Asian equity market performance is mixed this morning. Chinese indices led the underperformers as concerns about the rising numbers of Covid cases remained a factor. Comments from some US Federal Reserve and European Central Bank policymakers yesterday both indicated support for a slowing of the pace of interest rate increases at their respective December policy updates.
Just released data for October UK public finances showed net borrowing of £12.7bn. That was much lower than forecast but still some way above the borrowing rate for the same month a year ago. Today’s data may lead to some downward revision to borrowing forecasts for the year as a whole but the deteriorating underlying trend still provides support for last week’s fiscal tightening measures.
Senior officials from the Office for Budget Responsibility will testify to a House of Commons Committee this afternoon about last week’s fiscal update. Their comments are unlikely to reveal much that is new. However, it will be interesting to see if they are questioned about why they expect a quicker rebound in economic activity than the Bank of England. They may also be asked about how high the risks are that the new fiscal targets will not be met.
Today’s data calendar is light. Possibly of most interest will be the November consumer confidence update for the Eurozone. It rebounded modestly last month from a multi-year low, but it is unclear whether this month will have seen a further rise. Several central bank policymakers are also scheduled to speak in both the Eurozone and the US.
The OECD will release a new set of economic forecasts today. Those seem likely to show downgrades to economic growth forecasts everywhere, including the UK. Despite that forecasts for inflation will still show price pressures remaining intense near term but falling through next year.
The New Zealand central bank will issue its latest monetary policy update early on Wednesday. A ninth successive interest rate rise is expected and the majority of forecasters are expecting the RBNZ to up the ante with a 75 basis point hike. However, it faces a difficult decision with a tight labour market and recent inflation outturns above expectation pointing to the need to hike aggressively while a faltering housing market argues for caution. The RBNZ is also expected to make changes to its forward guidance by highlighting the likelihood that rates may peak above previously expected levels.
Global bond market performance was mixed yesterday as US Treasury yields rose but UK gilt yields slipped back close to their lowest levels since last Thursday’s fiscal statement. In currency markets, sterling was up against the euro but fell modestly against a generally stronger US dollar.
