90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Oil hits 30 mth high as Mideast turmoil widens; Commodity prices hit records; Monster Chinese copper bid; US nears debt ceiling

5th Apr 11, 8:29am 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 oil prices hith 30 month highs overnight as turmoil deepened throughout the Middle East.

Fighting intensified in Libya, violent new protests broke out in Yemen and riots widened in Syria, raising fears of further disruption to oil supplies. See more here at Bloomberg.

Meanwhile, other commodity prices also hit fresh record highs as hopes for global economic recovery and fears of rising inflation fueled demand and boosted prices.

Corn prices rose on talk of weak inventories and lead prices rose on hopes demand for cars and batteries would recover after the Japanese earthquake and Tsunami restricted production. See more here at Bloomberg.

New Zealand's commodity prices are also at record highs. ANZ's Commodity price index released on Monday showed prices for commodities New Zealand sells rose 4.7% in March to a fresh record high. See more here in Gareth Vaughan's article.

Slightly stronger than expected jobs growth figures late on Friday in the world's largest economy, America, has boosted hopes for global economic recovery and put fresh heat on prices.

Also signs of hot demand for commodities such as copper was reinforced by news that China's Minmetals plans a US$6.5 billion takeover bid for Perth's Equinox Minerals, which owns Africa's largest copper and gold mine at Lumwana in Zambia. It also owns Saudi Arabia's largest copper deposit.

Copper is a key ingredient used in the industrialisation of China, including for plumbing, roofing, cladding, cables, switches and heaters. See more here at Reuters.

Meanwhile, America's government is set to hit its legislated debt ceiling on May 16. This is triggering a big fight in Congress about government spending and threatens a US government shutdown unless a combination of spending cuts and a higher ceiling is agreed.

US Treasury Secretary Tim Geithner threatend that the US would have to default on its debt by July 8 unless the ceiling is raised. See more here at Bloomberg.

Most expect a deal to be hammered out before then, but there remains a chance of some form of limited shutdown.

The New Zealand dollar briefly hit 77 USc overnight on talk of rising commodity prices, but is off slightly at 76.7 USc in early trade.

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9 Comments

by Wolly | 5th Apr 11, 8:40am 1301949654

I would expect a hefty load of Chinese manipulation of the copper market given their intention to lock down supplies for the next 100 years. Who will buy the copper once they are in control of their own supply needs. The west's demands are static. That leaves India and the emerging markets to fill out the order books....and all the while knowing there are 600 thousand tons of copper sitting in Chinese storage.

I expect them to use that stockpile to bash down the prices and reshape the value of the mines they wish to buy. That is what I would do!

by Andrewj | 5th Apr 11, 9:16am 1301951795

http://viableopposition.blogspot.com/2011/03/shells-world-of-energy-zon…

Shell's World of Energy - A Zone of Extraordinary Opportunity or Misery?

by powerdownkiwi | 5th Apr 11, 10:00am 1301954408

AJ- nice links - thanks.

by Andrewj | 5th Apr 11, 9:20am 1301952000

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2011/03/can_banks_…

What is happening is that the UK's big banks are thrashing around in a state of mild panic, because of their concerns about what the commissioners will recommend.

The penny has dropped for them that this is the big event, more important than the final report due in the autumn - because it will condition the public and political debate about how to fix the banks, which will in turn determine what the government eventually feels confident it can deliver.

by steven | 5th Apr 11, 9:33am 1301952792

They are all threatening to leave....so is this a democracy or not,

Put gun to Govn head, tax me or make me responsible I'll pull the trigger bang goes 20%? of your GDP.......I wonder if its linked to JK's wish to get banks in here?

Go away is my answer, we dont need the risk and impact of your actions.

regards

by Andrewj | 5th Apr 11, 9:41am 1301953302

http://www.telegraph.co.uk/finance/comment/liamhalligan/8423520/The-US-… drjonathanwilson

The US economy is based on individual and household consumption and it is in this context that a rate rise on US debt needs to be seen.

But let us deal first with the nature of an economy that is based on consumption. Many see a consumption-based economy as a bad thing mainly because they confuse consumption with greed. But private consumption is not necessarily a bad thing if those who are doing the consuming are creating outputs that have a market value of at least the value of what they consume. This is called sustainable consumption and is closely allied to the concept of productivity.

The converse is unsustainable consumption which occurs when there is inadequate replacement of what is consumed – and the greatest source of unsustainable consumption in an economy is government expenditure for the very reason that the market value of its output is less than the value of the tax transfers that made the state based consumption possible.

For this key difference in sustainability it is possible to conclude that the engine of the US economy is not government expenditure but rather private consumption

Therefore the proper way to evaluate the importance of a rise in US yields is by asking the question, “What does this mean for private consumption – the engine of the US economy?”

And here is the very bad news that even Liam with his doomsday hat on has missed.

Rising yields on the increasing size of outstanding US sovereign and private debt will cause heart failure in the world’s largest economy and by extension the world economy by killing off private consumption. It is as simple but as lethal as that.

US yields cannot be allowed to rise before government expenditures have been brought under serious and long term control – and that without raising taxes on the most productive.

Jonathan

by scarfie | 5th Apr 11, 10:22am 1301955756

http://patriotupdate.com/4974/wsj-more-americans-work-for-govt-than-manufacturing-farming-fishing-forestry-mining-utilities-combined?sms_ss=facebook&at_xt=4d963db2678c6a5e%2C0\

Seems reasonable to follow your link with this one:)

"Every state in America today except for two—Indiana and Wisconsin—has more government workers on the payroll than people manufacturing industrial goods."

by scarfie | 5th Apr 11, 11:08am 1301958519

http://www.richardduncaneconomics.com/2011/04/04/abandoned-principles/

I like this guys articles. Would love to know where he is from as his concise style surely isn't American.

by Matt S | 5th Apr 11, 11:32am 1301959936

Oh dear, OPEC said they would increase supply of oil to keep prices down.. wonder where all that spare capacity is now? Oh that's right, there isn't any.

Perhpas the Lybian rebels can help, since they are now (besides fighting) engaged in the oil export business. War just isn't what it used to be.!!

But here's a question .. will soaring oil prices flow through to the CPI numbers? I bet the govt statisticians are working overtime on their calculators.

Where's my popcorn?