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The news stream
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- 90 seconds at 9 am: American QE 49
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- 90 seconds at 9 am: Reality checks 8
90 seconds at 9 am: Dow down 250 pts on global slump in factory output and disappointment over Fed's decision not to print money; NZ$ down to 78.5 USc; Oil under US$80/bbl
Here's my summary of the key news in 90 seconds at 9 am, including news US stocks fell 2.2% overnight after fresh data showed a concerted slump in factory output growth across America's east coast, Europe and China.
Investors were also disappointed over the US Federal Reserve's decision on Thursday our time to extend its 'Operation Twist' programme rather than start a third round of money printing known as Quantitative Easing III or QE III.
The Dow Jones Industrial Average fell 250 points or 2%, while the S&P 500, a broader measure of US stocks, fell 2.2%. See more here at Bloomberg.
US factory orders in the Mid-Atlantic region, as measured by the Philadelphia Federal Reserve Survey, grew at their slowest rate in 11 months and jobless claims last week were worse than economists had forecast. See more here at Reuters.
Euro-area manufacturing shrank at its fastest pace in three years in June, while the HSBC Markit guage of factory activity in China fell for the 8th consecutive month. See more here at Bloomberg.
Concerns about global growth saw commodity prices slump overnight to their lowest levels since November 2010. Commodity prices have now fallen 21% from their highs in February. Oil prices fell around 3% with the NYMEX crude price falling under US$80/bbl for the first time in 8 months. Gold fell almost US$50/oz to US$1,566/oz. See more here at Bloomberg.
The New Zealand dollar fell to 78.5 USc overnight, in line with a drop in appetites for risk. It had been over 80 USc for much of yesterday after stronger than expected GDP growth figures for the first quarter saw investors reduce their bets on a cut in the Official Cash Rate later this year. See more here in Alex Tarrant's article.
However, the New Zealand dollar hasn't fallen nearly as much as commodity prices since February. It is down just 6% from its February levels while the prices of New Zealand's export commodities are down 17%.
Meanwhile, there was some good news overnight in the Spanish bond markets for a change. The Spanish 10 year bond yield fell to 6.61% after auctions of 2,3 and 5 year Spanish government bonds were well bid and after fresh speculation that Europe's Financial Stability Fund (EFSF) will buy Italian and Spanish bonds directly. See more here at Bloomberg.
However, German Chancellor Angela Merkel again rejected talk of using European rescue to buy Southern European bonds directly. See more here at Bloomberg.