U.S.:
Dollar set for biggest weekly drop in four weeks on tax concerns
The dollar edged higher on Friday as an overnight spike in U.S. Treasury bond yields prompted some investors to buy the greenback after some recent heavy selling. But the greenback was set for its biggest weekly drop in four weeks as investors were disappointed that a landmark U.S. tax bill may be delayed until 2019. “I don’t think the markets were very hopeful on the passage of the U.S. tax bill this week to begin with so the indifferent reaction from markets was very much expected,” said Lutz Karpowitz, an FX strategist at Commerzbank in Frankfurt. Against a broad trade-weighted basket of currencies, the dollar edged 0.2 percent higher but was set for its biggest weekly loss until the week ending Oct. 15. The Senate Republicans’ bill to rewrite the tax code differed from their House counterparts’ plan. Like the House version, the Senate’s proposal would cut the corporate tax rate to 20 percent from 35 percent, but the Senate plan would delay implementation until 2019.
Europe:
U.K. Economy Displays Mixed Fortunes at End of Third Quarter
The U.K. economy ended the third quarter on a mixed note, figures Friday showed. Industrial production rose a larger-than-forecast 0.7 percent in September, with output increasing across most manufacturing sectors, the Office for National Statistics said. But construction fell the most in 18 months and a narrowing of the trade deficit was not enough to prevent the shortfall widening in the third quarter. The reports round off a quarter which saw economic growth pick up slightly to 0.4 percent, a level which remains below its pre-Brexit referendum average as political uncertainty and inflation crimp consumer spending. The Bank of England nevertheless hiked interest rates for the first time in more than a decade last week, saying the speed at which the economy can grow without fueling inflation has fallen. Manufacturing rose 0.7 percent in September, the fifth consecutive increase and more double market forecasts. Ten out of 13 factory sectors recorded increases. Total industrial production was also boosted by higher oil and gas output. Construction output fell 1.6 percent from August, the most since March last year.
It means industrial production grew 1.1 percent in the third quarter, slightly faster than the 1 percent estimated in GDP data last month. Construction fell for a second straight quarter, with the 0.9 percent decline exceeding the 0.7 percent initially estimated.
Asia:
China Moves to Open Market for Financial Firms in Historic Step
China took a major step toward the long-awaited opening of its financial system, saying it will remove foreign ownership limits on banks while allowing overseas firms to take majority stakes in local securities ventures, fund managers and insurers. The new rules, unveiled at a government briefing on Friday, will give global financial companies unprecedented access to the world’s second-largest economy. The announcement coincided with Donald Trump’s visit to Beijing and bolstered the reform credentials of Chinese President Xi Jinping less than a month after he cemented his status as the nation’s most powerful leader in decades. Foreign financial firms applauded the move, with JPMorgan Chase & Co. and Morgan Stanley saying in statements that they’re committed to China. UBS Group AG said it will continue to push for an increased stake in its Chinese joint venture. While China has already made big strides in opening its equity and bond markets to foreign investors, international banks and securities firms have long been frustrated by ownership caps that made them marginal players in one of the fastest-expanding financial systems on Earth. “It’s a key message that China continues to open up and make its financial markets more international and market-oriented,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “How important a role foreign financial firms can play remains to be seen.”
