Asia:
Chinese bankers, property developers downbeat on 2018 credit conditions
Most Chinese bankers and property developers at a recent closed-door meeting expect growth in credit to real estate firms will taper off next year, said two sources who attended the gathering, amid a government clampdown on inflated home prices. Funding channels for developers have shrunk as regulators make it tougher for real estate companies to raise money as Beijing aims to reduce sources of liquidity that has helped spur home prices to historic highs, analysts say. In a survey of attendees at the meeting last week, 37.5 percent of respondents said credit provided to the real estate sector will expand at a slower rate next year, while 25 percent said loans will fall year-on-year, one of the sources said, declining to be identified due to the sensitivity of the matter. None of the respondents expected a faster pace of credit growth, while the remaining 37.5 percent said the financial situation of developers will face uncertainties. Most of the meeting’s attendees – which included representatives from state lenders Industrial and Commercial Bank of China Ltd (ICBC) and China Construction Bank Corp – expected real estate transaction volumes to fall and home prices to be flat next year as measures to cool the market continue, the source said.
Europe:
Euro zone consumers still addicted to cash when they buy
Cash still dominates consumer payments in the euro zone, even as many Western economies are rapidly moving towards electronic payments, a survey published by the European Central Bank showed on Friday. The figures indicate that the euro zone is one of the slowest among big Western economies in giving up cash, trailing countries like the United States, Britain, Australia and Canada. Almost 79 percent of point-of-sale transactions were done in cash last year with the rate in Germany, the bloc’s biggest economy, at 80 percent, underscoring German unease over the ECB’s decision to phase out 500 euro notes, a move widely perceived as a first step in moving away from cash. Having lived through devastating world wars and hyperinflation, economically conservative Germans rely heavily on cash and even in their banking prefer simple saving products, particularly cash deposits. By contrast, cash is only used for about 15 percent of similar sales in Sweden with cash in circulation having declined for years, data from the Riksbank showed. The Dutch and the Estonians used cash the least in the euro zone last year, with less than half of transactions in cash. Cash is so vital in the euro zone that the average consumer carries 65 euros in their wallet with Germans holding over 100 at any one time.
ECB bond purchase debate pulls euro zone yields off lows
Euro zone government bond yields rose further off recent lows on Friday after a detailed account of the European Central Bank’s October meeting showed that ratesetters were divided on when exactly it should end bond purchases. Most euro zone government bonds – especially the lower-rated ones – have rallied strongly since late October when the ECB extended asset purchases until September 2018 and left it open-ended beyond that. But minutes of the meeting released on Thursday showed that while ratesetters broadly agreed on extending the scheme, many wanted a clean end to it next year. Some policymakers believe the ECB should stop linking extraordinary stimulus to inflation, which would allow it to end purchases even if consumer prices continue to lag economic growth. “For the central bank, this could be one point for an exit, if they link just the traditional toolkit to inflation dynamics, they could exit quantitative easing sooner rather than later,” DZ Bank analyst Sebastian Fellechner said. The yield on Germany’s 10-year government bond DE10YT=TWEB, the benchmark for the region, is 2 basis points higher than the week’s low at 0.36 percent. Lower-rated Southern European countries, seen as the biggest beneficiaries of ECB largesse, have seen some of the outperformance of recent times lose steam.
U.S.:
The GOP Tax Plan Is Entering Its Make-or-Break Week
The $1.4 trillion item on President Donald Trump’s wish list — a package of tax cuts for businesses and individuals that he has said he wants to sign before year’s end — is headed into the legislative equivalent of a Black Friday scrum next week. Senate Republican leaders plan a make-or-break floor vote on their bill as soon as Thursday — a dramatic moment that will come only after a marathon debate that could go all night. Democrats are expected to try to delay or derail the measure, and the GOP must hold together at least 50 votes from its thin, 52-vote majority in order to prevail. Their chances improved this week when Republican Senator Lisa Murkowski of Alaska said she’ll support repealing the “individual mandate” imposed by Obamacare — a provision that Senate tax writers are counting on to help finance the tax cuts. Murkowski had earlier signaled some reservations about the provision; and her support was widely viewed as a positive sign for the tax bill’s chances. If the bill clears the Senate — a step that’s by no means guaranteed — lawmakers in both chambers would have to hammer out a compromise between their differing bills, a process that presents potential pitfalls of its own. For now, though, much of the Senate’s attention will focus on its legislation’s price tag.
