Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that the Peoples Bank of China has tightened monetary policy overnight in an attempt to slow down the rollicking Chinese economy and growing inflation pressures.
The key 1 year lending rate was raised 25 basis points to 6.06% and the one year deposit rate was raised by the same amount to 3%. This is the third tightening in 4 months.
This means, however, that deposit rates are still well below the inflation rate of almost 5%, meaning it still makes sense for Chinese consumers to spend rather than save.
Economists expect China will have to tighten by a further 1.5% to slow economic growth that is galloping along at over 10%. See more here from Bloomberg.
China's growth outlook is crucial for New Zealand, given it is both New Zealand's second largest buyer of exports and Australia's largest buyer of exports. Australia is in turn the largest buyer of New Zealand exports. See more here at Bloomberg on future Chinese hikes.
Oil prices and copper prices fell overnight on expectations of a China slowdown of some sort. See more here from Bloomberg.
However, the Australian and New Zealand dollars were firm as risk appetites globally remained strong. See more here from Bloomberg.
The Dow was up a further 0.4% on renewed hopes for the US economy. See more here from Bloomberg.
Meanwhile, an auction of US$32 billion worth of US 3 year Treasury bonds was not well received overnight with the poorest demand from foreign buyers since May 2007.
This is worth watching because US$40 billion of 10 year and 30 year bonds are due to be sold over the next two days years. The outlook for long term US interest rates sets the tone for long term interest rates globally and any signs of a major selloff in US Treasury markets will dominate financial markets.
Meanwhile, in Ireland Anglo Irish Bank has posted a 17.6 billion euro loss, the biggest loss in Irish corporate history. It is now controlled by the government, which promised a bailout with taxpayer money and has paid for it with a massive loss of Irish sovereignty. It is now trying to sell Anglo Irish's assets. See more here from BBC.
In London, the British Government has increased its levy on bank funds to 0.1% or 2.5 billion pounds, endangering hopes for a 'Project Merlin' plan for banks to free up lending to businesses. See more here from BBC.
(Corrected to make clear bond sales are over the next two days not year. Thanks Wolly)
17 Comments
The I-word is hitting the mainstream media big time in the US now and the bond markets don't like it. So what will happen to stocks (AND commodities) if Bernanke can't follow through with QE3?
http://www.cnbc.com/id/41476250
http://online.wsj.com/article/SB20001424052748703989504576128130543513562.html#articleTabs%3Darticle http://www.bloomberg.com/apps/quote?ticker=USGG10YR:IND" US$40 billion of 10 year and 30 year bonds are due to be sold over the next two years."
Two years or two months?
$40billion or $400billion?
BH can you please check.
I'd rather watch the paint dry , than goggle at $US 40 billion in10 & 30 year treasuries being sold over the next two years . .......
...... QE has ended then , Bernard ?
Wolly
Thanks for pointing that out.
I've corrected to make clear bond sales are over the next two days not two years.
My bad
cheers
Bernard
$US 24 billion of 10 year treasuries , auction Feb 9 (2011)
$US 16 billion of 30 year treasuries , auction Feb 10 (2011)
......... Cheers !
To us, it's an obscure shift of tax law. To the City, it's the heist of the century
"Foreign means anywhere. If these proposals go ahead, the UK will be only the second country in the world to allow money that has passed through tax havens to remain untaxed when it gets here. The other is Switzerland. The exemption applies solely to "large and medium companies": it is not available for smaller firms. The government says it expects "large financial services companies to make the greatest use of the exemption regime". The main beneficiaries, in other words, will be the banks."
Just a tad important - Wikileaks cables reveals Saudi oil insiders statements that Saudi oil reserves are massively overstated and that they are close to peak capacity:
http://www.guardian.co.uk/business/2011/feb/08/saudi-oil-reserves-overs…
It has been known for a long time in Peakoil circles that Saudi (and other OPEC producers) have massively overstated their reserves. Here it is confirmed from the horses mouth.
Wakey, wakey..........
Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, said: "We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse."
I dont think 'possibly worse' comes close.
AH - just reinforcing what you and I and Stephen here, have known for some time.
Luckily, I've found a plan B:
Pretty much what the Peak oilists have been saying for a decade........the interesting thing about wiki-leaks of course is it pretty much proves the peak-oilists are not only accurate enough but the Saudi's and oil companies have been lying about when we will see peak oiland the US Govn if not more Govn's know this.......
Hey Mao still got your SUV? I have a brick I can sell you.
regards
Oh and we had a 1 in 1000 year heat wave in russia which knocked back wheat crops....guess what China looks like its probably going to have such an event also. but oh no such frequent and extrems isnt global warming...oh no....its um.....the communists....they um did it.....
"The U.N. Food and Agriculture Organization issued an alert Tuesday that a severe drought was threatening the wheat crop in China, the world’s largest wheat producer, and was even resulting in shortages of drinking water for people and livestock."
So wheat futures might be a buy.
regards
Steven - I would, but speculating on a global wheat shortage (even though it was always odds-on) goes against the grain.
:)
Saudi Peak Oil ...
Before you all get excited and " I told you so " - just remember there has been no incentive whatsoever to look at secondary recovery techniques when it just flows from any old hole as it does in Saudi.
The North Sea went on and on and on with new areas, new fields and new technologies and new techniques to produce many times it's initial estimates.
At over US $ 100 + / bbl Saudi has oil for all our lifetimes at around current production levels.
It just won't cost the couple of dollars at the well head that it does today.
Um, yes and no.
'Tis true that at a higher price, more will be gotten. To an extent.
The problem, is that the depletion rate (and your North Sea is down to 20% now - a fine example - sure it went on and on, but it also went down and down.) globally needs a Saudi Arabia to be found every four years (now) and every year from say 2020.
Then there's the problem of physics - all oils ain't oils. Call it quality, call it EROEI, call it what you will, there's less profit energy, after the energy has been expended getting it.
The best was cherry-picked - those who think a barrel of oil is a barel of oil regardless, are...........being simplistic, at best.
But the real point is that some 30% of all the oil will never be gotten AT ANY PRICE.
Simply, the energy expended to get it, exceeds the energy it returns.
No dollar figure changes the realities of physics.
Which is why economics a false god.
amen.
ps - somewhere 100 and 147 a barrel, (light sweet crude) BAU as we have come to want it, craps out. Because everything - no exceptions - contains/represents it.
here's the graph you would have to beat, just to stand still:
Then compare it to the North Sea decline:
http://oilprice.com/Energy/Crude-Oil/Is-the-North-Sea-Oil-Production-Bo…
North Sea production peaked at just under 6 million/barrels /day in 1999.
In eleven short years that production rate has collapsed by 50% to about 3 million/barrels per day; recent studies indicate that the rate of decline may now be close to 10% a year.
http://gregor.us/oil/happy-new-year-from-the-north-sea-or-secrecy-by-co…
All the new techniques, new fields, new areas etc have not been able to turn that decline around.
andyh - Very good analysis. But what did successive UK Govt's, of both left and right of politics, do with the oil windfall? IMHO they just wasted it on social welfare payments and other big Gov't expenditures. I think that when the oil revenues run out in the UK the social environment will turn very nasty.
Absolutely. Whats turning even nastier is the UKs trade deficit (as the UK has to import more and more fuel).
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