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China unsettles markets Strong economic signs from China - and the subsequent speculation that Beijing will hike interest rate to cool things off - are unsettling global markets today.

The numbers from Beijing illustrate why China has been the world's engine of growth after the recession. Its economy expanded 9.8 per cent in the fourth quarter compared to a year earlier, and that's up from 9.6 per cent in the third quarter. Inflation, meanwhile, dipped in December to 4.6 per cent from 5.1 per cent a month earlier. But that's still 4.6 per cent, and markets fear a further tightening in monetary policy, which, in turn, could reduce demand from China in key areas such as resources.

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"GDP growth was a little stronger than expected in the fourth quarter, and the near-term outlook for growth also looks solid," the emerging markets research group at RBC Dominion Securities said today.

"This suggests that price pressures will remain uncomfortably strong in the months ahead, and that the dip in headline CPI inflation in December will likely be temporary. The case for further policy normalization remains strong and Beijing still has more work to do to keep the economy on an even keel. We continue to expect more rate hikes, forecasting benchmark rates to be increased another 75 basis points this year, with the next move by the end of the first quarter - risks are skewed to more aggressive action."

While it's not yet official, it appears China has now surged past Japan as the world's second-largest economy behind the United States.

For the full year, China's economy expanded by 10.3 per cent in 2010, to reach almost 40-billion yuan, or almost $5.9-trillion (U.S.) based on last year's exchange rates, according to calculations by The Wall Street Journal. While Japan releases its economic readings next month, the forecasts call for gross domestic product of some ¥477-trillion, or $5.4-trillion.

Canadian shoppers hit U.S. malls Armed with a pumped-up dollar, Canadian consumers are border hopping to hit the U.S. malls again.

It's not yet the level of 2007, when the Canadian dollar hit $1.10, but it has been climbing steadily and is expected to continue.

"This trend is likely to pick up in the months ahead as the currency has since strengthened above parity, and as America's warmer southern climates attract vacationers and home buyers."

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Morgan Stanley profit jumps Morgan Stanley today reported a jump in fourth-quarter profit to $867-million (U.S.), or 41 cents a share, from $617-million or 29 cents a year earlier.

"Despite this year's challenging markets, we delivered strong results in investment banking, enhancing our leadership positions in M&A, global equity and IPOs based on the strength of our banking, capital markets and equities teams, said chief executive officer James Gorman.

Spain eyes its cajas Spanish authorities are taking another look at their troubled savings banks.

Spain's finance ministry said it will be studying the state of the banks, or cajas, but hasn't decided yet how much capital they need. The Wall Street Journal reports today that Spain is poised to issue €3-billion in debt, and could boost that to as much as €30-billion, to help out the banks.

"Spain is also mulling over the creation of a 'bad bank' that would consolidate the toxic assets of its cajas," said Scotia Capital economists Derek Holt and Gorica Djeric.

"This is clearly a pre-emptive step in advance of fresh European stress tests after even the much maligned first go round last summer had fingered the cajas as having among the bigger troubles facing European banks. But in the grander picture, Spain's banks are not the same issue they were for, say Ireland. In Ireland's case, it was the banks that were primarily responsible for massive external debt that ultimately backed up onto the Irish government's balance sheet. In Spain's case, their external debt-to-GDP ratio is far healthier in aggregate and in terms of the government's share than all of the other beleaguered peripheral economies."

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Wendy's/Arby's explores Arby's sale Wendy's/Arby's Group Inc. could soon just be Wendy's. The fast food giant said today it is looking at possibly selling the Arby's part of the business, known for its roast beef sandwiches.

"We believe the way to maximize shareholder value is to focus all of our management and financial resources on continuing to build the Wendy's brand," said chairman Nelson Peltz. "... Despite Arby's positive momentum, the reality is that the Wendy's brand, given its relative size and scope, is the key driver of shareholder return, and we believe we should focus on the execution of the compelling growth opportunities at Wendy's."

Boyd Erman's Morning Meeting Bank of Nova Scotia tapped the Australian market to raise $1-billion in a sale of covered bonds in Australia. The bonds are backed by mortgages that are held on the Scotia balance sheet, Streetwise columnist Boyd Erman reports today.

In Your Business today

Social media can help business travellers wring extra value from conferences. "You can have an extensive network that is intimate without having to do the 'circuit,' and then when you do hit the road it allows you to meet a wider range of people," says Alexandra Samuel, the director of the social and interactive media centre at Emily Carr University in Vancouver.

Bottling - or boxing - what you sell allows you to turn a squishy, people-dependent business such as a travel agency into a scalable and consistent growth company. SOTC Box Holidays, columnist John Warrillow writes, sells the benefit of travel in an all-in-one tangible package, rather than leaving would-be vacationers to piece together a holiday using a search site that can make even the most well-heeled traveller feel like a floundering neophyte.

When it comes to advertising, traditional blunt marketing methods required ad agencies, artists and contracts, and involved lots of costly and time-consuming mistakes. Now, says Your Business magazine columnist Doug Steiner, the distributed power and focus of the Internet has blown up that model.

In Personal Finance today

Personal finance columnist Rob Carrick and Home Cents blogger Chaya Cooperberg discuss how, used appropriately, a HELOC can be a good thing.

Smart Cookies columnist Angela Self describes the right way to use a Tax-Free Savings Account.

From today's Report on Business

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