Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that Europe's banking system continues to suffer enormous stress on fears a Greek default could unleash a contagion of bank losses across Europe.
European stocks closed down 2.5% and German stocks fell 3% on concern that European politicians remain divided about how to deal with Greece and the ensuing fallout within the banking system. See more here at Bloomberg.
Greece's latest bailout tranche was delayed again yesterday after it failed to meet deficit forecasts and Germany's Finance Minister continued to rubbish plans for a leveraged up 'bazooka' bailout fund to build a firewall around Greece.
However news in the last half hour of New York trade from the FT that European ministers were looking at a bank recapitalisation plan boosted stocks in late trade.
The Dow closed up 1.4% and the S&P 500 closed up 2.5%, having earlier fallen as much as 2.5% when the video was being recorded. See more here at Bloomberg.
After the US close Moody's downgraded Italy's sovereign credit rating by a stunning 3 notches. See more here at Bloomberg.
Shares in Belgium's Dexia Bank crashed a further 33% overnight after the Belgian government pledged to support it, which investors feared meant some form of nationlisation that would dilute their holdings. See more here from Bloomberg on signs of growing stress in Europe's banking system.
Germany's Deutsche Bank also announced it had abandoned its previous profit forecasts. See more here at NYTimes.
Goldman Sachs cut its global growth forecasts and not even comments from US Federal Reserve Chairman Ben Bernanke that he was prepared to act as the economy was close to faltering was enough to lift the gloomy mood on Wall St. See more here at BBC on Bernanke's comments.
Meanwhile, the Australian dollar fell vs the US dollar after the Reserve Bank of Australia held rates and indicated an easing bias. Many now expect the Reserve Bank across the Tasman to cut its official rate on the first Tuesday in November, which is also Melbourne Cup day. See more here at SMH.com.
All this volatility and concern about the global economy and commodity prices saw the New Zealand dollar fall under 75 USc overnight. It often moves in tandem with commodity prices. See more here in BNZ's currencies report on our site.
Milk powder prices fell a further 1.8% in Fonterra's fortnightly auction overnight. See more here.
The New Zealand dollar rebounded to over 76 USc in early morning trade as the Dow bounced sharply, although it has come off its highs after Moody's downgraded Italy's credit rating by three notches.
(Updated with sharp rebound in last half hour of New York Trade, NZ$'s jump back to 76 USc, 3 notch downgrade of Italy by Moody's after the close, links)
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Ive just read
Then it suddenly got a lot more interesting, as dairy prices get hit hard.
http://www.agrimoney.com/news/dairy-prices-drop-to-14-month-low-as-output-soars--3677.html
Please take the time to read Nicole Foss its a great article
http://theautomaticearth.blogspot.com/2011/10/october-3-2011-commodities-and.html
just fixing that link
October 3 2011: Commodities and Deflation: A Response to Chris Martenson
"Speculative reversals are thus followed by a temporary undershoot, as we saw in 2008. Prices fall to well below where the fundamentals would place them - in the case of commodities perhaps to the cost of the lowest price producer." AJs link
QED expect more downside until the lowest price producer level is reached...now where was that for Copper in 08....!
Seems like they are talking about the good bank/bad bank malarkey for Dexia - this was tried successfully by the Scandinavians as I recall in the 1990s, but only after bondholders were forced to take a hit. Also the Scandinavian crisis was small beer and contained.
Also worth remembering that Dexia passed those ridiculous EU stress tests a few months ago - now look where its at.
BREAKING NEWS
ITALIAN GOVERNMENT BOND RATINGS CUT 3 NOTCHES BY MOODY'Ssounds like the ratings agencies are trying to claw back their credibilty after the 2008 debacle, by becoming the Grim Reapers of the global economy...about time we lanced the boil and the old world economy died , pain and all so real green shoots can one day appear in the spring of a new, equal, modern economic environment..wonder if i'll be alive to see it even though i'm only in my 50"s ?
gotta knock off the vampire squid first before we can go there ...!!!!!
Here is the real problem.... http://www.stuff.co.nz/the-press/national/5733304/More-solo-dads-on-DPB........interesting to note his partner, 25 years his junior, decided with him that he would look after the children.....wrong....they decided that the taxpayers would look after their children. She will by now be producing another batch with another bloke, and likely as not the new batch will also be looked after by the taxpayer.
Meanwhile, expect him to begin producing another batch with another partner, and those kids will also be looked after by the taxpayers.
Wally - that's the sort of silly lightweight nonsense I'd expect from a Party hack in election-time. Lacks proportion.
Foss - sometimes she's right, but I don't think she gets the energy link - Martenson gets it better (building his greenhouse and thinking he's late,,,) but still advises on finance, and Staniford is blind to the point of spin, but you can read what you need from his graphs - which are real. You have to read between all their lines, big picture, to get it.
Orlov, Tainter, Heinberg and Greer do it better.
But get reported less.
Funny old world.
Re: Foss @ the Automatic Earth - I generally like her writing, but I dont think her recent stuff is as good as it was. Too verbose, less decisive than a few years ago.
Its an interesting battle between the inflationistas and the deflationistas. I am still not sure who will be proven right - but one thing for sure - it aint going to be nice.
I agree that Orlov et al deserve more press, but I wouldn't say Nicole Foss doesn't get the energy link. I think she understands it very well.
Her argument has always been that the current global financial bubble was going to burst no matter how close to peak oil (etc) we were, and that its direct effects were going to be felt before those of peak oil ... but she has never denied either the looming energy crunch - or oil's symbiotic relationship with today's financial system. Quite the contrary.
I realise many, such as Orlov, believe that this bubble is bursting now BECAUSE we have reached peak oil production. Foss would differ with them on that one particular point - but she doesn't appear to take peak oil any less seriously because of it.
More detail here on 3 notch downgrade by Moody's of Italy.
Echeers
Bernard
It never rains, but it pours. From Egan-Jones:
Morgan Stanley: EJR lowered A+ to A (Neg.) (S&P: A) (MS)
Synopsis: Questions about MS's French bank exposure and level of derivatives exposure. While June results were good, MS' French bank exposure (all asset and off balance sheet classes except derivatives) is estimated at $39B (57% of equity of $68B and 150% of market cap of $26B) of which interbank placements is believed to be a small component. These exposures are significant and unusually large as a percentage of capital. Of equal concern is the estimated $1.78T in notional value of CDS' on MS' books although EJR does acknowledge the netting effect (the net estimated exposure is $457M). The US is likely to provide MS additional support if needed, despite wind-down procedures contained in Dodd Frank. We are downgrading with a neg outlook.
http://www.zerohedge.com/news/egan-jones-downgrades-morgan-stanley-negative-outlook
Haaarrrrrhahahaaaahahaaaaa....yurk
"For Emma Marcegaglia, the head of Italy's leading industrial association, Confindustria, the downgrading of her country by America's leading ratings agency is the last straw.
"We are a serious country and we are fed up at becoming the laughing stock of the world," she said."
"But the legislation stops short of subjecting parliamentary spending to the Official Information Act – a key recommendation in a Law Commission report" stuff.co
Why?....why should the public not be allowed to know how the mps are spending taxpayer money on themselves...what is the secret?...John Key ?
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