European stock markets are mixed. FTSE 100 and DAX managed gains, while the Spanish IBEX lost -1.24%, as markets assess the fallout from the Catalonia crisis on the economic performance going ahead. Asian markets also treaded cautiously overnight. Japan was closed for a holiday, Hang Seng and ASX managed to close higher as investors took stock of U.S. tax plans and Powell’s nomination, while the CSI 300 closed down -0.11%. The Shanghai Composite Index posted a solid weekly decline led by technology shares and brokerages following the Communist Party Congress. Oil prices are slightly higher on the day, but are trading below the USD 55 per barrel mark.
BoE’s Broadbent hints at “couple” more rate hikes down the line. The Bank’s deputy governor said that he anticipates a “couple” of further hikes as part of measures to get inflation, which is currently at 3%, back on track. He said, “Currently we anticipate we will need maybe a couple of more rate rises to get inflation back on track, while at the same time supporting the economy.” His comments came after the Bank increased interest rates from 0.25% to 0.5% on Thursday, marking the first increase since July 2007.
The BoE did the expected and hiked rates by 25 basis points to 0.50% on Thursday, thus effectively reversing the “emergency” post-Brexit vote cut from last year. There were 2 dissenters and the central bank no longer warns that markets may be underestimating future rate hikes.
UK October services PMI beat expectations, rising to a headline reading rising to 55.6, up from 53.6 in September, the best level form April and slightly stronger than the post-crisis trend. The median forecast had been for a slight contraction, to 53.4. A rebound in new order growth from the 13-month low that was seen in September drove the recovery. The acceleration in activity marks a recovery from a recently underwhelming trend. The more cautious hiring strategies were reportedly due to respondents concerns about the long-term demand outlook.
The ECB Nowotny said Inflation is moving in the right direction
The ECB Nowotny said Inflation is moving in the right direction, adding that wage growth will eventually take off. “We see the economy is improving substantially but we are not yet there” and it is “too early” to have the discussion on an end date for QE. At the same time, he stressed once again that the fact that the ECB will be re-investing maturing assets and thus keep holdings steady, will continue to have an expansionary effect, even as the ECB scales down net purchases.