US and European stocks rally; Strong Italian and French bond auctions as euro fears easing; Aussie rate cut seen after weak jobs figures
Here's my 90 seconds at 9 am summary of overnight news in association with Bank of New Zealand, including news that US and European stocks rallied overnight as confidence grew about US economic growth and there were fresh signs of an easing in the European sovereign debt crisis.
However, unusually for when global stocks rally, the New Zealand dollar didn't rise overnight. This is because weak local inflation figures yesterday suggested our official cash rate will stay on hold at record low levels for longer and signs the Reserve Bank of Australia is likely to cut interest rates next month after very weak employment figures.
US stocks were up around 0.5% in late trade after Bank of America posted a profit and jobless claims fell to a four year low, suggesting the US economy is beginning a tentative recovery. See more here from Bloomberg.
European stocks rose 1-2% after Italian and Spanish bond auctions were successful as fears about the European crisis continued to ease. See more here at Reuters.
The European Central Bank lent almost €500 billion euros to European banks at around 1% just before Christmas against often poor collateral.. Some of those banks are reinvesting that money in European government bonds at higher interest rates, effectively making a nice 'carry trade' profit on the way through that is bolstering their balance sheets.
Also boosting global stock market sentiment, Bloomberg reported that Chinese authorities have eased lending rules for big Chinese banks, allowing them to increase lending to big companies by 5% and reducing their risk weightings for lending to small businesses, helping them boost lending. See more here at Bloomberg.
Elsewhere, Brazil cut its key interest rate for the fourth time in 8 months, slicing another 0.5% off its cash rate to 10.5%.
Also, Australia reported almost 30,000 jobs were lost in December, meaning our nearest neighbour saw a net 100 jobs lost in calendar 2011, which was the worst year for job creation in 20 years. Almost all economists now expect the Reserve Bank of Australia to cut its official cash rate again next month. See more here at Bloomberg.
Meanwhile, the New Zealand dollar remained surprisingly weak overnight after New Zealand's Consumer Price Index fell unexpectedly in the December quarter, cementing in expectations the Reserve Bank is likely to hold its official cash rate right through much of this year, possibly into 2013.
See more here on the inflation figures from Alex Tarrant.
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