90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: ECB's surprise rate hike warning; NZ$ hits 26 yr low vs A$; Dow up 1.6%; Oil down on Libyan mediation plan

4th Mar 11, 8:57am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news from the head of the European Central Bank, Jean Claude Trichet, that the ECB was likely to increase interest rates next month to head off inflation.

The markets had been expecting that the ECB would hold off rate hikes until August at the earliest. See more here at Bloomberg.

The euro strengthened against many currencies and German bund yields rose 18 basis points.

The New Zealand dollar fell to 53.1 euro cents overnight, it's lowest level since April 2010.

Overall, the New Zealand dollar on a Trade Weighted Index basis has fallen 6.6% to its lowest level since June 2010 in the last month.

This will no doubt be a factor for the Reserve Bank to consider when it makes its interest rate decision ahead of next Thursday's Monetary Policy Statement. It will wonder whether the fall in the currency has eased monetary conditions enough to boost the economy and may also contribute to inflationary pressures. See our interactive currency chart below.

Meanwhile, the US services sector grew in February at the fastest pace since 2005 and jobless claims fell by 20,000 to 368,000, which was the lowest level since May 2008 and much better than expected. See more here at Bloomberg.

The Dow was up more than 1.6% or 200 points in late trade as markets celebrated the signs of economic growth momentum in the United States. See more here at Bloomberg.

However, this didn't stop Minneapolois Fed Governor Narayana Kocherlakota saying monetary policy needed to be kept easy. See more here at Bloomberg.

The Dow was also stronger as the oil price fell around US$1.20/bbl to US$101/bbl after Venezuela and the Arab League said they planned to mediate a settlement in Libya, which is now mired in what appears to be a civil war. See more here at Bloomberg.

Gold also fell the most in six weeks from record highs on news of a possible solution to the Libyan crisis. See more here at Bloomberg.

No chart with that title exists.

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28 Comments

by Bernard Hickey | 4th Mar 11, 9:04am 1299182640

FYI we are officially Crusaders supporters today. Red and Black logo for the day.

Our thoughts are with everyone in Christchurch, including our Rural Editor Tony Chaston in Canterbury and many of our former colleagues at The Press.

Our new Personal Finance Editor Amanda Morrall was at the Press until Christmas and both Gareth and myself after ex-Fairfax Media.

Best wishes to all there. Thinking of you on Red and Black day.

cheers

Bernard

by andyh | 4th Mar 11, 9:20am 1299183644

Good to see the NBR coming out and criticising Key for passing judgement on Bollard's rate decision. Insufficient attention has been paid to this by the rest of the media.

So much for the encouraging folk to save/re-balancing the economy mantra - the main banks have slashed their term deposit rates, while those with debts reap the rewards of lower mortgage interest rates. It appears now that savers not only have to shoulder the burden of economic mismanagement but also of natural disasters.

by speckles | 4th Mar 11, 9:31am 1299184263

I was surprised the media had no comment, economic debate seems at an all time low out there in media land.

by Bernard Hickey | 4th Mar 11, 2:39pm 1299202774

I did make a comment at the time.

We'll see what the Governor says next Thursday. I'll be asking him at the MPS news conference.

cheers

Bernard

by Snarlypuss | 4th Mar 11, 2:57pm 1299203835

A to your Q : " The Prime Minister is an intelligent man, with past and current experience in the wider economy, and it is not unreasonable that his thinking and conclusions are similar to those that the Reserve Bank has arrived at, and announced, today".

Q: " But should he have expressed those thoughts, in public, given the importance that his words carry in the marketplace ?"

A: "That is a matter for him to concider, and you to evaluate. Next question please...."

by Andrewj | 4th Mar 11, 9:35am 1299184500

What banks want is what banks get. They marched Tbill tender rates down ~25 bps.

The government's maitre d'hotel confirmed the order and no doubt the RBNZ's head waiter will deliver it, next week.

http://omo.co.nz/

by Kate | 4th Mar 11, 9:59am 1299185993

I do love his sense of humour - highly appropriate for the black comedy that the "market" is these days.

by Andrewj | 4th Mar 11, 9:38am 1299184719

Niall Ferguson

http://www.telegraph.co.uk/finance/financevideo/8359992/Niall-Ferguson-…

Trouble getting the top post to paste, I think OMO has nailed it, the banks are pulling the strings and its a done deal and JK is just telling us what already is.

by KW John | 4th Mar 11, 10:34am 1299188044

Interesting squabbles ('awareness raising') in the Guardian over the UK 'feed-in-tariff'.

It's big business subsidy vs domestic subsidy

Either way the conversation is being had. The panels are being installed.

If we 'privatise' our power generators, do we lose the ability to have this conversation?

'M&D' investor is going to be pretty agitated when their profit stream is cut into - by govt policy!

Will we lose the chance to 'domestically' supply the grid?

Maybe we should sell all the generators - and use the money to try a different approach!

by Kate | 4th Mar 11, 11:24am 1299191097

So much of our power generation comes from renewables, that comparisons with the UK policy aren't necessarily appropriate. Here, I'm not so sure government subsidies to encourage home generation make sense from a public good point of view. Here, what one feeds back into the grid gets paid to the home generator at the wholesale rate, whereas what the same home generator purchases from the national grid is paid at retail prices. That seems logical and fair to me.

What isn't so good here are the regulatory barriers to installation of home generation facilities. There should be fast track type policies which encourage people to become more self-sufficient. But that's an RMA issue, not an electricity market/supply one.

by andyh | 4th Mar 11, 11:38am 1299191894

Hi Kate - I think you'll find that Meridian pay home generated electricity on a one for one basis - thus if you have a PV system you can switch to one of the low user day/night plans. For example at Tasman rates that would mean electricity generated during the day would be sold at 28.14c per kWh whereas at night (when you are importing electricity) you buy at 17.32c.

For non PV systems ie wind, which are not just daytime active this would not of course apply.

by Ms de Meanour | 4th Mar 11, 12:17pm 1299194249

Since power generation has been totally privatised for many years in the UK there is absolutely no reason to think that privatisation prevents the ability to introduce a feed-in tariff.

The bigger question is why you'd want to raise electricity prices in order to subsidise people who want to generate their own electricity. If your concern is CO2 emissions, micro-generation is an incredibly poor-value way of reducing them and you'd be better off spending the money on any other CO2-reducing approach. If your concern is security of electricity supply, then the benefit is only to the individual and why should the rest of us pay for that.

by KW John | 4th Mar 11, 2:05pm 1299200753

No profit/subsidy asked for .... Just musing on the idea of power self sufficiency - and maybe even the viability of generating surplus - sharing. Is there a resilience/redundancy to be gained. Infrastructure costs loads. :)

by scarfie | 4th Mar 11, 8:13pm 1299222808

Infrastructure costs loads. :)

It needn't if Tesla's wireless transmission patents from 1900 & 1903 are what they claimed. 10000W across 2000 miles or so.

Check out the book suppressed inventions.

by Gareth Vaughan | 4th Mar 11, 10:47am 1299188863

Interesting post earthquake trading update from Fletcher Building:

"Fletcher Building advises that whilst activity levels in Christchurch post the recent earthquakes are generally expected to increase as the rebuild and reconstruction work gets underway, there will however be a short term negative impact on earnings as the assessment and planning phases are put in place.

The earthquake that occurred on 22 February 2011 has caused significantly more damage than the first major earthquake on 4 September 2010, and the economic cost has been estimated to be two to three times higher than the earlier event. Consequently, the Christchurch economy has been seriously disrupted and general business conditions are expected to remain at very low levels for some time.

Based on current estimates, Fletcher Building expects the impact of this event will result in net earnings after tax for the year to 30 June 2011 to be approximately $14 million to $24 million lower than previously forecast.

Included in this estimate of the adverse earnings impact is an allowance of $5 million for support that the company expects to provide to assist with the recovery programme in the city of Christchurch.

The company has not quantified at this time any potential impact on its financial results in future years as a result of the Christchurch earthquake."

by goldenfox | 4th Mar 11, 12:15pm 1299194133

AKA - Sharetraders you are getting too far ahead of yourselves. Rebuild is going to take sometime, if a true rebuild ever occurs.

Wonder what Hawkins and Fulton Hogan are thinking about the Christchurch situation.

PS god I wish FH was public

by Gertraud T. | 4th Mar 11, 11:03am 1299189825

12 countries most likely to go belly up:

The Maplecroft study concludes: ".....without significant adjustments, such as raising taxes or reducing spending, countries risk going bankrupt."

NZ is considered "High risk". Coloured world map.

http://advisoranalyst.com/glablog/2011/02/28/12-countries-most-likely-t…

by YoungTel | 4th Mar 11, 2:14pm 1299201274

What strikes me about this graph is the very short list of countries that are "low risk": Paraguay; Uganda; Burma; Laos; Cambodia; Philippines.

Is this really a roll-call of the world's most prudent and well-managed economies?

Or does the study assume that because a country has a high birth-rate and vast numbers of young people to presumably provide for the old, everything is going to be all right?

Or does it mean that these are the only countries that provide levels of social services that are sustainable in the long term? Or what?

by Kunst | 4th Mar 11, 11:30am 1299191425

Protuktifity – no I try again protuctifity - I think I’m still wrong. It seems to be a bloody foreign word.

by Andrewj | 4th Mar 11, 11:35am 1299191715

http://www.zerohedge.com/article/china-moves-making-renminbi-reserve-cu…

by scarfie | 4th Mar 11, 8:23pm 1299223391

Can't see it happening Andrew.

If there is one thing that defines depressions with Austrian economics it is industrail overshoot.

China has overshot big time and is going to come down hard.

by Andrewj | 4th Mar 11, 8:42pm 1299224552

Im afraid you are right. I visited a retailer friend of mine today, 2 people a day in his shop, dead as dead can get. Looks like the EU is going to move on interest rates

http://www.telegraph.co.uk/finance/economics/8360378/ECB-prepares-rate-…

by scarfie | 4th Mar 11, 9:12pm 1299226350

Yeah I was up last night hoping to catch some profit on the FX moves. Spiked too quick to get an entry in, far faster than anything I have seen in my short time playing.

The bit that was missing compared to previous statements was that the current rates are 'appropriate'. Door is definitely open for a hike, but given this I couldn't work out the initial NZD response.

by Kate | 4th Mar 11, 9:13pm 1299226390

Yes on overshoot - but the intent of the strategy is of course the only way to go given Western markets are going west :-).

by scarfie | 4th Mar 11, 9:48pm 1299228507

Oh the intent is there, but succeeding is a long way removed from trying.

It is really geopolitical minefield.

Put it this way, you have a choice of an American bank or a Chinese bank, which would you choose? I suspect the answer to that is the answer to whether China holds No 2.

While I agree with the sentiments regarding America, I don't think it's quiver is quite empty yet.

by Kate | 4th Mar 11, 10:07pm 1299229634

It too might do to take on a more inward focus presently - like a moral movement by it's corporates to bring the jobs back home.

As for the banks.... well all I can say is thank Jim for Kiwibank!

by Kunst | 4th Mar 11, 11:41am 1299192111

Manuvagturing – hmm maneaufacturing – bloody hell another one – bureau, bureaucracy, bureaucrat.

Ah - I got it now manufucktering

by Alexander | 4th Mar 11, 1:53pm 1299199995

U. S. states consider going back to gold and silver coins as legal currency

http://www.foxnews.com/politics/2011/03/03/utah-considers-return-gold-silver-coins/