Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that US Federal Reserve Chairman Ben Bernanke has again reassured US investors he is ready to use all the tools he has available to promote a stronger US economic recovery.
But Bernanke again stopped short of detailing which tools he could use or how he might use them, disappointing many who are hungry for an announcement of a third round of money printing or quantitative easing known as QE III. See more here on the speech from Reuters.
Investors will have to wait for a key meeting of the Fed's policy making committee on September 20/21.
The Dow closed down 1% as Bernanke also said the risks to the recovery had increased. See more here at Bloomberg.
US Treasury yields fell again to near record lows as bond investors priced in a slide back into recession. The 2 year Treasury yield fell to 0.19%, while the 10 year fell again under 2% to 1.98%, while the 30 year yield fell to 3.31%. See more here at Bloomberg.
Markets are also waiting for the detail of a widely previewed speech from US President Barack Obama due late this morning New Zealand time. Obama is expected to announce a US$300 billion package to create new jobs.
The plan is expected to include extensions of payroll tax cuts, new aid for state and local governments, a tax holiday for US corporations repatriating funds and new infrastructure spending. (We will update with the details after the speech.) See a Reuters preview of the speech to a joint session of Congress here.
Meanwhile, the European Central Bank announced overnight it would hold its official cash rate at 1.5%, pausing a programme of interest rate hikes begun just 5 months ago to control inflation. ECB President Jean Claude Trichet said the European Economy faced "intensified downside risks" and was less worried about inflation.
These comments weakened the euro sharply against the US dollar. It fell to around US$1.38. See more here at Reuters.
The New Zealand dollar also firmed towards 60 Euro cents and 52 British p as talk of lower European rates and money printing in Britain grows at the same time that New Zealand is expected to increase rates. This will make the Rugby World Cup an expensive trip for European and British tourists.
However, the Kiwi is off its highs against the Australian dollar, making it better for Australian rugby tourists.
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