US rates hike ‘expected by the end of the year’Federal Reserve building

Minutes from the Federal Reserve’s September meeting show the majority of policy-makers expect a hike in US interest rates by the end of the year.

At its meeting, the Fed opted to hold rates between 0.25% and 0.5%.

But three officials opposed the decision – the most dissents since December 2014.

The Fed said: “The case for an increase in the federal funds rate has strengthened,” but said it would wait for more evidence of economic progress.

Doug Duncan, chief economist for Fannie Mae, said: “There’s a pretty big dissent. There seems to be a pretty big discussion about the direction on rates.

“It’s clear they want to raise rates in December if things don’t deteriorate.”

Risks ‘roughly balanced’

The Fed said US economic activity had picked up and job gains were “solid” in recent months.

The US central bank said it saw near-term risks to the economy as “roughly balanced.” It was the first time it has used that wording since late last year, when it most recently raised rates.

The Federal Open Market Committee had decided against raising rates “for the time being,” until there was more evidence of progress towards its employment and inflation objectives.

The committee said it expects inflation to remain low in the near term, “in part because of earlier declines in energy prices”, but that it would rise to the Fed’s 2% target over the medium term.

Policymakers have been divided when the next rate rise should be, with stock market volatility, China’s slowing economy, and Brexit among its concerns.

Analysis: Andrew Walker, BBC economics correspondent

The wait continues. Still, there were signs that the committee is closer to being ready for its next rise in interest rates.

For one thing, Janet Yellen said the case for an immediate increase was stronger than it was, though not strong enough for her to be ready just yet.

The number of dissenting members who did vote for an immediate move has increased. This time there were three. In July it was just one.

All that is evidence that the committee thinks the economy is continuing its gradual return to normal.

But we also discovered that the Fed’s thinking about what “normal” is has weakened further.

Their view of the economy’s long term growth prospects has edged down from 2% to 1.8%.

The level they think interest rates will settle at has also dropped slightly. In other words, growth and rates will fall even further below where they were before the financial crisis.

“Normal” is not what it used to be.

Federal Reserve chair Janet YellenImage copyrightGETTY IMAGES

Federal Reserve chair Janet Yellen said: “We judged that the case for an increase has strengthened but decided for the time being to wait for further evidence of continued progress toward our objectives.”

She said the decision to keep rates on hold “does not reflect a lack of confidence in the economy.”

“Conditions in the labour market are strengthening and we expect that to continue,” she said.

Luke Bartholomew, an investment manager for Aberdeen Asset Management, said: “It was pretty much a done deal that we weren’t going to get a rate hike today.”

He said the meeting had been about “setting the stage” for a hike in December.

But he added: “A December hike is by no means inevitable though. We’ve been in the situation before where the Fed has aligned their guns only to baulk at the last minute.”

China merger to create world’s second largest steel firmChinese steel worker

Two of China’s largest steel companies have announced plans for a merger, creating the world’s second-largest steelmaker, as the industry struggles with global overproduction.

Under the deal, Baosteel is to take over its smaller competitor Wuhan Iron and Steel.

Both companies are majority-owned by the state.

The announcement comes as Beijing tries to overhaul the steel industry, one of the country’s bloated state sectors.

The merger will create a new company, China Baowu Iron and Steel Group. Based on data from 2015, the two firms together have an annual production of about 60 million tonnes a year, which would make it the country’s largest steelmaker.

Globally, it would be second only to Luxembourg-based ArcelorMittal.

Baosteel’s net profit tumbled 83% to 1bn yuan ($150m) last year, while Wuhan lost 7.5bn yuan, a sharp drop from its 1.3bn yuan net profit in 2014.

Chinese steel workerImage copyrightGETTY IMAGES
Image captionThe steel sector provides jobs for millions of Chinese workers

Global steel slump

Steel demand in China, as well as worldwide, has slumped in the past year as the country’s economic growth has slowed.

The resulting overproduction has seen steelmakers around the world suffer huge losses. China has been accused of price dumping – selling its steel cheaply overseas in order to clear its stocks.

In April, China promised to reduce its steel output, following a crisis meeting attended by 30 nations.

Over the past 25 years, Chinese steel production has expanded hugely with output growing more than twelve-fold.

China produced more than 822 million tonnes of steel in 2014 and is expected to produce even more this year. However, projected demand for its steel in 2016 is only 672 million tonnes.

Banks ‘would lose passporting rights with hard Brexit’Jens Weidmann

Image captionJens Weidmann, head of Germany’s central bank, said British-based banks would lose their passporting rights if the UK left the single market

UK-based banks would lose the automatic right to trade in EU states if the UK left the single market, the head of Germany’s central bank has said.

Jens Weidmann said a “hard Brexit” would strip banks of valuable “passporting rights” that give unfettered access to the bloc.

This would force some to relocate from London, he added.

Passporting rights are considered by some to be vital to London’s position as a financial hub.

It allows banks to serve clients across Europe without the need for licences in individual countries.

Foreign secretary Boris Johnson has claimed that such rights would be preserved even if Britain left the single market after Brexit – an outcome some Eurosceptics favour.

But in interview with the Guardian, Mr Weidmann said that passporting rights were “tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area”.

‘Frankfurt attractive’

Were that to happen, he said “several businesses” would reconsider the location of their headquarters.

“As a significant financial centre and the seat of important regulatory and supervisory bodies, Frankfurt is attractive and will welcome newcomers. But I don’t expect a mass exodus from London to Frankfurt,” he added.

Philip HammondImage copyrightLEON NEAL
Image captionChancellor of the exchequer Philip Hammond is believed to be ready to give up access to the single market to satisfy voter concerns about immigration, according to reports

However, ratings agency Moody’s said banks could in fact “manage” such an outcome. In a report published on Monday, the firm claimed that while the loss of passporting rights would increase costs for banks, this would be “manageable”.

This is because incoming EU financial services laws will recognise that some non-EU countries’ rules and regulations are as tough as its own, it said.

“In particular, we consider that the third-country equivalence provisions contained within the incoming MiFID II EU directive may provide firms with an alternative means of accessing the single market,” said Simon Ainsworth, senior vice president at Moody’s.

“The complexity of (quickly) unwinding the status quo and a desire to minimise the initial impact on European domiciled banks will likely lead to the preservation of most cross-border rights to undertake business.”

The Chancellor of the Exchequer, Philip Hammond, is believed to be ready to give up access to the single market to satisfy voter concerns about immigration,according to reports.

Currently, membership of the single market is conditional upon states accepting free movement of labour, one of the EU’s founding principles.

Global banking watchdog warns over Chinese banks100 Yuan

Risks of a Chinese banking crisis are mounting, according to a warning indicator from the banking industry’s global watchdog.

A key gauge of stress in the banking sector is now more than three times above the danger level, the Bank for International Settlements (BIS) says in its latest quarterly review.

China’s credit-to-GDP gap hit 30.1 in the first quarter of 2016, it said.

The BIS considers a credit-to-GDP gap of 10 to be a sign of potential danger.

A year ago the BIS quarterly review put the figure for China at 25.4.

The BIS calculates the gap by looking at borrowing in relation to the size of the economy, and comparing that with the long-term trend of that ratio.

When the two start to diverge, the BIS argues, a banking crisis could be on the way.

The BIS has a central position in global finance as it provides banking services to central banks and monitors the international flow of money and credit.

The health of China’s banking sector has long been a source of concern for financial markets.

Since the financial crisis of 2007-2008 there has been a boom in credit as the Chinese government has attempted to spur flagging growth.

But some of that lending has not been productive and the IMF estimates that loans worth $1.3 trillion are at risk of default.

However, as the Chinese banking system is largely owned or controlled by the government, analysts say it would bail out the banking sector if necessary.

Brexit recovery

In its latest quarterly review, the BIS also said the markets has shown resilience following the UK’s vote to leave the European Union.

“The speed of the recovery took many by surprise, given the political and economic uncertainty that the vote had triggered,” said Claudio Borio, head of the Monetary and Economic Department at the BIS.

But he warned that, despite recent gains, global financial markets are in a sensitive state.

“There has been a distinctly mixed feel to the recent rally – more stick than carrot, more push than pull, more frustration than joy.

“This explains the nagging question of whether market prices fully reflect the risks ahead. Doubts about valuations seem to have taken hold in recent days. Only time will tell,” Mr Borio said.

YouTube ordered to pay more for music by Europe

Video sites such as YouTube will be forced to pay more to musicians and record companies under plans to reform European copyright laws.

The draft directive will also require publishers and producers to tell performers or authors what profits their works have generated.

The music industry has long criticised YouTube for failing to pay enough for content such as music.

News publishers will also be recognised as rights holders for the first time.

Under the directive, portals such as Google News would be forced to pay newspaper publishers a fee when using small extracts or snippets of news stories.

Carlo Perrone, head of the European Newspaper Publishers’ Association, said creating a copyright for news publishers in Europe was a “significant and historic step”.

Jean-Claude Juncker, president of the European Commission, said: “I want journalists, publishers and authors to be paid fairly for their work, whether it is made in studios or living rooms, whether it is disseminated offline or online, whether it is published via a copying machine or hyperlinked on the web.”

The Commission has not detailed how it would force sites such as YouTube to pay more to artists.

The plans also call for easier access to online content across all EU countries and to reform copyright rules for research and education.

Andrus Ansip, vice-president for the digital single market, said: “Our proposal will ensure that more content will be available, transforming Europe’s copyright rules in light of a new digital reality.”

The proposals, which are likely to be challenged by lobbyists, must go to the European Parliament and EU states for approval – which could take years.

A Google spokesperson said: “We believe there’s a better way. Innovation and partnership – not subsidies and onerous restrictions – are the key to a successful, diverse and sustainable news sector in the EU.”

‘Value gap’

More than 1,000 artists, including Lady Gaga and Coldplay, signed a letter earlier this year calling on the Commission to take steps to address the “value gap”.

It said sites such as YouTube were “unfairly siphoning value away from the music community and its artists and songwriters”.

YouTube, which carries videos as well as audio-only content, makes money by selling advertising and then divides profits among rights owners.

Its business model differs from music streaming sites such as Spotify and Apple Music, which pay record companies a small sum each time a song is played.

Craig DavidImage copyrightGETTY IMAGES
Image captionCraig David thinks YouTube will “line up with everything” in time

The body representing the UK recorded music business, the BPI, welcomed Brussels’ recognition for the need for a level playing field for digital music.

Geoff Taylor, BPI chief executive, said it was unfair that platforms such as YouTube are “building huge businesses using music and other content while paying only a fraction of the royalties paid to artists and labels by services such as Spotify and Apple Music”.

PRS for Music, which represents the rights of almost 120,000 songwriters, composers and music publishers in the UK, said it welcomed the move to ensure that searchable sites such as YouTube require a license from the rights holders.

“The European Commission’s proposed new copyright directive provides the framework for this essential legal clarity,” said chief executive Robert Ashcroft.

IFPI, which represents the international recording industry worldwide, said the proposals were a good first step towards better and fairer licensing for content in Europe.

Chief executive Frances Moore said: “Importantly, it confirms that user uploaded content services such as YouTube, which are the largest source of on-demand music, should not be able to operate outside normal licensing rules. However, there is a lot more to do to make this a workable proposal.”

UK Music, which represents the British music industry, said this week that YouTube was still not paying artists enough for their music.

UK Music said the Google-owned site was “yet to deliver fair financial returns for rights owners and creators, artists, composers, songwriters and publishers”.

The band Two Door Cinema Club said: “I don’t think things at the minute are fair. YouTube don’t pay a fair royalty.”

Google says it has paid the music industry more than $3bn (£2.3bn) since 2007.

However, the Commission’s proposals did not go far enough to prevent “geo-blocking” of online content, the European Consumer Organisation, BEUC, said.

‘Punish millions’

It also criticised plans to force websites to automatically detect and take down videos that contain parts of copyrighted works.

“This would punish millions of consumers who share a self-made remix of a song, family videos or holiday pictures which contain parts of a music tune or video clip,” BEUC said.

The Commission has also proposed an overhaul of EU telecoms rules to ensure much faster internet access across Europe.

It wants schools, universities, hospitals, transport hubs and companies that rely on digital technologies to have extremely fast connectivity in excess of 1 gigabits a second.

All homes – both rural and urban – should have broadband speed of at least 100 megabits a second.

Finally, the Commission calls for all urban areas, as well as major roads and railways, to have 5G wireless mobile data coverage. Each EU country should have 5G in at least one major city by 2020.

Singapore Airlines drops Airbus A380 planeSingapore Airlines A380 plane

Singapore Airlines has decided not to keep the first A380 it leased, delivering a fresh setback for Airbus’ super-jumbo plane.

Singapore Airlines was the launch customer for the two-deck jet in 2007.

The airline has decided not to renew the A380 plane when the ten-year contract expires next year.

The news comes after Airbus more than halved its delivery target for the A380, raising fears it could slip back to making a loss from the aircraft.

A Singapore Airlines spokesperson said: “Our first five A380s are on 10-year leases, with options to extend. The first expires in October 2017, and we have decided not to extend it.

“For the other four, decisions will be made later.”

But they added the airline had orders for five separate A380s with Airbus, which will start being delivered in the second half of 2017.

The A380 only began breaking even for Airbus last year.

In July, Airbus said it would still avoid losing money on the jet in 2017 with as few as 20 deliveries, but gave no further guidance.

Analysts says that big aircraft like the A380 and Boeing’s 747 series have fallen out of favour.

Smaller jets can be more profitable as they are easier to fill and are cheaper to operate, analysts say.

Bank of England to buy Apple bondsApple logo

The Bank of England has included Apple on a list of companies that qualify for its new economic stimulus bond-buying scheme.

This means the central bank views the company as making a “material contribution” to the British economy.

The decision will anger the Silicon Valley giant’s critics, who accuse it of avoiding tax on UK sales by routing them via Ireland.

The European Commission has attacked Ireland’s tax arrangements with Apple.

It said they allowed the iPhone maker to pay almost no tax on international sales, which amounted to illegal state aid.

Bond programme

On Monday, Apple was put on a list of 100 companies that will qualify for the Bank of England’s new corporate debt purchase initiative.

Introduced as a stimulus measure after the Brexit vote, the scheme will see the Bank enter the market for company bonds – tradeable IOUs – for the first time. The Bank says it will buy the bonds in an attempt to drive down borrowing costs and encourage businesses to invest more.

The test for inclusion was whether companies make a “material” contribution to the economy. Relevant factors include if headquarters are located in Britain, or whether a company has a significant volume of sales.

Apple does not have its headquarters here and a proportion of its sales in the UK are legally recorded in Ireland.

The Bank of England declined to comment on individual companies on the list, but a source at the Bank said the bond-buying programme was designed to influence market prices and that including the Apple bond increased its chances.

There are other companies on the list that might raise eyebrows – including the two British tobacco giants British American Tobacco and Imperial Brands – and the US fast food giant McDonald’s, whose tax affairs are also under investigation in Brussels.