Pension Pulse

Koh Gui Qing of Reuters reports, China January factory growth stalls, deflation pressures build, bad debt rises : China's manufacturing growth stalled for the second straight month in January and companies had to cut prices at a faster clip to win new business, adding to worries about growing deflationary pressures in the economy, a private survey showed. The HSBC/Markit Flash Manufacturing Purchasing Managers' Index (PMI) hovered at 49.8 in January, little changed from December's 49.6 and just below the 50-point mark that separates contraction from growth on a monthly basis. A Reuters poll had forecast a second month of contraction with a reading of 49.6. Reflecting the tumble in oil prices, which have more than halved in the last six months, a sub-index for input prices sank to 39.9, a level not seen since the global financial crisis. But companies also had to cut output prices for the sixth straight month to sell their products, and more deeply than in Dece...

Paul Carrel and John O'Donnell of Reuters report, ECB launches last-ditch program to revive euro economy : The European Central Bank took the ultimate policy leap on Thursday, launching a government bond-buying programme which will pump hundreds of billions of new money into a sagging euro zone economy. The ECB said it would buy government bonds from this March until the end of September 2016 despite opposition from Germany's Bundesbank and concerns in Berlin that it could allow spendthrift countries to slacken economic reforms. Together with existing schemes to buy private debt and funnel hundreds of billions of euros in cheap loans to banks, the new quantitative easing programme will pump 60 billion euros a month into the economy, ECB President Mario Draghi said. By September next year, more than 1 trillion euros will have been created. "The combined monthly purchases of public and private sector securities will amount to 60 billion euros," Draghi told ...

Barrie McKenna of the Globe and Mail reports, Bank of Canada shocks market with rate cut : The Bank of Canada announced a surprise quarter-percentage-point cut to its key interest rate Wednesday – a move it calls “insurance” against the potentially destructive effects of the oil price collapse. The reduction in the bank’s overnight rate to 0.75 per cent from 1 per cent – its first move since September, 2010 – comes as a precipitous drop in the price of crude slams Canada’s oil-dependent economy. The oil shock will be “negative for growth and underlying inflation in Canada,” the bank warned in a statement. Bank of Canada Governor Stephen Poloz is expected to explain his dramatic decision at an 11.15 a.m. news conference in Ottawa Wednesday. The rate move, which few analysts anticipated, is an attempt by Mr. Poloz to shield highly indebted Canadian households from an oil-induced hit to their jobs and incomes – signs of which are already evident in Alberta. The rate cut ...

Barry Critchley of the National Post reports, Brian Gibson’s take on Canada’s overstaffed public pension plans : Given his role as a senior investments adviser to the chief investment officer of the US$91 billion University of California pension fund, there’s no real surprise that Canadian Brian Gibson has strong views of the structure of a model pension fund. Gibson, the former senior vice president of public equities at both Ontario Teachers Pension Plan Board and AIMCo, has advanced a number of suggestions as to how the UC fund should operate. Those suggestions have been made to Jagdeep Singh Bachher, the fund’s relatively new chief investment officer. In essence the suggestions focus on filling knowledge or skill set gaps in the organization with a series of hires, culling some staff and giving more assets to a smaller group of external managers. In this way returns should improve and costs (to the extent that the fund can negotiate lower fees with the managers with ...

Samantha Marcus of NJ Advance Media reports, How did N.J. get into this pension mess? : Some 800,000 people, working and retired, are beneficiaries of New Jersey’s pension system, a collection of funds going deeper into the red. It’s a system that Gov. Chris Christie, in his State of the State address last week, called “ an insatiable beast. ” In boom years, New Jersey leaders shortchanged the pension system, and those “sins of the past,” Christie said, “have made the system unaffordable.” Fully funding the pension system this fiscal year would cost $3.9 billion, but Christie cut the pension payment to just $700 million to balance the budget — a move that landed him in court , battling an attempt by unions to force him to pay more. Union leaders accuse the governor of going back on his word to have the state make full payments in exchange for higher contributions from workers. It’s a hot issue in Trenton made even bigger with Christie considering a White House run. T...