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90 seconds at 9 am: Dairy prices rise; Dow up; German investors confident; new US budget plan; US Fed worries about image; PPP failure; NZ$1 = US$0.847, TWI = 77.0
Here's my summary of the key news overnight in 90 seconds at 9 am, including news that the Americans have come back to work in a positive mood.
And we start in a similar way with the globaldairytrade auction recording strong gains, up 3.1% on the previous auction. More details here »
The Dow has reached its highest level in more than five years (October 2007), touching 14,050 soon after opening and holding the gains in midday trading. Euro stocks rose as well.
Driving the sentiment were gains in German investor confidence and expectations of major M&A activity between big office-supply store chains. Google topped US$800/share for the first time. Gold however has fallen back to close to US$1,600/oz.
On the other hand, the British currency is under pressure on swirling rumours it is about to lose its AAA credit rating from S&P. Against the NZ dollar, it is now at a new record post-float low.
The OECD said the economies of its 34 members shrank by 0.2% in Q4 last year, dragged down by the EU.
In the US, a new attempt by two bi-partisan ex-senators is underway to solve their latest budget problems. They have updated their plan to reduce US government deficit spending by US$2.4 trillion over 10 years through a combination of spending cuts, a healthcare overhaul and major tax reform. These two have credibility although their first attempt failed.
US Federal Reserve officials are starting to worry about a backlash from paying billions of dollars to commercial banks when the time comes to raise interest rates. The growth of the Fed’s balance sheet means it could pay between US$50 and $75 bln a year in interest for holding those additional bank reserves it has imposed, at the same time as it makes losses and has to stop sending money to the US Treasury. Could be a bad look.
There has been a blow to the proponents of PPPs. In Brisbane, the Airport Link project has collapsed and it is likely private parties will shy away from similar arrangements given their experience here. It was placed into administration yesterday just seven months after the road opened. Not enough cars are using the road to enable it to repay debts. The Airport Link collapse is the latest big Aussie toll road to have failed to meet the traffic forecasts underpinning the decision to build them.
And finally, there has been a daring diamond heist in Brussels. A well organised gang dressed as police drove on to the tarmac and took NZ$60 million in stones right as they were being loaded. No-one has been arrested yet.
The kiwi dollar is up marginally again this morning against the US dollar at 84.7 USc, but unchanged at 82.0 AUc, and the TWI is at 77.0.