Here's my summary of the key overnight news in 90 seconds at 9 am in association with Bank of New Zealand, including news finance ministers from the world's 20 largest economies have rejected calls from Germany to expand the International Monetary Fund's (IMF) rescue funds by US$500 billion.
Instead, the G20 called on Germany to help beef up Europe's own rescue funds, which Germany is reluctant to do.
Chancellor Angela Merkel pushed the latest Greek bailout through the German parliament overnight, but only after saying she didn't want to contribute more to Europe's rescue plan.
Merkel pointed to a fall in Spanish and Italian bond yields this year after the European Central Bank lent €489 billion to banks for three year terms at 1% before Christmas in its first Long Term Refinancing Operation (LTRO). Many of those banks then re-lent that money to European governments at slightly higher interest rates to make a 'carry trade' profit.
See more at Bloomberg on the German parliamentary vote, where a growing number of rebels in her own coalition voted against the Greek bailout. Bloomberg reported a survey by German's Bild newspaper found more than 80% of German voters were opposed to the bailout.
Also there are signs the European Central Bank has stopped buying European government bonds on-market ahead of its second LTRO scheduled for Wednesday night New Zealand time where another €500 billion is expected to be doled out. Bloomberg reported the ECB hadn't bought any bonds for two weeks.
European stocks fell 0.3% on the news the G20 opposed bigger bailout funds. See more here at Bloomberg.
Meanwhile, US stocks (S&P 500) closed up around 0.1% after better than expected figures were published showing pending home sales rose 1.6% to a two year high in January. See more here at Reuters.
However, the Dow failed again to close above 13,000, ending down 1.4 points at 12,981.5. See more at BusinessInsider.
US stocks were also helped by a 1% fall in Brent crude to around US$124/bbl. The oil price had risen 5% in the previous week on fears any conflict in Iran might reduce oil supplies from the Middle East.
The New Zealand dollar, which often rises and falls with appetites for risk on global stock markets, rose to over 84 USc in morning trade.
Elsewhere, Japan's last major computer chip maker filed for bankruptcy overnight after it failed to anticipate the shift in chipmaking to mobile chips from PC chips. See more here at Bloomberg.
(Updated with Wall St close)
No chart with that title exists.
15 Comments
But the most interesting story this morning is the Otago Rugby Football Union.
A very poignant local lesson on the folly of government decision-making where 'glory project' debt is concerned. The ORFU's problems are in my opinion not purely of their own making. Trouble was magnified when central government said to the local folk "here have this [free] $15m for your new stadium".
ORFU was left with an aging asset in Carisbrook - which a year or so later the Dunedin ratepayer also purchased to further bail (i.e. "save") its ailing local rugby "business". But it merely delayed the inevitable for the ORFU ... and in its steps I suspect the City of Dunedin will follow.
If Otago doesn't field a team in this year's competition - that's $40m in ticket sales lost to the new stadium "asset" - which puts at risk its private sector funding - and the DCC has $400K in outstanding rent from the ORFU (having sold the asset to them, they then rented it back while the new stadium was being built) and they've already started playing extend and pretend in terms of pushing the new stadium loan out to 40 from 20 years;
http://www.odt.co.nz/news/dunedin/195256/stadium-140m-debt-loom-large-debate
It's got all the elements of a Greek tragedy.
"that's $40m in ticket sales lost"
I doubt it's anything like this much. There are ten games in the ITM Cup that the ORU fields a team in, 5 home, 5 away. Being generous, those 5 home games in 2012 might get a gate of 15,000 each. At $20 avg per ticket, that is 'only' $1.5 mln in lost ticket sales, max. Nothing like $40 mln involved. If $40 mln was involved per season, I doubt ORU would be bankrupt.
You are correct - I read this bit too fast:
Dunedin Venues Management Ltd (DVML), the Dunedin City Council-owned company running the stadium, has sold season tickets on the expectation an Otago team would play at the stadium in the ITM Cup.
Some of the more than $40 million of funding raised came from those sales, and may now be in doubt if there is no team, as would the expected rent.
http://www.odt.co.nz/sport/rugby/199313/doubts-over-private-sector-funding-stadium
I find in this day and age - numbers in dollar terms have little fundamental meaning .... I usually don't even make that mental compute as to whether a number makes sense anymore.
Glad someone is still paying attention!
Excellent piece explaining to the unitiated why the petrol price (it actually calls it the gas price as the article is somehat US-centric) is going up and likely to continue to go up:
http://earlywarn.blogspot.co.nz/2012/02/why-are-gas-prices-high.html
Some very nice graphs in there.......
andyh, in the immediate term, I think you also have to look at the geopolitical plays in motion as well;
http://en.wikipedia.org/wiki/Sanctions_against_Iran
http://english.farsnews.com/newstext.php?nn=9010176280
http://www.reuters.com/article/2012/02/20/us-japan-usa-sanctions-idUSTRE81J1FK20120220
Gotta fund the last gasp of costly exploration some way - so taking out a lesser cost country-of-origin makes alot of sense, for Big Oil and its political cronies that is!
Geopolitical risks are almost a given when it comes to oil, such is the nature of the OPEC producers. If its not Iran saber rattling, its Iraq, or Nigeria (with its militants) or Libya etc etc.
But note back in 2003 with the last major shooting war (Iraq) petrol in the US barely made $2. Now we only have the 'threat' of shooting from Iran and US petrol is shooting up past $4?
I disagree Kate - the geopolitical risk is merely the noise. Its what happened to the underlying supply post 2005 that has set the tone now.
US petrol was up another 13c nationwide in the past week. When it hits $4.50 or so I think you can be fairly sure the US 'recovery' will run into the sand (again).
http://www.eia.gov/petroleum/gasdiesel/
I dont think you can simply say a price point....I think you have to consider the steepness of the ramp up and for how long its been going on...I would suggest there is a delay/lag of some time period.....maybe 2 or 3 months before such an effect is felt/seen....on the other side the US economy is very weak and just waiting to turn over and die IMHO...Certainly seems to be going up by many cents per week....I dont see how that can last...
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=emm_epmr_pte_…
If you look at that upward curve line it still seems a little short compared to the others, but not good....I think the Shell's CEO's guess on $5USD by summer is looking very spot on, 10cents a week is 12 weeks to $5........puts us at $2.50 and up...
regards
andyh, you miss my meaning, I think. I've not studied the facts behind 'peak oil' but one only has to look at Deep Horizon as a sinlge example and you know you wouldn't attempt it unless the easy pickings were gone.
I don't look at it as "geopolitical risks" (as you refer to them) - rather "geopolitical plays" - with very deliberate outcome intentions - just as in the Iraq War - no WMD found there - but Big Oil loves a conflict, not only does it provide a convenient supply constraint/disruption propaganda scenario but also consumes product.
The market is long past telling us anything about the true cost of oil - have the major players ever admitted to pricing in recognition of diminishing supply? Not to my knowledge.
What I'm getting at is the saber rattlers are the oil corporates via their complicit governmental arms, including the West-sponsored UN.
That is not to deny the underlying supply realities - rather geopolitical plays arise in direct response to those realities - and they are used to control short-term price spikes; setting up a new normal. There is no "risk" of conflict - there simply "must be" conflict. We can't have easy pickings from subsistence economies charging an easy pickings price - neither can we allow them their sovereignty. Nor do we want to scare the masses out of their SUVs or governments out of their Humvees. The resource war must go on and on and on and on and on - and we revisit these easy pickings nations time and time again;
I don't disagree with anything you're pointing out about 'peak oil' but neither do I think the price has alot to do with underlying supply (otherwise the price would be much higher). It's more a matter of maintaining demand growth and future energy dependency while inflicting 'spikes' to reset to a new norm. And governments of course have a real friend in the oil corporates - look at all the tax collection dependent on demand volume being maintained.
Kate - I know I hammer on about it, but if money is inextricably linked to the energy which underwrites it, then valuing energy via money is like trying ascertain how long the Titanic will stay afloat by counting the deckchairs sliding past. Or trying to se how far advanced a cancer is, by monitoring blood-pressure. Perhaps you could write a multiple-variable programme to do it, my Dad was into Boolian Algebra in the pre-calculator days, perhaps that would get you there.
Updated with Dow closing down marginally and failing to close above 13,000, having blipped above 13,000 22 times during the day.
http://www.zerohedge.com/news/dow-jones-crosses-13000-22-times-and-clos…
cheers
Bernard
80 seconds at 8am
Anyone hearing about recovery in the usa...about employment on the rise...etc etc...would do well to go read this article...it will sober them up!
My daughter tells me fuel is up another 10c and the prices are coming up as the supermarkets like costco lift, its hard to find gas under 4.10. No one knows what to do, lots of people are 1/2 filling the tank. Vancouver has petrol at 1.40 Alberta at 1.08Ca.
Here is an interesting artical
http://www.zerohedge.com/news/guest-postthe-existential-financial-probl…
Employment will continue to "improve" in many countries, but for the wrong reasons:
http://www.scoop.co.nz/stories/HL1201/S00138/panetta-military-spending-…
...and so does fuel consumption.
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