7 in August. New business in September grew at a slower pace than in the previous month but was still relatively solid with a reading a 52.0, while backlogs of work declined for the first time in five months and hiring slowed. The survey also showed the services sector continued to see much less inflation than the manufacturing industry, in line with the view that price pressures in China are concentrated in upstream raw materials industries and are not yet percolating through to the consumer level.
U.S.:
Downplaying job losses, Fed officials eye December rate hike
Chocking up employment losses last month to the temporary hit of a severe hurricane season and reiterating expectations that inflation will strengthen, Federal Reserve policymakers on Friday signaled they continue to see gradual U.S. interest-rate hikes ahead. “Even though inflation is currently somewhat below our longer-run objective, I judge that it is still appropriate to continue to remove monetary policy accommodation gradually,” said New York Fed President William Dudley, whose regular meetings with Fed Chair Janet Yellen and constant contact with Wall Street banks bolster his influence among Fed policymakers. While other policymakers largely agreed, they also said they were keeping a close eye on the data, particularly on inflation. And one offered a strong rebuttal, saying the central bank risked a “policy mistake” if it continues raising rates despite inflation data that remains stalled. “If we go too far in our zeal to normalize (rates) we might push inflation expectations down further and that might hinder our ability to hit our target,” said St. Louis Fed President James Bullard, who called the September jobs number “startling” even given the hurricane. “The December meeting is going to be too early to make a determination on whether inflation is coming back.”
