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90 seconds at 9 am: Fed talks the money printing talk but doesn't walk the walk; Global factory output contracting; Dow falls; NZ$ solid at 80.8 USc after milk powder prices rise 3.5%
Here's my summary of the key news overnight in 90 seconds at 9 am, including news the US Federal Reserve said it was prepared to act to boost flagging growth in the world's largest economy, but held back from actually pulling the trigger.
Most economists had expected the Fed to hold off on announcing a third round of quantitative easing known as QE III until September 13, but the lack of concrete action was disconcerting for markets expecting something more definite after months of weak jobs data and signs the US economy was losing momentum. Here's the full Federal Reserve statement after the two day meeting of its Federal Open Markets Committee.
The Dow closed down 0.2% and the yield on the 10 year Treasury bond rose to 1.52% from 1.47%.
Market attention now swings to the European Central Bank's monetary policy decision later tonight, where it is expected to make some sort of announcement about buying Italian and Spanish bonds to ease stress in Euro-zone financial markets. See more here at Reuters.
The Fed's inaction came after a fresh round of factory output data showing the activity contracting or slowing in synchronised fashion around the world. The Purchasing Manager Indices (PMI) released for July are watched closely as an early indicator of economic activity, given they include detail on factory orders, export orders, investment intentions and employment intentions.
US manufacturing activity as measured by the Institute of Supply Management index unexpectedly contracted in July for the second month running. See more here at Bloomberg.
UK manufacturing shank the most in 3 years in July as export orders slumped. See more here at Bloomberg.
Chinese manufacturing was close to contracting in July as the PMI there unexpectedly fell to its weakest level in 9 months of 50.1 in July from 50.2 in June. Anything above 50 indicates expansion, while below 50 indicates contraction. See more here at Bloomberg.
Meanwhile, Euro-zone industrial output slumped for the 11th straight month, including in Germany and France, which had been the strongest parts of the Euro-zone. See more here at Reuters.
Despite the signs of a synchronised global slowdown and the Dow's slight fall, the New Zealand dollar was solid around 80.8 USc and near record highs vs the euro of 66.1 euro cents.
It was helped by good news from the fortnightly auction of milk powder on Fonterra's online auction platform Globaldairytrade. Prices rose 3.5% for the first time in two months. News of the worst drought in 50 years in America and the subseqent spike in dairy cattle feed prices there is thought to be a factor. See the Globaldairytrade results here and BNZ's currencies report on our site here.
(Updated with more detail, video)