“Budget Day in UK…..”

Budget Day in UK

Theresa May’s government acknowledged that the UK economic outlook is deteriorating and unexpectedly set aside an extra  GBP 3 billion to prepare for all Brexit outcomes. In his opening Budget speech in Parliament on Wednesday, Philip Hammond who is the Chancellor of the Exchequer said that the Office for Budget Responsibility now sees the economic growth for 2018 at 1.4 percent compared with the 1.6 percent predicted in March as a result of revised productivity data and Brexit.  With this news the pound edged lower.  Growth is predicted to be lower than forecast and less than 2 percent in every year through 2021.  Hammond announced the abolition of stamp duty, which is a tax on home purchases, for first-time buyers on all properties up to GBP 300,000.  In London, where property is more expensive, it will apply to the first GBP 300,000 pounds of any first home purchase.  Furthermore, the tax on fuel and alcohol were frozen and the chancellor said that money would be available to smooth access to benefits under the flagship Universal Credit program.  This measure is in response to complaints from lawmakers that the poor were having to wait too long to get help.   He also said that the thresholds for paying income tax will be raised to GBP 11,850 for the basic rate of 20 percent and GBP 46,350 for the 40 percent higher rate.    He also sped up a reform to property taxes for businesses which he said will save them 2.3 billion pounds over five years.  Support will also go for programs to build affordable homes.  Local authorities will also have the power to double tax properties left empty.

UK – Brexit

There are 16 months left until Britain leaves the bloc, and talks are at a deadlock particularly due to the financial settlement.  Discussions of future trading terms cannot begin until the European Union is happy with Britain’s offer on the bill.    The UK may be poised to increase its payment offer with regards to the divorce bill that is a crucial part of the exit talks.  Chancellor of the Exchequer Philip Hammond said Britain is “on the brink of making some serious movement forward”.  Businesses in the UK are increasingly concerned over the slow pace of progress.  The EU is pushing for Britain to pay at least 60 billion euros to cover budget commitments and future liabilities such as pensions for EU civil servants.  May has so far said that she will make EUR 20 billion of budget payments after Brexit.

US – Tax bill

The tax overhaul is in for a marathon debate on the Senate floor at the end of this month.  However, two parallel and large private negotiations will determine the content of the bill that is due for a full Senate as early as 30 November.  One of the aims is to get about a half-dozen wavering GOP (Republic Party) senators on board, and also to attempt to smooth the path for a final House-Senate compromise in December.  GOP leaders must write a bill that can pass under the Senate’s strict budget rules whilst bringing together 50 Senate votes.  Furthermore, they have to avoid political land mines such as the divisive health-care debate that has impacted Republicans for much of this year.  Congress is trying to make a self-imposed deadline of adopting tax legislation before the end of the year in order to achieve a major legislative accomplishment before the 2018 mid-term elections.  Although the House approved its tax bill with little hassle last week, the Senate vote has much higher stakes.

Janet Yellen

Federal Reserve Chair Janet Yellen said that she will resign from her position on the board of governors once Jerome Powell her nominated successor will take over in February.  This will leave ample power to President Donald Trump to form the board of the US Central bank which would leave four of the seven seats on the board vacant.

On a different note, Janet Yellen warned that there has been “some hint” that inflation expectations may be drifting down and said that removing policy accommodation too quickly could risk prolonging the US central bank challenge in meeting price goals.

Black Friday

This weekend shoppers descend in stores.  The National Retail Federation has predicted that about 164 million consumers that is around 69 percent of Americans will shop online or at stores over the Thanksgiving weekend.  Black Friday has become popular in other countries besides the US as shoppers benefit out of any discounts by retailers that kicks off the holiday shopping season.  Retailers have been offering deals online and in stores all week aiming to a good start before Black Friday and cut through the noise.

Germany

Recent data has underscored that growth in Germany is going stronger and stronger, with confidence at a new record high.  Exports and investment were the driving force behind the growth in the third quarter putting German economy into a better position to weather the rising political crisis arising after the coalition talks have collapsed.  Growth domestic product increased 0.8 percent putting the economy firmly on the good path for its best annual performance in six years.  According to IHS Markit a composite Purchasing Manager’s index rose to 57.6 from 56.6 in October.  New orders surged the most in more than 6 ½ years, leading companies to add jobs at one of the fastest rates in at least two decades.  The failure of Chancellor Angela Merkel to form a governing coalition did not go without leaving a shadow over the outlook however.   Two months after an inconclusive election Merkel is still trying to work out how she can govern after her effort to forge a deal with three smaller parties fell apart on Sunday.  Germany’s biggest opposition party said that it will open talks on backing a government led by Chancellor Angela Merkel, offering a way to restore political stability.

Turkey

The latest round of measures taken by the central bank are failing to bolster confidence.  The central bank pushed lenders to use a window that makes borrowing more expensive from Wednesday which amounted to a 25 basis point interest rate increase and came a few hours before a Treasury sale of five-years bonds.   The central bank said over the weekend that it would start auctioning as much as $3 billion in instruments through year-end to help corporate borrowers manage their foreign-exchange positions.  As a result the currency weakened more than 1 percent against the dollar and stocks fell.  Investor’s attention is turning to a high-profile case in the US that threatens to expose how powerful figures in Turkey may have helped undermine US sanctions on Iran. Among those charged are a Turkish-Iranian gold trader, a former Turkish economy minister and three executives from a state-run bank.  Furthermore President Recep Tayyip Erdogan hit out at the central bank on Friday saying that it was on the wrong path in using high interest rates to tackle inflation.  In a move to deteriorate the relations with Europe and the US, Turkey withdrew troops from a NATO military exercise last week, citing drills in which Erdogan and Turkey’s founder, Mustafa Kemal Ataturk, were portrayed as enemies.  Nato’s secretary general apologised to Erdogan for the incident.  In Istanbul the Lira weakened 1.2 percent to 3.9231 per dollar.  It has dropped 10 percent against the dollar and 20 percent against the euro this year.  The yield on the 10 year bond jumped as much as 46 basis points to 13.01 percent.

Oil

Crude headed for its highest close since June 2015 as the barrel of West Texas Intermediate for January delivery was trading at $57.87.  Last week the American Petroleum Institute was said to report that US inventories fell by 6.36 million barrels.    The OPEC meeting is to be held at the end of November and is likely to extend the current production cuts.  Veteran oil trader Andy Hall who closed his hedge fund this year will brief OPEC officials on the outlook for the US shale oil, according to a copy of the agenda seen by Bloomberg news.  OPEC and Russia are leading the global alliance of producers this year in cutting output aimed at clearing a global gut created by American shale drillers.   It is not the first time that OPEC has sought outside advice to understand the US energy revolution.  According to the US Energy Information Administration crude output from the major US shale will rise by 80,000 barrels a day to 6.17 million barrels a day in December.

Bitcoin

Bitcoin topped the $8,000 level for the first time as investors looked past the technology concerns.    It has been a turbulent year for the virtual currency as the bitcoin suffered three separate slumps of more than 25 percent followed by subsequent rallies.  Although many are sceptical calling the asset a bubble waiting to pop, it is becoming too big for Wall Street to ignore.  The recent volatility is arising from people switching to alternative virtual currencies, like bitcoin cash.  It is gaining popularity due to lower transaction costs and faster speed.  Bitcoin has advanced more than 700 percent this year and has a market value of more than $130 billion.  The cryptocurrency fell the most in a week after the company behind cryptocurrency tether reported a $31 million theft on the 19^th November.  According to an announcement on the company’s website the amount was sent to an unauthorised bitcoin address.  Bitcoin dropped as much as 5.4 percent the most since 13^th November.  The incident is the latest in a long list of hacks that has negatively affected confidence in the security of cryptocurrencies.

‘Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Timberland Finance has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Timberland Finance does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Timberland Invest Ltd.’