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90 seconds at 9 am: Bernanke says recovery frustratingly slow and Fed ready to act, but no green light for QE III yet; NZ$ firms with Dow; Milk powder price down 0.9% in Fonterra auction
Here's my summary of the key news overnight in 90 seconds at 9 am, including news US Federal Reserve Chairman Ben Bernanke told a senate committee hearing overnight that any reduction in unemployment was likely to be 'frustratingly slow' and that the central bank was ready to take further action to boost the economy.
However, Bernanke was also frustratingly non-specific about exactly what action the Fed might take or when it might happen. Markets were initially disappointed about the lack of a green light for a widely expected third round of a quantitative easing (QE III) or money printing to buy US government bonds.
But US stocks firmed in late trade after the intial disappointing when combing through the details they were able to find signs Bernanke is still in a mood to further stimulate the world's largest economy.
Bernanke said the Fed was looking at other tools for easing policy further, including buying assets such as mortgage bonds and government bonds, changing its communications about how long an 'extended period' it expected interest rates to stay 'exceptionally low' and possibly lowering the rate it pays on reserves deposited with the US Federal Reserve. See more here at Bloomberg.
The Dow eventually closed up 0.6% as confidence regained that an easing was possible as early as next month, boosting appetites for riskier assets such as the New Zealand dollar, which rebounded to around 79.8 USc from an overnight low of 79.3 USc.
The currency wasn't helped by results from Fonterra's fortnightly auction overnight of milk powder showing prices fell 0.9%, adding to the 5.9% fall at the previous auction. This was somewhat of a surprise after surges in other soft commodities such as wheat and corn because of a record-breaking drought in America. See the full auction results here.
Meanwhile, global banking group HSBC was severely criticised by a US senate committee, which charged it allowed terrorists, drug cartels and criminals access to the US financial system with lax controls on money laundering. The group's head of compliance told the committee overnight he was resigning. See more here at Bloomberg.