Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that Portugal's government is on the verge of collapse this morning. (It collapsed later in the morning)
Opposition politicians voted against austerity measures proposed by the government of the heavily indebted European nation. The Prime Minister Socrates then resigned. See more here at Reuters.
Financial markets fear that Portugal may not be able to service its debts, triggered a new round in the European sovereign debt crisis.
Portugese 10 year bond yields rose to an unsustainable 7.63%.
This came as Irish 10 year government bond yields rose to an even more unsustainable 10.05% as fears grew of a new banking bailout there. See more here at Bloomberg.
The sovereign debt crisis is coming to a head again as a key meeting in Europe is due to be held over the next couple of days to come up with a solution.
Many financial market players believe the crisis is insoluble without European banks and pension funds taking massive haircuts (losses) on much of the sovereign debt from the PIGS and on Irish bank debt they hold. That would trigger a new round in the financial crisis similar to the problems seen after Lehman Brothers collapsed in 2008.
European politicians and policy makers are scrambling to avoid this and the inevitable stresses on the euro currency itself.
More turmoil in these financial markets will make it more difficult for governments and banks globally to roll over their debts and issue new debt. See more here from Alex Tarrant on the IMF's view about the challenges to New Zealand's funding requirements.
Meanwhile the British government forecast lower than expected GDP growth and bigger borrowing in its budget overnight. See more here at Bloomberg.
The Pound fell because of the weaker forecast and comments from the Bank of England that it may not increase interest rates soon despite retail price inflation running at 20 year highs. See more here at Bloomberg.
The oil price rose to a 30 year high as Middle Eastern turmoil and new Japanese oil demands continued to weigh on sentiment. See more here at Bloomberg.
The New Zealand dollar was solid overnight.
Meanwhile, the Dow was up around 0.9% in late trade despite news of unexpectedly slow new home building in the United States. See more here from Bloomberg.
(Updated with Portugese vote against austerity)
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