Gareth Vaughan, sitting in for Bernard Hickey, details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news credit rating agency Moody’s Investors Service has warned it will place the US govt’s AAA credit rating under review for possible downgrade if no progress is made on increasing the country’s statutory debt limit by the middle of July.
Moody’s said heightened polarisation over the debt limit had increased the odds of a short-lived default.
A bill that would raise the US$14.3 trillion limit by US$2.4 trillion failed to secure sufficient support in the House of Representatives on May 31 with Democrats claiming the vote was rigged to ensure its defeat. Republicans who control the House, say they don’t support lifting the limit unless President Barack Obama’s administration agrees to significant spending cuts.
US Treasuries fell on the Moody’s news, sending yields up from their lowest levels of the year, and the US dollar dropped.
The Moody's warning follows a similar one from fellow credit rating agency Standard & Poor's (S&P) in April.
S&P is now warning a sudden slowdown in China may lead commodity prices to fall by up to 75% from current levels. Unexpected changes to govt policies or problems in the banking sector could trigger such a drop, S&P says.
The S&P index of 24 commodities dropped 6.8% last month, its first fall since August, as inflation rose in China leading to suggestions economic growth will slow. China’s equivalent of the Reserve Bank has raised benchmark interest rates four times and increased banks’ reserve capital requirement ratios by three percentage points since September. See a recent interview here with S&P China banking analyst Ryan Tsang.
According to a Bloomberg survey of analysts, China’s gross domestic product may grow 9.5% this year, down from 10.3% last year.
And in the latest move by an internet company to tap keen investor demand, Groupon, a Chicago-based provider of online coupons, wants to raise US$750 million in an initial public offering.
Groupon’s float follows the recent one of social networking site LinkedIn which is now valued at US$7.4 billion, or 31 times last year’s sales.
Groupon had revenue of US$644.7 million in the first quarter but made a US$113.9 million net loss.