Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that stocks plunged on global markets overnight on near panic about the state of the global economy.
The New Zealand dollar slumped to 82.75 USc this morning as the Dow plunged 512 points or 4.3% on growing fears the world's largest economy is sliding back into recession and signs the contagion over European sovereign debt is spreading to Italy and Spain.
The S&P 500 fell 4.8% or more than US$500 billion in value in one day and is now down 10% (an official correction) in the last fortnight.
US stock markets have fallen US$1.3 trillion in value this week, which will make American households feel poorer and tighten their belts even more. US house prices have also been falling again in recent months, unleashing a negative wealth effect in the world's largest economy.
The Nasdaq fell more than 5%. US Treasury yields rallied to record lows as panicked investors sought safety wherever they could find it. The US 2 year Treasury yield fell to 0.26%. See more here at Bloomberg.
The VIX index of volatility, also known as the fear index, rose 35% in its biggest jump since February 2007, widely seen as the beginning of the Global Financial Crisis when sub-prime debt started collapsing. See more here at Bloomberg.
One factor in the market's slump was news from Bank of New York that it would start charging clients a 13 basis point fee for holding large cash deposits, which means depositers have to pay the bank money to hold the cash. See more here at Bloomberg.
Here's a view from one large investor quoted by Bloomberg:
“People have had three years of being told by Washington and the news media that we are in a recovery,” Doreen Mogavero, chief executive officer of Mogavero, Lee & Co., said in a telephone interview from the New York Stock Exchange.
“Now to find out that we are not only not recovering but that growth is slowing, things are reversing, there’s going to be a double dip, ten more years of austerity, it’s completely disconcerting to the average investor.”
The New Zealand has fallen from over 88 USc since Monday as growing turmoil on financial markets saw investors move back to 'safer' assets from riskier assets in currencies such as the Australian and New Zealand dollar, which are more exposed to commodity prices.
A slowdown in the global economy is expected to drag commodity prices lower. The oil price fell more than 5% to below US$87/bbl.
See more here at Reuters on the market rout.
The European Central Bank was reported to have bought bonds to stem the panic in European bond markets.
It also pumped fresh cash into money markets to try to stop them from freezing again in the same way they did when Lehman Brothers collapsed.
See more here at Bloomberg on the ECB's bond buying.
There are also growing worries Italy may run out of cash by September if it cannot access bond markets.
Disillusion with the European Union's previous rescue plan is widespread. It is deemed to be insufficient to deal with any bailout of the Spanish and Italian governments.
(Updated with more details, links, chart below)
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