George Osbourne made a speech in Shanghai proclaiming that he wanted to create a link in the UK’s and China’s stock markets. He announced a "landmark feasibility study" into the idea, which would enable Chinese and British shares to be traded in both countries. He went to explain that "I want to see our stock markets in London and Shanghai formally connected, with UK firms raising funds from Chinese savers, and Chinese firms listing in London," In other measures announced on Monday, it emerged that the People's Bank of China is to issue short-term bonds in London denominated in the Chinese currency, the first time it has done so outside China.
Britain's public finances deteriorated unexpectedly last month, recording their worst August in three years as well as a decline in industrial orders signalling that a global slowdown is hitting the UK’s economy. The Office for National Statistics said Britain's headline measure of public borrowing rose to 12.1 billion pounds in August from 10.7 billion pounds in 2014, it was forecasted to narrow to 9 billion pounds. The Office National Statistics blamed the rise in borrowing during August on a fall in income tax paid during the month, with fewer of the payments that were due in July being paid late than in previous years. Osborne is due to publish updated budget forecasts on Nov. 25, alongside details of how government departments will cut spending by around 20 billion pounds over the next four years.
The Bank of England’s deputy governor spoke regarding wage growth in the UK. Despite a strong pickup in employment this year, wage growth has not significantly picked up. He says this is due to the present recovery being more biased towards low-paid jobs than previous recessions. Broadbent also attributes this to slowing productivity growth.
Bank of England’s, Ian McCafferty, has said he voted for an interest rate rise at the September meeting because inflation risks overshooting its short to medium-term target.
The Eurozone economy expanded in September, continuing a year of robust growth, according to survey figures released yesterday. Markit’s flash purchasing managers’ index (PMI) scored 53.9 for this month, down slightly from August but still above the 50 score that implies no growth and in line with economic growth.
According to Markit’s chief economist the September PMI surveys indicate a further steady expansion of the Eurozone economy, but there remains a worrying failure of growth to accelerate to a pace sufficient to generate either higher inflation or strong job creation.
European Central Bank (ECB) President Mario Draghi has explained risks to Europe's inflation and growth outlook have increased due to the emerging market slowdown but the European Central Bank needs more time before deciding on further stimulus.
Draghi said inflation will take longer than previously expected to rise back to the ECB's near 2% target and that the euro zone's central bank is ready to beef up its 1 trillion euro plus asset buying programme if needed. However, it needs more evidence to conclude whether China's slowdown and the euro's falling oil prices will divert inflation from its projected path.
Federal Reserve chair Janet Yellen again reiterated that the US is on course to raise interest rates this year. Speaking a week after the Fed voted against a rise in borrowing costs, she said inflation is being weighed down by temporary factors such as a strong dollar and low oil prices.
She continued to explain that the Federal Open Market Committee (FOMC) would look through renewed concerns over the slowing Chinese economy, as well as the consequent financial market turmoil.
"Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter," she said in a speech at the University of Massachusetts.
On Friday, US economic growth was revised upward. Gross domestic product grew at 3.9%, up from 3.7% in August, the Commerce Department said, ‘The GDP figure showed the world’s largest economy expanded more than previously forecast in the second quarter, boosted by gains in consumer spending and construction that may help the U.S. withstand a global slowdown.’
Strong hiring, cheaper gasoline and higher home prices will probably sustain household purchases, which account for about 70 percent of the economy. That helps bolster Janet Yellen’s view that the U.S. will overcome any fallout from cooling overseas markets and swings in global financial and commodity markets.
