BBC News - UK trade deficit widens in September, official figures show

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The UK trade deficit widened to £5.2bn in September from £3.8bn in August, the Office for National Statistics (ONS) said.

Exports decreased by £0.2bn, while imports increased by £1.2bn.

The widening between imports and exports was in part driven by a record £8.7bn deficit with the European Union.

Although the pound fell sharply after the Brexit vote, the ONS said there was little direct evidence so far of currency effects on trade.

After June's referendum, the pound fell more than 10% against the dollar and the euro, hitting a 31-year low against the dollar, and lost further ground in October to hit its weakest-ever level against a basket of major currencies.

However, ONS statistician Hannah Finselbach said: "So far there is little evidence in the data of the lower pound feeding through into trade volume or prices."

Between the April-to-June and July-to-September quarters, the total trade deficit for goods and services narrowed by £1.6bn to £11bn.

There was a £4.5bn increase in goods exports and a £3.1bn increase in goods imports between the second and third quarters, partially offset by a £0.1bn decrease in services exports and a £0.3bn decrease in services imports.

Some manufacturers reported a jump in foreign demand after the pound's fall, but it can take time for this to show up in trade data.

In the three months to September, Britain's economy slowed much less than most economists had expected, with signs that it was supported by continued robust consumer spending

Reuters News - Global stocks up as nervous markets wager on Clinton winning White House race

People are reflected in a display (top) showing the current exchange rate between U.S. dollar and Japanese Yen outside a brokerage in Tokyo, Japan, November 7, 2016. REUTERS/Kim Kyung-Hoon

By Nichola Saminather | SINGAPORE

Asian stocks rose on Tuesday as world markets braced for the outcome of one of the most contentious U.S. presidential elections in history, with most investors cautiously optimistic of a win by Democrat Hillary Clinton.

European markets are set to begin the session little changed, with financial spreadbetter CMC Markets expecting Britain's FTSE 100 and France's CAC 40 to open flat and Germany's DAX to start the day up 0.1 percent.

The Mexican peso, which strengthened as the perceived chances of an election victory by Republican Donald Trump has ebbed, retained its solid gains from Monday.

"As markets head into the U.S. election, a final recalibration of risk is in train," Michael McCarthy, chief market strategist at CMC Markets in Sydney, wrote in a note.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 percent. But Japan's Nikkei surrendered earlier gains to close flat, as the yen rose following Monday's losses.

The dollar, which also advanced on Monday, edged slightly lower.

Clinton's chances of winning got a boost on Sunday when the U.S. Federal Bureau of Investigation said it stood by its July finding that the democratic candidate was not guilty of criminal wrongdoing in her use of a private email server.

That came after the FBI announced on Oct. 28 it was reviewing additional emails relating to the server while Clinton was secretary of state, triggering a selloff in global markets.

Clinton is seen by investors as offering greater certainty and stability, and, until last week's stumble, had been seen as the likely victor in Tuesday's presidential vote.

While polls last week showed Trump closing in on Clinton's lead, at least five major polls on Monday showed Clinton still ahead.

But investors remained wary, noting Britain's shock vote in June to leave the European Union had defied most polls and bookmakers' odds.

The election "is the largest 'known unknown' markets have had to contend with since the global financial crisis," even more than Brexit, Mixo Das, Asia equity strategist at Nomura, wrote in a note. "The higher likelihood there is still that Clinton prevails. Her slide in polling numbers appears to be stabilizing... and reports about a surge in early voting over the weekend are positive for her."

In Hong Kong, the Hang Seng index ticked up 0.3 percent.

China's CSI 300 index index added 0.4 percent, with relief over improving prospects of a Clinton win offsetting bigger-than-expected declines in both imports and exports and a smaller-than-forecast trade balance in October.

The MSCI World index advanced 0.1 percent, adding to Monday's 1.6 percent gain, its biggest single-day jump in almost 19 weeks.

On Wall Street overnight, the S&P 500 and the Dow Jones Industrial Average soared 2.1 and 2.2 percent respectively, recording their biggest one-day percentage gain since March 1.

The dollar, which recorded its biggest one-day increase against the yen in almost four months on Monday, surrendered 0.1 percent to trade at 104.35 yen on Tuesday.

Bloomberg News - U.K. Opens Search for New BOE Deputy for Markets and Banking

The Bank of England has started looking for a new deputy governor, a possible stepping stone to the top job just three years before Governor Mark Carney steps aside.

Hopefuls to replace the BOE’s markets and banking chief Minouche Shafik have until Nov. 21 to submit their application for the 270,000 pound-per-year ($335,000) role. The ideal candidate, who will have passed a process that includes a six-page form on potential conflicts of interest, will have the ability to develop new policies, understand wholesale financial markets and have “a strong appreciation of risk management,” according to a job advertisement on the U.K. Cabinet Office’s website.

The successful applicant will join the three-century-old central bank just as it’s scheduled to end its latest round of asset purchases and as the U.K. is set to begin its formal negotiations to leave the European Union. Shafik, the BOE’s most senior female policy maker, has opted to end her stint in February in order to take up the role of director of the London School of Economics in September 2017.

“The new deputy governor will be responsible for managing the balance sheet of the bank,” the ad said. “He or she will look after the execution of financial stability and monetary-policy decisions via balance sheet operations, the management of the government’s foreign exchange reserves, gold custody services, the operation of the real-time settlement system, the effective risk management of these operations and the gathering of market intelligence relevant to policy decisions.”

Possible internal candidates for the role may include Executive Director for Banking, Payments and Financial Resilience Andrew Hauser, Executive Director for Markets Chris Salmon and Executive Director for Financial Stability Alex Brazier.

The new deputy governor will also join in the wake of controversy about Mark Carney’s position, after months of criticism by politicians about his communications and policy strategy surrounding the Brexit vote. Carney last week confirmed that he will extend his term as governor by one year, until 2019, in order to provide stability to the U.K. through its negotiations before stepping down.

by Lucy Meakin

BBC News - Bank sees sharp rise in inflation in 2017

The Bank of England has made a dramatic rise to its inflation forecast for next year, predicting that the rate will almost triple.

The Bank now expects inflation to hit 2.7% next year, up from the current rate of 1%.

It also raised its forecast for economic growth next year to 1.4% from 0.8%, but cut expectations for 2018 to 1.5% from 1.8%.

An interest rate cut this year was no longer an option, the Bank indicated.

"In light of the developments of the past three months, all MPC [Monetary Policy Committee] members agreed that the guidance it had issued following its August meeting regarding the likelihood of a further cut in [the] bank rate had expired," the Bank said.

The sharp rise in inflation expectations was blamed on the slide in the pound since the referendum, which is driving up prices of imported goods.

The Bank does not expect inflation to return to its 2% target until 2020.

The revisions to growth indicate that the Bank now thinks the impact of the Brexit vote will be felt later than expected.

---

Analysis: Kamal Ahmed, economics editor

Inflation is an approaching risk and the economy is facing difficult times ahead, according to the Bank.

Yes, it has upgraded its growth forecasts markedly for this year and next.

But it has downgraded growth for 2018 as business investment and trading relationship uncertainty start to feed through to economic output.

That downgrade is so substantial that at the end of 2018, the Bank believes the economy will be on aggregate more than 2.5% smaller than expected before the Brexit referendum vote.

That's a bigger relative decrease in output than the Bank predicted earlier this year.

This is economic pain delayed, not cancelled.

Other forecasters see an even more dramatic rise in inflation. This week the National Institute for Economic and Social Research said it expected inflation to quadruple to about 4% in the second half of next year.

The think tank also warned that prices would "accelerate rapidly" during 2017 as the fall in sterling is passed on to consumers.

Households hit

Explaining the raised growth forecasts for this year and next, Bank governor Mark Carney said that, since the vote to leave the EU, household spending had held up better than expected.

"For households, the signs of an economic slowdown are notable by their absence," he said.

But he warned that households would see "very modest" growth in their incomes over the coming years.

The Bank of England argues that food and energy prices have stopped falling and an increase in the price of imported goods will weigh on household budgets.

The Bank also warned that Britain's access to EU markets could be "materially reduced" following Brexit, which would hit economic growth over a "protracted period"

The pound jumped higher against the dollar and euro - to $1.24 and €1.12 - following the Bank's move away from a rate cut and the High Court's ruling that parliament must vote on the start of the Brexit process.

Mr Carney said the court defeat for the government was "just one of many twists and turns that are likely to happen" as the UK leaves the European Union.

He told BBC economics editor Kamal Ahmed there was already economic uncertainty about Brexit, but that at the moment households were "looking through that uncertainty".

The Bank governor also reiterated he would leave his post in 2019, even if the court ruling means the Brexit process is delayed.

BBC News - Egypt will allow its currency to float freely

Image copyrightAP

Egypt will float its currency in a move that is expected to see it fall by almost 50% against the dollar.

The price is expected to be around 13 to the US dollar, up from just under nine.

The country's central bank said the move was one of a list of reforms designed to strengthen confidence in the economy.

Egypt's main stock index jumped by more than 8% at the start of Thursday trading.

The central bank has also increased interest rates by 3 percentage points to 14.75%.

Banks will be allowed to open their branches until 9pm and over the weekend to allow more transactions.

Egypt has struggled to attract foreign investment since the political turmoil in 2011 during the so-called Arab Spring.

That has left the country with a shortage of hard currency as officially one dollar would only buy 8.88 Egyptian pounds while the black market priced it far lower.

The bank said in a statement it had moved to a "liberalised exchange rate... to create an environment for a reliable and sustainable supply of foreign currency".

The move is a key requirement of the International Monetary Fund (IMF), from which Egypt is asking for a $12bn loan over three years.

Egypt's economy is the second largest in the Arab world, after Saudi Arabia.

Bloomberg News - Rand Surges as Fraud Charges Against Pravin Gordhan Are Dropped

The currency gained 2.5 percent to 13.4907 per dollar by 6:04 p.m. in Johannesburg, the strongest on a closing basis since Sept. 27. The rand strengthened most among 31 major and emerging-market currencies against the dollar and climbed 1.7 percent in October, a second monthly advance. Bond yields fell to the lowest in three weeks and an index of bank stocks climbed the most in more than seven months.

South Africa’s markets were rocked last month after the National Prosecuting Authority summoned Gordhan to appear in court on Nov. 2 on fraud charges the finance minister, who is embroiled in a feud with President Jacob Zuma, described as politically motivated. NPA head Shaun Abrahams said Monday in the capital, Pretoria, that he had withdrawn the charges after reviewing evidence and representations. Rating companies have cited heightened political risks as credit-negative. The rand strengthened further after better-than-expected trade numbers.

“There’s relief,” George Glynos, the managing director and chief economist at ETM Analytics, said by phone from Johannesburg. “Across the bond market you’ve seen a de-risking of that market just simply because I think the market is going to price in Gordhan’s ability now to focus on the job at hand. That effectively could buy South Africa a little bit more time with the rating agencies.”

S&P Global Ratings Ltd. and Fitch, which both rate South Africa’s debt at the lowest investment level, are due to review their assessments in December. Moody’s Investors Service, which puts the debt two levels above junk, is considering its view next month.

South Africa’s economy is forecast to grow this year at the slowest pace since a 2009 recession. While ratings companies might decide to delay a rating cut after the Gordhan news, a judgment based purely on economic fundamentals should result in a downgrade, said Roxana Hulea, an emerging market strategist at Societe Generale in London.

“The comments we heard after the all-important medium term-budget statement was indicative of the fact that both Fitch and S&P were quite critical of the poor growth perspective, poor growth outlook,” Hulea said by phone. “Gordhan has been very important, a sort of key man for South Africa keeping fiscal rectitude and they might be inclined to give the country a little bit more room after this news just came out. But I’m not convinced that political risk with this news is over.” 

Trade Boost

The nation’s trade balance unexpectedly swung to a 6.7 billion rand ($494 million) surplus in September as imports of products including oil declined. The account was 8.9 billion rand in deficit in August.

Government 10-year bonds extended Friday’s gains, with yields dropping 16 basis points to 8.72, the lowest on a closing basis since Oct. 10. The cost of insuring the country’s dollar-denominated debt against non-payment using credit-default swaps declined 12 basis points to 242. 

Against the euro, South Africa’s currency rallied 2.3 percent to 14.8588, the highest since Aug. 16. One-week implied volatility on the rand rose for a fourth day on Monday, climbing 53 basis points to 20.63 percent and the most among 28 major and emerging-market currencies, suggesting options traders are anticipating wider price swings in coming days.

by Xola Potelwa

Reuters News - Fed to hold rates steady, put December hike firmly in view

A police officer keeps watch in front of the U.S. Federal Reserve in Washington October 12, 2016. REUTERS/Kevin Lamarque - RTSRYC8

By Lindsay Dunsmuir | WASHINGTON

The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday but set the stage for a hike in December amid signs the economy is picking up steam.

The central bank has grown increasingly confident about raising rates and Chair Janet Yellen said in September that a move before the end of the year was likely should employment and inflation continue to strengthen.

Data since then has shown payrolls still growing solidly while consumer prices are showing some signs of ticking higher, putting both employment and inflation close to the Fed's long-run estimates. Growth too has improved, with the economy accelerating at a 2.9 percent annual pace in the third quarter after a fairly sluggish first half.

Investors have all but ruled out a move at this week's meeting given it takes place only a week before the U.S. presidential election. A number of Fed officials have recently said a December rate hike would be preferable.

"It's widely understood that it would be politically treacherous for the Fed to hike just before a very heated election," said JPMorgan economist Michael Feroli, a former Fed staffer, in a note to clients.

An ABC News/Washington Post poll released on Sunday showed Democratic candidate Hillary Clinton with a 1 percentage point national lead over Republican rival Donald Trump, within the margin of error.

This week's Fed policy decision is due to be released at 2 p.m. EDT (1800 GMT) on Wednesday at the conclusion of a two-day meeting. Yellen is not scheduled to hold a press conference.

HOW STRONG A SIGNAL?

At the meeting prior to raising rates last year, the Fed firmly signaled its intentions by including a reference to possibly raising rates "at its next meeting."

This time around it could take a softer approach. In September, policymakers already put markets on notice by saying they decided to stand pat "for the time being, to wait for further evidence" employment and inflation were progressing.

The Fed could lower the bar more to "some further evidence" being required, which may also serve to assuage the concerns of at least one of the three voting policymakers who called for an immediate hike in September.

With investors already expecting a December move, the Fed probably won't feel like it needs to lock in its intentions any more than necessary, said Lewis Alexander, chief U.S. economist at Nomura and a former Fed staffer.

    "They will probably want to do something like have Yellen give some relatively high-profile speech a couple weeks before the [December] meeting," he said. "That's probably a better way than putting something in the statement that inevitably is going to be pretty cryptic."

(Reporting by Lindsay Dunsmuir; Additional reporting by Jason Lange; Editing by David Chance and Andrea Ricci)