Bernard Hickey details the key news over the weekend in 90 seconds at 9 am in association with Bank of New Zealand, including news from late on Friday night that Standard and Poor's has downgraded the credit ratings of nine Euro zone nations. See David Chaston's Saturday article.
Standard and Poor's cut the ratings of Italy, Portugal and Spain by two notches and cut France by one notch to AA+, saying European leaders had not found solutions to its debt crisis. See more here at Bloomberg.
However, the market reaction was muted. The downgrades had been expected and previous downgrades of America (and New Zealand for that matter) have not proved the disaster that many had feared beforehand. The Dow fell 0.4% late on Friday and US markets will be closed on Monday for the Martin Luther King Jr holiday.
European stocks fell 0.3% and the Euro fell to an 18 month low. See more here at Bloomberg.
The impact of the long feared downgrades is likely to be muted. Eurozone nations buy less than 10% of New Zealand exports and the widely feared increase in bank debt funding costs has yet to reach the levels seen likely to push up mortgage rates independently of the Official Cash Rate. Also, the European Central Bank's indiscriminate lending to European banks before Christmas on generous terms of up to three years seems to eased growing tensions in credit markets, for now at least.
The rise in the New Zealand dollar to a record high of over 62 euro cents is good news for importers of European produced goods.
Meanwhile, a potentially even bigger piece of news was the collapse of talks between the Greek government and Greek creditors over the weekend. See more here at Bloomberg.
The government wants the private creditors to accept a restructure that implies a 'haircut' of more than 50%. If an agreement cannot be reached then there is a risk Greece could formally default, which may trigger its exit from the Euro and more financial market turmoil.
Elsewhere, fuel prices have risen over the last week in New Zealand as oil prices have firmed.
Nigerian oil worker strikes and continued tensions around Iranian oil supplies are keeping oil prices high.
However, there was news over the weekend that Europe may delay sanctions on Iranian oil imports by six months, which may keep a lid on oil prices. See more here at Bloomberg.
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