ECB announces negative rate
Global markets have been a little slow of late, in no small part due to investors watching what might happen to boost the economy in the Eurozone. With inflation low, unemployment too high and growth poor, the European Central Bank’s much-anticipated announcement needed to do something special. There was speculation that the base interest rate would come down from 0.25% to zero; it didn’t, it drops to 0.15%, but the Bank has taken the unprecedented step of dropping the deposit rate to minus 0.1% which means banks will pay to deposit money with the ECB. That, of course, is not the idea. The move is hoped to encourage banks to lend their money instead, ideally to businesses, to boost the economy in general. Some analysts say it won’t work but that at least it shows a will to sort things out. The Bank hasn’t ruled out other measures, such as quantative easing if necessary later on. Read the full story.
European shares recover
As predicted, the European markets rallied following the ECB news and almost all of the other major global markets also ended the day on a high. The euro also ended the day higher. Read the full story.
Australian share market ends lower
Despite gains for mining firms, the Australian share market ended Thursday down again for the third session in a row with some falls for the big four banks and caution over the ECB decision. Read the full story.
Australian investment – not just in China
The Trade Minister Andrew Robb says Australia needs to broaden its economic links, rather than rely on China. With 30% of Australia’s exports going to China the worry is that if China sneezes, Australia could catch a cold. Mr Robb will be heading to North America next week for talks with Barrack Obama at the White House plus meetings in Texas, New York and Canada. He says that although links with China are important and may be where a lot of growth comes from, there are already strong links with other long term investors including the UK and Switzerland and that Australia is not in ‘danger’ from a Chinese slowdown. Read the full story.
Infrastructure bidding process ‘should be reversed’
Australia’s biggest infrastructure manager has told delegates in Singapore that the costs associated with bidding for infrastructure projects could be drastically cut if pension funds were allowed to be part of the funding before the projects go to tender. IFM Investors and Industry Super Australia said that getting finance in place before the tender for construction would cut the cost by almost a half and also shave time off the bidding process. Read the full story.
China should cut growth rate says IMF
David Lipton, second in command at the International Monetary Fund, says China should look to create long term financial stability rather than looking to gain the fastest growth. Mr Lipton says that China should look to strengthen weak links in the economy while still achieving a medium-pace growth, ensuring better sustainable growth. He also said that one area that the nation could do better is to find ways to increase household incomes and grow domestic spending. This would in turn help boost the yuan in the medium term. Read the full story.
European Central Bank drops rates in unprecedented moves... Australia should seek wider economic links says Trade Minister... and how infrastructure bidding costs could be halved...