Here's my summary of the key news overnight in 90 seconds at 9 am, including news key policy makers are moving markets.
Ben Bernanke came to the rescue of risk assets yesterday after he indicated that monetary policy would stay 'highly accommodative' for the 'foreseeable future'.
Bernanke has proved himself over the last few years as a friend of the markets, even though that may not be his main intention. Yesterday's comments suggest that he is all too aware of the mistakes by his predecessor following the Great Depression, a period in which he is a noted authority.
Monetary policy was tightened prematurely by the Fed in 1930s, and it seems that in 2013 Bernanke would rather err on the side of caution, particularly when inflation is so low. Expectations of QE tapering have now been scaled back, and the markets rallied accordingly.
US equities are up strongly this morning - up more than 1% in New York following the Aussie markets up 1.3%, as are metals prices; gold is up to US$1,285 this morning and copper is at a three week high, although oil has fallen more than US$3/barrel.
Not everything was rosy however. More people claimed for unemployment benefits in the US last week than was expected.
On the other side of the coin, the US Treasury reported a budget surplus, its second in the past three months and at a level almost three times what markets were expecting. A sharp fall in outlays in June and rising revenues were the cause of the unexpected result.
China looks set to soften its stance on monetary policy after Premier Li said the nation’s economic growth and employment must stay above a certain floor. The credit-fixing medicine threatened in China may not be quite as vigorous as first indicated.
And finally in Australia, their unemployment rate, although still only 5.7% has in fact risen to a 4 year high in the June quarter. Talk of an August rate cut is growing. We won't get our updated unemployment rate until the first week in August - it was 6.2% in March.
The NZ dollar starts today at 78.3 USc, 85.4 AUc, and the TWI is at 74.3.
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11 Comments
There never was, is, nor will be end of Q Eternity. Bernanke has got himself into a hole that he has no choice except to keep digging....all the way to emerge in China.....
Soon the Feds (Ben will leave by year end) will have to do a "double or nothing" Kuroda style just to keep the financial markets from imploding....right now they are trying to keep the Dow at 15,000 plus or minus a few hundred point, ditto with the S&P. It's a dangerous game and over time will become more and more difficult as their weakness is exposed.
Taper ?? Yeah Right !!!
I agree with Kin.....
As an investor... the key question is how can this all unfold...??
The mkts reaction to just the suggestion of only "tapering".... is a little bit scary.. So..central banks are more likely to ..." double or nothing".... as Kin puts it
I've learnt from hard experience that u dont want to fight Central banks nor Govts....
In that regard ... I don't see deflation as a big danger.... and what people call the new normal ...could be here to stay..... as the world does a bad job of trying to deleverage.
NZ certainly has not learnt much.... we are in the early stages of another credit growth cycle...
Interesting article from Stratfor today on the shipping crisis.
"The world's three largest container lines -- Maersk, CMA CGM and Mediterranean -- have formed an alliance of sorts in an effort to reduce operating costs."
The way I read that is a large monopoly has been formed. Once a few smaller competitors fall away and the supply and demand balance changes then watch them ramp up rates. That plus the rising cost of oil will be a serious impediment to any exporter.
Have a look at the BDI, its fallen from 9500 5 years ago to 1150 today, so its 12% of its former volume. Bunker fuel must be running at an all time high as well, overheads are fixed (crew etc) yet with greatly reduced volumes they cant raise prices. Who can blame them for merging...Im surprised its taken them this long.
Impediment, yes but the shippers cant take losses ie subsidize exporters. Fuel price is why manufacturing is starting to recover in the USA. Chinese / asian labour is cheap but shipping across tehe pacific negates that advantage enough that its economic to manufacture in the USA again, plus there is a % markup you can charge for made in teh USA, amaericans are fairly patriotic it seems.
regards
Yes, we'll see globalisation shrink back....
Trouble is places like the USA have to ship raw materials in...right now they are enjoying a short respite provided by shale gas. Not sure how many years that will last, 3 or 4? just a blip and they'll be back to needing offshore fossil fuel again...
hence Im not sure how well our food exporting will do....ppl need to be able to pay....if they cant well we wont be exporting.
regards
Well you and I, with a few others here, can see it but many can't.
Have my head into an interesting read at the moment. "The Clock of the Long Now - Time and Responsibility" by Stewart Brand. Last night I was reading about the opposite to the tragedy of the commons, known as the guardian of the commons.
kin.
I agree. What a joke NZ treasury making forecasts out to 2060....laughable.
Interest rates are centrally planned and controlled through check kiting between US treasury and federal reserve. They call it an asset purchase program to put lipstick on the pig. Even a bit of loose talk about tightening sent the markets into a conniption.
Good luck with weaning the addict off of free credit.
Not to mention it's barely getting any traction at $85 billion a month!
They have a lot to answer for.
Most interesting link and article I found on Chris Martenson's Daily Digest:
NAVY LENR Patent granted - transmutes radioactive waste
http://coldfusionnow.org/navy-lenr-patent-granted-transmutes-radioactiv…
Filing date: 21.Sept.2007
Publication date: 16.April 2013
Highly important discoveries in light of the problems at Japan's Fukushima plant and the whole worldwide nuclear issue.
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