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FT Editor Lionel Barber interviews China’s Premier Hu Jintao




Filed under: Economics, Politics, World, , , , , , , , , , , , , , , , , , , , , , , ,

U.S. Admiral: North Korean Missile Could Reach Hawaii

WIRE: America’s top military officer said on Friday that a rocket North Korea plans to launch next month has a range that could possibly reach Hawaii. Asked if the North Korean rocket could reach the US states of Hawaii or Alaska, Admiral Mike Mullen told CNN: “In some cases, yes, they could probably get down to Hawaii…”

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New Zealand GDP Better Than Expected

New Zealand’s economy shrunk by -0.9% in the three months ending 2008 after economists had expected this south-Pacific country’s GDP to contract by more. The move marks the fourth straight quarter that the island-nation has seen its annual output decrease.

Since July the central bank has slashed interest rates by 5.25% to 3.0% in an effort to provide short-term liquidity to businesses and financial markets in order to stave off the effects of the global recession.

Now, in its fourth straight quarter of contraction, the New Zealand economy has shed thousands of job. In the final three months of 2008, their unemployment rate jumped 0.4 percentage points to 4.6%, the highest level since 2003. Their Treasury department predicts that it will get worse. They have forecast that by early 2010 the jobless rate may jump to an 11-year high of 7.2%.

Yesterday, the IMF released a report stating that New Zealand’s economy would contract a total of 2.0% in 2009 after 2008 experienced a slight 0.1% decrease. One key “vulnerability” that is likely to keep the country under water is the extensive amount of short-term borrowing from abroad, the IMF said.

This final period of the year saw the country’s currency depreciate by as much as -20.95%, but ended the quarter down only 10.15%.

– LG

Filed under: Global Economics, World, , , , , , , , , , , , , , , , ,

New Zealand Trade Balance Soars on 11.6% Decline in Imports

New Zealand’s trade balance in February improved substantially from that which was expected. The figure jumped to 489.0 million from an expected 75.0 million after imports fell 11.6%.

The alleviating news comes just a day after Bill English, the nation’s Minister of Finance, said that the current account gap is “uncomfortably large.”

Imports fell as the New Zealand Dollar continued to stifle the purchasing power that domestic residents had for goods produced abroad. The first two months of the year saw their currency depreciate 16.57% against its U.S. counterpart and 9.12% against a trade-weighted basket of currencies.

The amount of goods shipped to the country from Europe fell by a staggering 21.3% and 14% from Asia.

– LG

Filed under: Global Economics, World, , , , , , , , , , , , , , , , ,

U.S. Criticized Over Immigrant Rights by Amnesty International

Amnesty International has said tens of thousands of people are being held in US immigration jails without receiving a hearing to determine whether their detentions are warranted.

About 30,000 immigrants are held on an average day, the rights group said in a report released on Wednesday, triple the number in custody a decade ago…

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New Zealand Economy Will Contract 2% in 2009, Says IMF

In a report filed by the International Monetary Fund (IMF) the Washington-based body said that the New Zealand economy will contract by 2.0% this year. “The near-term outlook is weak,” they mentioned. “Households are constrained by high debt levels, falling house and equity prices and uncertain employment prospects,” they added.

The startling words come after Bill English, New Zealand’s Minister of Finance, said that the current account gap is “uncomfortable large”. Indeed, the actual figure for the current account balance in the final quarter of 2008 came in at -4.026, surprisingly better than in the three-month period prior. Despite what would look to be as a positive sign, the deficit-GDP ratio actually became weaker, coming in at -8.9% from -8.6% the period prior.

Claims of weakness in the country are legitimate. Now, in its fifth straight quarter of contraction, the New Zealand economy has shed thousands of job. In the final three months of 2008, their unemployment rate jumped 0.4 percentage points to 4.6%, the highest level since 2003. Their Treasury department predicts that it will get worse. They have forecast that by early 2010 the jobless rate may jump to an 11-year high of 7.2%.

One “key vulnerably” is the country’s substantial level of short-term financing from abroad. With the central bank slashing rates by 5.25% since July, foreigners have been continuously disincentivized to invest in these debts with maturities of less than one year. The IMF may have been too cautious here. Albeit this may seem to be a risk on an absolute basis, the fact that short-term rates abroad are much lower than those in New Zealand may actually direct a greater amount of these foreign cash flows towards this South-Pacific economy.

Now, since Mid-March the New Zealand Dollar has fallen by as much as 40.4% against it’s U.S. counterpart. Generally, such a bearish movle would lead investors in domestically denominated short-term debt to flock away in hysteria. But what if their was an expectation that the currency would begin to rise in value? Under such a case, one would expect exchange rate risk to be of less of concern.

We are seeing such a pattern now. From the low on Mar. 3rd, the currency has rebounded 17.95%. This may be due to the inflationary fears that the Federal Reserve, with its plan to buy $1.2 trillion in treasury and agency/mortgage securities, has sparked among global investors. During this time we have also seen gold rally 7.43% and crude (West Texas Intermediate) break out of a range bound environment and rally 37% to as much as $54.18.

Historically we have seen a strong correlation between the New Zealand currency and commodities. A 180-day rolling correlation with the S&P Goldman Sachs Commodities Index shows that these two instruments have a correlation of .9688, a very substantial relationship.

Thus, if inflationary fears are correct (which the commodities markets seem to believe) then the New Zealand Dollar is likely to continue rising. Hence short-term financing from abroad may actually increase and not decrease.

– LG

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WIRE: North Korea is loading a Taepodong rocket on its east coast launch pad in anticipation of the launch of a communications satellite early next month, U.S. officials say. U.S. counterproliferation and intelligence officials have confirmed Japanese news reports of the expected launch between April 4 and 8…

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Geithner Open to China Using Non-Dollar as Reserve; Dollar Plummets

WIRE: Geithner was initially asked at a Council on Foreign Relations event in New York about proposals from People’s Bank of China Governor Zhou Xiaochuan for a new international reserve currency. He said “as I understand his proposal, it’s a proposal designed to increase the use of the IMF’s special drawing rights. And we’re actually quite open to that…”


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Fedex Cargo Plane Crashes at Tokyo Airport (Video)

AP: Police say the pilot and copilot of a FedEx cargo plane that crashed at an airport in Japan are dead…


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Japan Prime Minister: Must Build Defense

Japan Prime Minister“You must be well aware that we face many issues in the Asia-Pacific region, including North Korea’s nuclear and ballistic missile development...for us to assure peace and stability in Japan, it is extremely important to further strengthen the Japan-US alliance as well as to make its own efforts for self defense…”

U.S. To Move Troops From Japan to Guam…

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Investment Bankers Suspect Fed Knows China Will Stop Buying U.S. Treasury Bonds

“There is a concern that the Fed knows something about the economy or perhaps they believe there will be less buying from the Chinese, so they have decided to push rates sharply lower,” says John Spinello, strategist at Jefferies & Co…

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N.Z. Prime Minister Key Sees Nation Emerging Stronger After Tax Cuts

New Zealand Prime Minister John Key said that the nation’s economy will emerge from this recession much stronger. “I, for one, am confident that New Zealand can come out of this recession stronger than many other countries,” Key said. “These tough times could be a springboard for much better times ahead.”

Since reaching a high of 0.8213 in late Feb. 2008, the New Zealand Dollar has lost as much as 40.4% against its U.S. counterpart. But the Prime Minister has sees this as a positive shift. Indeed, “the exchange rate is acting as a buffer.” That is, “firms in some industries, including for example, sheep meat, venison, and even niche manufacturing, are getting better incomes as a result of the lower currency,” he added.

Australia’s neighbor has been in recession since the first quarter of 2008. It is likely that throughout the entire year, New Zealand’s economy shrank at least 0.3%. In that 12 month period, the unemployment rate rose from 3.4% to 4.6%. Since June the central bank has slashed the overnight cash rate by 525 basis points from 8.25%, the most of any nation throughout that period.

Key has taken steps to ‘think outside-of-the-box.’ His latest piece of legislation aims to give incentives for Australians to vacation in New Zealand. He has increased Tourism New Zealand’s budget by $2.5 million, an increase of more than 25% of its current $9 million budget. “The impact of the global recession is likely to result in New Zealand becoming a more attractive holiday option as Australian consumers tighten their spending,” Key said.

‘Trickle-down economics’ seems to be what Key really wishes to aim for. The Prime Minister plans to cut income taxes on Apr. 1. But such action won’t be adequate. His comprehensive plan also seeks to increase infrastructure investments. In an effort to enhance their transportation efficiency, he plans on increasing the petrol tax by NZ6 cents per liter. Other spending will include school building programs because he is ‘determined to build on these strengths so that when the world starts growing again, New Zealand can be running faster than the countries we compete with,” he said.

– LG

Filed under: Global Economics, World, , , , , , , , , , , , , , , , , ,



In November, the Chinese government announced that it would be implementing a stimulus package worth $915 billion. Details of the plan were not so readily available and made it difficult for economists to estimate the impact that it would have on the global economy. Just recently, however, the former head of the nation’s statistic bureau stated that they would be removing export taxes on many industries hurt by the crisis.

Moments ago China’s Premier Wen Jiabao spoke at a news conference and offered greater insight into the government’s thinking. He stated that the communist government has prepared other measures in case of greater problems head. He also said that they had a “full arsenal” to stimulate the economy. Wen may have been taking a shot at the U.S. legislature, saying that China can “at any time…introduce new stimulus.” It has “reserved adequate ammunition” to do so.

In a startling note, he also mentioned that they are concerned over the security of its investments in the U.S. He then urged the U.S. government to “ensure the safety” of its American assets. “We have lent a huge amount of money to the United States” and that “of course we are concerned about the safety of our assets. To be honest, I am a little bit worried.”

On foreign exchange intervention, Wen seemed a bit defensive. He argued that that the Yuan appreciated against a wide-range of currencies, but that the currency’s upward swing has hurt its exports. He also reiterated their stance on diversifying the basket against which the Yuan is pegged to. “No country” can “pressure” them to appreciate or depreciate the currency.

– LG

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U.S. Naval Destroyer Sent to Protect Ship Near China

“The USS Chung-Hoon, armed with torpedoes and missiles, is stationed in protection of the USNS Impeccable, an ocean surveillance ship. On Sunday, five Chinese vessels surrounded the Impeccable, which is unarmed. The Chinese ships approached to within 25 feet and blocked the Impeccable’s path with pieces of wood, the official said…”

USS Chung Hoon

USS Chung-Hoon

Troops Moved From Japan to Guam…

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Chinese trade with the rest of the world suffered heavily in February. Its surplus plummeted 87.6% to a mere $4.84 billion from $39.11 billion. The realized value substantially underscores expectations that the figure would print at $28.30 billion. Surrounding this event may be questions regarding the health of the world’s third-largest economy.

In the year through the month, exports from the Asian nation fell 25.7%; imports shipped to the country fell 24.1%. The sudden developments will likely add pressure to the Chinese government to add to the 4 trillion Yuan ($585 billion) stimulus announced in October. China’s commerce minister stated yesterday that the U.S.’ largest foreign creditor would be eliminating export taxes as part of the additions to the stimulus. He noted that the country would “use all possible measures to ensure the stable growth of our exports and prevent a large drop in external demand.” At this point it is questionable whether the communist nation’s domestic policies will aid the troubling glove in combating their lack of appetite for Chinese made goods.

The U.S. Dollar rallied on the news. Against the Euro, the greenback jumped from 1.2727 to 1.2656, or 71 pips in the 10 minutes following the release. Against the Australian Dollar, the greenback jumped from 0.6475 to 0.6427, or 52 pips.

– LG

China's Trade Surplus; Source: Bloomberg, Prepared by Luis Gil

China's Trade Surplus; Source: Bloomberg, Prepared by Luis Gil

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China’s Deflation Has Officially Arrived As Prices Fall 1.6%

China’s Consumer Prices declined by -1.6% in February from the year prior as the global economic contraction reduced demand for the Asian giant’s good. This is the first time since Dec. 2002 that prices in the world’s third-largest economy decline. Producer Prices led the decline; the cost of manufacturing products has been falling consistently since August, ultimately plummeting by -4.5% in January. The last time wholesale prices fell by this much was in Mar. 1999.

It was reported earlier today that China plans to reduce export taxes to zero. Such a move would allow supply pressures to ease domestic prices upward. As export taxes are reduced, the price for such goods decreases to those living abroad. When prices decrease, they tend to consumer more. While this is happening, those living in China see less supply of these products on their store shelves. And as supply decreases, prices increase.

On a similar note, Home Prices fell by 1.2% in February, marking it the steepest decline since the Chinese government began keeping track of the data in Aug. 2005. This is the third straight month that housing prices fall.

– LG

China's CPI Since 1999; Source: Bloomberg; Prepared by Luis Gil

China's CPI Since 2000; Source: Bloomberg; Prepared by Luis Gil

China's CPI Since 1999; Source: Bloomberg; Prepared by Luis Gil

China's PPI Since 1999; Source: Bloomberg; Prepared by Luis Gil

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China To Cut Export Tax to Zero as Part of Stimulus

China has set a plan to cut its export taxes to zero in an effort to encourage producers to sell their products abroad, the nation’s commerce minister said today. He added that the Asian country will “use all possible measures to ensure the stable growth of our exports and prevent a large drop in external demand.” The plan comes less than one week after it was reported that Premier Wen Jinbao would announce additions to the 4 trillion Yuan ($585 billion) stimulus package that was set in October.

Timing couldn’t be any more perfect. Indeed, collapsing global trade has forced the world’s third-largest economy to see its export volume plummet by 17.5% in January alone. Early reports, albeit unofficial, predict February’s figure to plummet by even more than that.

– LG

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Stocks Soar on Chinese Stimulus; Banks Plummet on Obama Mortgage Plan

US Session Key Developments

  • Stocks Reverse Course After Five Straight Brutal Sessions
  • China to Add to 4 Trillion ($585 Billion) Stimulus
  • Obama Unveils Mortgage Plan; Banks Plummet

Stocks Reverse Five Day Losing Streak on Chinese Stimulus Expansion

Stocks soared today, breaking a five-day losing streak, after former a former-official stated that Chinese Premier Wen Jiabao would add to the 4 trillion Yuan ($585 billion) stimulus package that he had announced in October of last year. Industrials surged as the Chinese stated their intent to expand military spending by 14.9% as part of the package. The plan, which has been seen to possibly benefit the entire world with the easing of export and import tariffs, will likely boost demand for steel and other raw materials produced abroad. Alcoa and Caterpillar surged ahead by at least 12.8% each. President Obama released his long-awaited mortgage plan only to see Banking stocks plummet by -6.59% after it was revealed that only those whose home-loans are owned by either Fannie Mae or Freddie Mac would be eligible. Indeed, Wells Fargo led the slide with its 16% market share of the mortgage market.

Dow 30                 6875.84                 +149.82                  +2.23%
The Dow saw Materials and Industrials lead the gain, rising 5.94% and 4.21% respectively after it was revealed that China would add to its history stimulus package. Financials, however, lost -5.23% after details of President Obama’s mortgage plan revealed that only those whose loans are owned by Freddie Mac or Fannie Mae would benefit.

NASDAQ              1353.74                  +32.73                    +2.48%

The NASDAQ rallied with Information Technology spiking 2.65% with Semiconductors jumping 4.45% on optimism from the Chinese stimulus package.

S&P 500               712.87                     +16.54                     +2.38%
The S&P gained as much as 3.95% in the last hour of trading before slipping at the end. Price action saw only the Financials sector finish in the red. VIX, or the fear index, fell -6.6% to finish under 50 for the first time this week.

Filed under: Economics, Obama, Stocks, , , , , , , , , , , ,


“China said it will boost defense spending by 14.9 percent this year to raise salaries of the world’s largest standing army as it competes for regional influence with the U.S. and Japan…”

And will also announce a new stimulus package…

China Plans on Boosting Military Spending by 14.9%

China Plans on Boosting Military Spending by 14.9%

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