Tuesday, February 27, 2018

BBC News - UK borrowing at lowest level since financial crisis

Budget red box

UK borrowing for the year to date is at its lowest level since the financial crisis, according to the Office for National Statistics (ONS).
Public sector net borrowing, excluding state-owned banks, fell to £37.7bn between April and January, down £7.2bn on the comparable period.
It is the lowest figure for the period since January 2008, the ONS said.
It added that it is investigating the impact of Carillion's collapse on public sector finances.
At the Budget in November, the government's independent forecaster, the Office for Budget Responsibility (OBR), forecast that public sector net borrowing would rise by £4.1bn to £49.9bn in the financial year to March 2018.
John Hawksworth, chief economist at accountancy firm PwC, said it now "looks likely" that public borrowing will fall below last year's figure of £45.8bn and the OBR's expectations.
"This will be a welcome windfall for the chancellor," said Mr Hawksworth. "But we would expect him to bank it for now rather than spending it in his March Spring Statement, which looks set to be a low key affair.
"The chancellor will want to retain as much room for manoeuvre as possible for his next Budget in November, bearing in mind ongoing uncertainties around the Brexit negotiations."
Public sector borrowing
In January, public sector net borrowing, excluding state-owned banks, showed a surplus of £10bn.
It was £1.6bn lower than the surplus in January 2017 but ahead of economists' expectations of £9.6bn.
January is typically a strong month for government finances due to a boost from self-assessment tax receipts.
Elizabeth Truss, chief secretary to the Treasury, said: "These are strong borrowing figures, which is proof that we are fixing our nation's finances and reducing the burden on future generations."
Carillion workersImage copyrightCARILLION
Image captionCarillion went into liquidation last month.
The ONS also said that it would be looking into the impact of Carillion's liquidation on the public sector finances "both in relation to the public-private partnership projects" and "the additional funding that government has provided in order to maintain public services".
"We will announce our findings in due course," it said.
Carillion went into liquidation last month. The construction giant ran a series of crucial services for schools, hospitals and prisons

Bloomberg News - The World’s Highest Paid Expats Live in This Place

Go East, expatriates looking to make the big bucks.
Mumbai, India’s financial, commercial and entertainment capital, tops global rankings for expat salaries, according to a survey conducted by HSBC Bank International Ltd.
Foreigners moving to the subcontinent’s most populous city reported average annual earnings of $217,165. That’s more than double the global expat average of $99,903, the HSBC Expat survey shows.
“Mumbai has the highest percentage of expats sent by their employer -- these expats often benefit from relocation packages which goes some way in explaining the higher salaries expats enjoy in the city,” said Dean Blackburn, who heads HSBC Expat. He also cited high employment and experience levels among expats and a substantial stake of engineers relocating from German and other infrastructure companies as reasons for Mumbai’s top slot.
Other Asian cities joining Mumbai in the top 10 expat salary rankings were Shanghai, Jakarta and Hong Kong.
While expats in Asia were generally well compensated financially, all -- including Mumbai, the megacity home to more than 18 million people -- ranked lower in expat job opportunities than U.K. and U.S. destinations such as London, San Francisco, New York, or even Birmingham, according to HSBC.
“The financial and technology hubs of the U.S. and U.K. are the most attractive for ambitious expats eager to push their career to the next level,” Blackburn said.
Dublin, a tech center in Europe, also ranked in the top five for expat job opportunities, but was below the global average in expat salaries. Nonetheless, 61 percent of expats in the capital of the Republic of Ireland reported an improved work-life balance.
Switzerland, the nation that has previously topped country rankings for expat salaries, had two cities in the top five. Zurich, home to banks including Credit Suisse Group AGand UBS Group AG and a tech hub for firms including Alphabet Inc., reported the third highest expat salaries, while Geneva, the base for some of the world’s biggest commodities traders including Trafigura Group and Mercuria Energy Group, was fifth.
Despite Switzerland’s notorious living costs, the country’s high salaries and low personal tax rates saw 77 percent of expats in Zurich report that their disposable income had increased since moving. In fact, over half of Zurich expats reported that they are living in a better dwelling than they did at home even with the Swiss city’s expensive rental and property markets.
And while Berlin and Prague rank toward the bottom of HSBC’s list of 52, the majority of expats in those cities said the cost of living is affordable.

Monday, February 26, 2018

BBC News - Federal Reserve policymakers more confident about economy

Jerome Powell arrives to takes the oath of office as he is sworn-in as the new Chairman of the Federal Reserve (FED) at the Federal Reserve Building in Washington, DC, February 5, 2018.
Jerome Powell arrives to be sworn-in as the new Chairman of the Federal Reserve on February 5, 2018

The US Federal Reserve is preparing for stronger-than-expected economic growth this year, a view that boosts the case for higher interest rates.
But some policymakers remain doubtful that the gains will appear in the form of rapid inflation and higher wages.
Those members urged their colleagues to be "patient" as they weigh future rate rises.
The views were revealed in minutes published on Wednesday from the Fed's January meeting.
The meeting, the final gathering led by former Federal Reserve chair Janet Yellen, concluded 31 January.
It preceded turmoil in the stock market that has been pinned partly on investor calculations that the Fed might raise interest rates more rapidly than anticipated.
Investors were reacting to data, including wage increases, that suggested inflation might be stronger than in recent years, prompting the Fed to raise rates more quickly.
US stocks jumped after the minutes were released, but sank again as the afternoon continued, reflecting continuing uncertainty about the bank's future course.

Meeting details

The Fed has been shifting away from the policies aimed at economic stimulus it enacted during the recession, including ultra-low interest rates.
The bank took no action to raise rates at its January meeting, but markets expect at least three rate rises this year, and predict the Fed will take its next action in March.
Investors are also watching carefully to see if new Fed chair Jerome Powell takes a more aggressive stance than Ms Yellen, who was viewed as moving relatively slowly to raise rates.
At the January meeting, "almost all" Fed members - more than previously - said they expect inflation to hit the bank's 2% target over the medium term, bolstering the case for future rate rises.
A number of Federal Reserve members also "marked up" forecasts for 2018 growth to reflect stronger economic data since December, according to the minutes.
However, the record showed the participants continued to hold a wide range of views about inflation and wage pressures.
While some see the possibility of rapid inflation, others see "little solid evidence" of inflation or wage pressures, the minutes said.
"They judged that the committee could afford to be patient".
Ken Matheny, executive director for US economics at Macroeconomic Advisers by IHS Markit, said the discussion was "consistent" with predictions of several rate rises in 2018.
Mr Matheny, whose firm is predicting four rate rises this year, said he expects inflation will finally hit the Fed's 2% target causing "dovish sentiments to fade".

Friday, February 23, 2018

Reuters News - Trump to announce new sanctions against North Korea; South Korea preps for talks with North

SEOUL/WASHINGTON (Reuters) - The United States is due to announce its largest package of sanctions yet against North Korea to further pressure Pyongyang over its nuclear and missile program, as South Korea readies itself for more talks with the North’s officials.
Tougher sanctions may jeopardize the latest detente between the two Koreas amid their preparations to create conditions appropriate to hold a summit between North Korean leader Kim Jong Un and South Korean President Moon Jae-in.
A senior U.S. administration official, who spoke to Reuters on condition of anonymity, called the new penalties “the largest package of new sanctions against the North Korea regime,” without giving details.
U.S. Vice President Mike Pence had hinted at such a plan two weeks ago during a stop in Tokyo that preceded his visit to South Korea for the Pyeongchang Winter Olympics.
North Korean leader Kim Jong Un said he wants to boost the “warm climate of reconciliation and dialogue” with South Korea after a high-level delegation including his sister returned from the Winter Olympics.
Last year, North Korea conducted dozens of missile launches and its sixth and largest nuclear test in defiance of United Nations sanctions. However, it has now been more than two months since its last missile test in late November.
The new U.S. sanctions will be announced while Trump’s daughter, Ivanka, is visiting South Korea to attend a dinner with Moon and the closing ceremony of the Games. In addition to the dinner which will feature a kosher menu for Ivanka’s dietary restrictions, the Blue House has planned a small traditional Korean music performance for her delegation.
Her visit coincides with that of a sanctioned North Korean official, Kim Yong Chol, blamed for the deadly 2010 sinking of a South Korean navy ship that killed 46 sailors. His delegation will also meet with Moon.
The Blue House has said there are no official opportunities for U.S. and North Korean officials to meet.
Kim Yong Chol is the vice-chairman of the North’s ruling Workers’ Party’s Central Committee and was previously chief of the Reconnaissance General Bureau, a top North Korean military intelligence agency which South Korea blamed for the sinking of its navy corvette the Cheonan.
North Korea has denied any involvement in the sinking.
South Korea on Friday said it approved the Winter Olympic visit by Kim Yong Chol in the pursuit of peace and asked for public understanding.
“Under current difficult circumstances, we have decided to focus on whether peace on the Korean peninsula and improvement in inter-Korean relations can be derived from dialogue with (the visiting North Korean officials), not on their past or who they are,” said Unification Ministry Baik Tae-hyun in a media briefing.
A South Korean lawmaker briefed by the country’s spy agency said on Friday that Kim was the “right person” for inter-Korean and denuclearisation talks.
“Kim Yong Chol is the top official regarding inter-Korean relations and he is being accepted (here) as the right person to discuss various issues like easing military tension, improving inter-Korean ties and denuclearisation,” said Kang Seok-ho to reporters.
Kim currently heads the United Front Department, the North’s office responsible for handling inter-Korean affairs.


South Korea’s decision on Thursday to allow Kim, currently sanctioned by the United States and South Korea, across the border has sparked protest from family members of the dead Cheonan sailors and opposition parties.
Some 70 members from the main opposition Liberty Korea Party staged a protest in front of the presidential Blue House on Friday, demanding the government withdraw its decision.
“President Moon’s decision to accept the North’s facade of peace is a serious issue and it will go down in history as a crime eternal,” said the party in a statement.
A group of family members of those killed in the Cheonan sinking has said it will hold a press conference against the decision on Saturday.
Acknowledging public angst over Kim’s pending visit, Baik said the South’s stance that the Cheonan sinking was instigated by the North has not changed.
“However, what’s important are efforts to create actual peace on the Korean peninsula so these kind of provocations don’t occur again,” said Baik, adding the government would make “various efforts” to assuage the public’s concerns.
Reporting by Christine Kim in SEOUL and Steve Holland in WASHINGTON; Editing by Michael Perry

Thursday, February 22, 2018

BBC News - UK economic growth revised downwards


The UK economy expanded by less than previously thought in the last three months of 2017, official figures say.
GDP grew by 0.4% in the October-to-December period, the Office for National Statistics (ONS) said, down from the initial estimate of 0.5%.
The revision was due to slower growth in production industries, the ONS said.
In 2017 as a whole, the economy grew by 1.7%, also slightly lower than previously thought and the weakest since 2012.
The ONS had previously estimated that the economy grew by 1.8% last year.
The statistics body said that household spending grew by 1.8% last year, also the slowest annual rate since 2012. It said the slowdown was partly because of shoppers facing higher prices in stores.
"A number of very small revisions to mining, energy generation and service were enough to see a slight downward revision to quarterly growth overall," said ONS statistician Darren Morgan.
One drag on the UK economy at the end of last year was the shutdown of the Forties pipeline system for a large part of December 2017.
The closure of one of the UK's most important oil pipelines cost about £20m a day in lost activity, according to Oil and Gas UK.
UK GDP figures
Chris Williamson, chief economist at IHS Markit, said that some areas of the UK economy looked "worryingly weak" in the final months of last year.
The data suggested the construction industry is in recession, business investment was stagnant and household spending was seeing only "modest" growth, he said.
Households have been squeezed by rising inflation coinciding with weak wage growth.
John Hawksworth, chief economist at PwC, said that would hold back growth this year to 1.5%.
"This would not be disastrous by any means, but would place us towards the bottom of the G7 growth league table together with Italy and Japan, rather than at the top with Germany and the US.
The UK's year-on-year growth rate in the fourth quarter of 2017 was 1.4%, making it the slowest growing of the world's wealthy nations (comparable figures for Canada are not yet available). The UK is also growing more slowly than the eurozone.
Comparative growth table
The Bank of England is a bit more optimistic about growth prospects.
Last month, it raised its growth forecast for the UK economy to 1.8% this year, from its previous forecast of 1.6% made in November.
At the time, the Bank indicated that the pace of interest rate increases in the UK could accelerate if the economy remained on its current track.

Encouraging signs

One nagging problem for the UK has been a lack of productivity growth since the financial crisis of 2007.
But on Tuesday, official data showed signs of improvement.
Output per hour rose 0.8% in the three months to December, the Office for National Statistics said. It follows growth of 0.9% in the previous period.
That was the the strongest two-quarter period of productivity growth since the recession of 2008.
There was also a better-than-expected rise in wages. Excluding bonuses, earnings rose by 2.5% year-on-year.
Unemployment edged higher at the end of last year, but still remains low at 4.4%.

Wednesday, February 21, 2018

Reuters News - High-risk euro bank bonds find buyers as crisis memories fade

 LONDON (Reuters/IFR) - Germany’s IKB Deutsche Industriebank, rescued twice during the financial crisis, has issued one of the riskiest forms of bonds without any credit rating from the big agencies. And yet, like many euro zone peers, it found itself swamped with demand.
IKB’s raising of 300 million euros last month, and other similarly successful debt sales, show how many investors are willing to set aside memories of the 2007-2008 global shock and its 2010-2012 repeat in the euro zone.
Despite misgivings among some others, they are happy to take on the extra risk due to attractive yields, a booming euro zone economy and confidence in banking system reforms implemented since the crises.
In particular, lower-rated, higher-risk bonds known as subordinated debt have become the preferred instrument for some of Europe’s biggest investors.
While such “junior” bonds are often in the first line of fire in the event of default, they are proving attractive as they typically offer a better return than more senior layers of debt whose holders would have a greater claim to repayment in the event of any bank failure. IKB’s issue, which yielded 4 percent, drew enough demand to sell the debt four times over.
“The fundamentals for banks in Europe are much better than they were in the past: not only because of the recovery but also because of the deleveraging of the sector and stronger regulations,” said Eric Brard, head of fixed income at Amundi, one of Europe’s largest asset managers with over 1.4 trillion euros of assets under management.
Brard points to expectations that the European Central Bank will gradually unwind its ultra-easy monetary policy. “With tightening policy, the move away from negative interest rates in coming months and years should benefit the financial sector in the long run,” he said.
Higher interest rates help banks which typically have large cash holdings from customers’ deposits. Also, with longer-dated bond yields rising, those that borrow short-term money and lend it on longer-term should likewise benefit.
Brard said he prefers subordinated bonds because of the 50-100 basis point yield premium they typically offer above their senior counterparts.
Amundi is not the only firm to hold this view. Subordinated bonds were among the best performing European debt over the past year and the most closely-watched index of the lowest-rated bank debt, Bank of America Merrill Lynch’s contingent capital index .MERCOCO, has risen strongly since its inception in January 2014.
Euro zone banks last year sold 106 billion euros’ worth of subordinated bonds, known as sub-debt, at an average 4.9 percent yield. Back in 2013, they raised 132 billion euros but yields were approaching double that at 9.2 percent, Thomson Reuters data shows.
Subordinated financials shine over the last year: reut.rs/2EHrpnJ
Reuters Graphic
IKB was only the latest illustration of the hunger for sub-debt. Spain’s Bankia, nationalized in May 2012 to prevent its collapse, last year sold 750 million euros of Additional Tier 1 (AT1) bonds - the most junior version of subordinated debt.
AT1 bonds are also referred to as “hybrid” debt because they have no maturity date and are therefore similar to equity in terms of the risk they represent, though the issuer has the opportunity to redeem the bonds at pre-determined dates.
“Bank balance sheets are much healthier now, and the ratio of non-performing loans has improved throughout Europe,” said Jean Baptiste Berthon, senior cross-asset strategist at Lyxor Asset Management, a fund owned by French lender Societe Generale, with 132 billion of assets under management.
The ratio of non-performing loans in the euro zone banking sector halved between 2012 and 2016 to just over 4 percent, according to World Bank data.
“We are quite confident that there is relatively little systemic risk,” Berthon said, adding that Lyxor’s multi-asset fund is overweight European banks across asset classes and was positive on subordinated bonds within fixed income.
Since the global crisis, regulators across the world have introduced stricter rules for banks to reduce systemic risk.
As part of this, lenders have been forced to issue shares and bonds to boost their capital buffers so that they are no longer forced to seek taxpayer-funded bailouts in future.
One measure of how well protected they have become is the fully-loaded Common Equity Tier 1 ratio which measures the bank’s capital relative to its assets.
This ratio, aimed at cushioning banks against unexpected losses, stood at 13.5 percent on average at the end of 2016 for euro zone banks, versus 3.7 percent in 2007.
Some query whether the bullishness may be going too far and stems to a large degree from investors’ hunt for yield.
For example, back in 2013, Banco Popular Espanol priced the first euro-denominated AT1 bond with a coupon of 11.5 percent. But last summer that bond was wiped out when regulators orchestrated a takeover of the bank by fellow Spanish lender Santander.
While this reminded investors of the risks posed by such bonds, Belfius Bank - which rose from the ashes of Franco-Belgian lender Dexia - sold 500 million euros of AT1 debt last month at a yield of 3.658 percent, a level so low relative to the risk that one banker described it as “bonkers”.
The bond tanked after the launch, buffeted by a broader market sell-off, and is now trading at a cash price of 97.75, well below the original 100 price tag. BE176404680=.
Still, such is the goodwill towards the sector that expectations are starting to surface about possible subordinated bond issuance by banks in Greece, a country that not long ago was on the verge of default.
One banker who sells subordinated bank debt through syndications said a client had expressed concerns that this sector has gained legitimacy purely because the bonds have moved into a lower-yielding bracket, implying lesser risk.
“When this asset class was yielding 7 percent, there were a lot of investors saying, ‘that is a risky instrument’,” he said, declining to be named as he is not authorized to speak about his clients.
“The exact same investors, in a similar macro environment, buy those bonds they wouldn’t buy at 7 percent, at 3 percent... The lower the yield, the more comfortable people are buying something.”
Reporting by Abhinav Ramnarayan and Alice Gledhill of IFR, Graphic by Alasdair Pal, Editing by Sujata Rao and David Stamp

Tuesday, February 20, 2018

BBC News - Latvian central bank boss detained by anti-corruption force

The head of Latvia's central bank, Ilmars Rimsevics, has been detained by the country's anti-corruption agency.
Ilmars Rimsevics, seen in profile, in this 2009 photo
No official reason has yet been given for Mr Rimsevics' detention
His home and offices at the Bank of Latvia were both raided by officers.
The country's Corruption Prevention Bureau gave no details about its investigation, or the nature of the raids.
Latvia's Prime Minister, Maris Kucinskis, has called an emergency cabinet meeting on Monday - but added there was no apparent national threat.
"There are no signs that there is any threat to the Latvian financial system," he said in a statement.
He said neither he, as prime minister, nor any other officials had any reason to interfere with the anti-corruption agency's work.
"The institution works professionally and accurately," he said, pledging the government's full support and saying there would be no outside influence.
The Bank of Latvia said it could not comment on the investigation, but said it had a "zero tolerance policy in respect of corruption and other illicit activities"
It said the bank's operations were unaffected by the investigation, and that it would open on Monday as usual.
A number of banks in Latvia have been subject to investigations in recent months.
In July 2017, two banks were fined for allowing their clients to circumvent international sanctions preventing payments to North Korea.
Another, Norvik Bank, is embroiled in a dispute with the state over what it calls "unfair, arbitrary, improperly motivated and unreasonable regulatory treatment".
Precisely what that entails has not been disclosed.
It is unclear if either of the investigations are in any way linked to the detention of Mr Rimsevics.
In his capacity as the governor of Latvia's central bank, Mr Rimsevic is also a member of the European Central Bank's governing council.
Latvia became the 18th member of the Eurozone on 1 January 2014.