90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Dow slumps 280 points on signs of slowing US growth; QE III talk growing; Moody's cuts Greek rating; Fonterra auction price up 4.5%

2nd Jun 11, 8:48am 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 US stock markets sold off heavily this morning on signs the world's largest economy is slowing sharply again.

ADP payrolls figures for May showed just a 38,000 increase across the United States in May, which was just a quarter of what economists had expected.

ISM factory output figures showed a slump in output growth to its slowest level since September 2009. See more here from Bloomberg on slowing growth in America, Britain and Europe.

These latest signs of a weakening US economy are increasing talk the US Federal Reserve will have to restart its programme of quantitative easing (QE) or money printing once its current programme (QE II) ends on June 30.

That would further weaken the US dollar and export inflation to other countries, potentially pushing up commodity prices. See more here from Bloomberg on talk of QE III.

The Dow fell 280 points or 2.2%, oil fell 2.4% to under US$100 and the yield on the 10 year US Treasury bond fell to March lows of under 2.95%. See more here from Bloomberg on the slump in stock markets and the rally on bond markets.

Meanwhile, Moody's has cut Greece's sovereign debt rating to Caa1, which implies a 50% risk of sovereign default. It was previously rated as junk. See more here at Zerohedge on the downgrade.

Elsewhere, Fonterra's auction of milk powder overnight produced a 4.5% increase in the GDT-TWI of prices. This takes prices back to within 7.5% of their March peak. See the full results here.

However, the fall on global stock markets saw the New Zealand dollar fall back towards 81.5 USc as investors took risk off the table.

The gold prices, however, rose back towards its highs as investors sought the ultimate safe haven.

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23 Comments

by Billy | 2nd Jun 11, 9:22am 1306963320

Why would an American QE export inflation to other countries? Wouldn't a weak USD make importing stuff cheaper for NZ ?

by Tailslide | 2nd Jun 11, 9:34am 1306964059

The relative increase in commodity prices via speculation, more than outweighs the benefit of the high dollar. (tongue in cheek - remember also if international dairy prices are high, fonterra has no problem hiking prices and telling us we need to pay the market rate)

Big drop on the Dow today..... Stand by to receive caller?

by Bernard Hickey | 2nd Jun 11, 9:38am 1306964312

Billy

Tailslide on the money.

Also, China and others have fixed or near-fixed exchange rates with America, which means when US prints it squirts out into these other economies offering higher returns, particularly if they don't have capital controls.

Which means America exports inflation to China etc.

Many argue the North African spring revolutions were caused by rising food prices (in US$ terms) causing civil unrest.

cheers

Bernard

by steven | 2nd Jun 11, 10:42am 1306968129

International market rate.....so we are competing for NZ made products on NZ wages v others who earn far more.

In the short term there is no way around this...but in a few years I suspect we will be doing like India banning rice exports (and thailand?) and russia with wheat...

I dont know why we bother looking at the like sof FTA....just let it run as is its more flexible...we are moving into a sellers market....but NZers still need to eat (well).

regards

by The best statu… | 2nd Jun 11, 9:43am 1306964638

The depression is arriving, it was after 3 years in 1932 the depression really started after crash of 1929. 3 years since 2008 now!.

Hope you have your debts under control. I have $20K mortgage now so I am ok. Will be paid off before I am made redundant, but my savings scheme at work will pay at least $20K as it is worth $50K now, so I can afford a 60% decline in my savings scheme:).

QEIII only option for USA now to avert total disaster at this time. Will make the crash even worse when it does arrive in 2013/4.

Re gold, may be safe option but you can't eat it, my 1/4 acre section will soon be a garden growing food. I wonder what people in high rises are going to do for food, jump off the balcony when they are starving to death.

All I need to buy now is a shotgun for the birds and theives who will try and steal my food.

Bring on the depression, it will make us all harden up, if you don't you will starve. The teenagers will wonder what the f#*k has happened when mummy & daddy cannot afford the designer clothes and new cellphones every 3 months.

by Matt S | 2nd Jun 11, 10:21am 1306966894

gold, may be safe option but you can't eat it. Well you can't eat your freshly printed $100 notes (created out of thin air and not backed by anything real) either, not without loads of tomato sauce right?

Gold is real money, punto.

by steven | 2nd Jun 11, 10:52am 1306968735

If it gets so bad you can only buy food with gold then frankly you should be buying lead.

regards

by Matt S | 2nd Jun 11, 12:07pm 1306973271

Haha, very true !! Lead wrapped in a nickel jacket, delivered through a stainless tube. ;-)

by powerdownkiwi | 2nd Jun 11, 10:22am 1306966975

Best status - yeah, but there is a caveat with comparisons to the Great Depression - there were only 2 billion folk on the planet, and they consumed commodities (real stuff, needing real energy to produce) at a much lesser rate per head.

In the developed (read: more intense human stocking-rates) world, those who'd come to the cities still had rural memories - and things like allotments. It's coming - books about chicken-keeping and home-produce don't stay on the shelves.

We did the same with our mortgage - targetted 2005, but were a wee bit late!

Savings schemes, I have my doubts about. They're not guaranteed to be underwritten, and any QE suggests your resultant buying-power will be diminished.

I've put my 'savings' into tools and materials - can't see them ever being 'cheaper' than now, and if you're going to need then in the future, it's better than money in the bank.

Teenagers? Yes. We anticipate that at least one of our two (in their 20's) will have to fall back on us. We bought the acreage in '94 with that in mind - there's room for a couple more houses, none of which have to 'see' each other, and there's enough thinnings to drop in the forest, to build them out of. One of mine understands what's coming, one doesn't want to know.....

Gluckman's study should have looked into the future.....

by andyh | 2nd Jun 11, 10:00am 1306965643

The Bernanke is now between a rock and a hard place - if he doesnt bring in QE3 equities and commodities will tank, all the effects of the sugar rush stimulus will be swept away, and the US will plunge back into recession.

If he does bring in QE3 all he will achieve is to kick the can down the road a bit further, devalue the US$ some more and export some more inflation.

As far as NZ goes - if he doesnt go for Q3 look for the price of our soft commodities to come falling down and for the NZ$ to come with them.

by realist | 2nd Jun 11, 10:44am 1306968260

Depression wat !!

Fonterra auction ......prices up 4.5%....dairy boys are laughing all the way to the bank.

How can you compare todays economy with the 1930's.

The world needs food....more so than ever before....we all have to eat before we buy cars,TV's,clothes houses etc.

by steven | 2nd Jun 11, 11:01am 1306969283

the Great Depression was a credit driven event as is / will be the "Great Austerity" today.

http://www.debtdeflation.com/blogs/

educate yourself

regards

by Les Rudd | 2nd Jun 11, 10:56am 1306968993

She's like a dark haired Jenifer Aniston, worth a watch:

http://tvnz.co.nz/business-news/amp-exporters-hurting-under-high-dollar-4-29-video-4203249

by Alex Tarrant | 2nd Jun 11, 11:06am 1306969607

Easy there Les...

by Les Rudd | 2nd Jun 11, 11:21am 1306970465

Just a marketing ploy to get folk to listen to John ....

Was thinking of the Rachel Green hair. Come to think of it a few of the female newscasters have same. However to add some balance to what might seem a boorish and sexist comment, from what I've seen this lady seems quite onto it and conducts some good interviews. Or have I made it worse? First law of the hole, stop digging ...

by Bernard Hickey | 2nd Jun 11, 12:07pm 1306973248

Les Nice interview with John. He's on the money.

Nadine very sharp and experienced as a business journo. Ex Radio NZ.

Does very well on the Telly too.

Knows her stuff.

cheers

Bernard

by Les Rudd | 2nd Jun 11, 12:31pm 1306974697

Indeed, I don't understand why certain:

"Business leaders are urging the Reserve Bank not to intervene in the currency markets as the New Zealand dollar hit a second post-float high against the United States currency in as many days."

http://www.stuff.co.nz/business/money/5082928/Forget-slowing-dollar-Reserve-Bank-told

and yet:

“This graph of the Trade Weighted Index over the past three weeks shows that it is not just a US dollar story. The New Zealand dollar has in fact been rising against almost all major currencies.”

http://www.realeconomy.co.nz/176-currency_head_wind_more_like_a.aspx

Instead authentic leadership for the 'real economy' is saying, "The Government and the Reserve Bank cannot continue to sit and watch as the currency appreciates say the New Zealand Manufacturers and Exporters Association (NZMEA). Any credible export based economic plan must deal with a persistently overvalued and volatile currency."

Perhaps Nadine should interview those other "business leaders" and see why they talk such crap. If she does Nadine would do well to read a few threads on Int.co and the PEC, NZMEA web/blog-sites to get an understanding of why they are talking crap. Of course I would be happy to help with her research more directly. Not kidding, this will be a bigger and bigger issue/risk/threat going forward and we need more clued-up business journos to challenge the status quo, particularly from Nadine's generation, because it is her generation that has more to lose in the long run.

Cheers, Les.

www.mea.org.nz

by steven | 2nd Jun 11, 11:14am 1306970056

Steve Keen Vs Chris Joye Property Debate Feb 2011

http://www.youtube.com/watch?v=-uHQeYY6K98&playnext=1&list=PL34202F4833…

Steve Keen on housing etc.

regards

by steven | 2nd Jun 11, 11:40am 1306971638

"If you ask me, the water level has now dropped so far that the fuel rods are exposed. We really are in meltdown territory."

http://krugman.blogs.nytimes.com/2011/06/01/the-euro-living-dangerously/

"A very important column from Martin Wolf. One way to summarize his argument is to say that slow-motion bank runs are already in progress in the European periphery, and that these countries’ banking systems are being sustained only by a process in which, say, Ireland’s central bank borrows from the Bundesbank and then lends the funds on to Irish private banks to replace the fleeing deposits. Here are claims among central banks as of the end of last year"

by Wolly | 2nd Jun 11, 4:21pm 1306988477

The following comments are known as 'Blatters'

Shouting Paula Bennett and Gerry Brownlee tickets to a Bon Jovi concert is business as usual for Westpac and not part of a campaign to curry favour to help retain a large lucrative Government contract, the bank says......herald

The Government says the Green Party's implication that Westpac Bank has bought access to ministers through generous corporate hospitality is wrong. Replies to questions from the Greens to the Government show that nine ministers accepted hospitality from Westpac in the past year, including box seats at the Rugby Sevens, dinner at the White House restaurant in Wellington and tickets to rock concerts.....stuff

by Wolly | 3rd Jun 11, 5:36am 1307036179

"Celebrities who make false statements about financial services could face a fine of up to $1 million under new laws that are being drafted, Commerce Minister Simon Power says." herald

Politicians who make false statements about financial outlooks could face fatter pay packs and beefed up perks under new rules being drafted in the Beehive.

Sir Humphrey who resides at Treasury most of his arduous days can expect a bonus and a bloated salary rise for false statements about the economies future growth.

by Wolly | 3rd Jun 11, 6:41am 1307040076

"While the council was told Arrowtown business owners who attended a meeting on Monday night "unanimously endorsed the increase in funding", those spoken to by the ODT yesterday were unaware the funding would come from increased rates.

Arrow Brewing Company Ltd co-owners Darryl Jones and Greg McMeeken were at Monday's meeting, but said they understood "all they [the association] were doing was asking for more money to be allocated to their promotion". ODT

Doh......

Dumb and Dumber have moved to central Otago....

by Wolly | 3rd Jun 11, 6:59am 1307041163

Nowhere to go...anyone want the "tuppawaka" in their back yard....no.....gosh JK it looks as though the shortest route to buying those votes would be to just hand the million dollars over and forget about the tuppawaka....