Daily Agenda: Ex-Euro-Zone Europe Adjusts Course

Japan gears up for special election; People’s Bank of China injects liquidity; Level Global Investors convictions overturned.


Kristian Helgesen

Today is proving to be a day of policy realignment for central banks in Europe, as ex-euro zone economies on the Continent grapple with their own sources of unhappiness. In Oslo, Norges Bank policymakers reduced the benchmark rate to 1.25 percent, as the nation’s economy feels the impact of lower oil prices on growth. The krone has fallen significantly in recent months in reaction to weaker energy prices but in a press conference today, central bank governor Øystein Olsen continued to express optimism that Norway would avoid deflation. Russia, another nation whose economy future is heavily dependent on the price of oil, also underwent a monetary policy shift today. The Central Bank of Russia increased its key lending rate by a full percent to reach 10.5 percent in an effort to stop the decline of the ruble and stem the tide of inflation. Bank of Russia estimates forecast a full recovery in the nation’s stalling economy to remain elusive until 2017, as economic sanctions and cheap oil take their toll. While central banks in Switzerland and Denmark did not tinker with rates today, both put investors on notice. The Swiss National Bank reduced consumer price index forecasts in the coming year while pledging to defend the cap on appreciation of the Swiss franc versus the euro. Yesterday in Copenhagen, Danish National Bank governor Lars Rohde urged greater caution among lenders. Taken as a whole, today’s policy news serves as a reminder that the pain in Europe extends well beyond the euro zone.

PBOC injects liquidity. Reports emerged today that the People’s Bank of China has delivered up to 400 billion yuan ($64.6 billion) into the banking system in recent days. The move sparked a rise in interest rate swap markets and money market rates as traders backed away from speculation that reserve requirements for banks will be lowered. Separately, Moody’s Investor Services released a report today that anticipates increase defaults among local government-controlled enterprises as growth in China continues to cool.

Japan’s economy in focus in lead-up to special election. The country’s special national elections are now three days away, with a major majority of voters expected to continue to support the administration of Prime Minister Shinzo Abe as it pushes for greater economic reforms to complement the Bank of Japan’s extraordinary easing actions. Among the latest macroeconomic data points to come out of the country is a sharp decline in machinery orders for October despite analysts’ predictions that export demand would prop up some segments.

U.S. data on deck. Weekly initial claims figures and retail sales data for November will be released this morning, with consensus forecasts for an improvement in the rate of layoffs and an increase in nonautomotive consumer purchases. Amid low gasoline prices, many analysts have predicted a brisk holiday season for brick-and-mortar retailers; however multiple reports have surfaced that a number of physical store chains including Target and Staples may follow Walmart in price-matching Amazon.com and other online store this year.

Insider trading convictions overturned. In New York yesterday the United States Court of Appeals for the Second Circuit overturned insider-trading convictions handed down last year against two portfolio managers for Level Global Investors, a now-closed hedge fund firm that prior to federal charges oversaw more than $4 billion in assets. According to the court’s opinion, federal investigators failed to provide sufficient evidence to support claims that the money managers acted on nonpublic information relating to the stock on Dell and Nvidia.