Europe:
IMF’s Lagarde says pre-Brexit warnings vindicated by slower UK growth
Britain’s economy is already suffering from last year’s vote to leave the European Union – fulfilling previous warnings that Brexit supporters had dismissed as too gloomy, International Monetary Fund chief Christine Lagarde, said on Wednesday. Before the June 2016 referendum, Lagarde had said Brexit would have “pretty bad to very, very bad” consequences for Britain, angering Brexit backers who viewed the body as exceeding the limits of its expertise. Speaking in London as she presented the IMF’s first full assessment of Britain’s economic performance since the Brexit vote, Lagarde said British growth was “a bit of a disappointment” compared to strength elsewhere in the world. “The UK economy is already losing out as a result of this decision,” she said at a news conference alongside finance minister Philip Hammond. “That narrative we identified as a potential risk in May 2016 is actually being rolled out as we speak. It’s not experts talking – it is the economy demonstrating that,” Lagarde said. Firms were delaying investment until they had more clarity about future trade rules, and she urged Britain and the EU to reach a deal soon on transitional arrangements for March 2019.
Asia:
China to remain the main game for global commodity demand: Russell
China strode like a colossus over major commodity markets in 2017, as the world’s biggest buyer of natural resources made its presence felt on demand for coal, iron ore, crude oil and liquefied natural gas (LNG). China’s influence on major commodities is likely to remain the single most important factor driving supply and demand in 2018, but that’s not to say next year will simply be a repeat of what happened this year. Still, some trends established in 2017 will continue, or even accelerate, with LNG potentially the best example. LNG imports surged 48 percent in the first 10 months of the year, as Beijing encouraged a switch from coal to the cleaner-burning fuel. Add in pipeline imports from central Asia, and China’s total natural gas imports were up 26.5 percent in the first 11 months of 2017. Despite the surge in natural gas imports, and a 9.1 percent gain in domestic output in the first 11 months, it became clear that China still doesn’t have enough of the fuel available to meet its plans to largely phase out coal boilers being used in industries and for residential heating. If history is a guide, however, it’s likely that by next winter China will have improved its natural gas infrastructure and will be able to consume more of the fuel.
U.S.:
U.S. tax cut to deliver corporate earnings gift
The massive Republican tax overhaul working its way to President Donald Trump’s desk is making bulls on Wall Street a little more bullish. Wall Street strategists are revising their 2018 earnings forecasts sharply higher because of the tax cuts, though the jury is out on whether that positive effect will endure much beyond next year. The tax bill will cut the corporate tax rate to 21 percent from 35 percent beginning Jan. 1 and is expected to be the single biggest positive factor for earnings in 2018. The Republican-controlled House of Representatives passed the tax package on Tuesday afternoon, but the move hit a last-minute snag, requiring another vote on Wednesday. A Senate vote was still awaited. Although there is a wide range of profit estimates for 2018, the expected tax plan benefit has strategists now calling for double-digit profit gains in 2018 over 2017, compared with their forecasts for mid-single-digit gains without the tax cuts. “This is going to drive the earnings numbers. (Tax) is going to overwhelm everything,” said Credit Suisse Group U.S. Equity Strategist Jonathan Golub, who was waiting for the bill’s passage to adjust his own earnings estimates.
