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90 seconds at 9 am: ECB cuts off cash to some insolvent Greek banks; US, European stocks down again; NZ$ at 76.2 USc; Beau Sancy diamond sells for twice reserve
Here's my summary of the key news overnight in 90 seconds at 9 am, including news from Reuters that the European Central Bank (ECB) has cut off emergency cash supplies to some Greek banks that are now insolvent.
The health of the Greek banking system and how it copes with heavy withdrawals of euros by depositers worried about a potential euro exit will decide Greece's future in the euro. Some observers have said the ultimate trigger for a 'Grexit' will be the collapse of Greece's banking system when the ECB, which is the only bank lending Greek banks money at the moment, cuts off supplies completely.
The FT reported overnight that bankers had seen 5 billion euros of cash withdrawals since May 6, with 0.75% of all deposits withdrawn on Monday and Tuesday.
These further worries that Greece will crash out of the euro zone and unleash yet more contagion across Southern Europe's bond markets and banking systems drove European and US stocks further down overnight, although not by as much as on Monday and Tuesday nights.
US stocks have just closed down 0.4% and European stocks fell 0.2%. Most of the action though was on European bond markets, where the Spanish 10 year bond yield rose to a painfully-high 6. 5% before easing back to 6.29% at the end of the day. The Italian 10 year bond yield rose well over 6% in early trade before closing at 5.98%. Many are now watching for ECB intervention.
Markets were calmed somewhat by the release of minutes from the US Federal Reserve's monetary policy committee showing several members were keen on further stimulus to get the US economy growing faster. The Fed has already assured markets of near 0% short term interest rates until late 2014 and has been buying longer term bonds to flatten long term interest rates too.
Markets see a 30% chance the US Federal Reserve will intervene again in coming months to carry out a third round of money printing or quantitative easing (QE III) to support the economy.
Meanwhile, all this turmoil saw the New Zealand dollar fall further overnight, hitting a fresh four month low of 76.2 USc. It is down from 82 USc just three weeks ago.
But to emphasise the topsy-turvy nature of demand for assets, the 400 year old 35 carat Beau Sancy diamond sold overnight for a record US$9.7 million, which was twice the reserve price, BBC reported.
Some investors are cashed up and hunting for 'safe haven' assets wherever they can find them.