The Week In Numbers: Race To The Bottom

Denmark has cut interest rates again – it is the fourth time that it has done so in three weeks. The benchmark rate was cut by 0.25% to minus 0.75%. Denmark’s central bank has also been actively selling its currency, the krone, in foreign exchange markets, in an attempt to weaken its currency.

The intervention by Denmark was prompted by moves at the European Central Bank (ECB) to combat deflation. Speculators believe that it might only be a question of time before Denmark, like Switzerland, decides to throw in the towel and allow its currency to bow to market forces and appreciate.

The Indonesian economy has grown at its weakest pace for five years. The low 5% annual growth rate was caused by a slowdown in private and public spending, and a drop in exports that include key commodities such as palm oil, coal and rubber.

The unsatisfactory growth data could be disappointing news for palm oil producers who have to contend with both feeble demand and weak prices. These could include Wilmar International (SGX: F34), Golden Agri-Resources (SGX: E5H) and First Resources (SGX: EB5).

Factories in China are struggling under the weight of global deflation. Chinese manufacturers were forced to cut prices as production fell.

The latest survey of manufacturers suggested that manufacturing activity shrank for the first time in 2-1/2 years. The HSBC/Markit PMI reading of 49.7 has fuelled suggestions that China might try to weaken the renminbi and embark on more monetary easing.

The price of a barrel of oil has climbed above US$50. It rose 4% to US$50.58. The unexpected rise in the cost of the “black stuff” boosted Australian equities. It could also bode well for embattled Singapore oil services outfits such as Keppel Corporation (SGX: BN4) and Ezion Holdings (SGX: 5ME).

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