A slew of economic data from China and the Pacific Rim show that orders are picking up and trade is rebounding after the industrial recession of the past few months. The Baltic Dry Index, measuring shipping rates for commodities – watched as a proxy for Chinese demand – has come back from the dead, rising 50 per cent since July. Container freight rates on Asian routes have started to recover. The Danish group Maersk raised its shipping rates two weeks ago, and the Chinese operator COSCO followed suit on Thursday. The HSBC/Markit index for Chinese manufacturing jumped to 49.5 in October. It is still below the expansion line of 50 – for the 12th month in a row – but domestic orders have risen sharply, suggesting that the world’s second-biggest economy is at last generating its own momentum. “China’s manufacturing sector has picked itself off the floor but it is not moving with anything like the speed we’ve been used to over the past few years,” said Mark Williams from Capital Economics, The Telegraph says.
The board of the Bank of England was kept in the dark for more than a year about a multibillion-pound scheme hatched by Bank executives to keep HBOS and Royal Bank of Scotland afloat at the height of the financial crisis. Details of how a plan to lend £62.5bn to the two collapsing banks was concealed from 12 of the 16 non-executive directors is contained in a report published today into the Bank’s handling of emergency liquidity assistance operations in 2008. Questions about the governance of the Bank and the dominance of the senior team headed by the Governor, Sir Mervyn King, were raised by two other reports into the Bank also published today. One dissecting the Monetary Policy Committee’s error-strewn forecasting track record said that the Bank’s attempts to get to grips with its mistakes was insufficient. Officials needed to reflect “more deeply and more systematically” about how they had gone wrong, it said, The Times reports.
Standard Chartered and BBVA have joined the global banks that will be required to hold extra capital because of their importance to the world financial system, the Financial Stability Board announced on Thursday. Three banks, Lloyds Banking Group, Commerzbank and Dexia, have dropped off the list of 28 “global systemically important financial institutions”. Dexia is being restructured and Lloyds and Commerzbank are shrinking. Banks on the list will be required to hold additional capital equal to between 1% and 2.5% of their assets, adjusted for risk, on top of the Basel III minimums, for a total ratio of 8% to 9.5%, starting in 2016. The Financial Stability Board, made up of regulators, central bankers and representatives of international bodies, plans to update its list of GSifis every November, and the methodology for determining which banks are systemic will also be reviewed every three years, The Financial Times reports.
China’s central bank pumped a record $60bn into the country’s money markets this week in an attempt to ensure that there will be ample cash in the economy to support the government’s push for more infrastructure investment. The People’s Bank of China was continuing its pattern in recent weeks of injecting a large amount of short-term liquidity into the financial system via its open-market operations. The net injection for this week came to Rmb379bn ($60.7bn), the highest weekly amount ever. The previous record was set in late September, just before a weeklong national holiday when demand for cash spiked. This time, however, there was no immediate prompt for the massive injection, apart from the central bank’s determination to keep monetary conditions relatively loose, according to The Financial Times.
Commodity giant Glencore’s controversial prediction that it could benefit from the impact of the US drought on harvests appears to have come to fruition, as it reported business has been “good”. The FTSE 100 commodities giant said that its marketing division, which trades raw materials, had seen a “healthy” improvement in the third quarter of the year. Agriculture, which has seen the prices of many crops soar because of the severe drought in America, had proved “particularly strong”, it said. Glencore has argued in response to criticism that its production and trading support the movement of agricultural commodities around the world, according to The Telegraph.