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.
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(Corrected to make clear bond sales are over the next two days not year. Thanks Wolly)
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