'New normal'?
China slowdown
China's leadership brushed off the slowdown in its economic growth to levels last seen a quarter of a century ago by welcoming the 'new normal' this week. China has been guiding expectations for many months that its economy would only grow by around 7.5 per cent in 2014, and this was borne out by a GDP growth figure of 7.4 per cent for the year. This was down from the 7.7 per cent growth recorded in each of the past two years. The administration is expected to guide 2015 growth expectations down to around 7 per cent. Meanwhile, Chinese equities were slammed earlier this week when a clampdown on margin lending to investors led to a 7.7 per cent one-day fall in the Shanghai Composite.
Swiss roll
FX chaos
The reverberations from last week's decision by the Swiss National Bank to unpeg its currency from the euro are still echoing around global markets. The Swiss franc was pegged to the euro at €1.20 in 2011 in a bid to stop safe haven seekers bidding up the currency to unsustainable levels, but the unilateral and abrupt decision to remove the peg late last week sent the euro into freefall against the franc and left foreign exchange dealers with serious liquidity problems - and in some cases, such as London-based Alpari, forced them out of business. The move was seen by some as a precursor to further quantitative easing by the European Central Bank, which is likely to weaken the euro further.
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Downgrade
World of worry
The global watchers of the economy are aligned in their deteriorating confidence in growth prospects. Following on from the World Bank's downgrade to its forecasts last week, the International Monetary Fund also pared back its expectations this week, cutting global growth forecasts for both 2015 and 2016 by 0.3 per cent, despite the 'shot in the arm' provided by the oil price slide. Only last month, the IMF said it expected a prolonged period of lower oil prices to boost global growth by between 0.3 and 0.8 per cent. Meanwhile, the IMF has downgraded its expectations for Chinese GDP growth to 6.8 per cent for this year, which would see its growth rate fall below that of India, and now expects Russia's economy to contract by 3 per cent in 2015.
1% warning
Davos discussions
The talking shop of the great and the good of the global economy that is the annual World Economic Forum meeting in Davos convened this week to discuss topics as diverse as global warming, geopolitical risk and waning global growth rates. In the run-up to the meeting research from Oxfam attempted to frame the absurdity of the wealthy holing up in a heavily guarded mountain village in Switzerland to debate ways to improve the lot of the many with the claim that the top 1 per cent of the world's wealthy are accumulating wealth at such a pace that they will own more than half of the world's wealth than the remaining 99 per cent put together.
Pooling resources
Funds facility
Some of the world's largest fund management groups, led by Fidelity, are forming their own 'dark pool' for trading in equities in an effort to avoid algorithm-led high-frequency traders from disrupting their largest trades. So-called dark pools have already been created to try to shield those making large trades from finding their trading hijacked by nimble traders looking for rapid profits, but they have not been an unqualified success. The venture, in which BlackRock, Invesco, JPMorgan Asset Management and another four asset managers will have a 4.9 per cent stake and Fidelity 60 per cent, should launch later this year.
BOE backs off
Rate rise off
The Bank of England's Monetary Policy Committee is singing from the same hymn sheet once again, pushing the likelihood of interest rate rises over the horizon. The minutes of the MPC's latest meeting show that the two dissenters, Martin Weale and Ian McCafferty, who have been calling for an interest rate rise since last August fell back into line giving a unanimous verdict on keeping rates unchanged at 0.5 per cent. The committee feels there is now a "roughly even chance" that inflation could fall below zero during the first half of 2015 and that it is "alert to the downside risk of current low inflation becoming entrenched".
