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90 seconds at 9 am with BNZ: US economic data mixed as confidence up but house prices and factory orders down; Markets wait ECB lolly scramble tonight
Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including mixed economic signs emerging from the world's biggest economy.
US consumer confidence rose in February to a one year high as hope for an employment recovery trickled through to the base of the economy. More than 60% of America's output is linked to consumer spending and their confidence will be crucial if the global economy is to start firing on all cylinders again. See more here at Bloomberg.
However, US durable goods orders fell by 4% in January, which was more than expected and the biggest fall in three years. This is a leading indicator of factory activity and may suggest America's manufacturing recovery is flagging, although economists pointed out the numbers might have been skewed by the expiry of a tax break, which boosted figures the previous month. See more here at Bloomberg.
Also, the S&P/Case-Shiller index of house prices in 20 American cities showed prices fell 4% in December from a year ago, which was slightly worse than expected. House prices are now back to their lowest levels since the housing crisis that triggered the Global Financial Crisis began in 2006.
This is a major factor to watch as the problems in the housing market filter through to US consumer spending because even if consumers have jobs, they feel poorer because of a drop in their house's equity, or even worse, an increase in the 'negative equity' between the house's value and the mortgage's value. See more here at Bloomberg.
These mixed signals meant US stocks continued to tread water overnight. The Dow Jones Index of America's 30 biggest companies struggled just below the key 13,000 mark again in late trade and the broader S&P 500 index was up just 0.2%. European stocks were up around 0.3% with many investors awaiting the results of the European Central Bank's Long Term Refinancing Operation (LTRO) due later tonight New Zealand time. The Dow eventually closed just above 13,000.
This is the ECB's second LTRO and is effectively the biggest lolly scramble on the financial planet. Any European bank can borrow as much as it wants for three year terms at 1% against often weak collateral. The ECB lent €489 billion to European banks in the first LTRO just before Christmas. This settled down Europe's bond market chaos because many of the banks turned around immediately after borrowing the money from the ECB and then bought government bonds in their respective countries, making a handy profit on the way through.
Markets are expecting the ECB to lend out another €500 billion in tonight's LTRO. See more at Reuters here.
The New Zealand dollar was in a holding pattern too. It was around 83.6 USc in morning trade, having made another abortive run towards resistance around 84.2 USc overnight. See more here in BNZ's currencies report on our site.
Meanwhile, closer to home, the CEO of QBE Insurance, Frank O'Halloran, announced yesterday he would step down after a 13 year run in the top job that saw QBE make 44 acquisitions globally. This followed a 38% fall in QBE's share price in the last year as disasters in Australia, Japan and New Zealand hammered its results. See more here at Bloomberg.
(Updates with Dow close above 13,000)