- Chinese stocks rise strongly on new push for urbanisation.
- Germany's Wolfgang Schäuble puts brake on bank union plan.
- Australia's Q3 GDP rose 0.5% q/q.
- Main releases today are US ISM non-manufacturing and ADP employment. Markets Overnight
Chinese stock markets rallied the most in three months
on news that the new Communist Party said it would actively promote urbanisation, see Bloomberg. The Shanghai composite index is up 3% this morning following a period of very weak performance. A push for urbanisation is expected to spur infrastructure investment and support Chinese growth.
In its first assessment of the economy under the new leader Xi Jinping the Communist Party’s Politburo said that the economy is stabilising but that the country faces various challenges next year that should not be underestimated. It also said it would make economic policies more targeted and effective and fine-tune these policies in an appropriate and timely way, indicating economic reform measures in coming years.
Germany’s finance minister Wolfgang Schäuble yesterday put a brake on the bank union plan as he expressed his concern over the ECB taking responsibility to supervise all 6000 eurozone banks – see FT. He also wants a clear separation between ECB’s monetary policy and the bank supervision role, which might require a change of the treaty – something that could cause a long delay of the plan. However, he also called for possible creative solutions to legal issues keeping hopes for a deal when finance ministers meet on the eve of the EU summit on Wednesday next week.
In the US the Republicans are under pressure to give in on allowing the top tax rate to rise in the fiscal cliff negotiations as another poll shows that a wide majority of the population is in favour of this – see New York Times. However, Republican speaker of the House John Boehner is challenged by internal disagreements in the party, where conservatives strongly resist higher taxes for the wealthiest.
Having support from the polls, President Barack Obama stands firm on the demand for the top tax rate to go up but in a Bloomberg interview yesterday reiterated willingness to reform entitlement programmes. S&P finished down 0.2% yesterday but has recovered in Asian trading, where the S&P future is up 0.4% on the better sentiment in Asian stock markets.
Australia GDP rose up 0.5% q/q in Q3 confirming a loss of momentum in the Australian economy, where consumption growth was the slowest in two and a half years. Yesterday the Reserve Bank of Australia cut the cash target rate to 3% to underpin the economy. EUR/USD has continued to rise overnight and US bond yields are slightly up from yesterday on better risk sentiment.
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