On a surprising move, China announced a replacement of former Finance Minister Lou Jiwei after a week-long Standing Committee National People’s Congress meeting this week.
In a stark and unexpected development, one which could have significant consequences for the future of China's economic reform push, on Monday Beijing unexpectedly removed Lou Jiwei, its highest-profile finance minister in years, ahead of a Communist Party Congress in 2017. Lou, an outspoken Communist Party veteran, had been picked for the job for his competence rather than a close relationship with President Xi Jinping in the early days of the administration. The reason why the move is largelyseen as symbolic, and one hinting at the future of China's financial reform, or lack thereof, is that as the WSJ writes, his removal raises questions about whether reform-minded officials are being sidelined as Beijing prioritizes short-term growth over major overhauls. Lou Jiwei, China's finance minister,. In his previous role as head of China Investment Corp., Lou vaulted the giant sovereign-wealth fund into the major league of global investment funds. He won the race to be the first finance minister under Mr. Xi, who had set out to give market forces a bigger role in China’s economy, largely because of his expertise on the country’s convoluted tax and fiscal system, according to the party officials with knowledge of the matter. However, it was not meant to be. Hired in the spring of of 2013, a time of significant volatility in China's financial sector when concerns about the country's massive debt load first emerged and led to a near collapse of interbank funding, Lou had expressed a wish to Premier Li Keqiang to allow him serve his full five-year term and hoped to implement a plan to overhaul the country’s creaky fiscal system and tax code. The chat with Mr. Li helped launch him as a major voice for market-oriented changes in China. However, on Monday, with two more years to go before his term ends, the 65-year-old Lou was replaced by a relatively low-profile bureaucrat. Lou is expected to take on a lesser role as head of China’s national pension fund. Xiao Jie, 59, a former top tax administrator, succeeded him as finance minister. The reshuffle, which also included the ministers of state security and civil affairs, is further evidence that President Xi Jinping is trying to position trusted allies in key government roles ahead of next year’s party congress that will shape policy agendas for years to come. More importantly, it signals that China has once again pushed pro-market reforms to the backburner in exchange for a perpetuation of the same failed policies that have led China to sport a gargantuan 300% debt/GDP according to the IIF. Of the personnel changes announced by the Standing Committee of the National People’s Congress, or China’s legislature, Mr. Lou’s departure was the big surprise. “Lou Jiwei’s abrupt ouster sends a strong signal that any prospects of even limited economic reforms are falling prey to President Xi’s focus on consolidating his power,” said Eswar Prasad, a Cornell University professor and former China head of the International Monetary Fund, cited by the WSJ. It's not the first high profile transition in China's government. Since coming to power in late 2012, Xi has been moving away from the party’s decadeslong collective leadership model and centralized decision-making within a number of small committees he heads. Last month, he was named the “core” of the party’s leadership—a designation giving him an even stronger perch to influence the outcome of the congress in late 2017. At that time, up to five of the seven current members of the Politburo Standing Committee, the top leadership body, are due to retire. In addition, more than 60% of the 376-seat Central Committee—which includes ministers, state industry chiefs and army generals—are expected to be replaced. Still, despite his consolidation of power, party insiders say Mr. Xi still has to vie with departing and retired leaders seeking to promote their own favorites. Some more observations on China's ongoing personnel changes from the WSJ: In another high-profile move announced Monday, Minister of State Security Geng Huichang will be succeeded by Chen Wenqing. The appointment was widely expected after Mr. Chen was made party secretary of the ministry last year in what was seen as a move by Mr. Xi to strengthen his control over the security services. And Cai Qi, a close associate of Mr. Xi’s who was previously a senior official in the National Security Commission, was appointed mayor of Beijing last week and is now considered a front-runner for a seat on the 25-member Politburo next year. “The best way to be sure of one’s power is to make sure that you put people you trust in positions to support you,” said Peter Mattis, a fellow at the Jamestown Foundation who studies China’s elite politics and security services. As the WSJ adds, "behind Mr. Lou’s removal, the party officials say, is a series of tough measures he spearheaded, especially attempts to rein in local-government borrowing, which have had the effect of squeezing short-term growth. His no-nonsense style and well-known bluntness, which earned him the nickname “Cannon Lou” in official circles, also didn’t do him any favor when senior leaders were mulling over his position, according to the officials." “This is about much more than his age,” one of the officials said. “He was expected to serve full-term.” At a time when local governments in China had racked up hundreds of billions of dollars in debt from big-ticket infrastructure projects, the new administration needed a tough official to put China’s financial house back in order, the officials said. In October 2014, Mr. Lou’s Finance Ministry issued a policy intended to prevent financing companies sponsored by local governments from taking on new debt. Soon, however, local officials complained to the top leadership that the policy made it hard to make any planned investments. In early 2015, China reported a sharp drop-off in growth of investment in factories, buildings and other fixed assets—a plunge many in the government attributed to the crackdown on local borrowing. Desperate to rekindle its debt-fueled growth, in May 2015, the central government relaxed controls on localities’ ability to raise money by again letting them tap government-sponsored financing firms—essentially reversing course on the measures launched by Mr. Lou months earlier. In the past year, Lou had led the effort to get a China-led regional development bank up and running, widely seen as a diplomatic coup for Beijing and a counterweight against U.S.-dominated institutions like the World Bank. This year, he co-chaired a series of meetings of finance chiefs from Group of 20 major economies. “I can’t say I’m the toughest finance minister” in recent history, Mr. Lou said in an interview with The Wall Street Journal in April. “I can only say I’m a man of principle.” That appears to have been enough to get him replaced; meanwhile China's reversion to its old, excess debt-fueled ways are now complete as any hope of real reform has now been extinguished.
COMMUNIST RULE RETURNS TO COMMUNIST CHINA: China Ousts Finance Minister Lou Jiwei in Surprise Reshuf…
COMMUNIST RULE RETURNS TO COMMUNIST CHINA: China Ousts Finance Minister Lou Jiwei in Surprise Reshuffle. Shortly before Lou Jiwei was appointed China’s finance minister in the spring of 2013, the outspoken Communist Party veteran expressed a wish to Premier Li Keqiang: to let him serve his full five-year term. Mr. Lou’s pitch, according to people […]
Lou Jiwei, widely seen as a voice for reform of China’s fiscal system, was abruptly removed in the latest sign that President Xi Jinping is trying to position trusted allies in key roles.
US Index futures, European and Asian shares surged most in weeks after the FBI cleared Hillary Clinton one last time of her handling of emails as secretary of state which it repeated wasn’t a crime. Oil, gas rise, together with most industrial metals; the VIX, yen and Swiss franc retreated with gold, silver and other flight to safety assets. The FBI news lifted a cloud over Clinton's presidential campaign two days before the U.S. election and put Wall Street firmly on track to snap a nine-day losing streak - its longest in more than 35 years. The US public and global markets were stunned for the second time in two weeks by the FBI, when James Comey announced in a letter to Congress just after 3pm on Sunday the Bureau was sticking with its view that Clinton’s handling of e-mails during her tenure as secretary of state wasn’t a crime, after reviewing new communications potentially related to the Democratic candidate. Comey’s announcement just over a week earlier that the bureau was looking into more e-mails sparked a selloff in risk assets, with U.S. stocks capping their longest run of losses since 1980. The peso’s fortunes have been tied to Trump’s campaign given his pledge to renegotiate trade deals with Mexico and to build a wall along the U.S. border, Bloomberg reminds us. According to a snap assessment by Deutsche Bank, with the election still largely in the margin of error, "a Clinton victory would be most likely to maintain the status quo policy wise and as our US fixed income strategists point out most likely to continue with financial repression tactics. We would probably have a short-term rally in risk and yields would spike a bit higher under this scenario. However could she get much fiscal stimulus through? If not this would cap the rise in yields. A Trump win is more likely to bring higher fiscal stimulus and an easing of financial repression. The uncertainly of what his policies would mean and the fact that financial repression is good for assets (all other things being equal) will probably mean a short-term risk asset sell-off. The scale and effectiveness of the possible fiscal stimulus would then play a big part in dictating risk assets over the medium term. The range of outcomes for asset prices and the economy (bad and good) are much higher with Trump." Many of the safe-haven assets that had performed so strongly last week when polls showed Republican candidate Donald Trump closing the gap turned the other way. Gold, bonds and the Swiss franc all fell on Monday. "Markets are pricing in a win for Clinton," said Kathleen Brooks, Research Director at City Index. "If Clinton wins we could see a continued recovery in risky assets like stocks and the Mexican peso. There could be another sell-off in gold and U.S. Treasuries, pushing up bond yields, which could also be dollar-positive." Among the biggest movers, the Bloomberg Dollar Spot Index rose for the first time in seven days on optimism the FBI’s latest statement will make a Clinton presidency more likely and pave the way for the Federal Reserve to raise interest rates in December. Crude oil rose 1.3 percent to $44.64 a barrel in New York after Algeria’s energy minister said he remains confident the Organization of Petroleum Exporting Countries will set output quotas at its next meeting to manage production. Gold fell as much as 1.3% to $1,288.11 an ounce. It surged 2.3 percent last week amid concern Republican Donald Trump may capture the White House, with Citigroup Inc. predicting a rally to $1,400 if he were to win. The VIX index posted its biggest one-day fall in over four months. That followed a record stretch of nine consecutive daily increases. In the latest US election news, FBI Director Comey vindicated Clinton in the latest email scandal over the weekend - leaving Clinton in a stronger position with just two days to go until the crucial vote. The USD strengthened and equities were bid overnight — MXN gained over 2% against the USD following the release — with downside observed in spot gold and fixed income. Further polls were released over the weekend, however, many now say that these could be out-of-date given the recent revelations with the FBI investigation. Mexico’s currency, which rises when Republican presidential candidate Donald Trump’s campaign has a setback, was set for its biggest jump since September ahead of Tuesday’s U.S. presidential election. European equities rebounded from a four-month low and Asian equities rose with S&P 500 Index futures. The yen sank by the most in two months, U.S. Treasuries fell and gold dropped for the first time in eight days as investors shunned haven assets. Hong Kong’s property developers tumbled amid a surge in taxes on housing transactions, while nickel led a rally among industrial metals. “The market is viewing the latest Hillary Clinton news as a positive, at least in the short term,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion. “It may still be a close call in the end, but the market for the time being is acting as if some of the uncertainty is gone.” Global stocks greeted the FBI announcement with a sigh of relieg, as the Stoxx Europe 600 Index jumped 1.2%, rebounding from its biggest weekly slide since February. In separate news, Euro-area finance ministers meet Monday to discuss banking union and Greece’s second bailout and European Central Bank Vice President Vitor Constancio may touch on monetary policy in a speech. The MSCI Asia Pacific Index added 0.5 percent, after sliding 1.4 percent last week. Japan’s Topix index gained 1.2 percent as the yen’s retreat gave a boost to the nation’s exporters. New Zealand’s benchmark stock gauge jumped by the most in five years. Westpac Banking Corp. led gains among Australian banks after reporting earnings and HSBC Holdings Plc rallied by the most in two months in Hong Kong following its results. The Hang Seng Property Index of property shares was headed for its biggest loss in more than a year after the government raised stamp duty on home purchases, meaning foreign buyers will now pay an effective 30 percent. Cheung Kong Property Holdings Ltd. and Sun Hung Kai Properties Ltd. tumbled more than 8 percent. S&P 500 futures rallied 1.3 percent following a nine-day slide in the underlying benchmark. The CBOE S&P 500 Volatility Index, a gauge of expected swings in U.S. stocks, soared 39 percent last week as Clinton’s lead was cut. While the race has tightened, the Democratic nominee maintains a 2.2 percentage-point lead over Trump, according to an average of polls by RealClearPolitics. “All that drama and yet the FBI director is sticking to the same conclusion that they had in July with respect to Hillary Clinton’s e-mail,” said Naeem Aslam, chief market analyst at Think Markets U.K. Ltd. in London. “This is good news for investors who have an appetite for risk in this environment.” The yield on 10Y Treasuries rose by 4bps to 1.82% as Clinton’s improved election prospects were seen boosting the likelihood of a Fed rate hike next month. Similar-maturity sovereign bonds retreated across most of the developed world. If Clinton wins, “interest rates are likely to head higher as the market looks towards Fed normalization,” said Eugene Leow, a fixed-income strategist at DBS Group Holdings Ltd. in Singapore. “Conversely, sentiment is likely to deteriorate further if Trump wins. We suspect that the knee-jerk reaction lower in yields would be comparable to what was seen in the immediate aftermath of Brexit.” * * * Bulletin Headline Summary from RanSquawk European equities enter the North American crossover firmly in the green amid Clinton being vindicated in the FBI investigation For the most part of this morning's session, we have seen the USD on the front foot again with EUR/USD back below 1.1100 and USD/JPY back above 104.00 Today's highlights include German Factory Orders, ECB's Coeure, Lautenschlager Market Snapshot S&P 500 futures up 1.5% to 2111 Stoxx 600 up 1.2% to 333 MSCI Asia Pacific up 0.4% to 137 US 10-yr yield up 4bps to 1.81% Dollar Index up 0.56% to 97.61 WTI Crude futures up 1.6% to $44.78 Brent Futures up 1.3% to $46.16 Gold spot down 1.4% to $1,286 Silver spot down 1.2% to $18.21 Top Global Headlines FBI Absolves Clinton Again, Two Days Ahead of U.S. Election: bureau’s director sends second letter to Congress before vote Don’t Worry When the Stock Market Goes Crazy After the Election: day-after election moves say nothing about annual returns OPEC Chief Says Russia on Board With Deal to Limit Output: non-OPEC cooperation will help re-balance oil market: Barkindo HSBC’s Profit Beats Estimates as Capital Buffer Strengthens: 3Q adjusted pretax profit $5.59b, est. $5.29b Ousted Tata Chief Said to Have Planned More Dividend for Owners: payout of about 8b rupees had been mooted for 2020 Gold Fields to Buy $270 Million Stake in Australia Project: miner agrees purchase of 50% stake in Gruyere gold project VW Woes Deepen as Prosecutors Extend Probe to Chairman: prosecutor in Braunschweig probes alleged market manipulation China May Let Wall Street Banks Run Own Mainland Units, WSJ Says: U.S. firms have long had to partner with Chinese companies U.S. Commerce Dept. Said to Begin New Chinese Steel Probe: WSJ: Agency expected to begin investigation into whether Chinese cos. shipped steel through Vietnam to avoid U.S. import tariffs, WSJ says Looking at regional markets, we start in Asia where markets traded higher across the board after reports over the weekend appeared to vindicate Hillary Clinton in the latest email scandal. FBI Director Comey said there is nothing in the new investigation that will lead to criminal charges being brought against Clinton - and this step down is especially important given the Clinton campaign made a point of attacking Comey personally. The moves in both futures and equities was pronounced, with the Dow Dec'16 E-mini and Nikkei 225 (closed +1.6%), gapping higher by over 200 points and 1.5% respectively. Chinese markets tracked higher in line with the sentiment, although the Shanghai Comp (+0.3%) lagged somewhat after the PBoC conducted a weak liquidity injection. Top Asian News Japan Worried About Yen After U.S. Election, FX Chief Says: Asakawa says intervention in FX market not ruled out Hong Kong’s Shock Home Curbs Seen Cutting Sales by Up to 70%: Stamp duty increased to 15% for all residential transactions SoftBank’s Profit Beats Estimates Amid Improvement at Sprint: 2Q net income 512.1b yen vs est. 446.9b yen May’s Indian Outreach Stumbles as Modi, Tata Play Hard to Get: Modi: Indian students must be encouraged to study overseas Westpac Lowers Profitability Target as Capital, Costs Bite: Lender drops 15% return on equity target amid capital needs China Flexes Legal Might to Quash Hong Kong Independence Calls: Ruling effectively prevents two localists from re- taking oaths China Names New Finance Minister to Replace Veteran Lou Jiwei: Xiao Jie, ex-aide to Premier Li Keqiang, succeeds to post Baidu Said to Seek Up to $500 Million for Delivery Startup: Waimai faces fierce competition for customers, restaurants European equity markets likewise gapped up at the open (DAX +1.4%) with financials leading the way, after FBI director Comey stated Clinton will not be met with any criminal charges. HSBC (+4.4%) also reported earnings which were mixed although the Co. reported a beat on pre-tax profits against the expected. Elsewhere in equities, energy names received some support after WTI and Brent crude prices retraced off lows. In Fixed income markets, prices gapped down at the open and across the core products after latest twist in the presidential saga, it also must be noted that volumes have also been light this morning and this could have had some impact on some of this mornings moves. Portugese bonds have been rallying as the country's parliament approved the government's plans to reverse public sector wage cuts, raise pensions and boost support for the poorest. Top European News Bpost Revives Approach for PostNL as Industry Shifts to Parcels: offer of EU5.65/share is half in cash, half in stock Nets Shares Fall; Carnegie Says IPO Didn’t Price in Risks: shares decline as much as 3.7%, hitting a new all-time low Munksjo to Acquire Ahlstrom for $639 Million in Fibers Deal: Munksjo investors to own 52.8% of company after combination Tesco Bank Halts Web Trades as Money Taken From 20,000 Accounts: About 40,000 customers experienced suspicious transactions Delta Lloyd Rises After Telegraaf Says NN Considers Raising Bid: newspaper says NN considering raising bid to EU5.80/share Telia Buys Phonero in Norway; Sees Annual Cost Synergies NOK400m: says transaction will strengthen Telia’s position in Norwegian enterprise segment Carlyle Gets $630m 5Y Loan for VXI Global Solutions Stake Buy: BOC, China Merchants, CTBC (agent) have underwritten the dual-tranche facility New Europe Property Investments Buys Arena Centar for EU237.5m: price settled from NEPI’s existing cash resources Qatar Airways Expects Deal to Buy 49% of Meridiana Fly by Jan.: comments in statement on website In FX, the biggest mover was the Mexican peso which climbed 2.1% versus the dollar. The currency fell in each of the last two weeks as Clinton’s lead over Trump narrowed in opinion polls amid the FBI’s renewed probe of her emails, an issue that has dogged her campaign. The Bloomberg Dollar Spot Index rose for the first time in seven days on optimism the FBI’s latest statement will make a Clinton presidency more likely and pave the way for the Federal Reserve to raise interest rates in December. Trump has advocated winding back free-trade agreements, which may hinder global economic growth and make the central bank less inclined to tighten policy. “A Clinton win would clear the decks for the Fed to raise rates in December and for markets to price in a more aggressive profile for tightening over 2017,” said Sean Callow, a senior strategist at Westpac Banking Corp. in Sydney. “The surge in U.S. equity futures and slide in the gold price reinforces the evidence that a Trump win is seen as negative for global growth and profits.” The yen and the franc slipped 1 percent or more, the largest declines among major currencies. The two are considered haven assets and posted gains of more than 1.5 percent last week. China’s yuan fell by 0.3 percent, the biggest loss in four weeks, after the central bank lowered its daily reference rate ahead of an update on the nation’s foreign-exchange reserves. The holdings are expected to have dropped by $34 billion to $3.13 trillion in October, according to the median forecast in a Bloomberg survey. In commodities, gold fell as much as 1.3% to $1,288.11 an ounce. It surged 2.3 percent last week amid concern Republican Donald Trump may capture the White House, with Citigroup Inc. predicting a rally to $1,400 if he were to win. Adding to the headwinds for bullion, U.S. employment data on Friday bolstered the case for higher borrowing costs and Fed Bank of Atlanta President Dennis Lockhart signaled a December rate hike was likely. Nickel surged by the most four months in London after violent protests in Jakarta on Friday spurred concern that Indonesian supplies could be affected if the unrest spreads. Copper advanced to its highest level in a year. “General bullish sentiment is driving up metals prices,” Wang Cong, an analyst with SMM Information & Technology Co., said from Shanghai. “It seems that Clinton’s now more likely to win the presidency. The protests in Indonesia have raised concerns about possible supply disruptions for ferronickel.” Crude oil rose 1.3 percent to $44.64 a barrel in New York after Algeria’s energy minister said he remains confident the Organization of Petroleum Exporting Countries will set output quotas at its next meeting to manage production. In terms of major economic events, it’s fairly quiet in the US datawise with only the labour market conditions index for October and consumer credit data for September due. Also due out is the Fed’s Senior Loan Officer Opinion Survey so that’s worth keeping an eye on. * * * US Event Calendar 10am: Labor Market Conditions Index Change, Oct. (prior -2.2) 3pm: Consumer Credit, Sept., est. $17.5b (prior $25.873b) DB's Jim Reid concludes the overnight wrap The universe looks perfectly in balance this morning from this vantage point as Liverpool sit on top of the Premier League here in England. Whether it looks in balance in 48 hours time depends on your view on the respective merits of a former reality TV host or the spouse of a former president being in charge of the free world. It's fair to say that a Clinton victory would be most likely to maintain the status quo policy wise and as our US fixed income strategists point out most likely to continue with financial repression tactics. We would probably have a short-term rally in risk and yields would spike a bit higher under this scenario. However could she get much fiscal stimulus through? If not this would cap the rise in yields. A Trump win is more likely to bring higher fiscal stimulus and an easing of financial repression. The uncertainly of what his policies would mean and the fact that financial repression is good for assets (all other things being equal) will probably mean a short-term risk asset sell-off. The scale and effectiveness of the possible fiscal stimulus would then play a big part in dictating risk assets over the medium term. The range of outcomes for asset prices and the economy (bad and good) are much higher with Trump. Back to our fixed income strategists they think the two candidates’ fiscal plans probably mean 10 year yields end 2017 at 2% with Clinton and 2.4% with Trump. However the first move with a Trump win would be risk-off and a bond market rally. So with the clock ticking and the campaign entering the battleground states, the big news to report this morning is the confirmation from the FBI not to recommend prosecution of Hilary Clinton following the handling of emails during her tenure as secretary of state. After the FBI shook things up on October 28th with the news that they were examining new emails potentially related to Clinton’s use of a private email server, the agency confirmed late last night that they maintain the same conclusions as those expressed in July and that no new evidence had been found to warrant charges. Clearly a huge boost to Clinton at the business end of the campaign. Based on the evidence from the polls there’s no doubt that Trump’s chances were given a boost when the FBI headlines initially broke over a week ago, although the latest polls from the weekend suggest that the momentum was perhaps starting to wane a bit. We’ll have to wait to see what the full impact from the latest FBI update is for now, but the latest ABC News/Washington Post Poll (with a survey period of November 1st-4th) now has a 5% lead for Clinton at 48% to 43%. That’s the widest margin in favour of Clinton under that poll since October 26th. Others include; Ipsos (Oct 31st - Nov 4th) with Clinton leading by 4%, NBC News/WSJ (Nov 3rd - 5th) with Clinton leading by 4%, Fox News (Nov 1st - 3rd) with Clinton leading by 2% and Marist College (Nov 1st - 3rd) with Clinton leading by 1%. The only recent reputable poll we’ve found with Trump holding the advantage is the IBD/TIPP (Nov 2nd - 5th) poll where Trump leads by 1%. In fact if we look at the 14 polls released since October 28th, on average Clinton’s lead is 1.9% while the median is 2.5%. RealClearPolitics is reporting that Clinton has a 2.2% advantage based on an average of polls although their study of battleground states still shows that it’s a more closely run thing. Their analysis shows that Clinton has an advantage in 8 of the 14 battleground states, versus 6 states for Trump. In terms of what markets have done the big mover in FX this morning is the Mexican Peso which has surged +1.83% as we go to print. At the intraday lows the Peso had been as much as -4.48% weaker last week after Trump made some moves in the polls. The Canadian Dollar (+0.18%) has also benefited from the news while the Yen and Swiss Franc, which surged last week, are -1.08% and -0.72% this morning. Gold is -1.00% while WTI Oil has rebounded +1.09% after plummeting -9.51% last week. There’s an unsurprisingly positive tone in equity markets in Asia. The Nikkei (+1.38%), Hang Seng (+0.50%), Shanghai Comp (+0.26%), Kospi (+0.67%) and ASX (+1.32%) are all posting healthy gains, while US equity index futures are up +1.30% or so. So could this be the day that the S&P 500 finally snaps its losing streak? It had looked like the streak would come to an end on Friday before a late dip into the close saw the index finish -0.17% and so extending the losing streak to a fairly remarkable 9 days. That is the worst such streak since November 1980. In fact, since the index expanded to the current 500 stock form in 1957, there have only been 5 other occasions where the index has fallen for 9 days in a row. As a reminder, there have been 2 occasions where the index has fallen 10 days in a row (the last being in 1975), 2 occasions where the index has fallen 11 days in a row (the last being 1971) and just the 1 occasion where the index has fallen for 12 days in a row, back in 1966. It’s worth noting that of the 11 greater-than-nine-day-selloffs, this is the second mildest at -3.07% and only a shade behind the mildest in 1963 at -3.06%. So as we noted on Friday, this is a run which has been more notable by its consistency than its depth so far. We thought it would be interesting to extend the analysis and see how the index performed in the month following these record selloffs. Well it turns out that performance has been hugely varied. In fact, amongst the other 10 comparable losing streaks, the index has only risen over the following month on 4 occasions while declining on 6 occasions. The average return however is +2.19% boosted by a +17.34% rally following the 1974 9-day crash, although the median is a more sedate -0.68%. In terms of the range the best return is that +17.34% rally while the worst is a -1.96% decline. In their latest note published on Friday our US equity strategists highlighted that they now think that election risk is better priced and so have changed their ‘next 5% move’ tactical call to ‘Up’. Staying with equities, it’s worth refreshing now where we are with earnings season. 421 S&P 500 companies have now reported comprising 88% of S&P earnings. The beat miss ratio now stands at 65% beating on EPS with a weighted average beat of 5.2% compared to 22% that have missed. At the sales line, 33% have beaten and 32% have missed with the remainder being in line. The average sales beat is just +0.1%. As our colleagues highlight, the blended (actual for reported and estimate for remaining) bottom up Q3 EPS climbed to $31.19, up +3.5% yoy. An interesting takeaway for us is what they have highlighted in the energy sector in particular. Our colleagues note that most energy companies beat analyst estimates as a result of last minute forecast cuts, but if you compare the reported earnings to September month end analyst estimates, then they missed by 3.4%. Indeed the cuts to forecasts are already playing out for Q4. The bottom up consensus (Bloomberg) is now $31.03, and down from $31.76 seen on September 1st. So as we’ve said for a while, earnings season looks optically better but has been boosted by lower and lower street forecasts. Back to Friday. For those that missed it, Friday’s employment report was fairly non-eventful and one that did little to really swing Fed expectations. Payrolls came in at 161k for October which was a touch below consensus (173k) but also included 44k in upward revisions over the previous two months. The unemployment rate declined to 4.9% as expected while the broader U-6 rate made a new cyclical low of 9.5%. Wage growth was impressive with average hourly earnings rising +0.4% mom to take the YoY rate up to 2.8% and the highest since mid-2009. Average weekly hours were unchanged at 34.4hrs while the labour force participation rate nudged down a modest one-tenth to 62.8%. 10y Treasury yields did dip back below 1.80% to 1.777% but are back up 5bps this morning at 1.823%. Fed Vice-Chair Fischer said following the data that the US economy could ‘to some extent exceed our employment and inflation targets’ and that ‘our assessment is that the most recent data have further strengthened the case for increasing the target range for the federal funds rate’. Meanwhile, the other data out in the US on Friday was the September trade balance where the deficit came in at a narrower than expected $36.4bn. Taking into account last week’s auto sales and trade data, the Atlanta Fed lifted their Q4 GDP estimate to 3.1% from 2.3%. Elsewhere, in Europe the focus was on the remaining PMI revisions. There was a bit of disappointment in the services data for the Euro area where the PMI was revised down from 53.5 to 52.8. That had the effect of the composite being revised down 0.4pts to 53.3. By country, Germany was revised up 0.1pts to 54.2 for the services PMI, however France was revised down 0.7pts to 51.4. Prints in the periphery were generally stable. Our economists in Europe note that the strong October survey data suggest an upside risk to their +0.3% qoq Q4 growth forecast for the Euro area. The general risk off tone did however result in the Stoxx 600 closing -0.83% on Friday, taking the weekly decline to -3.52% and the worst since February. Before we look at the week ahead, Our European bank equity research team, with a contribution on AT1s from my credit strategy team, published a piece commenting on the recent recalibration of capital levels below which supervisors would force banks to restrict their distributions, such as dividends and AT1 coupons. This follows recent disclosures of lower preliminary thresholds by French banks and the likely read-across for the sector. The authors do not rush to say this is dividend positive for European banks but conclude that this anticipated change is unambiguously positive for the AT1 market and its stability. Turning now to this week’s calendar. This morning in Europe we’re kicking off in Germany where factory orders data will be out, followed thereafter by September retail sales for the Euro area and also the Sentix investor confidence reading. Over in the US this afternoon it’s fairly quiet datawise with only the labour market conditions index for October and consumer credit data for September due. Also due out is the Fed’s Senior Loan Officer Opinion Survey so that’s worth keeping an eye on. China will also release the October foreign reserves data at some stage. It’ll be China who get things started on Tuesday with the October trade data released. In Japan we’ll also get the latest leading index reading. During the European session the focus will be on Germany again where the September trade data and industrial production print is due. Trade data for France is also out tomorrow while there are important releases in the UK too with the September industrial and manufacturing production reports. Over in the US the NFIB small business optimism reading will be due along with the September JOLTS report. Turning to Wednesday, it’s once again China where the early focus will be with the October CPI and PPI reports due out. During the European session we’ll get France business sentiment and UK trade data while the European Commission will also release its latest economic forecasts. It’s quiet in the US on Wednesday with just the final revisions to wholesale inventories and trade sales for September due. Moving to Thursday, there’s not much to report from the morning session in Europe aside from industrial production and wages data in France. It’s similarly quiet in the US with just initial jobless claims and the Monthly Budget Statement due out. Friday is also fairly quiet for data. In Germany we’ll get the final October CPI revisions while in the US we’ll get a first look at the University of Michigan consumer sentiment reading. Friday is also Veterans Day in the US meaning that bond markets will be closed, but stock markets remain open. The big focus is clearly away from the data however with the US Presidential Election. Exit polls should be out late on Tuesday night or very early on Wednesday morning with the suggestion being that we could have a likely result around 4am-5am GMT on Wednesday morning. Meanwhile, there’s also some Fedspeak this week with Evans speaking twice on Tuesday, Kashkari on Wednesday, Williams and Bullard on Thursday and finally Fischer on Friday. Another potentially interesting event worth highlighting comes today (at 3.30pm GMT) where the UK Attorney General Jeremy Wright is due to make a statement to the House of Commons about the government’s reaction to the High Court ruling last week. Questions from lawmakers are expected to follow. Finally earnings season winds down with just 30 S&P 500 companies reporting and 91 Stoxx 600 companies due to report.
В китайском правительстве произошла важнейшая кадровая перестановка: на место министра финансов вместо ветерана Лоу Цзивея, который был причастен к большинству экономических реформ КНР, назначен Сяо Цзе, передает агентство Bloomberg.
В китайском правительстве произошла важнейшая кадровая перестановка - на место министра финансов вместо ветерана Лоу Цзивейа, который был причастен к большинству экономических реформ КНР, назначен Сяо Цзе, передает агентство Bloomberg.
Новым министром финансов КНР назначен Сяо Цзе, замминистра финансов и глава налогового ведомства, сообщает «Синьхуа».
BEIJING (Reuters) - China appointed a new finance minister on Monday who is expected to maintain an expansionary fiscal policy and push reforms to put a lid on rising debt levels in the economy.
Based on a supply-side estimate of potential growth and projections of the main components of demand; Bloomberg's Chief Economist Tom Orlik notes that China potential growth - the rate at which the economy could expand when firing on all cylinders - will slow to 7.1% in 2016 and 7.0% in 2017 from 7.3% in 2015. The government's growth target for 2016 is 6.5-7% and - based on the 13th Five Year Plan - a minimum of 6.5% from 2016-2020. And that is why China is starting to manage expectations as the Xinhua news agency reported on Wednesday, citing the head state planner, that China will need "arduous efforts" to meet annual economic targets, with the economy expected to be under continued pressure in the second half of the year. As Reuters reports, the comments from Xu Shaoshi, head of the National Development and Reform Commission (NDRC), come as China's economy shows signs of stabilizing, but concern remains as to the sustainability of growth driven by government investment and the property market. Xu, however, said he was confident China "could meet major annual targets in economic growth, employment, commodity prices and residents' income", according to the state news agency. "Great difficulties remain in meeting goals for investment and trade," Xinhua quoted Xu as saying. "Currently, the foundations for stable economic development are not solid enough and downward pressure remains large, with difficulties hard to underestimate." Despite the weakest economic growth in 25 years, government sources have said policymakers do not see the need to reduce interest rates or bank reserves amid evidence companies and banks are hoarding cash. The focus instead has been on structural reform and fiscal measures... "China will continue to design and implement targeted and flexible macro-control measures, and pursue a proactive fiscal policy and a prudent monetary policy," Xu said, according to Xinhua. On the fiscal front, finance minister Lou Jiwei said China was considering higher export rebates for some mechanical and electrical products, Xinhua reported. Xu concluded by warning of regional polarization, difficulties with farmers' incomes and stable demand growth, and potential risks in finance and employment, as challenges facing the economy... but apart from that, everything is awesome??!! And sure enough it was proven awesome tonight when, right on cue ahead of the weekend's G-20 gathering, Bloomberg reports that China’s official factory gauge unexpectedly rose last month to the highest level in almost two years, suggesting a weakening in July was flood-related and temporary (even though Services PMI dropped and Aussie PMI crashed)... The manufacturing purchasing managers index rose to 50.4 in August, the statistics bureau said Thursday, up from July’s 49.9 and compared to the 49.8 median estimate of economists surveyed by Bloomberg. The non-manufacturing PMI stood at 53.5 compared with 53.9 in July. Numbers above 50 indicate improving conditions. "The number is quite surprising, but still reasonable following the policy support in some sectors," said Zhu Qibing, chief macro economy analyst at BOCI International (China) Ltd. in Beijing."The PBOC will refrain from more easing, but won’t tighten immediately." Measures of new orders, purchases quantity and input prices paced the PMI rebound. But the gains weren’t shared equally, with large enterprises reporting improved conditions even as medium and small firms deteriorated, the data showed. * * * So - China is fine (despite currency turmoiling) because floods across southeastern regions responsible for about a fifth of China’s economic output interrupted production in the summer... so that's good news right? Except the promise of more stimulus is now less likely... especially a broad-based stimulus. Still, Chinese stocks were the best in the world in August...
China is promoting priority areas and guiding principles designed for structural reform of G20 members, according to Finance Minister Lou Jiwei. • UN chief praises China's G20 summit leadership • Full coverage: G20 Hanghzou Summit
TROUBLED Dongbei Special Steel Group Co and its creditors continued with their battle publicly as investors pushed for the firm’s bankruptcy and objected to a potential debt-to-equity swap that could
The government will “help but not bailout” the rising defaults of corporate bonds, the Chinese finance minister said. “The corporate debts ratio are relatively high in China, but there are no systemic