US manufacturing activity stays strong in November: ISM

NEW YORK (AFP): The key US manufacturing sector continued to grow at an above average rate in November, as the impact of back-to-back hurricanes over the summer recedes, according to an industry survey. Output spiked and employment remains strong to produce "a really strong report" on the sector, the Institute for Supply Management (ISM) said. The ISM's purchasing managers index slowed to 58.2 percent from 58.7 in October, but remained well above the average for the past year, with 14 of the 18 industries surveyed reporting growth. Any reading above 50 indicates growth in the sector. However, the decline actually reflects an improvement in conditions following the hurricanes, as transportation issues from storms are being overcome, Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee, explained. The supplier deliveries index fell nearly five points to 56.5 percent, which indicates shipments are speeding up.

Manufacturers expected to see three months of transportation difficulties in the wake of the hurricanes -- especially Hurricane Harvey's hit to the key chemical and oil production facilities in Houston -- as well as six months of impacts on prices, Fiore said. He noted that only five percent of comments from the manufacturers surveyed mentioned the hurricanes, down sharply from the prior two months.

The report showed a three-point jump in the production index to 63.9 percent, and a more than half-point rise in new orders to 64 percent, while employment slipped a tenth to a still-strong 59.7 percent. The only industries reporting contraction were wood and petroleum and coal. Fiore said industries reported that "price pressures continue," with 16 of the 18 sectors surveyed reporting increases. The price index slipped three points to 65.5 percent.

The comments from the companies surveyed indicate a strong surge into 2018, with many noting they are not seeing the usual year-end slowdown in orders. "We are just coming off a record sales year. We expect to continue in 2018 robust activity," one manufacturing firm said. Meanwhile, a metal producer noted, "We are seeing steady, consistent demand for end of year. We usually see a slowdown, which we haven't seen yet."

IMF approves new $88 billion credit line for Mexico

WASHINGTON (AFP): The International Monetary Fund (IMF) announced it has approved a new $88 billion credit line for Mexico, replacing the existing line. The two-year flexible credit line boosts Mexico's ability to immediately deal with a potential need for liquidity, without having to request an IMF loan. The country considers the funds precautionary and does not intend to draw on them, although the IMF notes increasing risks from the potential changes to the North American Free Trade Agreement. While Mexico's economy has proven resilient, the credit line "will continue to play an important role in supporting the authorities' macroeconomic strategy by providing insurance against external risks and bolstering market confidence," IMF Managing Director Christine Lagarde said in a statement. "The global risk environment has improved, but the risk of an abrupt change in Mexico's trade relations, or of a surge in financial market volatility and a sharp pull-back of capital from emerging markets, continues to be high," she said.

NAFTA members Mexico, Canada and the United States currently are holding talks to renegotiate the 1994 trade pact, but are at odds over some of the measures Washington is demanding. The IMF cautions that the delay in the talks increases the uncertainty for Mexico's economy. Mexico requested a new credit line several months early, because the existing arrangement was due to expire only a few weeks before the July 2018 presidential elections, according to the fund report.

The IMF said Mexican authorities "prefer to de-link the renewal process from the electoral cycle." Mexico has had an IMF credit line in place since 2009, in the midst of the global financial crisis.

Bitcoin could threaten financial

stability: Fed governor

WASHINGTON (AFP): Digital currencies like bitcoin could pose a threat to financial stability as they gain wider use, a chief Federal Reserve banking oversight official said. The remarks from newly-installed Fed Vice Chairman for Supervision Randal Quarles came as bitcoin took a vertiginous dive on Thursday after skyrocketing earlier in the week to more than 10 times its value at the start of the year. Bitcoin is increasingly being embraced by Wall Street, with plans by mainstream markets to offer trading in the currency's futures, which is drawing interest and some concern from regulators. Quarles raised concerns about how cryptocurrencies would behave in a crisis. In a speech on the payments system he said that in times of crisis, demand for liquidity among bank depositors often shoots up, putting major financial institutions under strain. But it is not clear how digital currencies would perform in similar situations, he cautioned.

Decentralized virtual currencies like bitcoin operate as a payments system with no central bank and are exchanged using encryption.

"The 'currency' or asset at the center of some of these systems is not backed by other secure assets, has no intrinsic value, is not the liability of a regulated banking institution, and in leading cases, is not the liability of any institution at all," Quarles said in prepared remarks. "While these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide-scale usage."

That could create "a large challenge to the system," if digital currencies could not be predictably exchanged for the US dollar at a stable exchange rate in "times of adversity," he warned. After breaking through the $11,000 level on Wednesday, only hours after hitting $10,000 for the first time, bitcoin fell sharply and around 1800 GMT, was trading at $9,670.85, and had a total market value of about $163 billion.

Amid the turbulent price fluctuations, the White House said Homeland Security Advisor Tom Bossert was monitoring the situation and had discussed it in a meeting this week. "I know that's something he's keeping an eye on," press secretary Sarah Sanders said, referring to Bossert. Nasdaq President and CEO Adena Friedman tamped down news reports that her exchange is planning to launch bitcoin futures trading next year. She told CNBC on Thursday that the tech-heavy New York exchange was still considering its next move. "We actually haven't announced anything," she said. "I would just say that we have been having active dialogue with a lot of clients and with partners about what might be possible over time."

Tokyo stocks close higher after fresh Wall St record

TOKYO (AFP): Tokyo stocks closed higher, with investor sentiment buoyed by another record on Wall Street and a weaker yen. The Nikkei 225 index gained 0.41 percent, or 94.07 points, to 22,819.03 for its third straight rise, leaving it up 1.19 percent over the week. The broader Topix index rose 0.25 percent, or 4.45 points, to 1,796.53 with a weekly gain of 0.90 percent. US equities once again powered to new highs on Thursday as optimism over a long-awaited tax cut more than offset security threats by North Korea. Japanese markets also closed higher on Thursday despite Pyongyang's launch of another missile. Japanese markets "seem to have become more resilient to geopolitical risk", said Mutsumi Kagawa, chief global strategist at Rakuten Securities. "US stocks' rises led by IT development seem to be offsetting the geopolitical risk" in Asia, Kagawa added. The dollar inched up to 112.62 yen from 112.57 yen in New York on Thursday.

Sharp jumped 7.92 percent to 3.815 yen after the Tokyo exchange said it would bring the rehabilitated electronics firm back to its prestigious first section on December 7. Toshiba rose 1.81 percent to 281 yen after Bloomberg News reported it was close to settling its legal dispute with Western Digital, which has been trying to block the beleaguered Japanese group's planned sale of its flash-memory business to raise money. Banks were broadly higher, with Mitsubishi UFJ up 0.77 percent at 798.2 yen.