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There’s something about (the People’s Bank of) China

March 2: China gets a rate cut for the second time in three months. Plus, get your smartphone at the ready for the World Mobile Congress


 

MORNING-PLAYBOOK-STORY

How much economic data can you handle?

Get ready, because this week is scheduled to be a busy one, with economic numbers – from manufacturing growth to inflation – already coming thick and fast this morning from Asia and the eurozone, with more to come from North America throughout the day. Over the weekend, the big news was a rate cut from the Chinese central bank, the second such cut in three months. In Canada, today will see the current account deficit, and tomorrow will bring fourth-quarter GDP and an earnings report from Scotiabank, the last of the big six banks to report their Q1 earnings.

The main event on the calendar this week is the Bank of Canada’s policy announcement on Wednesday, and speculation over a possible benchmark rate cut has been building since last week, amid more signs that Canadian inflation is slowing. In Europe, the European Central Bank will provide the first dose this week of a controversial stimulus program, called quantitative easing. (You can read a bit more about how, and whether, QE works, here.) Janet Yellen, the chair of the U.S. Fed, will also give a speech on banking regulation tomorrow evening.

If you’re into tech, this week will be a fun one for you. The World Mobile Congress has begun in Barcelona, and since this is an entire event about smartphones, you can expect every second to be live-blogged and live-tweeted. Mark Zuckerberg is the headliner today, and he’ll be speaking around noon (Toronto time.)

A rate cut for China. The People’s Bank of China (PBoC) cut both the benchmark interest rate and the one-year deposit rate by a quarter of a per cent (also called 25 basis points.) The cut is the second this winter – the last cut was in late November, and was the first such cut in two years – and it comes amidst worry over falling prices and slowing manufacturing growth. The last inflation numbers were at 0.8 per cent, the lowest since the financial crisis, as prices for producers have been falling for more than three straight years. China also has massive amounts of debt, and an extremely hot real estate market. The move pushed an equity rally in Asia and the Pacific, with Australia in particular feeling the boost this morning, amidst their own disinflation worries. If you’re closely following China, the FT‘s Alphaville blog (which is not behind their paywall) offers some analysis here on whether the move was impressive or, given the scale of the slowdown, actually timid.

Falling prices and a sputtering manufacturing industry. The picture for the eurozone doesn’t feel particularly bright and sunny this morning: inflation numbers indicate that prices fell for the third straight month in February. At a 0.3 per cent decline, the decrease was half that of January, which saw a drop in prices of 0.6 per cent, and central bankers are watching closely to see what the first dose of a massive bond-buying program (QE) will have in the coming month. Meanwhile, manufacturing numbers for the eurozone are just barely clinging to growth, as the Purchasing Manager’s Index (PMI) stuck to 51 for last month (50 separates growth from contraction.) But, as always, the picture is very mixed across the eurozone and Europe as a whole as many countries have released their national numbers today and yesterday. Ireland saw a scorching 57.5 PMI last month, while Italian manufacturing managed to inch back into growth, and U.K. manufacturing stayed strong, growing to 54.1.

How does Canada compare to Japan, before the bubble burst? The answer is debt levels, but the difference is one of kind: in Japan, high corporate debt and low housing debt, and in Canada, the reverse, according to Taiwanese-American economist Richard Koo. Maclean’s Andrew Hepburn talked to Koo about whether Canada is at risk of falling into a balance-sheet recession, when’s the best time for fiscal stimulus, and where Canadian and Australian spending habits differ. The tax-free savings debate also continued over the weekend, with Jennifer Robson making the case for keeping contribution levels as they are – and worrying less about wealthy Canadians gaming the system.

On your smartphones . . .  and ready, set, go. You can feel the hype all the way from Spain, after the World Mobile Congress began yesterday. The congress is basically devoted to phones, and with major tech companies including Facebook looking to boost their brands (or, ahem, their advertising revenue) through mobile, there are some big announcements and big names, including Samsung’s curved screens (apparently a big deal, who knew), a showing by Mark Zuckerberg, and a keynote speech by Google’s Sundar Pichai, both today. Other highlights could include more debate over the appeal of smart watches, and an announcement from BlackBerry tomorrow on plans for new devices.

An undocumented migrant rose to the top-ranks of the banking industry. Ever feel like your economic news could use a human touch? Here’s the story for you: Julissa Arce, from Mexico, went from running a funnel cake stand in Texas to the top strata of Goldman Sachs and Merrill Lynch, all on forged immigration papers. She’s since gained U.S. citizenship and left the industry to campaign for immigrant rights, and her story is especially timely, after funding for the Department of Homeland Security nearly collapsed on Friday over Republican opposition to Obama’s immigration reforms. It’s also just a really good read.

Need to know:
TSX: 15, 234.34 (-6.82), Friday
Loonie: 79.98 (+0.15 cents), Friday
Oil (WTI): $48.77, Monday morning (7:15 a.m.)


 

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