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.
28 Comments
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
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.
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...."
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.
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.
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!
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.
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.
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.
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."
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…
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?
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-…
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.
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.
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/
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