Overseas Headlines- March 13, 2019

United States:

U.S. Business-Equipment Orders Advance by Most in Six Months

Orders placed with U.S. factories for business equipment rebounded in January by the most in six months, a sign demand is withstanding concerns about slower global growth and the trade war with China. Non-military capital goods orders excluding aircraft — a proxy for business investment — gained 0.8 percent, after a 0.9 percent decline the prior month, according to Commerce Department figures released Wednesday. The median forecast in a Bloomberg survey called for a 0.2 percent increase. The broader measure of bookings for all durable goods, or items meant to last at least three years, unexpectedly rose. The improvement in demand, underscored by orders for machinery and communications equipment, suggests a solid start to the year for manufacturers that should support economic growth in the first quarter. At the same time, other data for February give a more muted picture, with the Institute for Supply Management’s factory index falling to a two-year low in February and manufacturers adding the fewest workers since 2017. Some figures that are used to calculate gross domestic product also were more encouraging: Shipments of non-military capital goods excluding aircraft rose 0.8 percent after a revised 0.1 percent increase and exceeding the Bloomberg survey median of a 0.2 percent decline.



U.K. Cuts Growth Forecast Amid Parliament’s Brexit Chaos

Chancellor of the Exchequer Philip Hammond issued a fresh warning that leaving the European Union without a deal would damage the U.K. economy and leave people less well off. He said Parliament’s rejection of Theresa May’s Brexit deal had created a “cloud of uncertainty” warned crashing out would cause “significant disruption.” He urged politicians to vote to rule out a no-deal Brexit in a vote Wednesday evening. The chancellor unveiled new growth forecasts with the outlook for this year cut to 1.2 percent from 1.6 percent. There was an improved outlook for the public finances, though that’s dependent on the U.K. leaving the European Union with a deal. A chaotic exit that would throw his forecasts into disarray. “Last night’s vote leaves a cloud of uncertainty hanging over our economy,” Hammond said in Parliament. “The idea that some readily available fix to avoid the consequences of a no-deal Brexit is just wrong.” He added, though that the “economy itself is remarkably robust.” The budget deficit will be lower in the coming years than the Office for Budget Responsibility forecast in October, Hammond said in his Spring Statement on Wednesday. The growth prediction for 2020 was kept at 1.4 percent, and the OBR sees an acceleration the following year. His statement comes after Parliament overwhelmingly rejected May’s Brexit deal for a second time Tuesday night.



Hong Kong Peg Defense Hits $692 Million as Weakness Persists

Hong Kong’s de facto central bank intervened to defend the local currency’s peg against the dollar for the second time in days. The Hong Kong Monetary Authority bought HK$3.925 billion ($500 million) of local currency, according to its page on Bloomberg, after the Hong Kong dollar fell to the weak end of its HK$7.75-HK$7.85 trading band. It also purchased $192 million worth at the end of last week, it said Saturday. The move will reduce the aggregate balance, a measure of interbank liquidity, to HK$70.9 billion on March 14. Continued intervention could see local borrowing costs rise at a faster pace if the aggregate balance falls below HK$20 billion, said Carie Li, an economist at OCBC Wing Hang Bank Ltd, noting that rates will remain low in the near term due to an increase in foreign capital flows and the city’s large money base. Rising local borrowing costs, which have lagged U.S. rates despite the currency peg, would intensify pressure on home values in the world’s most expensive property market, and weigh on the city’s economy. The aggregate balance stood at about HK$180 billion just 11 months ago. The Hong Kong dollar was 7.8499 per greenback as of 2 p.m. local time. The city’s one-month interbank borrowing costs, known as Hibor, have risen 14 basis points to 1.49 percent this week, the highest since Jan. 8, and up from a low of 0.91 percent last month. The equivalent U.S. Libor is at 2.50 percent.



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