90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Commodity prices slide on Goldman warning and global growth fears; Oil, gold, wheat fall; NZ$ up then down; AMI exodus?

13th Apr 11, 8:56am 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 commodity prices fell sharply overnight after the International Monetary Fund downgraded its global growth forecasts and Goldman Sachs warned of a substantial correction.

News that Japan's nuclear situation had been upgraded to a Chernobyl-level event also worried markets. The world's largest aluminium producer Alcoa also reported disappointing sales, which raised concerns about slow demand.

The oil price fell 4% to US$106/bbl for West Texas Intermediate and the gold price fell to US$1,453/oz. Even the wheat price fell. See more here at Bloomberg.

The New Zealand dollar, which often moves in tandem with commodity prices, initially rose overnigth to 78.5 USc after Reserve Bank Governor Alan Bollard said the recent rises in New Zealand commodity prices may be structural rather than cyclical.

See our article on Bollard's comments here.

However, the renewed jitters about global growth and the fall in commodity prices through the early morning saw the New Zealand dollar dragged back down to 77.8 USc by early morning. The Dow fell 1%. See more here at Bloomberg.

Meanwhile, TV3News reported thousands of AMI customers are switching to other insurers in the wake of the government's bailout of the insurer.

AA Insurance said 5,000 policy holders had switched from AMI to AA, while AON said it had seen hundreds of inquiries from worried AMI policy holders.

AMI CEO John Balmforth rejected talk of an exodus, saying AMI had lost a net 1,072 policies out of a total of 1.2 million.

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8 Comments

by michael | 13th Apr 11, 9:22am 1302643376

The NZD is high now, eventualy it will fall back to the 60's. I don't think that Mr Bollard's "structural" idea has any thing to do with it. People want an explanation and politics turn up with an explanation that everybody is willing to accept, so now you all know it is about "structural" LOL Wait and see what hapens when it nears 1.30 to the AUD there will be a rush to talk it down again... it will probably be" structural " but the other way round... Get it ? It's a hedge fund toy.

by Bernard Hickey | 13th Apr 11, 9:23am 1302643434

A couple of other good little stories around

Karyn Scherer reports at NZ Herald that Shanhai Pengxin will file its bid for Crafar Farms with the OIO this week. Remember this is the Shanghai property developer rich-lister, not May Wang. Wonder what the gummint thinks? I've asked Alex to ask the question. John Key used to worry about being tenants in our own land.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10718901

Also, Tim Hunter reports at Stuff about a board stoush at Allied Farmers between directors Andrew McDouall and Rob Alloway over NZ$562,000 worth of investment banking fees charged to Allied by McDouall Stewart.

http://www.stuff.co.nz/business/industries/4879545/Board-stoush-at-Allied-Farmers-over-Project-Eureka-fees

cheers

Bernard

by scarfie | 13th Apr 11, 10:56am 1302648970

"Loughlin said Allied had paid no fees to McDouall Stuart relating to the Hanover deal"

Hahahahaha, no only half a million dollars.

It is very interesting to note that it was Allied the paid all the costs to set the deal up. Was this to keep that off the already toxic balance sheet for Hanover? All to try and con the share holders?

by neco | 13th Apr 11, 9:59am 1302645551

So if Bollard is right why didn't the NZD "slide" together with the commodity prices? I can understand Bollard not intervening to lower the NZD (i.e. it doesn't work) but I would never have thought before that he would actually talk it up when its close to USD0.8. So what does he know (expect) that we don't? Ratings downgrade after the budget?

by steven | 13th Apr 11, 10:04am 1302645892

AMI, well it makes sense to shop around, from what I can see there is cover to June so ppl should set themselves up to be able to walk easily and quickly if need be.

Personally I think an Insurance company is something like "death and taxes" its there to cover you.....so if confidence is lost in your insurance company to do that, thats probably the end of it (AMI).

NB whether its jumping out of the frying pan into the fire is a Q to ask.

regards

by steven | 13th Apr 11, 10:20am 1302646846

Being in a global economy.....Europe works on brent pricing....which is still $120 so is the one to watch....WTI is $106...so the USA isnt being quite as badly slapped as the EU....

Must go look and see how the baltic dry index is doing.....

What a beautiful trend line.......down....

http://www.bloomberg.com/apps/quote?ticker=BDIY:IND

Core inflation in the USA, forcasted as flat.....$1.5% give or take a bit...

http://www.frbatlanta.org/research/inflationproject/ip_081310b.cfm?meth…

EU doesnt look much different....

and it seems teh expectations are it stays there...

http://macroadvisers.blogspot.com/2011/03/larry-meyers-op-ed-in-new-yor…

http://www.nytimes.com/2011/03/25/opinion/25meyer.html?_r=2&ref=opinion

So, food and oil are transitionary and volitile....so since I think thats not coreect, oil is up and without recession / depression will stay there ie no demand destruction...does that mean core rises? no because other things deflate if you dont have any more money, and without wages increases thats obviously the case....

regards

by powerdownkiwi | 13th Apr 11, 11:41am 1302651716

Bernard - repeat after me:

Oil is not a commodity.

It is the thing without which nothing else happens.

Down? Yes, but Brent is a better yardstick that WTI - it's being skewed at the moment.

http://www.oil-price.net/

It'll be interesting to see whether it drops to the trend-line, or whether we put a line through the low points to establish a base-line. The problem is, that it's like trying to use a sextant in the fog - the item you're costing impacts everything else, including the diffo between incomes and desires. Plus which theres speculation both ways - as there is with everything.

The only real measure is 'produced'. Real calories per hour data. Tells you whether more or less work is being done.

by steven | 13th Apr 11, 11:51am 1302652304

Comparison of the instability of CPI v core inflation.

http://krugman.blogs.nytimes.com/2011/04/12/annals-of-well-duh-commodit…