David Chaston details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand.
Today is when the crest of the floods in SE Queensland are expected to happen. When that passes, attention will turn to the economic impacts on the Australian economy.
First indications are that it could turn the Federal govt’s budget surplus into an unexpected deficit.
Substantial spending on relief and reconstruction, and lost tax receipts, will be the main impacts. However, when things recover, Australian commodity exports will be being sold at significantly higher prices.
Portugal’s bond issue last night went off successfully. There was strong, non-ECB demand. EU president Barroso (who is also Portuguese) called for increasing the size of their bailout funds, and although the initial reaction was negative, bond buyers can clearly see little downside to buying Portuguese debt now if they are going to be bailed out should things wobble in the future.
In the middle of the euro storm in Germany, and that economy is doing very well indeed. It’s economy expanded at its fastest pace in over two decades on both export and domestic strength. A real growth rate of +3.6% was reported for 2010.
The Dow was up strongly on this news and the successful Portuguese bond auction, and signs of strength in the American banking sector.
Oil was up strongly also, as was the value of the Chinese Yuan. Premier Hu is about to visit the US and when that has happened before, the Chinese allow noticeable appreciation to take the sting out of direct US criticism of their exchange rate policy.
The Chinese, in their turn, want the US to stop monetizing their debt. Not much chance of that now, I suspect.