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Japan adopts a negative rate; US growth slows; Wall Street jumps; Swiss finds huge fraud at 1MDB; HSBC imposes hiring & pay freeze; UST 10yr yield 1.92%; gold and oil up again; NZ$1 = 64.8 USc, TWI-5 = 70.5

Japan adopts a negative rate; US growth slows; Wall Street jumps; Swiss finds huge fraud at 1MDB; HSBC imposes hiring & pay freeze; UST 10yr yield 1.92%; gold and oil up again; NZ$1 = 64.8 USc, TWI-5 = 70.5

It's a holiday in both Auckland and Nelson today and our offices there are closed.

But Bernard and I will be updating the site content and adding stories to cover the main news events. Here's my summary of the key news over the weekend in place of our regular 90 @ Nine summary.

Firstly, the Bank of Japan delivered a surprise policy change late on Friday, signaling the adoption of a negative interest rate, and stunning investors with what is seen as a "bold move" to stimulate their economy in the face of their deflation challenges and the slowdown in China. The rate cut move was from +0.05% to -0.10%.

The US economy expanded at a slower pace in the fourth quarter of 2015. It is limping into 2016 having posted growth at a rate of just +0.7% in that final quarter, following a +2.0% growth in the third quarter and +3.9% in the second quarter of 2015.. Observers however are picking a rising rate in the first quarter of 2016.

Wall Street was higher however, despite the lacklustre growth data, up +2.5% to end the week.

The US labour market has taken a turn for the better for young college graduates. Incomes for the newest batch of diploma-holders are now at the highest level in more than a decade, while unemployment rates are falling quickly, according to a new report from the Federal Reserve Bank of New York.

In Switzerland, prosecutors there say about NZ$6 bln may have been stolen from a fund owned by the Malaysian state. Their 1MDB fund was set up in 2009 to pay for major new economic and social developments in Malaysia. Last year, Swiss authorities opened an investigation into 1MDB after it amassed more than NZ$17 bln of debt. Switzerland's attorney general said over the weekend there were "serious indications that funds have been misappropriated from Malaysian state companies". This gets tricky because the Malaysian prime minister himself is suspected by many to be behind the fraud.

Staying in Europe, inflation there is ticking up, despite the downward pressure from oil prices. January data shows a rate of +0.4%, up from +0.2% in December. A quick look at their data release will show that without the impact of low oil prices, they are actually facing a rate of over +1.0%

And one European decision that will have echos here: HSBC has reportedly announced a hiring and pay freeze globally as it battles its cost structure problems.

The oil price is higher with divergence seen between the two benchmarks again. The US WTI price is up to almost US$34/barrel, which the Brent benchmarks is even higher at almost US$36/barrel. The recent rise is not enough to avoid the damage low prices are having on Nigeria who has approached the World Bank for a loan of US$3.5 bln.

And finally, in what may be another blow for the NZ beef industry, the Chinese look like they are about to lift a ban on US beef imports. However, less domestic beef in the US might hold up prices there for our hamburger ingredient.

Gold starts a little higher at US$1,118/oz.

But the UST benchmark 10yr bond yield is starting the week low at 1.92%.

The NZ dollar starts today at 64.8 USc, the Aussie is now at 91.5 AUc, and the euro is at 59.8 euro cents. The TWI-5 is at 70.5.

The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »

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6 Comments

Why would negative interest rates be a 'surprise' in the context of global conditions?

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Permabull. Need I say more.

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Agreed, not really surprising, but I must say might work against them as people will pull their money from the banks rather than face more charges. Banks are raking in money hand over fist putting "our" money to work, and already charging us, often excessive fees for their services despite the obvious profits they are already making. To start adding an extra cost just for putting our money in the bank would likely cause people to give the banks the proverbial finger by pulling their money out and going back to the mattress. a small number may invest in shares but many would see that as too risky.

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most experts are saying this will not help grow inflation, the money is going into assets not spending so will do the opposite and hold back CPI inflation.
was watching a professor of economics from Singapore saying if they included a bag of assets in the CPI they would have all the inflation they want

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The currently-accepted popular definition of "asset" may need to be reconsidered.

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Aaaaaaand....they're off !!! First one to the bottom "wins".

The Japanese really do have a good sense of humour.

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