Saturday, December 15 2018 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
Updated: 3 hours 21 min ago
Fed Chairman Powell’s speech drove the USD to depreciate after markets read his speech as “dovish”. He said that interest rates are “just below” neutral levels. In another front, financial markets remained calm awaiting the outcome of the Xi-Trump’s meeting at the G-20 summit.
In September 2018, the nominal annual growth rate of the balance of the current loan portfolio granted by commercial banks to the private sector was 11.2% (5.9% real). This rate was equal to the previous month and lower than the same month of 2017 (12.2%).
Increasing trade fears among investors ahead of Trump-Xi meeting at the G-20 summit as US President Trump threatened to go further with tariffs on Chinese imports unless China opens its markets to competition from US companies.
Net profit in the first half of 2018 was 6,654 million euros compared with losses of 6,170 million in the first semester of 2017, period in which the resolution of Popular had an impact. Defaulting within the system as well as the deleveraging of the private sector continues. The system’s efficiency and profitability improved in the first half of the year compared to 2017.
Among the various types of risk that the financial system is currently facing is that of cyber-attacks. The national producer price index for the construction sector increased by 8.1% in the third quarter of 2018, but we expect that at year-end 2019 the increase will have slowed to below 5% on an annual basis.
Financial markets seemed to recover on the back of positive news on Brexit negotiations, Italy’s budget plan and a rebound in oil prices. The Xi-Trump talks at the G-20 leaders’ meeting later this week will be key for investors.
In the past few days the bill introduced by Senator Ricardo Monreal aimed at prohibiting certain bank commissions has led to intense, and in my view healthy, debate as to whether or not bank commissions are too high and if so what is to be done about it. I have to declare an interest, since I work in a bank, but here are my views.
It seems that we are into a crucial moment in the drafting of the Brexit agreement with the extraordinary meeting scheduled for this weekend, which should serve to approve the withdrawal deal and the political declaration that will define the future relationship. Yet, even the agreement has not yet been finalised, the likely success of the summit is just one more step.
Highlights: SRB issues MREL policy for banks without resolution colleges. EBA issues RTS on the specification of downturns for the IRB approach. ESMA issues statement regarding Brexit and CCPs. FSB issues reports on correspondent banking, infrastructure finance, and OTC derivatives. BdE updates list of systemically important institutions. CFTC approves its Margin Rule.
The GDP of construction closed 2017 with a fall of 1.1% in the annual rate. This is a result of the 10% decline in civil works and the slowdown in building that only improved 0.4%, both in annual terms. However, for the second quarter of 2018, the construction sector has an accumulated advance of 2%.
Headline inflation increased 0.61% FoF in the first fortnight of November, with a slightly higher-than-anticipated 0.19% FoF rise in core inflation.
EZ 3Q GDP growth slowed down by 0.2pp (more than expected) to 0.2% QoQ, with a negative surprise in Germany, partly due to the impact from new autos regulation, and stagnation in Italy. Our models predict growth at around 0.3% for 4Q, which implies small downward bias to our forecast for this year and next. Uncertainty surrounding Brexit and Italy has increased markedly.
Budgetary constraints in the public sector and the poor development of the financial system make it convenient to involve the private sector in investment in infrastructure. The regulatory framework mitigates risks but does not completely isolate the effects of country risk volatility, knowledge about past corruption and lack of confidence in management.
The recovery of growth in Latin America continues to be very uneven. We are simultaneously dealing with the impact of the Argentine exchange rate crisis, the uncertainty generated by the reforms of the new government in Brazil and the mixed news coming out of Mexico. By contrast, the Andean countries are accelerating thanks to the recovery of internal demand.
RMB exchange rate is on its second wave of depreciation since the devaluation in August 2015. Escalating trade war, economic slowdown and divergence of US and China’s monetary policy contributed to the depreciation. The authorities' attitude has been from “ride-on-the-wave” to “lean-against-the-wind” and RMB outlook is hinging on the meeting between Trump and Xi in G20.
We expect a headline inflation print of 0.65% HoH in the first fortnight of November, translating into a 4.60% YoY number, and core inflation to post an increase of 0.15% HoH, 3.59% YoY.