David Chaston details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the sovereign credit rating downgrades just keep coming. Over the weekend, Italy was downgraded by Moody’s three notches to AA from AAA, and Spain was cut by Fitch by two notches to AA-. Belgium’s AAA rating was also put under review by Moody’s.
And the ratings downgrades didn’t stop there.
Moody’s cut ratings for nine Portuguese banks, and did the same for twelve British banks.
In the case of Britain it said the prospects for those banks hadn’t changed, but the regulatory environment means the taxpayer is less likely to bail them out if they get into difficulties. Among their big banks, only HSBC, Barclays and Standard Chartered escaped these changes.
Across the Atlantic, the US economy added 103,000 jobs in September, higher than many economists had expected.
But the US jobless rate was unchanged at 9.1%.
Although the figures were boosted by the return to work of 45,000 striking telco workers, employment data from August and July was revised upward.
Here in New Zealand all eyes were on last week’s cut in our sovereign credit rating by both Fitch and S&P from AA+ to AA. That was for the NZ Government foreign currency rating. But unnoticed by many was that both agencies cut our government’s domestic currency ratings one notch as well, and for NZ$ obligations the government no longer has a AAA rating – it is now AA+, and that will mean upward pressure on the price of NZ$ bonds; maybe not a lot, but when you have issued $67 billion of them, every little added premium means more tax that needs to be collected and longer to pay them back.
The international markets were quiet over the weekend and the NZ dollar starts this week at 77 US cents. Gold will open at 1,652 US dollars an ounce having drifted steadily down since its high point at the beginning of September. Oil on the other hand has risen $5 US since the beginning of the month, along with a similar rise in the Dow.
Interestingly, in China however, the government there has reduced the price of petrol and diesel, and along with falls in housing costs, says it is all part of its plan to tackle their growing inflation pressures.
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