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90 seconds at 9 am: China, Euro-zone and Britain ease monetary policy within 45 minute window; All eyes on US jobs data for QE III green light; NZ$ hits record high 65 euro cents
Here's my summary of the key news overnight in 90 seconds at 9 am, including news of concerted central bank action overnight to ease monetary policy to try to turn around a slumping global economy.
The People's Bank of China delivered the main surprise, cutting its main deposit and lending rates by 31 basis points.
This second easing of Chinese interest rates within a month came moments after the Bank of England announced an increase in its money printing programme to buy long term government bonds known as quantitative easing. Less than 45 minutes later, the European Central Bank cut its main interest rate by 25 basis points to 0.75% and reduced its overnight deposit rate for banks to 0%. See more here at Bloomberg.
The Chinese move surprised many, coming so soon after a previous easing and suggesting figures due on the weekend on Chinese economic growth could be weaker than expected. See more here at Bloomberg.
However, some had hoped the European Central Bank would do more to boost the Euro-zone economy, which is slumping back into recession in the wake of the latest debt crisis turmoil. European stocks fell 1.2% and US stocks fell 0.4%. Spanish and Italian bond yields spiked. See more here at Bloomberg.
The trouble is central banks are nearing the edge of their ability to influence economies as interest rates get ever closer to zero. They are essentially now pushing on a string. Borrowers are ignoring record low interest rates because either lack the confidence to invest or already have too much debt. Many European and US bankers are also reluctant to lend their money out, given borrowers either don't have good enough credit ratings or the banks themselves are hoarding cash to bolster their profits and repair shredded balance sheets.
Meanwhile, Investors will watch US non-farm payrolls figures closely tonight. Economists are expecting US jobs to grow around 95,000 in June, up from the much-weaker-than-expected 69,000 growth in May. Another weak number is widely expected to give the US Federal Reserve the green light for a third round of Quantitative Easing (QE III) when it next decides on monetary policy on August 1.
There was a glimmer of hope for the jobs figures after US jobless claims last week were better than expected. See more here at Bloomberg.
All this monetary policy easing, money printing and rate cutting overnight in the Northern Hemispher made the New Zealand dollar look relatively attractive. It was solid around two month highs of 80.4 USc this morning and hit a fresh record high of 65 euro cents overnight. It is also up at a two month high against the British pound of around 51.8 p.