Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that New Zealand's economy managed (just) to avoid a double dip recession in a technical sense in the second half of 2010.
But the economy was as flat as a pancake through the second half of the year and is expected to contract in the first quarter because Christchurch, which generates 15% of NZ GDP, has been shut for the last 5 weeks of the quarter. See Alex Tarrant's article on the GDP result.
However, economists are expecting growth to rebound later this year and in early 2012 as the effects of the Rugby World Cup and more than NZ$15 billion worth of foreign reinsurance money flows into the Christchurch rebuild. Most expect the Reserve Bank to start increasing the Official Cash Rate again from as early as December this year.
Meanwhile, Portugal is now expected to have to ask for a bailout to avoid defaulting on its sovereign debt. This follows the resignation of its Prime Minister Socrates yesterday and the failure of an austerity package to get through parliament. See more here at Bloomberg.
A key meeting of EU leaders will be held this weekend to try to stop the European Sovereign Debt crisis from worsening further. The euro rallied ahead of the meeting. See more here from Bloomberg.
The key points to watch are the Spanish and Italian bond markets, given the big fear is the problems now evident in the PIGs (Portugal, Ireland, and Greece) spreads to the S (Spain) in PIGS.
Overnight Moody's downgraded 30 smaller Spanish banks on fears the Spanish government might not bail them out if they have to book massive losses from their exposure to the collapsed real estate market there. See more here at Bloomberg.
Meanwhile in the United States overnight, figures showed durable goods orders fell surprisingly. See more here at Bloomberg.
But the Dow was up 0.6% and the gold price rose to a record high. See more here at Bloomberg.
The New Zealand dollar rose to 75 USc after the government sold NZ$950 million worth of bonds, forcing foreign investors to buy NZ$950 million of New Zealand currency.
One of the problems with too much foreign borrowing is it pushes up the New Zealand dollar and punishes exporters.
(Updated with links out)
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