90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ; rising Dow; steeper rate curve; rising food prices

17th Jan 11, 8:53am by David Chaston

David Chaston details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand.

We start the week with the Dow at a 30 month high, and stock markets riding a wave of optimism that earnings will be good, and the Europeans will be able to contain their debt problems, We’ll see.

US banks are reported to be expanding their lending to consumers.

However, this new positive mood into equities signals that markets are now prepared to accept more normal commercial risks and have less of a concern their capital will be jeopardized.

We see this in the bond markets too, with a steepening positive rate curve in the 2 to 30 year US Treasury bond spread.

Rising inflation expectations may be behind this market mood shift. Commodities are higher and around the world there is real concern, especially at food price rises.

The US government surprised traders by cutting stock forecasts for key crops, sending corn and soyabean prices to their highest level in 30 months. Food price hikes have already led to riots in Algeria and Mozambique.

And China increased its bank reserve-ratio late on Friday, just one of the region’s actions to tame inflation. South Korea and Thailand boosted their interest rates. India is now importing onions, a curry staple, from Pakistan, its historical enemy.

Later this morning, the Statistics Dept will release our food price data for December. This time last year, these increases were under 1%, but in the two latest months they have been nudging 5%, and another high result today is expected.

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6 Comments

by Rob of the North | 17th Jan 11, 9:30am 1295209838

The REINZ figures out tomorrow will be more fun but here's First NZ Cap's take, today, on US economy growth: ( just to get the day rolling?)

US Economic Outlook

The tenor of our US cyclical outlook is more upbeat than it was at this time last year.We expect 2011 real GDP growth at 3.8%, measured on a Q4/Q4 basis, a speed-up versus our latest estimates for 2010 (2.9%). We expect progress on the unemployment front, with the jobless rate subsiding to roughly 8.6% by year-end. Core inflation should remain low, but deflation risks have receded. We look for the Fed to complete its QE2 purchases as planned and anticipate no hike in the fed funds rate target before late-2012.

If growth alone were the issue, we might be so bold as to claim “mission accomplished.” Yet momentous structural challenges remain. Illustratively, the Great Recession pushed the level of GDP (or business activity or material well-being, call it what you will) way below the level implied by the previous growth path. And resuming growth at the old rate leads to levels of activity that take a long time to get back to what one might have expected and planned on had the Great Recession not occurred.

i think the second para above is the telling one ??!!

by Kunst | 17th Jan 11, 9:52am 1295211153

Considering negative accumulation and acceleration on many fronts and their worldwide correlation – prepare for turmoil. We must adapt and learn to be self- sufficient and independent as a nation with all the consequences described in many of my articles.

by martinv | 17th Jan 11, 1:26pm 1295223995

Agree completely. We're in the process of converting our property to edible plants only. Remember that trees take time to grow - plant ASAP!

Funny, while buying a chicken coop on the weekend from the RD1 shop, the sales guy said that sales and interest in chicken-related gear by the public was very strong. He wondered why. I think people are starting to catch on to what is happening. If the public lead, the leaders will follow.

by Wolly | 18th Jan 11, 6:41am 1295286074

Wellington city rate payers looking at an 8% rate rise...harhaaaaaaaaaaaaahahaha and the cost of power is set to rise as well...and insurance....oh feck what a laugh.

by Wolly | 18th Jan 11, 7:19am 1295288396

The King liar....

http://www.marketoracle.co.uk/Article25637.html

"...i f the Bank of England was not expecting high inflation during 2010 and beyond then why did the Bank of England's own staff pension fund switch from being 30% invested in inflation index linked government bonds to 70% during late 2009 ?"

Go on...have a read of how the BoE is always lying to the British public...then ask yourself whether you are being told the truth by the RBNZ! we don't have inflation in NZ cos we are different...doh.

by Wolly | 18th Jan 11, 7:39am 1295289540

You know it's coming don't you!...power and insurance premiums rising...rates too...govt charges and fees..diesel and petrol and wof tax and reg tax ....but food will surprise thanks to droughts and floods and speculation and gst and freight. Inflation on its way and Bolly already months behind the curve playing the 'cheaper for longer' tune together with that old time cracka 'gotta pork the market cos there's feck all else to do'( it's the Bismark tune)

Soooooo....less to spend on stuff we don't need...greater drive to be self sufficient...falling govt revenue as the retail trade dries up...fiscal hole heading for China.