Asia:
China cracks down on online micro-lending firms with new rules
China’s financial regulators on Friday circulated new rules to local governments targeting a rampantly growing online micro-lending sector, part of a campaign to rein in its rapidly developing financial sector. A top-level multi-ministry body, tasked by the central government to bring risks in the internet finance sector under control, said unlicensed organizations and individuals were not allowed to conduct lending business, according to the notice, carried by a publication under China’s central bank. Lending institutions are also not allowed to give loans to borrowers who have no source of income or to mislead consumers into over-borrowing, according to the notice. Beijing has zeroed in on the fast-growing and loosely regulated market for small, unsecured “cash loans”, which can be quickly issued over mobile phone apps and have come under criticism for exaggerated advertising and aggressive debt collection.
Europe:
U.K. Manufacturing Grows at Fastest Pace in More Than Four Years
U.K. factories recorded their strongest growth in more than four years in November, with firms recording strong domestic and export demand. The picture in IHS Markit’s latest manufacturing Purchasing Managers Index follows a similarly upbeat report from the Confederation of British Industry, whose monthly factory-orders index is at the highest since 1988. In a further positive sign, orders for U.K. investment goods rose at the fastest pace in more than two decades. According to Rob Dobson at Markit, it suggests that capital spending is “showing signs of renewed vigour.” The headline index number rose to 58.2 from 56.6 in October, the highest since August 2013 and well above the median forecast. While manufacturing accounts for less than 10 percent of the economy, the figures are still good news amid a broad slowdown in growth. Expansion this year is forecast to be the weakest since 2012. The report also highlighted some supply constraints. The Bank of England has warned that the economy’s potential pace has fallen, and so inflationary pressures could build more easily.
Lowflation” pushes German 10s/30s bond yield gap to three-month lows
The gap between German 10-year and 30-year borrowing costs was at its tightest level since late August on Friday as a lower-than-expected euro zone inflation number pushed back prospects for monetary policy tightening well into the future. Most euro zone government bond yields dropped on Friday, falling around 3-4 basis points across the board, a move that was attributed both to low inflation and to a delay in the U.S. Senate voting on a Republican tax overhaul. Euro zone inflation rose by less than expected in November, highlighting that price growth remains weak in the bloc and supporting the European Central Bank’s plan to remove stimulus only gradually. Long-dated bonds are the most sensitive to any change in interest rates, so the consumer price figure released the previous day boosted demand for 30-year euro zone government bonds. “People were like wow, this pushes back rate normalization and also creates expectations that the ECB won’t end QE too soon, so the rally in (long-dated) Bunds makes complete sense,” said ING strategist Martin van Vliet. The gap between German 10-year and 30-year borrowing costs went as low as 75 basis points, its tightest since August 24, according to Tradeweb prices.
U.S.:
New York Fed’s Dudley sees reasonable case for December rate hike: WSJ
New York Federal Reserve President William Dudley agrees with Fed chair nominee Jerome Powell that there is a reasonable case for an interest rate hike in December, the Wall Street Journal on Friday reported him as saying. A rate hike in December would be the third by the Fed this year and Dudley said continuing to raise rates along the same path in 2018 would depend on how the U.S. economy performs. “Let’s imagine that I had three rate increases penciled in for 2018. I‘m not wed to that in any way. We could do more. We could do less,” he told the Wall Street Journal. He also said if the current U.S. economy conditions were to continue, the Federal Reserve would continue to gradually remove monetary policy accommodation.
