Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news European and US bank stocks were hit hard overnight as fresh fears emerged about a Greek default and contagion to Europe's banking system.
Greece missed its budget deficit targets yesterday, sparking fresh speculation that Belgium's Dexia Bank, which is heavily exposed to Greece, may need to be bailed out by the government. Its shares fell 10%. An emergency meeting of the Dexia board is now underway. See more here at Bloomberg.
Dexia has a market value of around 2.5 billion euros, but is currently borrowing 34 billion euros from the European Central Bank because it cannot borrow from other banks.
Meanwhile, incoming European Central Bank President Mario Draghi has admitted that banks in Europe are facing funding problems. See more here at Bloomberg.
German Finance Minister Wolfgang Shauble also doused hopes for a 'bazooka' rescue fund, increasing fears that Europe's politicians will struggle to agree on a uber-plan to fix the euro crisis. There was also a report at FT Deutscheland after the close that Greek Prime Minister George Papandreou had offered his resignation. See more here at FTAlphaville.
Fears that US banks are exposed to the European banks saw their shares hammered too. Citigroup shares fell 9%, Bank of America fell 10% and Morgan Stanley fell 6.7%. Bank of America's website went down sporadically overnight because of heavy customer usage.
Also, America's third biggest airline, American Airlines, saw its shares plummet 33% on talk it will have to file for Chapter 11 bankruptcy protection.
US stocks closed down around 3%. The S&P 500 ended down 2.9% and below the key 1,100 level. See more here at Reuters on US markets.
Meanwhile, investors continued to pile into safe haven assets such as US Treasuries.
They were also helped by the beginning of the US Federal Reserve's 'Twist' programme, where it sells short term bonds and buys longer term bonds.
The US 30 year Treasury yield fell 14 basis points to 2.78%. See more here at Bloomberg.
The New Zealand dollar continued to fall as investors moved away from riskier assets exposed to commodity prices and a sliding global economy.
The New Zealand dollar fell to a 7 month low of 75.3 USc. See more here in BNZ's currencies report on our site.
(Updated with details on Papandreou resignation, S&P 500 closing down 2.9% and below 1,100)
39 Comments
The trick to all this is to get into a lifeboat while you still can and watch the ship go down from a comfortable distance. You should make sure you have sufficient popcorn to enjoy the show.
That bloke issuing the orders in your lifeboat Matt goes by the name of Capt Bligh...enjoy the long long row.
MattS ...I fear your sprint across the decks to where the lifeboats ...were....may lead to the ultimate disapointment.....
AS you see fat sweaty Banking elite being rowed away by the Bernake's of this world....calling to you assurances that he'll be back for you.............................................NOT.
Wolly - whatever you taught, I hope it wasn't history.
Bligh got all his boat-load home.
Things didn't go so well on Pitcairn:
"resulted in the violent deaths of all but two of the men – Adams and Young." .
A small version of the dog-eat-dog free market, methinks.
I didn't suggest he didn't PDK....I was pointing out the trip was bloody hell as will be the case for all of us who manage to sidestep the bomb going off around us.
There I agree. May you live in interesting times.
Hold on Wolly, you were a teacher? You would have been hilarious! Was it you that was from Rangiora or was it GBH? If it was you, perhaps you taught me...
Oh dear that link AJ presents me with a really difficult decision...do I believe what the pollies in europe the uk and the usa are saying...along with Bernanke and our very own govt.......................................or do I believe the warnings from those in that link.....jeez this is a really really tough one....
Ahem. One or two popped out of the woodwork last week to gloat over the apparent demise of gold - even some folk who I would generally think of as being smarter than the herd.
They have been rather more taciturn for the last few days, but should they need reminding - gold in US$ terms has bounced strongly off its lows (+US$100 and rising).
More significantly gold in NZ$ is now a mere $NZ75 off its all time high. Much of this is down to the fall in the NZ$ in the past 10 days.
Thats right ladies and gents, gold acts as an excellent hedge against a falling NZ$, something some seem unaware of when they parrot the 'you cant eat gold' malarky.
It has been a nervous few weeks for me Andy as the metals appeared to be following the other commodities down, but the divergence is back again in the last few days. Wish I was as confident as you, although all I am interested in is ounces per acre, so I can set up my lifeboat.
Scarfie - Ive held gold for a fair few years so these sudden downturns are just grist to the mill. There have been 3 or 4 very similar swoons in the past 5 years or so. Everyone gets excited for a little while and the antis get to whoop and holler.
I must admit I was slightly taken aback when you said you had gone all in. Ballsy decision but I certainly think you got the tim ing right as you will get such buffering from the fall in the NZ$. However I would advocate some gold exposure to everyone. Back in the day classic portfolio theory was that folk should have 5-10% exposure to PM's, but that seemed to die a death in the foolishness of the last 20 years.
If, as I expect, our economic policies get found out, and we catch the considerable downdraft from China/Aussie hitting the wall I can now see the NZ$ falling rapidly towards 0.60US$. Thats going to take gold in NZ$ terms way past NZ$2900......and you'll be making close to NZ$1000 an ounce.
Sound advice AndyH. I'd add that ultimately holding gold will prove to be the best protection against the falling value of all the fiat currencies. Problem for central banks right now is they can't all compete for the lowest value currency against the others at the same time, someone always ends up with the strong currency, but they can all devalue against gold.
Volatility is also likely to increase, so $100+/- swings are to be expected, but the long term upward trend is unmistakable.
Not disagreeing on the long term position MattS but that is not how I been reding scarfies post since he went ..."all in" as he put it ...sounded more like a short to capitalise other havens.
Hence my apprehesion shall we say..!
All in probably wasn't the best terminology there Count, moderately in might be more appropriate.
I must say part of my reasoning when taking the position, was that there don't actually seem to be many people in PM's. Among my circle of influence I don't actually know of anyone. So there might be some significant head room yet, and certainly plenty with the chaos that seems likely to rain down upon us anytime now.
The PM bugs and guys like Marc Faber say the same thing, lots of talk about gold, but very few own any. Meanwhile central banks are continuing to accumulate and China is after thousands of tons of the stuff... and encouraging their citizens to buy.
Scarfie....although I think as our currency fall it favors andyh's point of view which is tech sound.......the second rush usually sucks in the stragglers allowing top ends a second chance to relieve their positions ....cause they been having a buck both ways till they were sure there was ...Sh*t...and Fan within a combustable proximity.
But I still say ...and mean ....best of luck to you..!
Aw crikey andyh...now you know he's gonna have to go retrieve it from the long drop n clean it up a mite but there's no saving the Market oracle mailouts..!.....darn told him to leave it in the matress ..rheumatiz or no.
FYI updated with US S&P 500 close below 1,100, the Bank of America website problems and the Panpandreou resignation offer.
cheers
Bernard
Panpandreou resignation offer.... I think you meant wish there Bernard.....Panpandreou resignation wish...
My money is on the Greek PM having a bloody huge gold parachute strapped to his arse.
Gosh isn't it strange how the banks have serious website failures at times when their shares are in freefall...wonder how Warren is feeling!
Hey Big B...you better hook on over to Ollie's how to lose your shirt 101 and sort that out for Walter...he's having a royal meltdown there.....remember the Love Bernard the Love...it's what were all about here..!
Terry - your country needs you
alright Gonzo...I'll bite ...who's Terry and why do we need him/her...? come on man ..out with it....or have you just found out who PDK is...
That's not news...! look up Gentle Annie genius..... the guys a bloody legend mate.
Ambrose keeps up his excellent work:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/88024…
Fascinating link in Ambrose's piece:
http://www.bis.org/speeches/sp110928.pdf
He says much that is highly relevant for New Zealand:
"Before moving on, it is worth noting that the sensitivity of a country's current account to its real exchange rate depends on the composition of its trade flows. As Kharroubi (2011) discusses, the more a country's exports and imports are substitutes, the higher the sensitivity. And, conversely, the more exports and imports are complements, the less is the sensitivity."This means it is better to have a more broadly based economy than an over specialised one. It makes the exchange rate work as a useful mechanism. This is important to us as we seem quite happy to destroy anything that's not dairy.
Hope all is ok up there GBH....... I see your getting a pounding from the typhoon with lots of coastal evacuations...!
Stay well..!
Thanks , Count ....... the Gummster saw a cloudburst on Sunday morning that'd have made a West Coaster proud . Yup , getting a pounding ..... and loving every minute of it ( as my hero , " Maxwell Smart , Agent 86 " used to say ) .
... A 48 hour black-out makes one appreciate the simple things we so often take for granted , such as a reliable electricity supply .
Glad to hear your coping GBH.....you were MIA for a while especially when Walter went neuclar over at Ollie's rave this morning.....hope you had a chance to finish up that puppy from the other night.
I missed what Walter said . Our dial-up is slow , just tickling over nicely now .
.... went into bat for Kunzie , gave him a thumbs up . But no explanation from the immoderator why his post was edited .
Called Ollie Newland some choice names ? .. Ollie's OK , broad shoulders & all that , he can cop it sweet . I don't agree with much of his stuff , but I'm open minded enough to give him a hearing .
.. and are Ollie's pronouncements any more irresponsible than Bernard's , the Hickey death rattle on houses ?
It was a pre edit ..GBH....so noboby knows what he said...it may have been libelous...or embarrassing for Int.co...we don't know, suffices to say the Monitor has been observing Walters growing frustration and put him on the watch list ......... if the measure, is by the length of some of the slack we get cut .....then I'd guess it was potentially libelous.
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