Friday, December 30, 2016

BBC News - House price growth 'to slow in 2017'

UK house prices will continue to rise in 2017 but at a much slower rate, according to research from the Halifax.
House for sale
Britain's biggest mortgage lender said annual house price growth would be running at between 1% and 4% by the end of the year.
That compared with an average of 10% in March 2016.
Halifax attributed the forecast to a "higher than normal degree of uncertainty" about the economy in 2017, linked to the recent fall in sterling.
It said a weaker economy, combined with falling affordability, would lead to fewer house sales.
The buy-to-let sector is also expected to cool further as new tax rules restrict landlords' profits.
Halifax said prices in London would slow more sharply than elsewhere, as affordability in the capital was already stretched.
However, the current low cost of mortgages and the ongoing shortage of properties for sale would continue to support prices across the country, it said.
Martin Ellis, Halifax's housing economist, said: "The housing market is critically dependent on how the wider economy evolves. We consider it most likely that the UK economy will soften over the course of 2017.

Further easing

"This is most likely to result from the weakening of sterling pushing up import costs and dragging on purchasing power, both for consumers and as a determinant of business investment spending."
With a higher risk of unemployment, rising inflation and "affordability constraints", housing demand was likely to be curbed, Mr Ellis said.
"These factors ... particularly in London and the South East, are likely to result in a further easing in annual house price growth during the coming year, continuing the trend seen since the spring of 2016."
The forecast chimes with several other predictions that point to slower house price growth in 2017.
Nationwide Building Society predicts price rises of about 2% next year, while the Royal Institution of Chartered Surveyors has said it expects property values to rise by about 3%

Thursday, December 29, 2016

Reuters News - Trump tax reforms could depend on little-known 'scoring' panel

U.S. President-elect Donald Trump talks with the media at Mar-a-Lago estate where Trump attends meetings, in Palm Beach, Florida, U.S., December 21, 2016. REUTERS/Carlos Barria
U.S. President-elect Donald Trump talks with the media at Mar-a-Lago estate where Trump attends meetings, in Palm Beach, Florida, U.S., December 21, 2016. REUTERS/Carlos Barria
President-elect Donald Trump's goal of overhauling the U.S. tax code in 2017 will depend partly on the work of an obscure congressional committee tasked with estimating how much future economic growth will result from tax cuts.
Known as the Joint Committee on Taxation, or JCT, the nonpartisan panel assigns "dynamic scores" to major tax bills in Congress, based on economic models, to forecast a bill's ultimate impact on the federal budget. The higher a tax bill's dynamic score, the more likely it is seen as spurring growth, raising tax revenues and keeping the federal deficit in check.
As Trump and Republicans in Congress plan the biggest tax reform package in a generation, the JCT has come under pressure from corporate lobbyists and other tax cut advocates who worry that too low a dynamic score could show the legislation to add billions, if not trillions of dollars to the federal deficit.
"The problem is that the Joint Committee staff has adopted a whole series of assumptions that truly minimize the effects and underestimate the impact that a properly done tax reform could have," said David Burton, an economic policy fellow at the conservative Heritage Foundation think tank.
A low dynamic score could force Republicans to scale back tax cuts or make the reforms temporary, severely limiting the scope of what was one of Trump's top campaign pledges.
Other analysts warn that pressure for a robust dynamic score raises the danger of a politically expedient number that could help reform pass Congress but lead to higher deficits down the road.
Until last year, JCT used a variety of economic models in its arcane calculations, reflecting the uncertainties in such work. But House of Representatives Republicans changed the rules in 2015 to require that a bill's score reflect only a single estimate of the estimated impact on the wider economy and resulting impact on tax revenues.
Next year's anticipated tax reform package would be the biggest piece of legislation that JCT has scored using this new, narrower approach, presenting the committee with a daunting challenge.
JCT Chief of Staff Thomas Barthold acknowledged the challenge of dynamic scoring in an interview with Reuters.
"The U.S. economy is so darn complex, you really can't have one model that picks up all of the complexity and nuance. So the essence of modeling is to try to slim things down, try to emphasize certain points," he said.
Tax reform is still months away. But the initial legislation expected in 2017 is likely to fall somewhere between two similar but separate plans, one backed by Trump and the other by House Republicans including Speaker Paul Ryan.
The proposals lean heavily for fiscal legitimacy on dynamic scoring. Even the most robust independent scores show both plans adding to the deficit.
But dynamic scoring, like any economic modeling technique, is far from precise and, when it comes to fiscal policy, any theoretical flaws could lead to very real consequences for taxpayers and the U.S. economy.

The JCT has included macroeconomic analyses in its tax bill scores since 2003, providing a range of estimates on economic effects built on a variety of assumptions.
When Dave Camp, as chairman of the House Ways and Means Committee, produced a tax reform bill in 2014, JCT used two models and forecast revenue gains ranging from $50 billion to $700 billion. The committee also provided economic growth forecasts from as low as 0.2 percent to as high as 1.8 percent.
The tax package likely to emerge next year will probably be even more complex than Camp's, prompting some to worry that budgetary and economic forecasts will range even more widely.
Some critics, including lobbyists for major corporations that stand to gain from big tax cuts, want JCT's numbers to look more like the nonpartisan Tax Foundation's, a research group whose work has been embraced by Trump and House Republicans.
The Tax Foundation estimates that the House Republican tax plan would lead to a 9.1 percent higher gross domestic product over the long term, 7.7 percent higher wages and 1.7 million new full-time-equivalent jobs. It predicts the plan would reduce government revenue by $2.4 trillion over a decade, not counting macroeconomic effects, but by only $191 billion once economic growth is taken into account.
By contrast, the centrist Tax Policy Center estimates the House plan would add 1 percent to GDP over 10 years and erase $2.5 trillion of revenue, even with positive macroeconomic feedback, due to higher federal debt interest.
By David Morgan
(Editing by Kevin Drawbaugh and Leslie Adler)

Wednesday, December 28, 2016

BBC News - Lord King says Brexit brings 'real opportunities'

Lord King, the former governor of the Bank of England, has said that the UK should be "self-confident" about leaving the European Union.
Mervyn King
He said there were "real opportunities" for economic reform and new trade deals which meant Brexit could be a success.
He highlighted agricultural reform and a developing relationship with the Republic of Ireland as areas where the UK could be positive.
After Brexit, the Irish border will be the only EU-UK land border.
"I think the challenges we face mean it's not a bed of roses, no one should pretend that, but equally it is not the end of the world and there are some real opportunities that arise from the fact of Brexit we might take," he said in an interview with Radio 4's Today programme.
"There are many opportunities and I think we should look at it in a much more self-confident way than either side is approaching it at present.
"Being out of what is a pretty unsuccessful European Union - particularly in the economic sense - gives us opportunities as well as obviously great political difficulties."
Lord King suggested that Britain would be better off economically completely out of the EU single market and that there were "question marks" about staying in the customs union as that may constrain the government's ability to sign trade deals with countries outside the Union.
"I think it's more difficult to take advantage of those opportunities," Lord King said when asked about staying inside the customs union after leaving the EU - a position, for example, adopted by Turkey.
"I don't think it makes sense for us to pretend we should remain in the single market and IPublished on
 think there are real question marks about whether it makes sense to remain in the customs union.
"Clearly if we do that we cannot make our own trade deals with other countries."
The government has made it clear it wants to control immigration laws and be outside the jurisdiction of the European Court of Justice, two positions which appear to be incompatible with membership of the single market.
Lord King said the government should outline its policies on immigration "sooner rather than later" and that it would be a mistake to put the issue into the "basket" to be negotiated once Article 50 is triggered next year and the formal process of leaving the EU begins.
Lord King defended his successor, Mark Carney, who has faced criticism for being too "political" in warning about the possible economic consequences of leaving the EU.
The former governor said Mr Carney had been put in an "almost impossible position" because of the polarised nature of the debate and had remained well within the Bank of England's remit to outline the possible path of economic growth in the short term should Britain vote to leave the EU.
Lord King said it was too early to tell what the overall effect on the economy would be, despite data since the referendum result being more positive than many economists predicted.


Tuesday, December 27, 2016

Bloomberg News - Outrage Over the Economy Doesn’t Explain Surging Global Populism

The year belonged to people like Bill Heinzelman, a retiree from Wisconsin, and Lucien Durand, a farmer in southeastern France.
They helped propel the populist wave that swept across the western world in 2016, blindsiding pollsters and investors with how strongly they felt the status quo in politics must go. The conventional wisdom among election observers and establishment politicians is that widespread anger at being left behind by globalization compelled Britons to forsake the European Union and Americans to vote for Donald Trump.
Yet the concerns of people from the U.S. Midwest to Greece, where a populist, anti-austerity government has been in power for almost two years, are only partially rooted in a sense of abandonment in a global economy. There’s a deeper discontent with the way they are governed that a fiscal stimulus program, import tariffs or a stock-market rally won’t quickly soothe.
Unemployment where Heinzelman lives is 3.2 percent, matching the lowest level since 2000. His beef is with undocumented immigrants, so the retired small-business owner backed Trump. Durand, whose family farm is in a moderately prosperous region between Lyon and the Alps, said bureaucrats in Brussels who are “totally removed from the real world” have solidified his loyalty to France’s National Front party, which could help propel the anti-euro party under Marine Le Pen to power next spring.
"Whether they’re virtual or real, the reality is we’re going to see a world with more walls," said Ian Bremmer, president of Eurasia Group, a New York-based risk consulting firm.
As a result, it might be years before policy makers absorb the significance of the economic and political forces now playing out, let alone craft a case for globalization that secures broad appeal.
Measures of financial and trade globalization confirm that the integration that has lifted hundreds of millions out of poverty in the developing world is fraying. International bank lending has declined since the financial crisis, data published by the Bank for International Settlements in Basel, Switzerland, show. International bond issuance is stagnant.
And while the amount of trade in goods and commercial services was nearly twice as high in 2015 as in 2005, growth has shuddered to a near-standstill. The ratio of merchandise trade to world output fell sharply in 2015 and is now at roughly the same level as in 2005, World Trade Organization data show.
“Global trade is sliding into ever more gloomy territory,” according to Raoul Leering, head of international trade analysis at ING Bank NV in Amsterdam. Citing the Netherlands Bureau for Economic Policy Analysis, Leering says that global trade in volume terms “took a beating” in October 2016, and is heading for its worst year since 2009.
Journey into America’s manufacturing heartland, and you’ll meet plenty of people blaming their struggles on unfair foreign competition.
"It just sucks. It’s hard to find jobs, and the ones you can find don’t pay enough," said Jeff Mansfield, 39, a Trump supporter in Youngstown, Ohio, who works for a firm selling satellite TV subscriptions. "It’s just living paycheck to paycheck."

Market Optimism

Meanwhile, U.S. financial markets reflect the opposite of glum. The S&P 500 Index has risen more than 10 percent this year. The Bloomberg Dollar Spot Index is reaching new heights. The yield on 10-year Treasuries hit 2.6 percent on Dec. 15, the highest since September 2014, as investors see stronger growth in the world’s largest economy.
To address the malaise of his supporters, Trump is signaling that he’ll keep a campaign promise to turn the U.S.’s economic gaze inward when he takes office in January. On Dec. 21, he named Peter Navarro, a fierce critic of China’s trade practices, as head of a newly created National Trade Council inside the White House.
The real-estate developer’s vow to "Make America Great Again" resonates in places like Youngstown, once a steel-making powerhouse immortalized in a Bruce Springsteen song. With its deep union roots, the town of about 65,000 people used to be considered a Democratic stronghold. But in Youngstown and elsewhere across the so-called Rust Belt, Trump’s message played especially well with white males with no college education, helping to flip counties that went to President Barack Obama four years ago.
Many workers can be forgiven for feeling they aren’t getting ahead. Since 2000, income per capita in the U.S. has risen 2.9 percent to just under $32,000, which works out to an annual raise of less than 0.2 percent.

‘Get Booted’

But it’s a mistake to explain anti-establishment sentiment purely in economic terms. Exit polls show Hillary Clinton beat Trump among those who considered the economy their top issue. Trump was the preferred choice among those concerned about national security and immigration.
For Heinzelman in Wisconsin, undocumented workers are part of the problem and Trump’s tough stance has merit. "When you come into this country and don’t follow the law, you get booted," he said.
In Europe, immigration may be a stronger source of tension than trade. The influx of refugees from war-torn Syria has reignited sensitive debates about identity and culture. U.K. Prime Minister Theresa May plans to trigger EU withdrawal in the first quarter with a focus on gaining control of immigration.
Now, nationalist parties are proving themselves forces in Germany, France and the Netherlands ahead of 2017 elections there that could shape the future of the euro.
"There’s nothing inevitable about globalization," said Jeff Colgan, a political-science professor at Brown University in Providence, Rhode Island. "The cosmopolitan elite of many countries have not done a good job of defending rhetorically the benefits of globalization, and we’re seeing a real challenge to that."

Smith, Ricardo

The openness of world markets has ebbed and flowed throughout modern history. Between the 16th and 18th centuries, European powers sought to hoard as much gold and silver as they could by maximizing exports to other nations. Mercantilism reigned until Adam Smith and David Ricardo explained how trade can make nations collectively better off.
The embrace of that notion in the 19th century helped set off what some call the first age of globalization. Trade boomed amid technological advances such as the steam engine and the monetary stability of the gold standard.
But nations relapsed during the Great Depression, imposing tit-for-tat tariffs and devaluing their currencies. It took the devastation of World War II to convince governments to refrain from protectionism, a commitment that still underpins policy discussions at meetings of the world’s biggest economies.
The risk today is another period of "deglobalization," as Deutsche Bank economists George Saravelos and Robin Winkler warned in a recent report. That could further slow growth in trade, hinder capital flows and erode the "multinational business model" adopted by many corporations, they predict.

Lagarde’s Challenge

Even the International Monetary Fund, seen by some as head cheerleader, has conceded that the system may be tilted too much in favor of those who already wield wealth and power. In an interview this month at Bloomberg headquarters, IMF Managing Director Christine Lagarde said the world needed to "move toward globalization that has a different face, and which is not excluding people along the way."
The defenders of free-flowing capital and labor will be devoting much of next year to figuring out what can be done. The World Economic Forum, which holds its annual meeting in Davos, Switzerland, in January, will dedicate itself to finding the “agile, inclusive and collaborative responses” needed urgently to address the complexity and uncertainty in people’s lives.
The Group of 20 economies, led by Germany next year, will also be occupied with trying to make globalization benefit everybody. “To benefit from the advantages of global competition and exchange, countries need to enable their citizens to manage the changes in their economic and social life,” Bundesbank President Jens Weidmann said in a speech in Brussels Dec. 19.
Yet if the global elite are focusing their energy on an economics-led band aid, they may find it difficult to apply. About the only thing certain about populist movements is that they run their course -- and not always in a way that leaves their supporters feeling satisfied. The cause -- and source of the remedy -- for populism lies in what Greek political scientist Yannis Stavrakakis calls a “crisis of representation.”
In other words, it’s the gulf between voters and governments that’s what really matters.

Monday, December 26, 2016

BBC News - UK third quarter GDP growth revised up to 0.6%

The UK economy grew by 0.6% in the third quarter, according to official figures, faster than previous estimates.
The current account deficit widened in the third quarter
Growth for the July-to-September period had originally been estimated at 0.5%.
New data from the Office for National Statistics (ONS) suggested that the business and financial sector was more active than previously estimated.
The ONS also said that growth in the third quarter of the year was helped by "robust consumer demand".
However, the ONS trimmed its estimates of growth in the first and second quarter of the year. It now says the economy grew by 0.3% in the first quarter, compared with an earlier figure of 0.4%, and cut its estimate for second-quarter growth to 0.6% from 0.7%.
Ruth Gregory, UK economist at Capital Economics, said the figures suggested that June's Brexit vote had had little impact on the economy and that growth in the final quarter of the year would be positive.
UK GDP growth since 2005
"The latest set of UK National Accounts leave the economy looking even stronger after the referendum than previously estimated," she said.
"GDP growth in Q3 was revised up from 0.5% to 0.6% and the 0.7% growth rate seen in the second quarter was revised down a touch, to 0.6%, suggesting that the economy didn't lose any pace following the referendum."
Further figures from the ONS showed that the UK's service sector, which accounts for nearly 80% of the economy, grew by 0.3% in October from the month before.
ONS statistician Darren Morgan said: "Robust consumer demand continued to help the UK economy grow steadily in the third quarter of 2016.
"Growth was slightly stronger than first thought, though, due to greater output in the financial sector.
"New figures on services also suggest that growth in that predominant sector of the economy continued into October, helped in large part by another strong showing from the retailers."
Martin Beck, senior economic adviser to the EY Item Club, said the figures had brought "some unexpected pre-Christmas cheer".
However, he added there were question marks about how long consumer spending could continue to drive the economy: "With high inflation set to weigh further on spending power next year, the consumer is surely set to falter soon."
Separate figures from the ONS showed the UK's current account deficit widened towards record levels in the third quarter, with few signs that the fall in the pound in the wake of the Brexit vote has helped to boost exports.
The gap widened to £25.494bn for the period, from a deficit of £22.079bn in the second quarter.
While that was lower than economists had expected, it caused the deficit to rise to 5.2% of GDP from 4.6%. The record percentage level was 6% in 2013.

Friday, December 23, 2016

BBC News - US economic growth revised even higher

Consumer spending lifted the US economy in the third quarter

The US economy grew even faster than thought in the July-to-September period, latest official figures indicate.
The world's largest economy grew at an annualized rate of 3.5% in the quarter, up from an earlier estimate of 3.2%, the Commerce Department said.
It was the second time that the figure had been revised upwards, from an initial 2.9%.
The rate of growth in the third quarter was the strongest for two years.
The figure outstrips the second-quarter growth rate of 1.4%.
The Commerce Department said consumer spending, which accounts for more than two-thirds of the US economy, increased at a rate of 3%, compared with the previous estimate of 2.8% and the initial estimate of 2.1%.
"The relative boom of the US economy shows no signs of slowing down, with another strong set of GDP figures," said Dennis de Jong, managing director at
"[US Federal Reserve] chair Janet Yellen has already stated that another round of rate rises are on top of her to-do list for 2017.
"With the incoming president's fiscal policy largely yet to take shape, a period of cautious optimism will likely remain for some time."

Thursday, December 22, 2016

Bloomberg News - European Banks Risk Becoming Irrelevant

Any conversation with a European bank executive these days quickly turns to talk of how their U.S. rivals are in better shape. American banks were much quicker in bolstering their capital bases after the financial crisis; they also have more regulatory certainty (in part because they didn’t challenge every proposed rule change). And in at least one corner of the financial markets, Europeans are ceding market share at an accelerating rate.
International bond underwriting is where the biggest U.S. and European banks compete for the right to raise capital for the world’s biggest borrowers. This year, the total borrowed has reached almost $4 trillion. What has become clear is that European banks are ceding this business to the United States. And the consequences will be felt in other areas of their businesses:
At the start of this decade, Deutsche Bank was consistently the No. 2 underwriter of international bonds. Last year, it dropped to sixth place; this year, Germany’s biggest bank is down to seventh. In 2010, Deutsche Bank controlled 7.3 percent of the international bond market; this year, its share is down to 5.1 percent. With Chief Executive Officer John Cryan continuing to make cuts to the investment bank -- Chief Risk Officer Stuart Lewis told Die Zeit newspaper this week that the bank’s derivatives book is still too large -- it seems unlikely that Deutsche Bank’s appetite for bond sales will return anytime soon.
Who will fly the European flag? Not the U.K.’s Barclays, which led the pack for international bond management at the start of the decade, topping the 2010 table with a market share of more than 8 percent. Like Deutsche Bank, Barclay’s has been shrinking its investment-banking activity amid tougher post-crisis capital regulations from U.K. regulators. While it remains third in the league table, its share has dropped to 6.8 percent, behind both JPMorgan and Citigroup (more on them later).
Barclays is now poised to discard as many as 7,000 of its least-profitable corporate customers, in addition to the 17,000 clients it’s already jettisoned since 2014. Shedding customers is a surefire way to shrink your balance sheet -- as well as your revenue and your potential profit.
Other European banks seem to be giving up on bond underwriting altogether. In 2010, Royal Bank of Scotland was a credible player in international bond management, with a market share of a bit less than 4 percent putting it in 11th place in the underwriting table. Now, it has less than 1.4 percent of the business.
The bank has been distracted by scandals and management problems. It missold loan insurance to U.K. retail customers, faces investor lawsuits over how it raised capital in 2008, and is being probed in the U.S. over mortgage-backed securities. It failed the Bank of England’s stress tests last month, eight years after a taxpayer bailout that saw it made a ward of the state at a cost of more than 45 billion pounds. Little wonder it’s poised to report its ninth consecutive annual loss in February.
The Swiss banks have fared no better. At the start of the decade, Credit Suisse and UBS were, respectively, the sixth and seventh biggest managers of international bond sales, each with about 4.3 percent of the market. This year, Credit Suisse is down to 11th with 2.5 percent of the business. UBS is 16th, with a 1.8 percent share. That’s a major decline from the early days of the Eurobond market when some three-quarters of all the newfangled securities were bought by Swiss investors.
So if the Europeans are effectively letting the international bond market slip away, who’s benefiting? JPMorgan tops the table with 7.8 percent, as it did last year with 8 percent; that’s about the same as its position at the start of the decade. Citigroup has improved its standing to second from third, and increased its business to 7.2 percent from 6.5 percent in 2015; in 2010, it was a lowly eighth, with 4 percent. 
But it’s Goldman Sachs that has been making hay. In sixth place with 5.6 percent of the market, it’s little changed from last year but up from 10th with less than 3.9 percent in 2010.
The one bright spot on the European map comes courtesy of HSBC Holdings. As the U.S. subprime mortgage crisis took off, the U.K. bank was quick to realize that Household International, the U.S. lending business it paid $15.5 billion for in 2003, was bust. It was the first European bank to make provision against subprime losses, and was quick off the mark in raising almost $18 billion in fresh equity in 2009.
As a result, HSBC is one of the few European firms that hasn’t been actively shrinking its balance sheet. Its total assets of $2.6 trillion are bang in line with the average for the first half of the decade.
With its market share rising to 6.6 percent from 5.2 percent, HSBC Holdings is also one of the few European banks to have increased its international bond underwriting business since 2010 (France’s BNP Paribas has improved a tad to 4 percent from 3.9 percent, leaving it little changed from last year). It’s telling, then, that HSBC’s shares are up more than 20 percent this year, compared with Deutsche Bank’s 20 percent decline and Barclays’s basically unchanged valuation in 2016.
The universal banking model -- in which banks both serve retail and corporate customers -- was always likely to struggle as market overseers try to resolve the too-big-to-fail problem. Trying to provide a one-stop shop in finance is hard enough in the good times, let alone in an environment where regulation makes some businesses unprofitable by increasing how much capital has to be set aside against potential risks and losses. 
But banks that don’t commit capital to underwriting bond sales for their clients are likely to miss out on more lucrative deals, such as mergers and acquisitions. Europe’s finance firms risk becoming irrelevant if they concede too many markets to their American cousins, and that can’t be good for the companies or the economies that they serve.

Wednesday, December 21, 2016

BBC News - Government borrowing falls less than expected in November

Government borrowing fell in November to £12.6bn, down £0.6bn from November 2015, according to the Office for National Statistics
British bank notes and coins
However, the fall was less than analysts had been expecting.
The monthly borrowing figure had been expected to shrink to £11.6bn, according to an economists' poll.
Borrowing for the financial year so far is down on last year. From April to November, borrowing, excluding state-owned banks, fell by £7.7bn to £59.5bn.
Despite the smaller-than-expected fall in November's borrowing figure, economists said the government was on track to meet its less ambitious deficit forecast set out in November's Autumn Statement.
Chancellor Philip Hammond said at the time the government was aiming for a higher budget deficit of £68.2bn for the full financial year, well above predecessor George Osborne's £55.5bn target.
Philip Hammond
Chancellor Philip Hammond may have to borrow more, just to keep up the interest on his debts

Analysis: Andrew Verity, BBC economics correspondent

The public finances last time round (October) were unexpectedly healthy - with the government having to borrow less than expected. In November that went into reverse.
It's traditionally a tough month for the Exchequer, with more money flowing out than flowing in. But the government (more accurately, the public sector) over-spent its income by more than expected - and therefore had to borrow £12.6bn.
If your yuletide glass is half-full, that's still broadly in line with the projection at the last Autumn Statement that the government would borrow £68bn over the full financial year (to the end of April). And while government spending is growing, tax receipts from VAT, income tax etc are growing faster.
If it's half empty, that £68bn target is already far more than the government projected last March. And we were told in 2010 that austerity would eliminate the deficit by 2015.
The government's ultra-low cost of borrowing, in the last two months, has become more expensive. That might mean Philip Hammond has to borrow more, just to keep up the interest on his debts.
If that gets worse, the chancellor may want to drain his glass and forget about the public finances.

Capital Economics economist Scott Bowman expects borrowing for the full year to "come in close" to the government's current forecast.
"[Tax] receipts growth has been on a slight upward trend since May - adding to the evidence that the economy has held up well following the vote to leave the EU," he added.
Mr Hammond has already said he would not seek to balance the government's finances by 2020.
Instead, he plans to put more investment into areas such as infrastructure.
However, accountancy industry body the ICAEW said the high borrowing figure demonstrated "the vital need for stronger financial management expertise at the heart of government".
"His [the chancellor's] promise to supply more funding for infrastructure projects across the country has the potential to inject some much-needed confidence into the UK, however these projects can only be successfully delivered if he is supported by a strong team that has the right mix of professional, financial and commercial skills," said ICAEW public sector director Ross Campbell.

Tuesday, December 20, 2016

Reuters News - Dollar climbs as attacks subdue euro, BOJ saps yen

By Marc Jones | LONDON
The dollar climbed back towards a 14-year high on Tuesday as the yen fell after the Bank of Japan held policy steady and fallout from attacks in Germany and Turkey subdued the euro.
European shares were steady, with unease over the attacks balanced by gains by bank shares and the Milan market .FTMIB after Italy's government said it wanted approval for up to 20 billion euros to rescue troubled lenders.
On currency markets, risk aversion sent the safe-haven Swiss franc to a near a six-month high versus the euro EURCHF= and pushed the common currency firmly back below $1.04. EUR=
But the dollar .DXY and rising bond yields US10YT=RR again dominated, after the head of the Federal Reserve flagged the strength of the U.S. jobs market in a speech to students on Monday.
That sent the greenback bouncing towards last week's 14-year high and it was at 103.40 on the index that measures it against other leading currencies, just short of its recent peak of 103.56. [/FRX]
The gains were strongest against the yen which slid around 1 percent after the Bank of Japan, shrugging off the yen's recent slump, said it would keep monetary policy loose.
"The biggest impact you see from the attacks in Berlin and Istanbul is the Swiss franc/euro," said Societe Generale FX strategist Alvin Tan.
"But apart from that the dollar continues to be strong after we had some rather positive comments from Janet Yellen,"
Benchmark 10-year U.S government bond yields, which set the bar for global borrowing costs and have been rising hand-in-hand with the dollar over the last few months, were back above 2.58 percent. [US/]
The greenback has risen 12 percent versus the yen since Donald Trump's surprise presidential election victory, on his promises of increased fiscal stimulus. The win was made official on Monday after he got the required Electoral College votes.
Modest gains for European shares came after MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS had ended down 0.2 percent as emerging markets stocks suffered their fifth straight day of losses.
China's CSI 300 index .CSI300 slid 0.6 percent, on Beijing's move to tighten supervision of shadow banking activities and on liquidity concerns, while Japan's Nikkei .N225 closed up 0.5 percent after the BOJ meeting. [.T]
"There was no particular surprise from the policy meeting, but investors are happy that the economy's fundamentals are finally rising after the BOJ expressed an upbeat view," said Takuya Takahashi, a strategist at Daiwa Securities.

Wall Street was expected to nudge higher later having tailed off slightly on Monday as risk aversion set in following the deaths in Germany, the shooting dead of Russia's ambassador in Turkey, and a gun attack in a mosque in Switzerland.
Berlin police said on Tuesday that investigators suspected a truck that was driven into a Christmas market crowd was a terrorist attack.
The lira rallied on relief that Moscow and Ankara struck a unified tone after the Ankara attack, rising 0.3 percent to 3.5196 per dollar on Tuesday after falling 0.7 percent on Monday. The rouble was steady at 61.8926 per dollar.
Safe haven gold XAU, which rose 0.4 percent on Monday, pulled back 0.3 percent to $1,135.06 an ounce, as the prospect of further U.S. rate hikes outweighed political concerns.
Oil prices also eased as traders began to unwind positions in the run-up to the holiday season. U.S. crude CLc1 slid 0.4 percent to $51.91 per barrel as global benchmark Brent LCOc1 slipped 0.2 percent to $54.81.

(Additional reporting by Nichola Saminather in Singapore; editing by John Stonestreet)