90 seconds at 9am: Euro debt contagion fears hit hard; RBA hikes
5th May 10, 8:59am
Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news stock markets and the euro have slumped globally overnight on fears that the Greek bailout package has failed to contain the contagion. Bond vigilantes are targeting Spain and Portugal next. Spain, which is 5 times bigger than Greece, was forced overnight to deny that it needed IMF aid or was in danger of going down the same road as Greece. However, there are fears that European banks may have to write down the value of their holdings in European sovereign debt, causing another Lehman-like financial crisis. News overnight that Chinese factory output grew at its slowest rate in 6 months also added to concerns about global economic growth. Luckily for us, the Australasian banking system and our economies are much healthier than the ones in Europe. Our fiscal positions are also much more solid. But any financial crisis in Europe would make it much more difficult for New Zealand exporters to the region and generally increase borrowing costs. It may also slow global economic growth. Meanwhile, the Reserve Bank of Australia hiked its official rate to 4.5% and warned of a hot housing market and firming Asian markets. The RBNZ is expected to hike our OCR on June 10 to 2.75% from 2.5%.