90 seconds at 9am: Naked short selling ban triggers fresh Euro nerves; NZ$ down to 67.2 USc
20th May 10, 7:49am
Bernard Hickey details the key news overnight in 90 seconds at 9am in association with BNZ, including news the New Zealand dollar fell sharply overnight to 67.2 USc from almost 70 US cents after a German ban on 'naked short selling' spooked global credit and stock markets. The video is due shortly. Investors became more worried about riskier currencies on fears of another Lehman-style implosion on credit markets because of the stress in European financial markets. German Chancellor Angela Merkel unveiled a ban on the ability to sell financial stocks and some bond derivatives without owning them. This is known as 'naked short selling' because it allows speculators to sell stocks quickly, driving down prices. Market players saw the move as a sign of panic. Emerging market and 'risky' currencies like the New Zealand dollar, the Australian dollar and the South African rand fell sharply. European stocks fell 2.9% and the Dow was down 1% in late trade. Also stress on credit markets drove the London Interbank Offer Rate (LIBOR) up to a 9 month high of 0.477%. This is a sign some European banks are nervous about borrowing from each other in case the other bank goes broke. The underlying fear is that European countries will either default on their debt or be turfed out of the euro, triggering massive losses for French and German banks. Meanwhile, I'm in Wellington today for the budget, which is due at 2pm. We'll have all the coverage of the tax moves and what it means for property investors, savers and income tax payers from 2pm. Bill English signalled higher effective tax rates for property investors in parliament on Tuesday.