Investors upbeat ahead of Fed meeting on Wednesday
US central bank expected to hold interest rates
Coming up: Eurozone inflation & Mark Carney speech
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
World stock markets have hit a new alltime high this morning, as traders regain their appetite for risky assets.
Markets anticipate that the Fed will keep rates unchanged (with a December rate hike now seen as 50/50), but announce that it will commence balance sheet reduction at a pace of $10bn per month in Q4.
The statement will doubtless keep the option of a December rate hike clearly on the table, but markets will as ever hone in on the ‘dot plot’, with many expecting the likes of Brainard to perhaps adjust their trajectory lower
Short of shots being fired, these tensions are likely to have fairly short term and short lived effects, which helps explain the positive start to the week for Asia shares this morning which in turn is likely to lead to a positive start to this week’s European trading session.
Near-zero rates have spurred borrowing and left consumers, businesses and governments at risk, says Basel institution
A new warning has been issued about the growing risk of a “debt trap” if interest rates around the world stay near zero, which has encouraged borrowing by households, businesses and governments.
The Bank for International Settlements – known as the central bankers’ bank – highlighted the vulnerability of consumer, business and government finances to interest rate increases in its 174-page quarterly report. Claudio Borio, the head of the monetary and economic department, described this as “a defining question for the global economy”.
The increase in the percentage of firms unable to cover their interest payments with their earnings does not bode well
As Bank of England hints about a hike, stimulus from the government – including removal of the pay cap – could lead it to push further ahead on rates
We’ve heard it all before. The Bank of England is putting debt-laden consumers on notice of higher borrowing costs, yet again.
But this time, just maybe, interest rates could finally be on the march from as early as November after more than 10 years without a hike. While the first rise may simply serve to reverse last year’s emergency rate cut, there are signals that the Bank may then push still further ahead.
The virtual currency’s success reflects the continuing lack of trust in traditional banking following the credit crunch
When the boss of Wall Street’s biggest bank calls a bubble, the world inevitably sits up and listens, albeit with a sense of historically weighted irony: of course an investment bank boss would spot disaster after his industry presided over the last one. Jamie Dimon, the chief executive of JP Morgan, said last week that the ascendancy of the virtual currency bitcoin – which has risen in price from just over $2 in 2011 to more than $4,000 at points this year – reminded him of tulip fever in 17th-century Holland. “It is worse than tulip bulbs,” he said. “It could be at $20,000 before this happens, but it will eventually blow up. I am just shocked that anyone can’t see it for what it is.”
Dimon’s comments are an open invitation for derision from those who, rightly, point out that although JP Morgan may be top of the Wall Street heap, that heap is far from being the moral high ground. Under Dimon’s leadership, it has agreed a $13bn settlement with US regulators over selling dodgy mortgage securities – the instruments behind the credit crunch – and its run-ins with watchdogs include a $264m fine last year for hiring the children of Chinese officials in order to win lucrative business in return.
Jean-Claude Juncker believes Europe is starting to recover at last. But the picture from the union’s most fallible economy is very mixed
Is the eurozone on the mend? Jean-Claude Juncker certainly thinks so. The EU president was upbeat in Brussels last week as he gave his annual state-of-the-union address, proclaiming that “the wind is back in Europe’s sails”.
Juncker’s optimism appeared to match the view from Greece, the currency bloc’s problem child. In Athens only the previous week, the visiting French president, Emmanuel Macron, had been even more enthusiastic, declaring against the backdrop of the Acropolis that Greece’s prolonged crisis was over, and that therefore Europe’s was too.
Structural reforms since financial crisis are slowly but surely starting to bear fruit, with the lowest unemployment since 2009 and production ratcheted up
It was a story few predicted: the eurozone is growing faster than the United States. When Jean-Claude Juncker gave his annual state of the union speech on Wednesday last week, Europe’s booming economy was near the top of his list. Ten years since the crisis struck, “Europe’s economy is finally bouncing back,” the European commission president told MEPs. Detailing the economic resurgence, but also referring to the EU’s newfound unity after Britain’s vote to leave, Juncker declared: “the wind is back in Europe’s sails”.
Some on both sides of the Channel believe that trade and prosperity will win the day. But in the EU just as in the UK, politics now trumps economics
There is a shared belief among Leavers and Remainers to the effect that when the Brexit cliff-edge comes into view, London and Brussels will hatch a face-saving compromise.
It’s not entirely clear what kind of gleaming alloy can be forged from the fire of claim and counterclaim on either side of the channel, but there should be a way, they think, to cut through the noise and make something solid and lasting that shows neither side is entirely inept.