90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Risk appetites returning as nuclear fears ease; Oil up on new Yemen strife; Euro down on Irish default fears; UK inflation high

23rd Mar 11, 9:01am 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 that risk appetites are returning to global markets as fears about catastrophic nuclear meltdowns in Japan start to recede.

Power is being restored to the stricken reactors at Fukushima and radiation has yet to spike to dangerously harmful levels in populated areas. See more here at Bloomberg.

Commodity prices rose again overnight, pushing up commodity currencies including the New Zealand and Australian dollars.

The New Zealand dollar rose over 74.1 USc and the Australian dollar rose over US$1.01. The Nikkei rose 4.4% overnight on hopes the nuclear crisis may not worsen. See more here Bloomberg.

Meanwhile the oil price rose another 1% as unrest spread in Yemen and started growing in Syria. See more here at Reuters. There is also talk Japan will have to buy more fuel oil to generate electricity to make up for that not produced at Fukushima. Japan released extra oil supplies from its strategic reserve yesterday. See more here at Bloomberg.

Meanwhile, the euro fell overnight as concerns grew that Ireland may have to default on the debt owed by its stricken banks. See more here at Bloomberg. Allied Irish Banks had to deny rumours that it had missed a coupon (interest) payment. See more here at Reuters.

There is growing talk in Ireland that it may have to default on its bank debts. Fresh stress tests on its banks are due within the next week or two, raising fears that another 20 billion euros of taxpayer money will have to be pumped into a never-closing black hole.

European banks own most of the Irish debt and are fearful that a default would force them to revalue the loans and take major losses, causing chaos in the European banking system.

A summit is due later this week in Europe to discuss the crisis.

Meanwhile the interest rate on Irish 2 year government bonds rose as high as 10.18%.

Elsewhere, British inflation figures of 4.4% annually were higher than expected, raising expectations the Bank of England may have to raise interest rates.

The European Central Bank has reiterated it will raise interest rates next month.

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25 Comments

by Wolly | 23rd Mar 11, 9:19am 1300825182

"risk appetites are returning to global markets"....fools rush in etc and the QE madness is about to be brought to an abrupt end...goodbye equities...hello market funda mentals....hello bond market rout....

by Wolly | 23rd Mar 11, 9:50am 1300827034

Please try and learn more Westminster....the "sustained economic recovery" you see has been on the back of Bernanke flooding the too big to fail banks with heaps of cash and the bond rates kept low due to Bernanke making the money he lets the banks have as cheap as he can...like zero to .25%.....all backed up by QE1 and QE2.....and when that madness ends...as it must...the demand for equities will turn to smoke just as in 08 and the rates will rise rapidly....leaving those who bought bonds with a very low return stapled to them( only the inflation adjusted ones will be safe and they rely on a lying govt)...deeply in the shite...and wanting to offload their rubbish as fast as possible...driving down the value.

The rates will rise and new bonds will promise better returns...but who will buy them...when trillions will have been wiped off the equities!....and faith in the value of the bonds will see them tossed into the junk box.

Go and buy some Greek govt bonds Westminster...show us how brave you are!

by goldenfox | 23rd Mar 11, 10:41am 1300830069

Wolly, you paint in broad strokes.

Some equities will outperform in the future. Those protected from excessive inflation - power companies, mining companies’ already in production and with solid reserves, property companies which are not requiring debt roll-over anytime soon, lines companies, hospitals, port companies. Basically defensive stocks in monopoly/quasi-monopoly positions whom don't require massive refinancing or whose debt maturity profiles are well spread.

I am not and would not be interested in any bond at the moment. The printing press has already been used in America and is likely to be used in the future. Principal won't be worth anywhere near what it is worth today if you invest in bonds. TIPS are a joke.

A keen investor should watch for solid companies whom can not re-finance and therefore require equity injections at deeply incentivised rates. In this environment your money has worth and you can be tough, don't pay for goodwill and demand management accountability.

by Boatman | 23rd Mar 11, 10:11am 1300828287

@Westminster , Wolly is correct in part in as much as both Bonds and Equities can rise and fall in tandem. There is seldom an inverse correlation especially when interest rates rise . A rise in interest rates sees a fall in the trade value of a Bond . Higher interst rates punish highly geared companies so thier shares could fall .

The reason the Dow has reached such high levels as 12000, so quickly is expalined by loose monetray policy by the Fed .

by Vanderlei Luxemburgo | 23rd Mar 11, 10:22am 1300828957

ok so there's talk of ireland telling the banks to ox off ....i guess it's attractive now that iceland hasn't been too badly affected....

my question is: what's the tipping point? how many countries need to stand up to the banks before we have a global rejection of the banks' "position of power" ?

is it only going to take ireland giving the banks the finger before it all starts tumbling?

by Wolly | 23rd Mar 11, 10:34am 1300829678

The bank boards of directors are rushing to bloat the bonuses given to the bosses and indeed to all staff who know about the bank liabilities and dead rats in the closets. Paying for their silence!

Sooner or later it becomes obvious to all, which bank is nearest to the cliff edge. On that day you will read of a bank failure. Then it's on to the next weakest bank.

by KW John | 23rd Mar 11, 11:56am 1300834595

Iceland still has a referendum to get through...(April 19).

and Icelandic government on shaky ground.

"With hindsight, it seems clear that competent prudential supervision was particularly important for the Icelandic banks. They burst onto the international stage rapidly between 2000 and 2008, and foreign investors had little history to evaluate. When the banks’ foreign activities had grown too large for the Central Bank of Iceland to support them, any big problem was likely to cause the bank’s demise. The banks’ remaining protection against foreign investors’ skepticism should have been the supervisors’ ability to monitor and control risky behaviors. But the supervisory authorities had not kept pace with the banks’ expansions. Indeed, the resource-starved FME had become less effective at prudential supervision as the banks expanded overseas. In the end, public inputs to a successful financial system had failed to keep pace with private expansion. Outside creditors viewed Icelandic banks whose accounts were difficult to understand, and the banks had no credible supervisor to help those creditors understand the full value of the banks’ future plans."

- Report of the Special Investigation Committee (2010)

Go Ireland...

by Billy | 23rd Mar 11, 10:24am 1300829045

If everytime the "sustainable economic recovery" shows signs of tapering off, another QE is introduced, theoretically it can become "sustainable economic recovery".

by Didge | 23rd Mar 11, 10:26am 1300829182

The proof that bonds never looked better.

http://looks.bonds.com.au/

by Wolly | 23rd Mar 11, 10:38am 1300829898

Now if you owned them bonds...seeing them fall would bring a smile yes....!

by Samal Bahay Kubo | 23rd Mar 11, 11:51am 1300834315

Corporations as persons:

http://www.truth-out.org/unequal-protections-from-birth-american-democr…

by Wolly | 23rd Mar 11, 12:08pm 1300835282

"Moody's Investors Service says that the Reserve Bank of New Zealand's ("RBNZ") Open Bank Resolution policy could create additional negative pressure on the supported debt and deposit ratings of New Zealand's four major banks.

Those banks are ANZ National Bank Limited, ASB Bank Limited, Bank of New Zealand, and Westpac New Zealand Limited, and all currently have long-term bank deposit ratings of Aa2.

"The ratings of the four are already under review for possible downgrade for reasons unrelated to the Open Bank Resolution, but the adoption of a pre-positioning mechanism could add further downward pressure to their supported deposit and debt ratings," says Marina Ip, a Moody's Assistant Vice President and Analyst." voxy.co

Notice how Moody's fail to explain why there would be additional negative pressure.....they are independent...aren't they...!

by Boatman | 23rd Mar 11, 1:19pm 1300839592

Bernard , Interesting articles in Sydney papers about Whitcoulls funders BOS International's bewailing their losses in this neck of the woods running into Billions of dollars .

They are to blame for their own misfortune, they threw money around here like drunken sailors.

While they positioned themselves as high risk lenders to property developers , they actually lent recklessly.

At the time I recall thinking how silly they were , with all these pie- in- the- sky property developments . Anyone visitng Queenstown and these tourist spots out of season would know we dont have the population or depth of wealth in New Zealand to sustain all these luxury developments and run them profitably . There are not enough people here , and there certainly are not enough wealthy people. The very wealthy overseas investors have a multitude choice of other options for holiday homes , so chasing that limited market was always going to be hard work . Their Auckland staff were real high flyers which made me think meant they were chasing and achieving highly incentivised lending targets .

Frankly , its hard to be sympathetic with such idiocy , although having nearly one in three loans impaired is a terrible outcome for any bank .

They have also not foreclosed on all the impaired assets and not yet released these properties onto the market, so it makes me think that we have not seen anywhere near the bottom of our domestic property market yet

by Kate | 23rd Mar 11, 1:40pm 1300840837

...risk appetites are returning to global markets as fears about catastrophic nuclear meltdowns in Japan start to recede.

Should read:

...risk appetites are returning to global markets as mainstream media is successfully co-opted by the powers-that-be to quell fears about catastrophic nuclear meltdowns in Japan.

by Christov | 23rd Mar 11, 1:46pm 1300841171

well said Kate in addittion should read

Currency traders continue to steal money from burning houses as mainsteam media mouthpieces distract the fire brigade long enough for safe entry and exit.

it is indeed a $ick $ick world.

by Belle | 23rd Mar 11, 2:01pm 1300842083

Yes well put Kate. After major explosions the likelihood that electricity and water will be restored to all reactors seems low. So are they going to firehose them for the next few years, and who will staff the firehoses....the volunteers will die, who will go in to do their job....its awful. But I have not believed the media since day one, even WHO are now getting aggresive about the food production in the area. From softly softly to 'heh you cant eat this stuff'.

by Kate | 23rd Mar 11, 2:55pm 1300845310

I read one account from a worker at the plant, who, at the time of the earthquake was standing adjacent to one of the spent fuel pools. He was fully doused in water from the spent fuel pool. Can't imagine the concrete pool could remain intact after that. Leakage from those pools will be a major problem going forward, I suspect.

by steven | 23rd Mar 11, 3:08pm 1300846118

If you have ever tried to move a full bowl of water at the sink you would know full well its splashes over the sides if you try and move it too fast.....that isnt even complicated physics or engineering....

"Cant imagine"....."I suspect" you have no proof of problems and no training as an engineer to even begin to assess that.....

The pools are mounted above the reactors? maybe they are made of steel ie just a big tank which could be on steel legs and simply flexed and slopped a bit...and then if so you can see the leaks.......evenif its concrete pools they would I expect have inspection ways all around to allow checking.....so many unknowns.

I think you jumping to conclusions and are being almost hysterical...

regards

by Kate | 23rd Mar 11, 4:14pm 1300850085

...you have no proof of problems...

Well, "proof" of anything at the moment is difficult, but perhaps these guys (Union of Concerned Scientists) might lend the credibility you are looking for;

http://allthingsnuclear.org/post/3964225685/possible-source-of-leaks-at-spent-fuel-pools-at

and a more recent update;

http://allthingsnuclear.org/post/4008511524/more-on-spent-fuel-pools-at-fukushima#disqus_thread

by steven | 23rd Mar 11, 3:12pm 1300846331

The explosions were not major, I would think the earthquake shocks far more stressfull to the structures than the odd hydrogen fire popping off.

LOL, firehoses, what an imagination.....if the area is too hot its most likely they would bury it.....constant hosing would leech stuff out, you want to contain it not wash it way.

regards

by Belle | 23rd Mar 11, 5:06pm 1300853200

Is that not what they are currently doing, they have firehoses on it continuously, so where is the excess water going. They dumped tonnes of water from helicopters....where do you think the spill went Steven?

by Belle | 23rd Mar 11, 5:12pm 1300853524

My understanding is you can't put sand or concrete on this stuff either, sand turns to glass and concrete goes poof. Burying isnt an option till it cools.

by Wolly | 23rd Mar 11, 3:34pm 1300847690

This does not make for good reading..... http://www.marketoracle.co.uk/Article27101.html

by Snarlypuss | 23rd Mar 11, 4:47pm 1300852022

Buy Gold...and 'give' it to the Government if things get nasty with fiat?

"(Here) you have it. Legislation already exists in Federal law to authorise the Australian government to confiscate private property. And no new law is required to do it.

“Subject to this Part, (IV) a person who has any gold in the person’s possession or under the person’s control… shall deliver the gold to the Reserve Bank… within one month after the gold comes into the person’s possession or under the person’s control, or if the gold is in the person’s possession or under the person’s control on any date on which this Part comes into operation, within one month after that date.”

http://www.moneymorning.com.au/20110323/is-your-gold-safe-from-government-theft.html#more-4870

by Wolly | 24th Mar 11, 7:15am 1300904117

This should come as no surprise....

"Owners of old earthquake-risk Wellington buildings can expect to see a fourfold increase in their insurance premiums.

In the wake of the recent earthquakes, insurance companies will be taking a closer look at the strength of buildings, and the ground they are built on, and will crank up the excesses, Insurance Brokers Association chief executive Gary Young says.

The earthquake component of insurance could rise 60 per cent for buildings regarded as average risks.

But with unstrengthened pre-1930s buildings, that figure could be as much as 600 per cent"stuff

Market forces doing the work the bureaucracy has failed to do...force the demolition of old rubbish.