UK shopper numbers down as new restrictions hit
European stocks lose ground
Cryptocurrency traders wait for Powell speech
In Washington, the International Monetary Fund’s annual meeting is still in full swing, a a week after it started. Several big names in the central banking world are due to speak later today. They include Fed chair Jay Powell, several ECB officials and ECB president Christine Lagarde, as well as the Bank of England’s deputy governor Jon Cunliffe, who will make two appearances this afternoon.
Their comments will be scrutinised for any hints as to whether interest rates will go negative. Britain’s banks are not ready for negative rates, the chairman of NatWest, Howard Davies, said last Thursday, pointing to technical and contractual issues. Here is a handy explainer what negative interest rates would mean for consumers.
Powell’s speech at a panel on cross-border payments and digital currencies could be interesting in other ways.
Bitcoin and other cryptocurrency traders are hoping for some signals from Powell at the panel, which also includes the general manager of the Bank for International Settlements, Agustín Carstens. The price of bitcoin has risen to $11,400 after endorsement from Twitter founder Jack Dorsey’s payments company Square, which bought $50m of bitcoin earlier this month.
In February, comments from Powell on the potential power of digital currencies during testimony in front of Congress sent the bitcoin price higher.
Powell said Facebook’s libra, a digital currency project that was deemed too risky by most major central banks last year, was a “wake-up call” that a digital currency could come “fairly quickly” and in a way that is “quite widespread and systemically important”.
Mati Greenspan, the founder of market analysis firm Quantum Economics, was quoted by Forbes as saying:
This IMF webcast is highly anticipated in the crypto community and the chairman’s attendance speaks volumes to its importance in traditional finance. Central bank digital currencies have increasingly been on the minds and lips of those who govern our money for obvious reasons.
The panel will be livestreamed by the IMF.
There are hopes that a US fiscal stimulus package can be agreed soon. House Democrat leader Nancy Pelosi said over the weekend that she was “optimistic” about getting a stimulus deal before the presidential election on 3 November.
She acknowledged that would require agreement within the next 48 hours. And Treasury Secretary Steven Mnuchin, her negotiating partner, is in the Middle East until Tuesday.
The White House proposed a $1.8 trillion stimulus last week to help Americans struggling because of the coronavirus pandemic. Pelosi said the offer fell short in a number of areas, including tax credits for poor people, aid to state and local governments, worker protections and rent help. She has stuck to her demand for a $2.2 trillion aid and stimulus package.
But markets have undoubtedly been cheered by signs of progress in the talks, after Pelosi and Mnuchin had a lengthy discussion on Saturday night.
Ben Emons, Medley Global Advisors managing director, said on Bloomberg TV:
It seems that the market is optimistic that indeed stimulus will follow whether that is tax cuts under a Trump presidency or spending under a Biden presidency.
Introduction: China first big economy to rebound from pandemic
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
China has become the first major economy to recover from the Covid-19 pandemic. It grew 4.9% between July and September from a year earlier, up from a 3.2% annual rate in the previous quarter, according to government data.
The growth rate was slightly lower than the 5% or more forecast by analysts, but represents a major reversal from the first quarter of this year when the economy shrank by 6.8% – China’s first contraction since 1992 when officials began keeping quarterly GDP data.
China’s central bank governor Yi Gang said on Sunday that officials predict growth of about 2% for 2020. China is expected to be the only G20 economy to grow this year. The world economy as a whole is expected to shrink by 4.4%, according to predictions from the International Monetary Fund, which would be the steepest downturn since the Great Depression.
The Chinese economy remains resilient with great potential. Continued recovery is anticipated, which will benefit the global recovery.
Here is our full story.
While the growth rate disappointed the market, “it was in fact quite good,” says says Iris Pang, chief economist, Greater China, for ING. The most encouraging factor is consumption, she says.
Retail sales jumped to 3.3% YoY in September from 0.5% YoY in August. This big jump shows that consumption has further stabilised, and there was also evidence of more spending from the business side.
Cross-provincial travel has helped the economy a lot as Mainland China “spenders” have stayed in the home country to spend on tourism services and luxury items in the duty-free shops. These activities have created jobs for low-skilled labour market participants and have helped to further stabilise consumption.
Chinese stock markets rose initially but later fell back. The CSI 300 index dropped 0.87%. Other stock markets in Asia rose, however, with Hong Kong’s Hang Seng gaining 0.5% and Japan’s Nikkei up 1.1%. Confidence was boosted by hopes of a US fiscal package and expectations of a coronavirus vaccine by the end of the year.
It’s a big day for central bank speeches, with US Federal Reserve chair Jerome Powell, European Central Bank president Christine Lagarde and Bank of England deputy governor Jon Cunliffe due to to speak this afternoon. Markets will be looking for further clues as to UK central banks’ leanings when it comes to negative rates.
The pound is lingering above a 10-day low as Brexit talks enter a crunch week. Boris Johnson said on Friday that it was time to prepare for a no-deal outcome when the transitional phase ends on 31 December, alarming markets. The EU’s chief negotiator, Michel Barnier, had been due to travel to London for talks with his UK counterpart David Frost, but they will now speak by telephone.
- 1pm BST: Fed chair Jerome Powell speech
- 1:45pm BST: ECB president Christine Lagarde speech
- 3:05pm BST: Bank of England deputy governor Jon Cunliffe speech