U.S.:
Fed Debate Over Rate-Hike Pace in Focus Amid Strong Job Market
Federal Reserve officials have penciled in a gradual path for raising interest rates, but minutes of their last meeting may show increasing concern that the U.S. labor market is overheating. Scheduled for release at 2 p.m. in Washington on Wednesday, the minutes of the Federal Open Market Committee’s Oct. 31-Nov. 1 closed-door debate could harden investor expectations for a further tightening of monetary policy even though inflation remains below its 2 percent target. Policy makers already upgraded their view of the economy, saying economic growth was progressing at a “solid rate” while joblessness “declined further.” Unemployment fell to 4.1 percent in October, a 16-year low, and the tone of the talks could confirm trades that the Fed will raise rates in December and suggest support for several more moves in 2018. “The decline in the unemployment rate seems to be weighing heavily in their thought process,” said Stephen Stanley, chief economist at Amherst Pierpont Securities in New York. “The Fed views policy from a risk management perspective and the risk is going too slowly.”
U.S. jobless claims fall after two straight weekly increases
The number of Americans filing for unemployment benefits fell last week after two straight weekly increases, pointing to continued steady job growth after recent hurricane-related disruptions. Initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 239,000 for the week ended Nov. 18, the Labor Department said on Wednesday, reversing the prior week’s increase. Claims had risen in recent weeks as a backlog of applications from Puerto Rico was processed following repairs to infrastructure damaged by Hurricanes Irma and Maria. A Labor Department official said claims-taking procedures continued to be disrupted in the Virgin Islands. The claims report was released a day early because of the U.S. Thanksgiving holiday on Thursday. Economists polled by Reuters had forecast claims falling to 240,000 in the latest week. Last week marked the 142nd straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at a 17-year low of 4.1 percent. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 1,250 to 239,750 last week.
Europe:
Regulation should not hinder cross-border bank deals: ECB’s Villeroy
Tougher financial regulation should not have the adverse effect of hindering cross-border banking deals in Europe, said Bank of France governor and European Central Bank governing council member Francois Villeroy de Galhau. Villeroy, who was commenting while addressing an industry event in Paris on Wednesday, did not mention any particular banks or deals by name, but said cross-border European banking tie-ups could bring benefits. “Healthy and solid cross-border consolidation deals would allow banks to better diversify their risks across the whole of the euro zone, and to orient their funds more efficiently towards productive investments,” he said. Recent takeover speculation has centered on Germany’s Commerzbank. Germany has denied a report that it favored a merger of Commerzbank with France’s BNP Paribas, while Italy’s UniCredit recently told Berlin it was interested in eventually merging with Commerzbank, according to people close to the matter. Villeroy also highlighted in his speech that euro zone banks were lagging their U.S. peers in the sense that the top five U.S. banks had a 40 percent share of their market, whereas the top five in Europe had a share of less than 20 percent.
Asia:
China clamps down on online micro lending
China took steps to rein in the rapidly growing and lightly regulated market for online micro-lenders in the government’s latest crackdown on internet finance, sending shares of U.S.-listed Chinese financial firms into a tailspin. A top-level Chinese government body issued an urgent notice on Tuesday to provincial governments urging them to suspend regulatory approval for the setting up of new internet micro-lenders, sources who had seen the notice told Reuters. The multi-department body, tasked by the central government to rein in risks in the internet finance sector, also told local regulators to restrict granting of new approvals for micro-loan firms to conduct lending across regions, according to the sources. The information office of the State Council, or Cabinet, referred Reuters to the People’s Bank of China (PBOC) and other regulators when asked to comment. The PBOC has yet to respond to a faxed request for comment. Beijing started a relentless crack down on the internet finance sector last year, issuing guidelines and rules to regulate online financial activity following a spate of scandals, frauds and high-profile peer-to-peer (P2P) failures.