China slides, but will be OK, we promise! China is clearly worried that the economy’s slowdown is gathering pace and will prove hard to control. Premier Li Keqiang said yesterday in Beijing that while the economy faces downward pressure, the government has room to step in and has “more tools in our toolbox”, should growth flag and affect employment. The Premier told his usual end-of-congress press conference that policymakers would prop up the economy if growth was at risk of breaching a “lower limit”, or hurt employment and income gains. The lower limit is the 7% GDP estimate for this year.

“If the slowdown in growth affects employment and incomes, and approaches the lower-limit of a reasonable range, we will stabilize policies and the market’s long-term expectations for China,” he told the briefing. Clear about that? It’s more impenetrable than much of the stuff turned out around the world by central bankers. “It is true we have adjusted down somewhat our GDP target but it will by no means be easy for us to reach this target. China’s economy has already exceeded $US10 trillion so a 7 per cent increase is equivalent to the entire economy of a medium-sized country,” Li said.

For little ol’ Australia, what does this mean? Well, our biggest export market is running sluggishly (like Australia’s economy), with wide swathes of the economy gripped by intense price deflation, with no sign of any easing. Demand is weak, the housing sector’s slump is deeper than expected, and the Premier (and therefore the government) is getting twitchy about this slowdown gathering pace and pulling growth lower, impacting incomes and making people unhappy. And if that happens, the government will throw money at the economy and hope for a repeat of the great surge after the US$586 billion stimulus in late 2008, as the GFC plunged the economy into the danger zone. Two rate cuts and two cuts in bank reserve ratios (freeing up more money for lending) in just over three months tells us of the government’s increasing concern. — Glenn Dyer

America the banana republic is back. If you had to give an award to repeated stupidity/inability learn from their mistakes, then the US Republican members of Congress, and especially the Tea Party loonies, would be repeat winners. In 2011, they took the US to the brink of default by refusing to lift the debt ceiling in an attempt to embarrass the Obama administration. They lost, but not before Standard & Poor’s cut America’s credit rating from AAA. In 2013, the government was temporarily shut down and a deal was done to push the issue out past 2014. But the rating cut remains in place today and was justified by what happened in 2013, despite the recovery in the US economy and the falling budget deficit. That 2013 deal put the debt ceiling issue on the backburner until March 16, 2015, which is today.

So yes, folks, the US debt ceiling/default idiocy is back on again, courtesy of the Republicans. The US Treasury Department has put in place measures to cut spending and other outlays that will obviate the need to raise money until October (which will be 13 months from the 2016 presidential and congressional elections). The Republicans have already lost confrontations on ObamaCare and funding the Homeland Department, invited the Israeli Prime Minister to address Congress and try and embarrass the President (Netanyahu could lose tomorrow’s elections in Israel) and attempted to subvert the Iranian nuclear talks, which resumed in Switzerland at the weekend. — Glenn Dyer

How many pins on the head of that Angel? That’s the question the usual cast from the commentariat will be again asking this week as we get yet another burst of interest rate rise/cut speculation on both sides of the Pacific. In Washington, the US Federal Reserve meets Wednesday/Thursday morning our time and releases its usual statement. The big question is, will that statement include the word “patient”? According to the experts, the dropping of that word could mean a rate rise in the US in June or perhaps August. Leaving it in could mean a rate rise won’t happen until later in the year. It’s all very biblical. In Australia, the minutes of the Reserve Bank’s board meeting at the start of March are out tomorrow and RBA governor Glenn Stevens speaks in Melbourne on Friday at lunchtime — both will be parsed and re-parsed to try to work out when the next rate cut will happen. As I said, it’s all very biblical. And by the way, attractive as “rate cut looms” stories are, Thursday’s interim results for embattled department store chain, Myer, might provide better sport for the commentariat, and something a bit more meaningful. — Glenn Dyer

So much for the iWatch thingie. Apple shares fell last week for a third successive week — so much for the song and dance on Monday about the new watch and other products. Apple shares ended trading early Saturday at US$123.54 taking its loss for the week to 2.4%. Apple shares peaked in late February at US$133.60, so they are down 7.5% since then. That peak came in the wake of all the headlines after the huge quarterly sales of iPhone 6 models around the world. A real concern for investors is the rising value of the US dollar, which will cut  revenue growth and earnings in the current quarter, something Apple quietly slipped into its quarterly outlook. The soaring value of the greenback is starting to impact the outlook for US sharemarkets and profits. — Glenn Dyer

Oils ain’t oils. Oil prices slid between 8% and 9.6% last week in a nasty reminder to all those bulls sniffing a recovery in the price of the greasy stuff. In fact, there may be a bit more price weakness to ride out before that starts. US oil futures actually touched a 2015 low on Friday (when the price fell 4.7% alone). The soaring US dollar isn’t helping companies ride out the slide, as they hope of an upturn later in the year. The dollar is up 13% against the euro so far this year and that helps choke off any nascent recovery in oil prices. One company not waiting around is the Italian oil major, Eni, which, on Friday, said it was cutting investment by 17% over the next three years (to around US$48 billion), selling US$8 billion in assets. Eni also said it will slash dividends to 0.8 euros a share, down from 1.12 euros a share for 2014. While plenty of small oilers have cut dividends, Eni is the first oil major to go down this route (its peers include BP, Shell, Total, ExxonMobil and Chevron) in the current price slide. It won’t be the last. — Glenn Dyer

Peter Fray

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