Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that Fitch Ratings has downgraded New Zealand's sovereign credit rating from AA+ to AA.
Fitch said New Zealand's poor savings rate and heavy foreign borrowing showed little signs of turning around and further structural reforms were needed.
See the the full article on the Fitch downgrade here.
This is the first sovereign credit rating downgrade for New Zealand in 13 years and will prove a warning shot over the govenrment, which yesterday borrowed a record-equalling NZ$1 billion in a single bond auction.
See Alex Tarrant's article on the record bond issue here.
The New Zealand dollar fell sharply after the announcement.
It fell as much as 1 USc to 76.5 USc before recovering some of its losses to be over 77 USc by 9 am. See more in BNZ's currencies report here.
Meanwhile, the German Parliament overwhelmingly approved a previous plan to increase the size of Europe's bailout fund, helping spark a rally of around 1.5% in European stocks and a rise in the euro. See more here at Reuters.
However, the real work of approving a so-called 'bazooka' plan to vastly increase the size of the fund has yet to be agreed and there remain significant hurdles to jump before Europe's financial crisis has calmed.
US stocks were mixed with tech stocks falling after a profit downgrade by chipmaker AMD.
See more in BusinessDesk's market report.
The Dow closed up 1.3% and the S&P 500 ended up 0.8%, but the Nasdaq closed down 0.4%/
(Updated with links to reports and detail on US stocks close)
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9 Comments
Looks like the economic benefits of holding the RWC were wildly over-estimated - we had better win it now!
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10755430
Wither the $700m?
in December 2010
New Zealand's rising debt levels will not bother the international ratings agencies unless government debt hit 30% of GDP from about 18% now, Prime Minister John Key said, adding that debt is tracked to reach as high as 28.5% of GDP.
French banks in the poo
"At the same time, El-Erian noted that the ratio of market capital to total assets for the sector has fallen to 1% to 1.5% — far short of the range of 6% to 8% typically seen for healthier banks."
Good ole Tony Alexander is slowly coming around to the pessimistic reality espoused here for quite some time - good lad:
http://www.bnz.co.nz/static/www/docs/weekly-overview/w2011-09-29.pdf
good to see him debunking the notion of decoupling spruiked recently by Key
"The Greek government is a bottomless pit. 2. Big banks in Europe are undercapitalized. 3. Big banks are loaded with Greek debt. 4. Big banks are loaded with other PIIGS debts. 5. The European Central Bank will bail out banks. 6. Other PIIGS will face default. 7. The size of the PIIGS debts is enormous. 8. German voters oppose more bailouts. 9. German politicians ignore German voters. 10. German voters will replace them. 11. A recession is looming. 12. Recessions increase government deficits. 13. More PIIGS will get into fiscal trouble. 14. More PIIGS will threaten default. 15. And the beat goes on. 16. And the beat goes on."
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