Iceland cuts interest rate as

currency advances

REYKJAVIK (AFP): Iceland’s central bank on Wednesday shaved its key interest rate by a quarter of a point to 5.0 percent, citing the krona’s appreciation and political uncertainty following the country’s October elections. Gross domestic product, business investment growth and export growth had all been stronger than projected for the first nine months of the year, the bank noted. The rate of inflation, which was 2.1 percent in November, “has remained below target for nearly three years” despite large pay increases and higher household spending. Favourable external conditions, the appreciation of the krona, and a relatively strict monetary stance compared to the rest of Europe has meanwhile slowed inflation, the bank said. But the increase in household spending has been weaker than expected in recent months, and the fact that Iceland’s political parties have not been able to form a government since October 29 elections, have sparked uncertainty about the future budget, it noted.

The overall economic situation “gives the Monetary Policy Committee some scope to lower nominal interest rates now,” though it noted that “strong demand growth and the aforementioned uncertainties call for caution in interest rate setting.”

Iceland’s economy is one of the strongest in Europe, with the central bank forecasting growth of 5.0 percent in 2016 after ticking in at 4.2 percent in 2015

Greek shares drop after debt relief frozen


ATHENS (AFP): Greece shares fell over 3 percent on Wednesday after eurozone finance ministers suspended debt relief measures in response to benefits announced by the government. The Athens stock exchange closed at 619,19 points, a loss of 3.21 percent as a eurozone spokesman said limited pension hikes and a localised tax break announced last week “appear to not be in line with our agreements.” The eurozone last week approved some short-term relief measures to alleviate Greece’s enormous debt, which is set to reach 315 billion euros ($338 billion) this year. Speaking before the announcement, Prime Minister Alexis Tsipras said creditors “had to respect the Greek people, who have made major sacrifices these past seven years in Europe’s name.” “I have no doubt that what we are doing is within the framework of the agreement,” said Tsipras, who announced last week a one-off payout to 1.6 million low-tier pensioners, and a sales tax break for islands sheltering thousands of migrants.


S Africa’s Steinhoff and Shoprite

to form retail giant

JOHANNESBURG (AFP): South African retail giants Steinhoff International and supermarket group Shoprite Holding Wednesday said they were in talks to merge their African operations to form a single company worth over $14 billion. The companies said in a statement they had initiated talks “regarding the potential combination of their respective African retail businesses” with an objective of creating what could be regarded as “the retail champion of Africa”. The new venture to be called Retail Africa would have annual revenues of about 200 billion rand ($14.6 billion). The companies said the proposition of this “formidable entity” was supported by their shareholders. Shoprite is Africa’s largest food retailer with a presence in 14 African countries, including Nigeria, Africa’s largest economy, oil-producing Angola and Zambia. It is said that the new venture would employ nearly 186,000 people and would give Steinhoff “African exposure”.


Steinhoff’s African businesses include a range of credit-based household goods and the company has vast interests in Europe.

The company recently bought UK discount chain Poundland and US retailer Mattress Firm Holding.

According to the companies, the proposed retailer is geared to become a leading discount retailer for value conscious African consumers.

They stated that Retail Africa would have “the required size and scale to compete with any other international retailer” and lead to job creation in various countries.



China new bank loans grow modestly


SHANGHAI (AFP): Chinese bank lending grew modestly month-on-month in November, official data showed Wednesday, after being almost halved in October, the latest indication that the country’s economy may be stabilising. New loans extended by banks rose to 794.6 billion yuan ($115.1 billion) last month, compared with 651.3 billion yuan in October, said the People’s Bank of China (PBoC), the country’s central bank. Analysts said the rising lending figure is consistent with the stronger economic growth reported for November. The lending figure is “in line with the recent macro-economic figures which shows the demand in the real economy has recovered to a certain degree”, Liu Dongliang, a Shenzhen-based senior analyst with China Merchants Bank, said in a research note. Chinese exports snapped a seven-month losing streak and rose 0.1 percent in November while import also gained 6.7 percent. Its producer prices rose at their fastest pace for five years last month while industrial output and retail sales growth both accelerated in November.

In a separate statement, the central bank said total social financing — an alternative measure of credit in the real economy — surged to 1.74 trillion yuan from 896.3 billion yuan in October, beating Bloomberg’s median estimate of 1.1 trillion yuan.

Analysts said that despite the rising credit, China will not raise its interest rate.

Julian Evans-Pritchard, China Economist at Capital Economics said: “we don’t expect any move to raise benchmark rates or the required reserve ratio.”

“Instead, we expect the PBOC to continue to focus on curtailing credit demand via mortgage restrictions and tighter oversight of local governments’ off-budget borrowing.”