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90 seconds at 9 am: Italian election outcome confused, euro at risk; China PMI falls unexpectedly; tough US budget deal emerging; Aussie banks in China food focus; NZ$1 = US$0.838, TWI = 76.6
Here's my summary of the key news overnight in 90 seconds at 9 am, including news indications that a pro-reform centre-left government may win the Italian general election boosted risk assets today, though there remains considerable scope for volatility, especially if Berlusconi wins the Senate.
Early exit polls signalled that the centre-left coalition led by Bersani’s Democratic Party is set to emerge as the largest party in the lower house of parliament, with Berlusconi’s centre-right coalition trailing in second place.
Bersani is broadly supportive of Mario Monti’s reform programme, which is why his apparently strong showing is positive for the markets. Monti himself appears to have done poorly, but the most favourable outcome – a Bersani/Monti coalition government – is still possible.
But watch that Senate outcome. Markets are nervous and euro stability is at risk.
In China, a key gauge of momentum in the manufacturing sector fell unexpectedly in February, raising concerns about the strength of their economy.
HSBC said its "flash" index of purchasing managers' sentiment fell to 50.4 in February from January's final reading of 52.3, indicating China may be shifting to slower growth, although the timing of the Lunar New Year holiday may also be a reason.
In the US, Congressional leaders are quietly considering a deal to avert a government shutdown next month - but at the cost of prolonging across-the-board spending cuts.
The President may have miscalculated Republican acceptance that defence spending may need to be sacrificed to get the spending cuts they want.
And finally, the push by Australian banks to fund the 'food bowl of China' strategy is getting another boost with NAB, BNZ's owner, stumping up for their share of what they see as lucrative business. To date, ANZ has been the most vocal exponent.
The kiwi dollar starts today inching higher at 83.8 USc, 81.5 AUc, and the TWI is at 76.6 mainly because of the falling euro.