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UK still an attractive place to invest despite Brexit uncertainty, report finds

The UK has retained its position as one of the world’s leading hubs for business, according to a new report which suggest investors have taken a ‘wait-and-see’ approach towards Brexit.

In a comprehensive global index released this morning, the UK was ranked as one of the best global hubs for business, scoring highly for its low start-up costs and attractiveness for foreign investment.

Business advisory group Eight Advisory, which produced the report, suggested the long-term cost of Brexit has yet to emerge across a wide range of economic and wellbeing indicators.

“While Brexit creates considerable uncertainty the foundations of the UK’s economy are particularly strong, and it remains an attractive place to invest and do business,” said Alexis Karklins-Marchay, a partner at Eight Advisory and prominent figure within the French business community.

He told City A.M.: “Confidence has plummeted in the last 3 years, but Britain should have confidence in its own ability. This is one of the most competitive countries.”

Despite scoring highly in areas such as human freedom, higher education and happiness levels, the UK’s productivity was found to be “an ongoing and long-running concern”.

Eight Advisory also said that Brexit was proving a “distraction from the issues facing the UK economy”, such as productivity and standards of primary education.

The report comes weeks after consultancy Z/Yen showed that London has clung onto its second place in a ranking of the world’s top financial centres, but its position in the top tier is under threat amid Brexit chaos and other geopolitical shifts.

“There are fundamental issues that need to be addressed if the UK’s hard-earned reputation as an international leader is to be protected in the long term,” Karklins-Marchay added.

By Sebastian McCarthy

Source: City AM

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UK firms investing billions abroad because of Brexit

The UK government hopes that Brexit will make the UK a better place to do business, but new numbers from the Centre for Economic Performance (CEP) show that the opposite is happening. UK firms are voting with their money and offshoring new investments to the rest of the EU.

The study finds that the Brexit vote has led to a 12% increase in new foreign direct investment (FDI) projects by UK firms in EU countries, a total increase in foreign investment of £8.3bn. A no-deal Brexit would further accelerate the outflow of investment from the UK.

This is the first systematic, evidence-based analysis of how the Leave vote has affected outward investment by UK firms. The findings support anecdotal evidence that fears about Brexit are causing UK companies to move investments elsewhere in Europe.

The report, by CEP experts Holger Breinlich, Elsa Leromain, Dennis Novy and Thomas Sampson, found:

  • The Brexit vote has led to a 12% increase in the number of new investments by UK firms in EU countries.
  • The estimated increase totals £8.3bn (over the period between the referendum and September 2018). To the extent that increased investment in the EU would otherwise have taken place domestically, this represents lost investment for the UK.
  • The data show no evidence of a ‘Global Britain’ effect. There has not been an increase in investment by UK firms in OECD countries outside the EU.
  • Higher outward investment has been accompanied by lower investment into the UK from the EU. The referendum reduced the number of new EU investments in the UK by 11%, amounting to £3.5bn of lost investment. This illustrates how the UK is more exposed to the costs of Brexit than the EU.
  • The increase in UK investment in the EU comes entirely from higher investment by the services sector. Brexit has not affected foreign investment by UK manufacturing firms. This suggests that firms expect Brexit to increase trade barriers by more for services than for manufacturing, perhaps because the government has prioritised the interests of manufacturing over services in the Brexit negotiations by focusing on reducing customs frictions, while ruling out membership of the EU’s single market.

The report’s findings support the idea that UK firms are offshoring production to the EU because they expect Brexit to increase barriers to trade and migration, making the UK a less attractive place to do business.

Holger Breinlich said, “Our results show that Brexit has already led to an investment outflow from the UK of over £8bn.

“These outflows are likely to accelerate substantially in the event of a no-deal Brexit.”

Dennis Novy said, “The economic risk of Brexit is larger on the UK side of the Channel. British firms feel compelled to invest more in the EU but not the other way around.

“Combined with existing evidence that the Brexit vote has already affected the UK economy through lower real wages, slower GDP growth and fewer firms starting to export to the EU, the initial signs are that ‘Project Fear’ may turn out to have been ‘Project Reality’.”

Thomas Sampson said, “The data show that Brexit has made the UK a less attractive place to invest.

“Lower investment hurts the economy and means that UK workers are going to miss out on new job opportunities.”

Source: London Loves Business

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Where are the best investment opportunities for 2019?

With 2019 fast approaching, we asked some of the UK’s leading fund managers to highlight the stocks they are watching closely and to share their outlooks for the new year.

As 2018 draws to a close, there is much to feel nervous about.

The UK is set to leave the European Union in March 2019 and a deal is yet to be agreed; investors have experienced a profound sell-off over the past few months; trade tensions have escalated between the US and China; and the global economy appears to be cooling.

“Global growth is getting harder, with the trade war having a particular impact on China. The US too is finding growth more difficult, as the Trump stimulus package wanes,” explained Jeremy Lang, manager of the Ardevora UK Equity fund.

“There was nowhere to hide for investors in the recent market sell-off, as traditional areas of shelter did not provide any safety,” he added.

Lang suspects that 2019 will be much like 2018, with the market experiencing “many wild mood swings”.

UK outlook

When it comes to the UK market, he notes there appears to be “more palpable gloom and little optimism”.

“This undoubtedly drives strong investor desire for overseas earners.

We are now enticed by areas of the market most other investors hate, as there are increasing odds of a surprisingly benign outcome.

“While still small, the odds of another referendum and a remain verdict are far better than they were weeks ago. Even if we were to see a second referendum, there are going to be a number of hurdles and pockets of anxiety along the way,” he explained.

With this in mind, Lang and co-manager William Pattisson have reduced their fund’s exposure to commodity stocks which earn a large proportion of their earnings overseas.

“We used the proceeds to buy into more domestically-focused value opportunities, such as Travis Perkins,” he added.

Ken Wotton, manager of the LF Gresham House Multi Cap Income fund, notes that Brexit is likely to cause further volatility in the UK market. Nevertheless, investors must remember that this will create selective opportunities.

“While large-cap businesses are generally impacted by macro factors, the agility and niche positioning of smaller companies may allow them to react positively to broader economic headwinds,” he said.

He believes Inspired Energy, which provides energy advisory services, is poised for strong performance in 2019.

“While it advises mid-sized corporations, Inspired Energy is paid in commission from contracts with large energy suppliers, with payments based on the energy usage companies incur. This guarantees multi-year revenue and high earnings visibility for the business,” Wotton said.

Phil Harris, manager of the EdenTree UK Equity Growth fund, notes that the unforeseen variables and endgame scenarios surrounding Brexit may feel like attempting to play “three-dimensional chess”.

In spite of the political headwinds, he is encouraged that the UK economy has so far proven robust.

“With sentiment at multi-year lows and UK valuations reflecting this, we expect to find multiple opportunities across the UK small and mid-cap space for us to deploy our current high levels of cash,” Harris explained.

Better opportunities elsewhere

David Coombs, who manages the Rathbone Multi-Asset Portfolio range, and assistant manager Will McIntosh-Whyte note that Brexit has so far divided the nation and slashed the amount that businesses have invested here.

“Yet the UK has muddled through so far. Wages are rising, albeit slowly, retail sales were okay despite some high-profile high street failures and business surveys remain in expansionary territory. We don’t think the UK is doomed, but we see better investments elsewhere,” the managers explained.

Looking ahead, as central banks around the world tighten monetary policy, the managers suspect that share prices will come under pressure.

“That’s just the way valuations work: as the rate you get for taking zero risk goes up, the value for risky cash flows goes down. While this will likely cause another bumpy year for stock markets, it does come with benefits.

“Government bond yields are returning to levels where they should offer better protection for portfolios. And for rates to rise, that’s usually because countries are growing and deflation is out of the picture,” they added.

Against this backdrop, Coombs and McIntosh-Whyte expect well-run businesses with low debt levels to prosper.

Source: Your Money

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Property investment: the four property types you should avoid

When it comes to property investment, I always emphasise the need to have personal goals.

What you want to achieve from your property journey will be different to another investor and, as such, the type of investments you put your money into will differ too.

That being said, there are some investments that I wouldn’t recommend to anyone.

Student pods

You buy a room within a purpose-built student block and rent it out to students. Many will come with a guaranteed rental return for a period of one or two years. What’s not to love?

Well, lots actually. Firstly these pods are almost always overpriced, that guaranteed return you’re getting will have been factored into the asking price.

Secondly, the resale market is virtually non-existent. You can only sell to other investors. And your tenant market is also severely limited.

Finally, there is very little possibility of capital growth. Prices will only rise if yields do.

Student apartments can be a terrible investment (image: PA)

Hotel rooms

Hotel room investments are similar to student pods.

You buy a hotel room, a management company rents it for you, and you get a return. It’s a hands-off investment – which can be many attractive to investors.

What’s not so attractive, of course, is the fact these too have a capital growth issue and a distinct lack of a resale market. What’s more, you’ll be hard pushed to find a lender willing to lend to you on such an investment.

Think twice before investing in hotel rooms (image: Shutterstock)

Overseas ‘hotspots’

I’m certainly not suggesting overseas investments are a bad idea in general. However, you should be wary of areas marketed in a particular way.

We’ve seen what happens when marketers get overexcited. A few years ago Bulgaria and Spain were the locations what we’re heading for a boom; prices were going to soar, so investors and developers had to get in quickly. And now? Prices have plummeted in both countries, and thousands of homes stand empty.

Be cautious around claims of price rises. Do your own research, don’t focus too much on price, look at yields and, as ever, consider the fundamentals of the area.

Overseas properties can be prone to hype (image: Shutterstock)

Bargain properties

It is certainly possible to get a property bargain.

If you’re able to have other points of negotiation, you could get a great deal on a property. But if a property price seems too good to be true, assume that it’s not and do your research.

There’s very little point in buying a family house to rent out – even if you get it for rock bottom price – if nobody wants to rent it!

Check the rental market, the local amenities, the employment opportunities before getting carried away by a bargain.

By Rob Bence

Source: Love Money

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Economic Calendar – Top 5 Things To Watch This Week

The big event in the coming week for global financial markets will be Friday’s release of the March U.S. employment report, as traders and investors look for further clues on the Federal Reserve’s likely rate hike trajectory through the end of the year.

U.S.-China trade frictions will also remain a central focus this week.

Over in Europe, investors will await the first estimate of euro zone inflation figures, which if they remain strong could push the European Central Bank another step closer to ending its mass stimulus program.

Meanwhile, in the UK, traders will focus on a trio of reports on activity in the manufacturing, construction and services sectors for further hints on the health of the economy and the likelihood of the Bank of England raising interest rates this year.

Elsewhere, in Asia, market participants will be looking ahead to monthly data on China’s manufacturing sector amid recent signs that momentum in the world’s second largest economy remains strong.

Finally, a monetary policy announcement from the Reserve Bank of Australia will also be on the agenda.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. U.S. Employment Report

The U.S. Labor Department will release the nonfarm payrolls report for March at 8:30AM ET (1230GMT) on Friday, and it will be watched more for what it says about wages than hiring.

The consensus forecast is that the data will show jobs growth of 198,000, after adding 313,000 positions in February, while the unemployment rate is forecast to dip to 4.0%from 4.1%.

However, most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.2%, following a gain of 0.1% a month earlier. On an annualized basis, wages are forecast to increase 2.7%, a tad faster than the 2.6% increase recorded in February.

A pickup in wages is usually a sign of rising inflationary pressures, which could support the case for a faster pace of rate hikes from the Fed in the months ahead.

This week’s calendar also features reports on ISM manufacturing and service sector growthADP private sector payrolls, auto salesconstruction spendingtrade figuresas well as factory orders.

In addition to the data, market players will also pay close attention to comments from a few Fed speakers this week for insights into the outlook for monetary policy.

Topping the agenda will be remarks from Fed Chair Jerome Powell, who is scheduled to speak about the economic outlook at the Economic Club of Chicago on Friday at 1:30PM ET (1730GMT).

Speeches from Fed Governor Lael BrainardCleveland Fed President Loretta Mesterand Atlanta Fed boss Raphael Bostic are also on the agenda.

The Fed hiked rates last month and stuck to its projection for two more rate hikes this year.

Meanwhile, on Wall Street, equities could see more volatility in the coming week after each of the three major U.S. averages logged their worst quarter in more than two years, as concerns over a global trade war and a rout in technology stocks dampened sentiment.

Elsewhere, news out of Washington D.C. is expected to keep investors on their toes, as they watch further developments amid a brewing trade war between the U.S. and China.

2. Euro Zone Flash Inflation

The euro zone will publish flash inflation figures for March at 0900GMT (5:00AM ET) Wednesday.

The consensus forecast is that the report will show consumer prices rose 1.4%, quicker than the 1.1% gain seen in February.

Perhaps more significantly, the core figure, without volatile energy and food prices, is seen inching up to 1.1%, from 1.0% a month earlier.

Besides the inflation report, this week’s calendar also features final survey data readings on euro zone business activity.

Even if inflation remains short of the European Central Bank’s target of almost 2%, its policymakers are now debating whether to end lavish bond buys later this year.

The ECB dropped its long-standing easing bias at its meeting last month, taking another small step in weaning the euro zone economy off its protracted stimulus.

3. UK PMI’s

The UK will release readings on March manufacturing sector activity at 0830GMT (4:30AM ET) on Tuesday, followed by a report on the construction sector on Wednesday and the services sector on Thursday.

The manufacturing PMI is forecast to dip to 54.8 from 55.2 a month earlier, construction activity is expected to weaken slightly to 51.2 from 51.4, while a survey on Britain’s giant services sector is forecast to slip to 54.2 from 54.5.

On the central bank front, Bank of England Governor Mark Carney is due to speak at the International Climate Risk Conference for Supervisors, in Amsterdam on Friday afternoon.

The BoE kept interest rates steady last month, but two policymakers unexpectedly voted for a hike, reinforcing the view that borrowing costs will rise in May for only the second time since the 2008 financial crisis.

Politics is also likely to be in focus, especially as the Brexit negotiations enter a key phase with a just a year to go until the deadline to agree to an official deal is reached.

While Britain’s economy is lagging behind the global recovery, it has held up better than the gloomy forecasts made at the time of the 2016 vote to leave the European Union.

4. China Manufacturing PMI

The Caixin manufacturing index, which focuses more on small and mid-sized firms, is due at 0145GMT Monday.

The survey is expected to rise by 0.2 points to 51.8 from 51.6.

The official Purchasing Managers’ Index released on Saturday rose to 51.5 in March, from 50.3 in February. That was well above the 50-point mark that separates growth from contraction on a monthly basis.

The PMI survey is seen as a good indicator of economic conditions and it is even preferred by some analysts to gross domestic product, which might be affected by poor seasonal adjustment and is prone to revisions.

China’s economy grew 6.8% in the fourth-quarter from a year earlier, helped by a rebound in the industrial sector, a resilient property market and strong export growth.

5. Reserve Bank of Australia Policy Meeting

The Reserve Bank of Australia’s (RBA) latest interest rate decision is due on Tuesday at 0430GMT.

Most economists expect the central bank to keep rates unchanged at the current record-low of 1.5% for the 18th straight meeting and maintain its neutral policy stance.

Policymakers are also expected to sound less confident that the economy would grow at 3% or more this year, in another sign rates will likely remain on hold for months to come.

Data on retail sales and the trade balance published later in the week should also capture some attention.

Investors expect policy will stay on hold for a long time to come, with interbank futures not fully pricing for a 25-basis point rise until early 2019.

Source: Investing

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How better understanding risk can boost your investments

The ‘right type of risk’ can transform people’s finances in a positive way, according to a new study.

Few investors like taking risks with their money. The chance of losing your hard-earned cash is never an appealing prospect.

However, the harsh reality is you need to embrace some risk to stand any prospect of making decent returns with interest rates being so low.

When you consider inflation is around 3% at a time when the Bank of England’s Monetary Policy Committee has set the base rate at just 0.5%, the imbalance is clear.

The right type of risk can also transform people’s lives in a positive way, according to a new study from Investec Click & Invest.

The survey found almost half of investors could put more aside for a rainy day, 38% had made home improvements, while a third were able to buy a house earlier.

It has also positively helped many of them with their financial situations, with 28% able to retire earlier and a quarter paying off long-term debts more quickly.

Jane Warren, chief executive officer at Investec Click & Invest, agreed risk-taking could be intimidating but insisted the study illustrated the potential benefits.

“This is especially (the case) when it comes to achieving some of those key goals in life such as getting on the housing ladder and making provisions for the future,” she said.

The key, she believes, is empowering people to make these decisions and begin improving their financial futures.

“We believe more needs to be done to educate potential investors about the benefits of investing so that it doesn’t always feel like a giant leap and is an educated decision,” she said.

It’s another point highlighted by the Investec study, which revealed confidence, knowledge and experience were the key barriers to taking risks.

Of those that hadn’t invested, around a third would do so if they were more knowledgeable and 27% if they better understood the risks involved.

Meanwhile, more than half (54%) simply believe that their savings are more secure in a savings account rather than investing it in the stock market.

However, there is also the prospect of risk regret. When reviewing their life decisions, almost a third regretted taking too few risks, according to the survey.

More than one in 10 people (12%) regret not investing in the stock market at all or not doing it earlier – and this figure rises to 15% of 18-34-year olds.

Delaying retirement savings is also a key regret, with almost a fifth of 18- to 34-year-olds (18%) wishing they had started a pension earlier, while 18% of women have the same regret.

Embrace risk, but find a balance

While humans are naturally cautious, they are also curious and only grow through taking risks, according to psychologist Corinne Sweet.

While the more introverted tend to be risk-averse, the more extroverted will generally be more adventurous.

“Finding a balance, and branching out, even taking risks, is what keeps us alive and moving forward as a species,” she said.

The key, of course, is taking enough risk to improve your chances of hitting financial goals, while at the same time not gambling everything you have saved on the stock market.

Choosing the right investments depends on your financial goals, such as putting your children through university or helping them get on to the property ladder.

It will also depend on how quickly your money is needed. For example, if you have a decade to earn a set amount you may be able to take more risk with your money.

Of course, there are ways to help mitigate the risk being taken. One suggestion is to invest in stages rather than as a lump sum.

Although you can’t eliminate risk from your investments – and nor should you because it is needed for the pursuit of decent longer-term gains – you can manage it better.

The first way is through having exposure to a broad range of asset classes. This is known as diversification and involves investing in a variety of asset classes.

The idea behind diversification is that any losses suffered in one asset class should be balanced out by gains made elsewhere.

Investing at different times will also help reduce your timing risk and enable you to take advantage of any stock market falls.

Another option – which takes this idea a step further – is investing regular amounts each month in a process known as pound cost averaging.

Investors pay a set monthly figure to buy units of a fund – at whatever price they are available.

Therefore, if you regularly invest £200 into the fund and have been buying units at £8 each, when they fall down to £6 you will get more units for your money.

Source: Love Money

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Economic Calendar – Top 5 Things to Watch This Week

Global financial markets will focus on this week’s European Central Bank meeting for further details on when the central bank plans to end its massive economic stimulus program.

Staying on the central bank front, traders will pay close attention to a monetary policy decision from the Bank of Japan for hints on when it will start withdrawing stimulus.

Meanwhile, investors will keep an eye on the monthly U.S. employment report to gauge how it will impact the Federal Reserve’s view on monetary policy in the months ahead.

Elsewhere, in the UK, investors will focus on a report on activity in the dominant services sector for further indications on the health of the economy and the likelihood of the Bank of England raising interest rates this year.

Market participants will also be looking ahead to monthly trade figures out of China amid recent signs that momentum in the world’s second largest economy remains strong.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. European Central Bank Policy Meeting

The European Central Bank is widely expected to keep interest rates at their current record low levels and make no changes to its guidance on future policy when it holds its second meeting of the year at 1245GMT (7:45AM ET) on Thursday.

President Mario Draghi will hold what will be a closely-watched press conference 45 minutes after the rate announcement. How he views signs of undershooting inflation and any clues on when the central bank plans to end its €2.5 trillion stimulus program will be important.

Concerned about recent market turbulence, the strong euro and a dip in both headline and underlying inflation, officials prefer waiting, perhaps as late as the summer, before starting to signal the end of asset buys, three sources with direct knowledge of the discussion said last week.

The ECB will also unveil new macroeconomic projections, but sources familiar with the matter said they are unlikely to offer many surprises as growth and inflation are broadly on the same path as before.

The central bank cut its monthly bond purchases from €60 billion to €30 billion back in October, but extended the program until the end of September 2018, citing muted price pressures.

The euro-area economy is undergoing its broadest expansion in a decade. Yet inflation pressures remain feeble, with the headline rate falling last month to the lowest since 2016, underlining the ECB’s caution in removing stimulus.

Results of Sunday’s Italian general election as well as political developments in Germany will also be on the agenda.

2. BOJ Policy Announcement

The Bank of Japan is also seen keeping policy on hold at the conclusion of its two-day rate review on Friday, including a pledge to keep short-term interest rates at minus 0.1%, while painting a slightly better picture of the economy.

BoJ Governor Haruhiko Kuroda will hold a press conference afterward to discuss the decision. His comments will be monitored closely for any new insight on his views on inflation and how that can affect its current stimulus policies.

Investors will also be watching for comments on the yen, in light of its recent surge against the dollar.

There have been some indications recently that the central bank is setting the ground to begin discussions on winding back its quantitative easing program thanks to an improving economic outlook and hints of rising inflation.

Japan’s economy, the world’s third-largest, marked eight straight quarters of expansion in October-December, its longest such run since a 12-quarter stretch of growth during the 1980s boom years.

3. U.S. Employment Report

The U.S. Labor Department will release the nonfarm payrolls report for February at 8:30AM ET (1330GMT) on Friday, and it will be watched more for what it says about wages than hiring.

The consensus forecast is that the data will show jobs growth of 204,000, after adding 200,000 positions in January, while the unemployment rate is forecast to dip to a 17-year low of 4.0% from 4.1%.

Most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.3%, following a similar gain a month earlier. On an annualized basis, wages are forecast to increase 2.9%, slowing slightly from 2.9% in January, which was the largest annual gain in more than 8-1/2 years.

A pickup in wages could be an early sign for higher inflation, supporting the case for higher interest rates in the months ahead.

This week’s calendar also features the ADP private sector nonfarm payrolls report and the ISM non-manufacturing survey.

Besides the data, markets will also be paying close attention to comments from a few Fed speakers this week for their views on the recent uptick in inflation and how that can affect monetary policy. Topping the agenda will be remarks from influential New York Fed boss William Dudley as well as Fed Governor Lael Brainard, a known dove.

In his first congressional hearing as head of the Fed last week, Jerome Powell vowed to prevent the economy from overheating, while sticking with a plan to gradually raise interest rates. Those comments fueled speculation in equity markets over U.S. monetary tightening this year happening faster than expected.

Indeed, many economists have started to forecast four rate hikes this year, compared to the three the Fed currently predicts.

The Fed is scheduled to hold its next policy meeting on March. 20-21, with interest rate futures pricing in an 85% chance of a rate hike at that meeting, according to Investing.com’s Fed Rate Monitor Tool.

Meanwhile, on Wall Street, retailers such as Target (NYSE:TGT), Costco (NASDAQ:COST) and Dollar Tree (NASDAQ:DLTR) report results, as do a number of smaller chain stores, in what will be the last busy week of earnings season.

Elsewhere, news out of Washington D.C. is expected to keep investors on their toes, after President Donald Trump announced plans to slap tariffs on aluminum and steel late last week. He kept up pressure on trading partners on Saturday, threatening European automakers with a tax on imports.

4. UK Services PMI

A survey on Britain’s giant services sector due at 0930GMT (4:30AM ET) on Monday is forecast to inch up to 53.3 from the previous month’s reading of 53.0.

While Britain’s economy is lagging behind the global recovery, it has held up better than the gloomy forecasts made at the time of the 2016 vote to leave the European Union.

The Bank of England kept interest rates steady last month, but signaled it was likely to raise rates sooner and by more than it thought a few months ago as it seeks to keep a grip on inflation.

Politics is also likely to be in focus, especially with the Brexit negotiations entering a key phase. Prime Minister Theresa May urged the European Union on Friday to show more flexibility in talks on future ties, saying Britain was ready to swallow the “hard facts” of Brexit but did not believe they prevented a successful trade deal.

5. China Trade Figures

China is to release February trade figures at around 0300GMT on Thursday.

Exports are forecast to have climbed 13.9% from a year earlier, following a gain of 11.1% in the preceding month, while imports are expected to rise 9.7%, after soaring 36.9% in January.

Additionally, on Friday, the Asian nation will publish data on February consumer and producer price inflation. The reports are expected to show that consumer prices rose 2.4% last month, while producer prices are forecast to increase by 3.8%.

China’s economy grew 6.8% in the fourth-quarter from a year earlier, helped by a rebound in the industrial sector, a resilient property market and strong export growth.

China’s annual two-week long National People’s Congress commencing on Monday will also grab some attention. The political meeting is used by leaders to set policies for the year and detail plans to curb financial risk, air pollution, and excess industrial capacity.

Investors will also want to see how the world’s largest steel producer might react to Trump’s plans to impose heavy import tariffs on steel and aluminum.

Stay up-to-date on all of this week’s economic events by visiting: http://www.investing.com/economic-calendar/

Source: Investing

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Economic Calendar – Top 5 Things to Watch This Week

Global financial markets will focus on this week’s Federal Reserve policy meeting, which will be the last under the leadership of Janet Yellen before she hands the chairmanship over to Jerome Powell.

There are also some major data releases in the coming week, as the calendar rolls to February from January, with Friday’s monthly employment data in the spotlight.

Meanwhile, in Europe, investors will await monthly inflation data to assess how fast the European Central Bank will start unwinding its asset purchase program.

In the UK, traders will focus on a pair of reports on activity in the manufacturing and construction sectors for further hints on the health of the economy and the likelihood of the Bank of England raising interest rates this year.

Elsewhere, market participants will be looking ahead to monthly data on China’s manufacturing sector amid recent signs that momentum in the world’s second largest economy remains strong.

Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.

1. Federal Reserve Rate Decision

The Federal Reserve is not expected to take action on interest rates at the conclusion of its two-day policy meeting at 2:00PM ET (1900GMT) on Wednesday, keeping it in a range between 1.25%-1.50%.

The central bank will release its post-meeting statement as investors look for any change in language which could point more clearly to a rate hike in the months ahead.

This week’s meeting will be the last under the leadership of Janet Yellen, before she is replaced by Fed Governor Jerome Powell.

The majority of economists believe that the Fed will hike rates in March, followed by another hike in June, with a third move higher arriving in December.

2. U.S. Employment Report

The U.S. Labor Department will release its January nonfarm payrolls report at 8:30AM ET (1330GMT) on Friday.

The consensus forecast is that the data will show jobs growth of 180,000, after rising by 148,000 in December. The unemployment rate is forecast to hold steady at 4.1%. Most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.3% after gaining 0.3% a month earlier.

This week’s calendar also features reports on personal income and spending, which includes the personal consumption expenditures inflation data, the Fed’s preferred metric for inflation.

Data on consumer confidence, ADP private sector payrolls, pending home sales, ISM manufacturing sector growth, weekly jobless claims, construction spending, auto sales and factory orders will also be on the agenda.

Meanwhile, for the stock market, more than a fifth of the S&P 500 companies release earnings, with reports from tech heavyweights Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Alibaba (NYSE:BABA) likely to garner most of the attention.

Results from Dow components Boeing (NYSE:BA), AT&T (NYSE:T) and McDonald’s (NYSE:MCD) as well as big oil firms ExxonMobil (NYSE:XOM) and Chevron(NYSE:CVX) will also be in focus.

On the political front, another headliner this week will be President Donald Trump’s State of the Union address on Tuesday. The theme of Trump’s address will be “building a safe, strong and proud America,” a senior administration official told reporters on Friday.

According to the White House, the speech will focus on five main policy areas: jobs and the economy, infrastructure, immigration, trade and national security.

3. Euro Zone Flash Inflation

The euro zone will publish flash inflation figures for January at 1000GMT (5:00AM ET) Wednesday.

The consensus forecast is that the report will show consumer prices rose 1.3%, slowing slightly from 1.4% in December, remaining short of the European Central Bank’s target of just below 2%. Perhaps more significantly, the core figure, without volatile energy and food prices, is seen inching up to 1.0% from 0.9% a month earlier.

Germany, France, Italy and Spain will produce their own CPI reports throughout the week.

In addition to the inflation data, the euro zone will publish a preliminary report on fourth-quarter economic growth on Tuesday, which if they remain strong could push the European Central Bank another step closer to ending its mass stimulus program.

The region’s economy is forecast to expand 0.6% in the June-Sept. period, equivalent to an annualized 2.7%.

The ECB reiterated last week that it will keep its €2.5 trillion stimulus program in place for as long as needed and stated that there are “very few chances” that it will change interest rates this year. Despite those remarks, market players remain convinced that easy monetary policy in the region is coming to an end sooner rather than later.

The central bank cut its monthly bond purchases from €60 billion to €30 billion back in October, but extended the program until the end of September 2018, citing muted price pressures.

4. U.K. PMI’s

The U.K. will release readings on January manufacturing sector activity at 0930GMT (4:30AM ET) on Thursday, followed by a report on the construction sector on Friday.

The manufacturing PMI is forecast to ease up to 56.5 from 56.3 a month earlier, while construction activity is expected to weaken slightly to 52.0 from 52.2.

Data released last week showed Britain’s economy unexpectedly picked up speed in the last three months of 2017, revealing that Brexit was still weighing on the economy, but not as heavily as once feared by investors.

Politics is also likely to be in focus, as market participants keep an ear out for any news regarding the ongoing Brexit negotiations.

The Bank of England raised interest rates for the first time in more than ten years in November, but said it sees only gradual rises ahead as Britain prepares to leave the European Union.

5. Chinese Manufacturing PMI

The China Federation of Logistics and Purchasing is to release data on January manufacturing sector activity at 0100GMT on Wednesday, amid expectations for a modest downtick to 51.5 from a reading of 51.6 in December.

The Caixin manufacturing index, which focuses more on small and mid-sized firms, is due at 0145GMT Friday. The survey is expected to dip by 0.2 points to 51.3.

The purchasing managers’ index (PMI) is seen as a good indicator of economic conditions and it is even preferred by some analysts to gross domestic product, which might be affected by poor seasonal adjustment and is prone to revisions.

Anything above 50.0 signals expansion, while readings below 50.0 indicate industry contraction.

China’s economy grew 6.8% in the fourth-quarter from a year earlier, helped by a rebound in the industrial sector, a resilient property market and strong export growth.

Source: Investing

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Devon council could spend up to £75m on property in the county

A Devon council could spend up to £75m buying commercial property in the county to earn some extra cash.

In a bid to make up for a shortfall in Government funding, West Devon Borough Council has already set aside £35m of borrowed cash to plough into commercial property – and could borrow up to £75m.

The council is the latest in a growing number borrowing cash to splash on purchasing buildings to cover a funding black hole.

They are even allowed to invest the money outside of their council patches, as authorities are not constrained by where they spend.

This has led to one council even purchasing a hotel almost two hours away from its area.

There is speculation that an authority such as West Devon, which is set in a mainly rural area, could look to its neighbouring city of Plymouth for investment opportunities.

The council stressed it has made no decision on where to put its cash, as yet, only that it has a pot ready to invest.

It said it is looking at commercial property that could generate a profit as part of a “commercial property acquisition strategy” approved in 2017.

In July the council agreed to borrow up to £25million, out of a possible £75million, as part of an initial phase to acquire property and thus generate income streams.

At a meeting of full council in December 2017, WDBC agreed to increase the size of this initial investment purse by £10million, plus the associated acquisition costs which might need “more flexibility” as it searches for suitable properties to snaffle.

Cllr Philip Sanders, WDBC leader, said: “So far we have not made any purchases but we have considered a number of opportunities.

“What has become clear to us is that in order to secure property we need a little more flexibility to enable us to get the right deal for us.

“This agreement gives us the flexibility we need to kick-start this project.”

The property acquisition strategy was discussed by WDBC before a decision not to create a new council by merging with its South Hams equivalent was binned in November 2017.

That decision does not change the property strategy “in principal”, the authority said – but it does make the need to generate income streams “more urgent”.

The property strategy will see the council borrowing money to purchase commercial property with established tenants in place.

Once all costs are taken off, this strategy could deliver a £450,000 surplus which would be used to fund services within the borough, the council said.

The trend in councils borrowing to invest comes as heavy cuts in central government funding have left councils having to consider increasingly creative solutions to ease financial constraints.

Between 2010 and 2015, there was a 37 per cent cut in real terms in central government funding to councils.

So authorities have looked to borrow from the Treasury-run Public Works Loan Board (PWLB) at rock bottom interest rates and plough the cash into commercial property ventures that can offer returns of as much as eight per cent.

In June 2017, Plymouth City Council bought the huge Royal Mail centre at Plymstock so it can rake in £325,000 a year in rent.

The authority splashed out an undisclosed but “significant” sum for the Royal Mail Regional Mail Centre, which meant the city council saw its investment portfolio rise to in excess of £130million.

Every year an average of about £10m in rent comes into the authority from these properties, which range from small shops and retail parks to industrial estates.

Tim Western, a director at leading commercial property consultancy JLL, which advised the city council on its Royal Mail deal, said across the South West local authorities are hungry for investments.

He said councils bought more than £1bn of property across the UK in 2016.

He also said councils are investing in business developments outside their patch, particularly if in a rural area with little to sink their cash into.

He said West Sussex County Council is involved in the £20million Aztec West Business Park – in Bristol.

He said: “Across the UK we are now seeing local authorities buying properties outside their patches if it gives them the best return.

“We may see more of this across the region.”

However, some experts are worried by the borrowing-to-invest trend, with former Business Secretary Sir Vince Cable warning the strategy risks creating a bubble that could bankrupt local authorities.

Source: Devon Live

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Will the Bank of England raise interest rates again in 2018?

The Bank of England’s Monetary Policy Committee (MPC) has decided to hold base rate at 0.5 per cent, a month after its first rise in a decade. Interest rates are the primary monetary lever that the governor of the Bank of England, Mark Carney, can pull to bring down inflation if it is deemed too high.

But while the UK currently has its highest rate of inflation in five years at 3.1 per cent, the Committee believes this is ‘likely close to its peak, and will decline towards the 2 per cent target in the medium term’.

Nick Dixon, investment director at Aegon comments: ‘This week’s inflation figures will make uncomfortable reading for Mark Carney, given previous predictions that inflation had already peaked. With pressure on for wage increases and political demand for looser fiscal policy, the governor will worry about the potential for high inflation to become embedded.’

Michael Metcalfe, global head of macro strategy at State Street Global Markets adds: ‘Even with current inflation above 3 per cent no-one expected back-to-back hikes from the Bank of England. The big question now is how quickly inflation will fall. While the bank projects a gentle fall in 2018, our online inflation measure from PriceStats1 suggests a faster drop, which may yet undermine the case for further tightening altogether.’

With the inflation issue not yet quelled there are calls for the MPC to begin acting more quickly. Currently, it would appear that uncertainty around the UK’s weak economic growth and unwillingness to disrupt strong employment figures are the main reasons for a lack of action.

UK inflation: where’s it heading in the long term?

Angus Dent, chief executive officer of peer-to-peer lender Archover, argues: ‘This decision [to hold base rate] ends 2017 on a damp squib. The Bank of England’s approach is too slow. We need a bolder approach to monetary policy in the new year.

‘Rather than playing wait-and-see, the Bank should emulate the US Federal Reserve and use interest rates as a tool to combat the growth in inflation currently squeezing British incomes.

‘At a time of low wage growth, UK households need a funding boost. It’s clear that 2018 is going to be a rocky road for the UK economy as we navigate the final stages of Brexit. With rates staying low for the foreseeable future, UK investors and savers need to take matters into their own hands.

‘Instead of waiting for the Bank to hand them better returns, they need to take the initiative and look for high-yield investment options themselves. As Mark Carney continues to tread gingerly, individuals need to broaden their portfolios to make sure they’re making the most of their money.’

However, Mr Dixon adds that consumers may not have to wait that long for bolder action to start: ‘With pressure on for wage increases and political demand for looser fiscal policy, the governor will worry about the potential for high inflation to become embedded. In our view it’s likely that rates will rise sooner than people expect and we may not have to wait long in the new year for another rate increase.’

Source: Money Observer