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- Elevated inflation risks not hard to see 22
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90 seconds at 9 am: Markets steadier as investors await Fed and ECB confirmation of fresh money printing to restart US economy and settle euro crisis; NZ$ hits record high vs euro
Here's my summary of the key news overnight in 90 seconds at 9 am, including news investors settled down overnight into a waiting and watching pattern in expectation the US Federal Reserve and European Central Bank (ECB) will confirm new stimulatory measures later this week to restart growth in the US economy and stave off a collapse of the euro zone.
The US Federal Reserve is widely expected to launch a third round of money printing to buy long term government bonds known as Quantitative Easing ( QE III) as early as Thursday, while the hope is the ECB will muster the necessary political consensus for fresh buying of Italian and Spanish bonds.
There remain doubts about the ECB stimulus, despite comments from the ECB President Mario Draghi, Italian Prime Minister Mario Monti, French President Francoise Hollande and German Chancellor Angela Merkel this week that they would do 'whatever it took' to save the euro. Markets believe this means Europe will use its temporary rescue fund, the European Financial Stability Fund (EFSF) to buy Italian and Spanish bonds directly from governments, while the ECB restarts its programme of bond buying in secondary markets.
However, Germany's central bank, the Bundesbank, is opposed to these measures and there remains doubts about what can be agreed at an ECB meeting due late on Thursday.
European stocks rose 1.6% on hopes for fresh ECB stimulus from the Thursday meeting. See more here at Bloomberg.
Spanish and Italian bond yields fell in anticipation of ECB-sanctioned bond buying. The Spanish 10 year bond yield fell to 6.61%, while the Italian 10 year yield fell to 6.03%. However, the German 2 year bund yield fell to minus 0.08% after fresh Eurozone confidence figures showed a worse-than-expected slump to three year lows. See more here at Bloomberg.
This Eurozone weakness saw the New Zealand dollar rose to a fresh record high vs the euro of 66 euro cents.
US stocks fell around 0.1% with the markets on hold for the Fed's decision on Thursday and ahead of key jobs figures due on Friday. See more here at Bloomberg.
The New Zealand dollar was solid around 80.8 USc in morning trade. Traders will be watching National Bank Business confidence figures due later today for direction for the New Zealand dollar.
Meanwhile, local investor confidence fell in June to a net 0% in June, the ASB investor confidence survey showed. Investors preferred term deposits again for the first time since the fourth quarter of 2011 over rental property, although Auckland rental property investors remained buoyant.