Europe needs fresh push at overhauling banking sector – IMF
The International Monetary Fund urged Europe to make a fresh push at strengthening its banking sector on Tuesday, calling for weak institutions to be closed, bigger financial safety buffers and a revival of cross-border M&A. In the text of a speech to a banking conference in London, the IMF’s First Deputy Managing Director David Lipton said European policymakers needed to take advantage of the region’s economic recovery. “The time has come to make that policy arsenal (to tackle banking crises) real and effective, and to coordinate such policies across the European economy,” he said. Many banks show consistently low returns on assets and equity, a trend that may continue given the region’s low interest rates and flat yield curves. That makes it harder to raise capital and renders banks more vulnerable to future problems, Lipton said. The European Central Bank’s latest proposals for banks to set aside provisions up to certain levels can help create the right incentives to reduce the remaining bad loans on their books.
Euro zone annual growth exceeds U.S., backs ECB QE taper
The euro zone economy grew by more than the United States in the third quarter compared with a year earlier, data showed on Tuesday, supporting the European Central Bank’s move to begin reducing its bond-buying programme. The European Union’s statistics office Eurostat confirmed its estimate from Oct. 31 that the gross domestic product (GDP)of the 19 countries using the euro grew by 0.6 percent in July-September from the previous three months and was 2.5 percent higher than in the same period of 2016. In the United States, the economy grew 0.7 percent quarter-on-quarter and 2.3 percent year-on-year in the third quarter. The annual rate was also greater in the euro zone in the second quarter. The euro zone growth rate also exceeded that of Britain, which will leave the European Union in March 2019. Its economy expanded 0.4 percent quarter-on-quarter and 1.5 percent year-on-year.
China’s economy cools as gov’t curbs hit factories, property and retailers
China’s economy cooled further last month, with industrial output, fixed asset investment and retail sales missing expectations as the government extended a crackdown on debt risks and factory pollution. Beijing is already in the second year of a campaign to reduce high levels of debt as authorities worry that riskier lending practices, especially in the real estate sector, could imperil the economy. Data on Tuesday pointed to moderating growth over the next few quarters as credit expansion slows, with year-on-year industrial output gain of 6.2 percent in October missing analysts’ estimates of a 6.3 percent rise, and below a 6.6 percent increase in September. Fixed-asset investment growth slowed to 7.3 percent in the January-October period, the National Bureau of Statistics (NBS) said. Analysts had expected an increase of 7.4 percent. “The moderation in activity data released today suggests that growth slowed in October and adds to our conviction that it will continue to do so in the quarters ahead,” Nomura analysts wrote in a note to clients.
Fed should stand pat on interest rates for now: Bullard
The Federal Reserve should keep its benchmark interest rate at current levels until there is an upswing in inflation, St. Louis Fed President James Bullard said on Tuesday. “Inflation data during 2017 have surprised to the downside and call into question the idea that U.S. inflation is reliably returning toward target,” Bullard said in prepared remarks during an appearance in Louisville, Kentucky. He added that even if the Fed does managed to return inflation to its 2 percent inflation target, it would not happen before 2018 or 2019. The U.S. central bank has raised interest rates twice this year and appears on course for another upward move in December despite persistently weak inflation. Bullard has repeatedly said raising interest rates again in such an environment risks harming the economy. The Fed’s preferred gauge of inflation currently stands at 1.3 percent and has undershot the central bank’s 2 percent for 5-1/2 years.