90 seconds at 9 am: Global slide

90 seconds at 9 am: US, European and Asian stocks fall on fears central banks and govts can't or won't do more to prevent a synchronised global slowdown; NZ$ down

13th Jul 12, 9:03am by Bernard Hickey

Here's my summary on on the key news overnight in 90 seconds at 9 am, including news US stocks, European stocks and Asian stocks continued to fall as fears grow that central banks and governments either won't or can't do much more to prevent a synchronised global slowdown in economic growth.

Investors took money out of riskier assets and currencies and put their money into 'safe haven' assets such as US and Japanese Treasury bonds. This saw yields on those bonds hit record lows and both the US dollar and Yen strengthened. The New Zealand dollar fell to 79.1 USc overnight.

These fears about central bank impotence or intransigence are combining with worries about the austerity strategies being pursued by governments on both sides of the Atlantic.

Spain's announcement yesterday of an extra 65 billion euros of budget cuts, including a GST hike from 18% to 21%, has refocused attention on the German-led strategy in Europe of forcing governments to try to cut their way back to growth. Many fear this will worsen a deleveraging spiral that simply magnifies the weight of impossibly high debt loads in the peripheral European economies. See more here from Ambrose Evans Pritchard at The Telegraph.

US stocks fell 0.5%, European stocks fell almost 1% and Asian stocks fell almost 2 percent as investors weighed up recent central bank comments and actions. See more here at Bloomberg.

US Federal Reserve minutes released on Thursday morning our time showed the Fed divided over suggestions of a third round of quantitative easing, while the Bank of Japan announced moves yesterday that effectively left its monetary stimulus unchanged. See more here at Bloomberg.

Meanwhile, investors are putting their money into US and Japanese bonds. Bloomberg reports the 30 year Treasury bond yield fell in a fresh auction to a record 2.58% and the 10 year Treasury bond yield fell in an auction the previous day to 1.46%. See more here at Bloomberg.

These moves into 'safe haven' assets also saw the euro fall again against the US dollar and yen, while the pound also weakened against the US dollar.

Meanwhile in Australia, there was a surprise loss of 27,000 jobs in June. See more here at Bloomberg.

Markets will focused later today on Chinese GDP figures for the second quarter, which are expected to show annualised growth falling to 7.7% from 8.1%.

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57 Comments

by vavau.to | 13th Jul 12, 9:34am 1342128862

first time first comment. US 1.46 ten year bond. lets get proactive and cut rates now save tourism, fishing ,forestry,farming & manutactuering as this = jobs . the economy needs money circulating.

by idlebumski | 13th Jul 12, 9:51am 1342129905

There are some who argue that it is only the govt who can direct fresh money to main street, thereby defeating the deflationary impulse. Low interest rates arguably signal that there is plenty of money around, but it is not circulating in daily commerce of the masses, and more importantly there is no demand for it in private sector while there is any deflatonary threat. Once this is the prevalent psychology, it feeds on itself. It has taken hold in other places but it remains to be seen what all this will lead to here in NZ. I like following this guy, who seems to understand it, has proved himself by making righteous calls over the preceeding months, and more importantly is making huge money betting on deflation.

by Christov | 13th Jul 12, 10:16am 1342131409

Thank You...idlebumski, a ripping read and not too dissimilar from my ground zero theory.

A couple of closing lines to maybe whet the appitite of those who have not yet clicked your link.....Cheers again...really good read.

Soros knows they won’t……he will be right once again. And become wealthy twice over because of it. The third option of course, is to form the United States of Europe. Fiscal – political union. Problem. Can’t be completed before the currency collapses. The only way for Germany to protect the wealth it has made from this beneficial Euro experiment……is to get out of the union……or break it up.

by iconoclast | 13th Jul 12, 10:34am 1342132457

Christov: Like your "ground zero" idea. Last week, in response to BH's proposal for a sudden "inflationary hit", I put forward the opposing argument for a one-off hit for a "levelling of the playing field" and got whacked by Chris_J, he of the landed gentry.

by Christov | 13th Jul 12, 10:42am 1342132923

iconoclast .....That is always going to be the response from those with leverage and exposure ...understandably I might add, but if idlebumski's guy is right or even there abouts right it will have the gravest effect upon those who rely heavily on leveraged positions....Banks included.

by idlebumski | 13th Jul 12, 11:17am 1342135072

Christov; It is apparent that whatever happens in NZ is a reaction to what's going on in more important markets, the same markets that determine the value of NZD daily. Right now the biggest canary in the coalmine is TNX (10-yr US treasury), now below 1.5%. That spells pure deflation. Some here reckon there will be inflation resulting from recent stimuli and/or another property bubble in AKL, but I am more inclined to hide behind the big boys who are driving rates lower in the capital markets. To bet against them seems like asking to be crushed.

As I said somewhere else yesterday; in a way this means all who are bullish on property in AKL are in essence long the fear that has defeated greed lately. If that eases, rates will come up, and possibly interupt the game of musical chairs that is property spec.

But sitting in cash means also I am looking for signs like this.

Am open to have my position challenged by the obviously learned participants here.

by Christov | 13th Jul 12, 11:42am 1342136523

I have a Question idlebumski.......what currency have you chosen to sit upon....?

by idlebumski | 13th Jul 12, 11:51am 1342137089

Mainly NZD, but am following rocksolidtruth and the bond market makers by moving that mostly into USD, most likely in prep to buy some real estate in Los Angeles (I have green card) next couple weeks. I had been saving hard since 2008 in readiness for picking up AKL property at fire sale prices, but it hasn't happened, yet. So I have to go where it has.

by idlebumski | 13th Jul 12, 12:36pm 1342139806

Agreed there are many with cheap money and hard on for AKL property. They are only there though because they think they will make money. And so far they have. If that market psychology changes, the top is in and they'll disappear quicker than a fart in the wind. Could either be from something 'conventional' we expect (like EU/US recovery forcing rates up and that cheap money gets repatriated), or something else; maybe Winston Peters becomes next PM, maybe some type of disruption to the massive foreign student market in AKL, maybe somehow NZ and US end up in some dispute over Kim Dotcom. Anything is possible. All I know is that underneath it all, you gotta try and stick to the buy low sell high ethos. All else is noise.

by Ghost Dog | 13th Jul 12, 4:21pm 1342153311

The low interest on US Bonds are a product of the Fed printing money to buy them.

This is the legendary inflationary pressures that result from money printing.

As the yield from Bonds fall they become correspondingly more expensive compared to last year (especially true when yields fall below the CPI).

So rather than hitting the real economy (until the money is spent by govt on-shore) its the Bond market that is awash with 'funny money' and as such the price, to the buyer, rises.

by Rudderless | 13th Jul 12, 1:31pm 1342143103

New factories that make what we need - must be fired up fast. Import Substitution. Burn the Free Trade Agreements.

The US manufacturing is growing fast. They are planning massive Import Substitution.

Ironic. When our currency falls - the cost of the tooling will increase. It will be too late to act.

Manufacturing what-we-need will provide us with jobs and customers.

by raegun | 13th Jul 12, 1:13pm 1342141998

Hence the old expression, "made round to go round"

by raegun | 13th Jul 12, 1:15pm 1342142156

Which of course, was meant as a reply to vavau.to comment about money and circulation

by Andrewj | 13th Jul 12, 9:44am 1342129456

Liars, Damn Liars, And Budgets

The U.S. government’s budget deficit widened in June, as spending jumped 9.3 percent from the same month a year ago.

$59 billion? More like $85 billion, on a run-rate for $1.267 trillion this calendar year ($633 billion thus far since January.)

http://market-ticker.org/akcs-www?post=208520

by Andrewj | 13th Jul 12, 9:46am 1342129579

Current debt crisis merely a warm-up act

It is sometimes possible to believe that suffering is worthwhile, a way of paying for past sins. In this light, the age of austerity in which we supposedly live has a sort of redemptive quality. Grit our teeth and we’ll come out the other side, purified and ready for robust economic recovery.

However, after five years, we are in a worse place than when we started. One would have thought that the recent deleveraging caused debt ratios to collapse. Yet, after the financial maelstrom of the past five years, debt ballooned to a weighted average of 417 per cent of gross domestic product from 381 per cent in June 2007 in the 11 economies most under the market microscope.

http://www.ft.com/cms/s/0/418ceb14-c45d-11e1-9c1e-00144feabdc0.html#axz…

by Andrewj | 13th Jul 12, 10:00am 1342130426

Euro tumbles as Asian funds shun EU chaos The euro has plunged to multi-year lows against a range of currencies on fears of a deepening slump in Italy and Spain, and ugly disputes between eurozone leaders

http://www.telegraph.co.uk/finance/economics/9396430/Euro-tumbles-as-As…

Peugeot have laid-off 8000 workers from one of its factories near Paris today.

by Christov | 13th Jul 12, 10:01am 1342130515

Can't or won't ,Bernard ?....are you starting to believe in a Unilateral Ground Zero....yet...?

If...............great big IF...Andy Xie is not exagerating....we are getting ominously close to that very scenario.

I still think it's what the Americans want albeit on the down low.....leveling the playing field.

I find it a bit amoooosing that the cries from here on QE1...QE2...TWIST...Twist with a twist...were all recieved as idiotic ideas...(quite agree) but now people seem to be sending messages that the Fed ..ECB...need to ...do...more......why won't they...do...more.

Print and Pump doesn't work...didn't work then ...wont work now....but if we all went broke on the same day....?...well.,..I mean well...you get a brand new Monopoly board...with some brand new cash...and get out of jail cards...for those in need.

by iconoclast | 13th Jul 12, 10:15am 1342131353

Bernard: your headline "can't or won't do more to prevent a synchronised global slowdown"

Can you do a grammatical analysis and explain in simple terms what you are trying to convey.

Do (you) they want an un-synchronised chaotic slowdown? What type of slowdown would you prefer?

by south paw | 13th Jul 12, 11:27am 1342135647

Loaded question there iconclast.

How about you answer the question "When are you going to stop beating your wife?".

by Christov | 13th Jul 12, 11:39am 1342136342

Geesus...South Paw, what th hell did he say to draw a comment like that...? " beating the wife" is that vanacular for choking your right honorable member...?

In any case, I thought his question was fair, I'd also like to know Bernard's opinion on it....as previously he has castigated the FED at every opportunity for redefinining the meaning of stupidity in caving in to the "Markets"

Just a little clarity ...as obviously you can't have it both ways...or can you...?

by south paw | 13th Jul 12, 11:48am 1342136895

Do you no understand what a loaded question is, Christov?

The full...stop...key...on your computer...will wear out...if...you...keep doing that...

by Christov | 13th Jul 12, 12:16pm 1342138611

Thanks for the Tip there South Paw......but I've got one of those new fangled detachable keyboards, ya just throw it out and get a new, full stop...............................................On the debt jubilee, just when all bets are off someone kicks the ante can again.........pulling de..lever.

by iconoclast | 13th Jul 12, 12:28pm 1342139295

No loaded question .. I'm just a simpleton .. with a simple question .. the teaser headline means the global economy is slowing of its own accord, and it's doing it in a uniform (synchronised) way all on its own. Now what needs to be known is why should governments and their central banks intervene to prevent or disrupt that uniformity? (synchronisation)

So what are you implying southpaw - spit it out - what is the opposite of synchronise?

by Bernard Hickey | 13th Jul 12, 3:31pm 1342150308

Iconoclast

Good question and I don't think it's of the 'wife beating' variety.

It's a question I think about a lot.

There are two answers. I think the world's central banks can't do much more to boost the global economy, now that interest rates have been cut to the zero bound. The money printing isn't working because all it's doing is circulating back into the central bank vaults courtesy of banks being either too risk averse or borrowers unwilling/unable to take on more debt.

Governments won't do much more (currently) to boost the economy because they are captured by the austerity and worry about electorates and bond markets punishing them for taking on too much debt. However, government bond yields are at record lows because the rich and companies and pension funds are scared witless about investing and approaching ages where they have a lower risk appetite.

So the only way out seems to be for governments to force their central banks to print money to buy bonds directly off governments, who then spend the money directly into the economy to get growth and confidence going again. This is possible if central banks give up their independence and politicians can convince voters that the paradox of thrift means mass debt repayment will kill the economy.

For now we have a stand off that is only likely to be broken by political change.

Voters revolting at austerity and depression will force governments to print and spend. Or something else will happen to convince voters/governments to do it.

The last time we were in this position a short man with a small mustache in Germany forced them to do it...

cheers

Bernard

by Christov | 13th Jul 12, 3:52pm 1342151566

So effectively you don't buy the Ground Zero idea Bernard,,,?

On political change, perhaps pre war civil disobedience, there does not have to be a logic or consideration to the fiscal outcomes, the fiscal landscape alters with the occurence of events.

By the way I believe I asked a similar question....thank you for covering both of us with it.

Cheers....heard anything of GBH..? I'm jus back so don't know where he's got to and I need a laugh, you know how it is.

by iconoclast | 13th Jul 12, 4:15pm 1342152900

Christov: Ground Zero is the markets built-in re-balancing mechanism to re-balance any excesses it ocasionally produces. That's the way it's supposed to work. These interventions undertaken by the central banks, invented and led by Bernanke were presumed to cushion the impact of sudden implosions of the Lehman kind, in the expectation everything would return to normal within 6 months. The fact Bernanke was prevailed upon to dream up his fiendish plan was a red-flag that the problem was bigger than he was prepared to tell. His next problem is he is now having to prop up (patch-up, repair) the safety nets which are still in place after 4 years when it should have been over in 6 months. In todays Top Ten there is comment that the de-leveraging (capitulation, puking distressed assets) will take up to 15 years. Now that is telling you something. What should have been 6 months, turned into 4 years, now expected to go for 15 years. How much longer do these protectees want. I say "ground zero" now. Pull the pin and let-em-have-it. They've had 4 years of protection.

by Christov | 13th Jul 12, 4:17pm 1342153074

Amen to that iconoclast...let's be on with it.

by Stephen Hulme | 13th Jul 12, 10:31am 1342132280

A little flavour on the significant move of deposits post ECB directives accounts for the highlighted currency and yield moves.

by south paw | 13th Jul 12, 11:33am 1342136033

Too late for a debt jubilee? Looks like the economic tsunami has reached the shoreline now.

Steve Keen says don't hand out the 'printed' money to the banks, go direct to the people who have to first use it pay off any debt, anything left over is yours to start spending. It's the only chance to escape the gravitation of the biggest debt blackhole in history.

by idlebumski | 13th Jul 12, 12:00pm 1342137658

Interesting; Yours is the 2nd comment I've seen in last 24-hours mentioning this debt 'jubilee' concept, the possibility of which is something to watch.

by Ralph | 13th Jul 12, 11:44am 1342136645

Wells Fargo, the nation’s largest home mortgage lender, has agreed to pay at least $175 million to settle accusations that its independent brokers discriminated against black and Hispanic borrowers during the housing boom ...

http://www.nytimes.com/2012/07/13/business/wells-fargo-to-settle-mortgage-discrimination-charges.html

So if you're thinking of commiting fraud then make sure you spread around the love. LOL.

by vavau.to | 13th Jul 12, 12:02pm 1342137776

well i would like to know more from the guy here who mentioned $2 billion support from NZ goverment a year that supports houseingmarket, why we then hit morgages with high interest rates to lower it

would love to hear more about this

by mike | 13th Jul 12, 7:12pm 1342163545

Was'nt me but the government shells out about a billion in rent subsidies for landlords each year.

by General HubHub | 15th Jul 12, 10:35am 1342305320

Seriously, how do they do that?

by mike | 15th Jul 12, 8:18pm 1342340281

Accommodation assistance from winz

by Kate | 15th Jul 12, 9:16pm 1342343763

Think its more near $2billion these days;

http://www.landlords.co.nz/read-article.php?article_id=4192

by waymad | 13th Jul 12, 12:50pm 1342140642

Synchronised Slowdown - is that like when one of a pair of Synchronised Swimmers drowns?

by raegun | 13th Jul 12, 1:18pm 1342142295

Oh well, at least the light at the end of the tunnel can be seen. While the world comes crashing down round our ears, NZ house prices start to head for the stratosphere again. Or maybe that's an oncoming train

by Wolly | 14th Jul 12, 9:46am 1342215988

"French carmaker Peugeot Citroen has set out plans to cut 8,000 jobs and close an assembly plant outside Paris as losses mount.

Last week, Peugeot said its first-half sales had fallen 13% amid a "profound crisis" in its eurozone markets. Peugeot's chairman, Phillipe Varin, said the situation was grave.

"I am fully aware of the seriousness of today's announcement, as well as of the shock and emotions they will arouse in the company," he said in a statement.

Unions described the announcement as a "declaration of war" and an "earthquake", the AFP press agency reported"

http://globaleconomicanalysis.blogspot.co.nz/2012/07/car-maker-peugeot-to-cut-8000-jobs.html

Time for some socialist idiocy from the new gee wizz president of France...remove all taxes from auto sales...on French cars only of course...for union members only of course...oh and socialist pollies...haha

by Wolly | 14th Jul 12, 10:06am 1342217169

"His Keynesian thesis simply does not add up. We saw endless Keynesian and monetarist stimulus in Japan. It got them nothing. He learned nothing from Japan. He learned nothing from the great depression. Yet, because he has a Nobel prize, he can write a book and tell everyone what they should be doing. Man, this guy needs to get out of his ivory tower, Lauren, and get into the real world."

Mike "Mish" Shedlock

by Wolly | 14th Jul 12, 1:44pm 1342230283

"Maori claims threaten SOE value - Treasury" herald

And there I was believing the water came from the sky where it belonged to nobody....silly me...of course it belongs to those who own the land it falls on....oops wait a bit...what about rivers!...they flow through from somewhere else...so do many lakes....oh dear oh dear.

Next up will be Maori claims of ownership of the air we breath...stands to reason when the airflow is used to generate power...

Does this mean Maori also own the geothermal energy....which results from tectonic plate movement...which causes earthquakes that destroy cities...so shouldn't Maori be forking out to rebuild chch!

Hang on a bit...didn't many tribes butcher and slaugter neighbouring tribes using European weapons...so they could flog the stolen land to buy more weapons....and doesn't that mean the iwi owning land stolen using said non Maori weapons, under Maori traditional beliefs, have to give it back!!!!!

by Kunst | 14th Jul 12, 2:36pm 1342233382

Wolly – old bean - I hope you don’t let you grow a little moustache.

by Alter Ego | 14th Jul 12, 3:20pm 1342236037

Do not say that Walter, they have not taxed that yet...and Wolly growing a moustache....may give em ideas, if you put words into their mouths and a thought in their tiny socialistic, inflated minds.

So lets all keep a stiff upper lip, be clean shaven and Soldier on...

And buy the way.....do not mention the war.

And whatever else..............Remain neutral..in whatever you say and do....there is an art to...it...as ye well know.

by Kunst | 14th Jul 12, 3:33pm 1342236792

Alter Ego - Remain neutral..in whatever you say and do – huuu that’s not me – there are too many sheepish people in our society, who unfortunately are victims of our system.

I’m quite happy to swim against the flow.

by robby217 | 14th Jul 12, 3:51pm 1342237862

"I’m quite happy to swim against the flow"

Everyone claims they are swimming against the flow these days

by robby217 | 14th Jul 12, 3:59pm 1342238395

by Alter Ego | 14th Jul 12, 4:02pm 1342238535

Sharp as a Swiss Army Knife...Walter....I knew you was not neutral....I know where ye stand.

I was just winding up for the day....and you was first...well second.....but not last.

The Government think we are the sheep and just fodder for the system.

Swim with the tide...mate...like me. (Yeah...right)....It's going out fast.

Go with the Flow..

There is billions to borrow, if ye want to borrow your way to success...get a big mortgage and open up the biggest Art Emporioum in the Southern Hemisphere.

Cannot lose mate..........mates rates is the go from all Banks now.

Think Big. Think Bigger, Think Biggest.

The skies the limit.....so add a Casino on the side....Ye do not have one in Kaikoura yet....maybe a wee Conference Centre, along with the Pokies...and a wee bike trail.

It is all the rage.

May prove to be a big asset. (But secure the Water Rights first...nudge, nudge...wink...WINK)

by Ergophobia | 14th Jul 12, 2:44pm 1342233850

Wolly, on the matter of Maori tribes enslaving, killing and eating other Maoris, this has actually been before the Waitangi tribunal; the Solomon family, I think, argued that Taranaki Maoris (the same tribes that now hold an annual peace festival) had done just that to them and, ipso facto, indigenous rights in the Chatams belonged to them. As I recall the Court threw the case out because it had all happened a couple of years before the Treaty(even tho a British ship transported the invaders) and the Morioris should just suck it up. Rough Justice?

Ergophobia

by Wolly | 14th Jul 12, 7:02pm 1342249331

Yes but they used non traditional weapons to carry out the murders...the court did not want to trigger a wholesale mess as would have been the case, since many iwi 'own' land stolen by that means.

The court took the easy way out. Far better to sweep the inter tribal warfare and theft under a carpet of when the Treaty was signed....not good form to have iwi fighting iwi in the courts knowing it would result in bloodshed.

by Alter Ego | 14th Jul 12, 3:43pm 1342237408

Only works one way. New comers always pay to join the club and a yearly membership fee thereafter.

No Zeal-and never was formed before the white hon-key saw a way to extract real Mana from the Native Population with white, yellow and pink and other such foreign skin.

Skin in the game is a real asset. Depends on yer colour. Blue, Green, or even Red.

So let us bury the hatchet....once and for all. Shake hands.....and do not come out fighting.

All ye of Asian, Japanese, German, Italian, French and British blood etc.....forget it...we is the United Nations, but some are more united than others, in the National interest.

(Used to be in the Labour one...but that stopped working...in more ways than one and the benefits just got bigger and bigger)

Some people do have long memories... I think as an indiginous person, I own half of Cumbria and Norway, with a little Irish and Scotch claims...and come to think of it...there must be a Gold Claim in there somewhere, if I can work it.

Now where is that Indiginous Lawyer....I will slip him a wee dram if the Scotch one comes orf.

by Wolly | 14th Jul 12, 7:09pm 1342249773

"Mayor Bob Parker says he will keep a $2500 pay rise this year, and if anyone wants to complain they should write to the Government" press

Better still, they should vote for someone else to be mayor...

by Alter Ego | 14th Jul 12, 8:05pm 1342253140

An inflated ego and an inflated salary....and an inflated sense of his own importance.

Two heads would be better than one.....and at half the price....A BARGAIN.

Total would pay for one of Hugh's sections...and a house, if the materials were sourced right.

Still...a dunny at the bottom of the drive is all a ratepayer is worth....eh. ...and that is right on the NOSE.

by Wolly | 15th Jul 12, 8:31am 1342297885

Probably one of the ten most serious dangers the NZ economy faces.....................Sue Bradford!

"beneficiary advocate and former Green MP Sue Bradford said everyone would be better off if beneficiaries received more money.".....doh

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10819669

by Alter Ego | 15th Jul 12, 9:04am 1342299845

Wolly...

Normally her Mother would have smacked that nonsense...on the head.

That is joke folks...in case you were wondering.......

But as the loonies are in charge, what would you expect in the insane asyslum I call No Zeal-and. (And this just proves my point)

And we actually paid for her nonsense, probably still do.

No wonder the Country is bereft of any sanity.

by Wolly | 15th Jul 12, 9:29am 1342301382

Bradford should show us all how great she can be at owning and running a private business...one not receiving state handouts...one that depends on efficiency and enterprise and good management....shall we call it 'Bradfords Folly'

She is a serious risk to this economy...of that I have no doubt....sadly she is not alone....there are heaps who are of the same mind..

Socialists and Marxists suffer from a belief that they can make the world to be what they think is better....so far they have failed in every way possible and all their efforts have served to make matters worse.

by General HubHub | 15th Jul 12, 10:17am 1342304254

How those capitalist rorters in the Beehive doing for you? I don't know which lot is worse!?

by Wolly | 15th Jul 12, 9:42am 1342302148

"Arron Baker, acting general manager for immigration, said any person who obtained a visa dishonestly risked prosecution and having their immigration status reviewed with a view to being deported."

Number deported in the last 5 years....zero?

http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10816725