In a positive turn of events for the recovering UK economy, the trade deficit fell to a 7-month low at the end of October. The goods deficit decreased from £2.8bn in September to £2bn in September, while exports rose £200mln to £24.3bln in October. The increase in exports and the decrease in oil imports were major factors.
The US dollar extended recent losses against the euro and yen. Oil prices continue to swoon. The price of Brent oil has fallen below $60 and WTI approached $54.
While most emerging market currencies are higher today, a notable exception is the Russian ruble. Very early Tuesday in Moscow, the central bank hiked the key interest rate to 17% from 10.5%. This follows about five days after the central bank hiked by 100 bp.
Those in the business of long-run GDP projections expect Asia, and particularly China, to keep growing above world trend rates for some years. The most optimistic — such as former Chief Economist at the World Bank, Justin Lin — have China growing at 8 per cent for at least the next decade. The semi-official China 2030 report projects 7 per cent growth later this decade, falling to between 6–5 per cent by 2030. The Australia in the Asian Century White Paper projected Chinese economic growth of 7 per cent and Indian growth of 6.75 per cent until 2025.
Are South Korea’s relations with China and Japan warming?
Developments in the coming days will likely push the People’s Bank of China into easing monetary policy the near-term. Many have been looking for a follow up move since the PBOC surprised the market on November 21 by cutting interest rates for the first time in two years.
EM currencies remain soft ahead of the FOMC meeting Wednesday. The Fed is widely expected to modify the language in its forward guidance, which would be consistent with the first rate hike that is expected around mid-2015. This would be unequivocally negative for EM. Indeed, lower commodity prices and the looming turn in the US interest rate cycle are likely to maintain downward pressure on EM currencies well into next year.
The fundamental issue confronting investors is about supply and demand. In recent weeks, as energy prices and other industrial commodity prices fell, investors focused on supply. The stimulative effect of falling prices and the likely policy response by some major central banks, such as the ECB, and possibly the BOJ, was good for equity markets and weighed on the euro and yen.
American consumers are the most confident in their purchasing power since January 2007, thanks to falling oil prices and an improving domestic job market.
On a backdrop of falling bond yields, deflationary risks, and falling stock prices, American consumers are feeling decidedly upbeat. The Thomson Reuters and University of Michigan preliminary December Consumer Sentiment index rose to 93.8, up 5.6% from the prior month and above economists’ expectations. Falling gasoline prices and unemployment claims, which are at their lowest since 2000, are helping Americans spend more.
In 2007, the 10-member Association of Southeast Asian Nations (ASEAN) bloc adopted the goal of creating an integrated economic region—termed the ASEAN Economic Community (AEC)—by December 2015. However, concerns have been expressed that the regional integration project’s 2015 deadline will be missed due to an overly ambitious timeline and too many ill-thought-out initiatives. With the AEC deadline looming, this article critically assesses the progress that has been made, charts some of the main challenges, and suggests the next steps for the AEC.
The ongoing disputes between the Philippines and China in the South China Sea are about to reach a critical point. In January 2013 the Philippines activated procedures under Article 287 and Annex VII of the 1982 UN Convention on the Law of the Sea (UNCLOS) over a dispute about the validity of China’s ‘nine-dash line’ in the South China Sea. The Philippines contests the validity of this line and any attempts by China to assert sovereignty or sovereign rights over islands and other maritime features found within this area.
