Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that China's central bank tightened monetary policy overnight for the fourth time in six months.
The People's Bank of China raised its one year lending rate to 6.31% from 6.06% as Chinese authorities try to contain a surge in inflation surge, in part created by very loose lending in 2009 and 2010 and the US Federal Reserve's near zero interest rate and money printing policy over the last three years. See more here at CNN.
China's currency is very closely connected to America's currency so it virtually shares its monetary policy, meaning inflation is exported from America to China.
New Zealand should watch what happens in China closely because China is now the second largest buyer of our exports and is the largest buyer of Australia's exports, which in turn is the largest buyer of New Zealand exports. If the policy tightening were to slow the Chinese economy too quickly, that would slow the economies on both sides of the Tasman.
Meanwhile, Moody's has downgraded its credit rating for Portugal for the second time in a month, pointing out that it is now likely to seek a bailout from its partners in the European Union. Portugal is one of the PIGS (Portugal, Ireland, Greece and Spain) group of countries running huge budget deficits that are blowing out their public debts. See more here at BBC.
Financial markets have been pushing up interest rates on the PIGS' sovereign debt in expectation that they may eventually not be able to service those debts. If financial market turmoil in Europe continues to worsen that will make it more difficult for New Zealand's banks and its government to roll over its foreign debt relatively cheaply.
Meanwhile in Australia, Labor Treasurer Wayne Swan has indicated he will reject the A$8.4 billion takever bid for the Australian Stock Exchange by the government-controlled Singapore Exchange. Swan said the Foreign Investment Review Board had concluded unanimously that the bid was "not in the national interest." See more here at The Australian.
The NZX has a limit on shareholdings which means no one shareholder can hold more than 10% of its shares. That would have to be lifted for anyone to launch a bid for the NZX.
Meanwhile the Reserve Bank of Australia (RBA) left its official cash rate on hold at 4.75%, pointing out the Queensland flood and Japanese quake/tsunami would deliver temporary hits to the Australian economy. Economists don't expect the RBA to start tightening again until later this year. See our article from late yesterday.
Again, we care about what happens in Australia as it is our largest trading partner.
Meanwhile, the New Zealand dollar briefly spiked to 77.2 USc overnight, but is opening around 76.8 USc. See our interative chart below.
The Dow first firmed and then fell on concern the US Federal Reserve may start withdrawing its monetary support through either stopping money printing or increasing interest rates. See more here from Bloomberg.
Minutes from the US Federal Reserve's monetary policy committee showed they were divided about when to reverse its stimulus. See more here at Bloomberg.
Also US service industries grew less than forecast in March. See more here at Bloomberg.
It's also worth watching growing talk that a showdown in the US Congress between new 'Tea Party' Republicans and Democrats could leave the US government without sufficient funds to keep operating.
A government shutdown, the first since under President Clinton 15 years ago, could start as early as the weekend. See more here at Bloomberg.
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