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INVESTMENT FOCUS-Press here, Mr Carney, for lower volatility?

In the struggle to explain this year's collapse in volatility and volume in financial trading, one newly-nominated culprit is central banks' intent to use every tactic available short of raising interest rates too soon. It sounded like a deeply contrarian view on Friday after comments by Bank of England Governor Mark Carney, but a study by analysts from market heavyweights HSBC this week argued that the use of macroprudential steps will make central bank interest rates in general less volatile in future. Implicitly that may mean markets see less marked swings. The global economy is right at the point, as the economic fates of Japan, Europe and the United States diverge, when an upturn in trading action could be expected due to the growing chances for arbitrage between future interest rates. Yet volatility, which traders depend upon for profits, is at rock bottom. Trading in currencies on the biggest platforms has fallen by a third to half in the past year; options contract

UPDATE 1-UK construction data revised higher, policy moves may hold sector back

British construction output grew faster than previously thought in the first quarter, new figures showed on Friday, but could slow in the next three months, particularly after the government took steps to cool the housing market. Finance minister George Osborne said on Thursday that he would give the Bank of England stronger powers to curb mortgage lending, while BoE Governor Mark Carney said interest rates could rise sooner than financial markets expect. The comments sent sterling and short-dated British government bond yields soaring and caused shares to plunge, with housebuilders particularly hard hit. Some 1.7 billion pounds ($2.85 billion) has been wiped off the value of the six housebuilders and two property groups. Economists say Osborne's announcement means the Bank may adopt a more direct approach when trying to curb mortgage lending. It is expected to announce more controls after its Financial Policy Committee meeting next week. The moves should help take some heat o

UPDATE 4-Union says wage deal to end South African platinum strike is imminent

The leader of South Africa's AMCU union said on Friday a wage deal with the top three platinum producers was imminent, signalling a possible end to a crippling five-month strike that has disrupted global output of the metal. Workers from the Association of Mineworkers and Construction Union (AMCU) begged leader Joseph Mathunjwa on Thursday to end the country's longest mining strike and sign the latest offer - an increase of about 20 percent, or 1,000 rand ($93) a month. Mathunjwa told Johannesburg radio he would take the offer to more AMCU members at mines on Friday, before meeting with management at Lonmin , Anglo American Platinum and Impala Platinum later or over the weekend to relay the response of his miners to their offer. "At least there is light at the end of the tunnel, which is not the light of a goods train," he told Talk Radio 702. The main outstanding sticking point was whether the wage deal should stretch over three or five years, he said. "W

UK markets scramble to price in 2014 rate rise after Carney warning

Investors braced on Friday for a UK interest rate hike later this year, pushing sterling to five-year highs and hurting property stocks, after the head of the Bank of England said rates may rise sooner than markets predict. Governor Mark Carney's surprisingly stark warning late on Thursday prompted investors to bring forward expectations for a first BoE rate hike by nearly four months, to December from the first quarter of 2015. Sterling's trade-weighted index posted its biggest one-day rise in four months, hitting 5 1/2-year highs. Short-dated UK government bond yields were on track for their biggest daily gain in more than three years. A rate hike by the end of 2014 is likely to come at least six months before the U.S. Federal Reserve tightens policy. It would contrast sharply with the European Central Bank, which cut rates last week and is likely to ease policy in the coming months. "The BoE seems to be slightly ahead of the Fed as far as rate hikes are concerned,&

UPDATE 4-Carney signals earlier British rate rise, sterling soars

Britain could become the first major economy to tighten monetary policy since the 2008 financial crisis, Bank of England Governor Mark Carney has signalled, sending sterling shooting towards a five-year high against the dollar on Friday. British government bond yields soared, construction stocks tumbled and interest rate futures priced in a first hike by December after Carney said rates could rise sooner than markets had thought - his most hawkish comment to date. "There's already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced," Carney said in a speech late on Thursday alongside British finance minister George Osborne. "It could happen sooner than markets currently expect." Few economists had expected rates to increase until the second quarter of next year given the central bank's previous guidance that there was plenty of scope for Britain's economy to expand further without causing infla

Taste for little luxuries suggest Japan's tax rise hangover fading

Bartender Yoshiro Tsuneoka smiled with satisfaction between popping open bottles of champagne. It was midweek, 8 pm, and business was good at the tiny bar in downtown Tokyo. Watching a bevy of young professionals quaffing sparkling wine, there was little sign that an increase in Japan's sales tax in April caused anything more than a hiccup in the economy. "Sales have been doing well for a while now and we've noticed no change after the tax increase," Tsuneoka said above the sound of clinking glasses. "We get a broad range of customers, and their spending hasn't changed." Japan needs people spending with confidence if a radical strategy adopted by Prime Minister Shinzo Abe is to succeed in breaking the economy free of two decades of deflation and sub-par growth. Government data covering the period after the tax was increased to 8 percent from 5 percent at the start of April has begun to trickle in. Household spending and retail sales in April dropp

Fed should stop sending profits to Treasury, economist argues

The U.S. Federal Reserve should suspend payments to the Treasury to avoid a potential cash crunch when the time comes to raise interest rates, according to former Richmond Fed policy adviser Marvin Goodfriend. Such a reversal in policy is critical to protecting the Fed's inflation-fighting credibility, Goodfriend said in an interview Thursday, because otherwise the central bank will find itself needing to print money to pay for its obligations as it raises interest rates, an untenable situation in his view. "It's not good idea for a central bank to ever put itself in the position of having to create money to stabilize the value of money against inflation," said Goodfriend, now an economics professor at Carnegie-Mellon University. "You are throwing fuel on the fire." The U.S. central bank has sent about $320 billion to the Treasury since 2010. The money comes from interest earned on the Fed's massive portfolio of bonds acquired in its ongoing effort