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| HKECIC Weekly Market News |
| 15 October 2018 |
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| Market Snapshots |
| Asia and Australasia |
China: Trade surplus with US surges to record high in September despite trade tensions
According to the General Administration of Customs, China’s exports rose 14.5% yr/yr to US$226.69 billion in September, accelerating from a 9.1% increase in August. Imports grew 14.3% in September, slowing from a 19.9% increase in August. Overall, China registered a total trade surplus of US$31.69 billion in September. In particular, its trade surplus with the US widened to a record high of US$34.13 billion in September. With China’s manufacturing sector cooling and export orders shrinking, the State Council announced to increase export tax rebate from 1 November and promised to cut corporate burden on a larger scale to help struggling Chinese firms. The tax rebate rate for goods currently stands at 15% will be raised to 16%, and also some goods at 13% will also be raised to 16%, while those at 9% will be raised to 10% or 13% and those at 5% will be raised to 6% or 10%. China's central bank also announced to cut the reserve requirement ratio by 100 basis points effective from 15 October, a move to lower financing costs and spur growth. |
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| Europe |
UK: Economy grew 0.7% in the three months to August
The Office for National Statistics (ONS) reported that the UK economy grew by 0.7% in the three months to August, the same rate as in July. The rolling three-month growths were the highest growth rates since February 2017, which was attributed to the warmer than usual weather in the summer and a rebound in construction, the ONS said. Separately, European Union’s (EU) chief Brexit negotiator Michel Barnier said that a Brexit deal could be agreed this week if Prime Minister Theresa May agrees to a customs union, and he reiterated that as much as 85% of a withdrawal agreement had already been agreed.
Italy: Plans to run a larger budget deficit of 2.4% of GDP next year
Despite warnings by the International Monetary Fund (IMF) not to breach European Commission’s spending rules in the next budget, Italy’s populist government is planning to run a budget deficit of 2.4% of GDP next year, tripling the previous government’s target. Italy is due to submit its draft budget by 15 October to the European Commission, and the EU officials have warned that they will reject the budget if the Italian government does not improve its announced deficit figures. Tensions between Italy and European Commission will continue to increase as credit rating agencies prepare to review their appraisal of the Italian economy. Moody’s, which has a negative outlook on Italy’s Baa2 rating, said it would release a new assessment by the end of this month. Standard & Poor’s, which rates Italy’s debt “BBB” with a stable outlook, is scheduled to publish its new rating on 26 October. |
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| North America |
US: Jobless claims rise unexpectedly last week while remains near 49-year low
The Department of Labour reported that the Consumer Price Index (CPI) increased 2.3% yr/yr in September, slowing from 2.7% rise in August. The core CPI, which excluded food and energy items, rose 2.2% yr/yr in September, the same increase from the prior month. A separate report from the Department showed that initial jobless claims in the week ending 6 October stood at 214,000, an increase of 7,000 from the previous week and still nearing a 49-year low level. While a strong labour market condition will tend to drive the Federal Reserve to further raise the interest rate later this year, US president Donald Trump said that the US economy does not have an inflation problem and that the central bank is moving too quickly in trying to curb price increases. |
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IMF lowers global growth forecast for 2018 and 2019.
In its latest World Economic Outlook report released in October, the International Monetary Fund (IMF) has lowered its forecast for the global economic growth for 2018 and 2019. It now expects the global economy to expand by 3.7% this year and next year, down 0.2 percentage points from the April's forecast. The downward revision reflects the negative effects of the trade tensions and a weaker outlook for some key emerging market and developing economies arising from country-specific factors, tighter financial conditions, geopolitical tensions, and higher oil import bills.
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Coast Fashions Ltd, a UK-based women’s fashion retailer, has gone into administration. The chain has closed 24 stores and put 300 jobs at risk, while its website and department store concessions will keep trading. According to its administrator PricewaterhouseCoopers, Coast has been affected by the structural challenges in the retail sector and lower demand for occasion wear, amongst other things.
Sears Holdings Corporation (NYSE:SHLD), once the nation's largest retailer, has filed for Chapter 11 bankruptcy protection. The company said that its Sears and Kmart stores, and online and mobile platforms will continue operation in normal course. Currently, the company operates around 700 Sears and Kmart stores and employing about 70,000 people. As part of the restructuring, Sears plans to close 142 stores by end of the year. |
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Hong Kong Export Credit Insurance Corporation
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