Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news US Federal Reserve Chairman Ben Bernanke told Congress overnight the central bank was comfortable with its existing level of stimulus.
The Federal Reserve has previously pledged to keep interest rates near 0% until 2014, but many had expected it would also undertake a third round of Quantitative Easing or money printing known as QE 3. Bernanke's comments overnight were interpreted as meaning this QE 3 was now less likely. See more here at Bloomberg.
Gold fell US$75/oz to US$1,709/oz as the comments reduced expectations of money printing made gold less valuable in the eyes of investors looking for harder currencies than the US$, which rose in response. See more here at Reuters.
US stocks fell slightly and US bond prices also fell, which meant yields rose. See more here at Bloomberg.
Meanwhile, the European Central Bank lent a further €529 billion to 800 banks for 3 years at 1%. This was the ECB's second Long Term Refinancing Operation (LTRO). The first LTRO just before Christmas dumped €489 billion into Europe's banking system, helping to calm down stressed European bond markets.
Many of the banks promptly re-lent their long term funds to their own governments at slightly higher interest rates, collecting a handy profit on the way through and easing the short term stress for Southern European governments. The 'lolly scramble' was slightly bigger than expected.
However, European stocks finished marginally down on the day, dragged lower after Bernanke's comments.
Meanwhile, the New Zealand Institute of Economic Research (NZIER) issued a slightly downbeat economic forecast for this year and 2013, seeing growth of 1.5% and 2.4% respectively.
It sees no need for the Reserve Bank to hike the Official Cash Rate until the first quarter of 2013, which is later than most other economists, who see a late 2012 hike. See more here in Alex Tarrant's article.
The New Zealand dollar rose as high as 84.6 USc overnight, but the comments from Bernanke, which strengthened the US dollar vs other currencies where central banks are not printing, saw the kiwi drop back down to around 83.7 USc.
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6 Comments
The momentum types ignore the contrarian advice of Pericles, who, according to Thucydides said: government is the art of terrifying the herd when they are complacent, and placating them when they are terrified, keeping them ever under pressure, headed always to higher ground.
ECB's Mario Draghi raises the stakes with trillion euro gamble
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/91144…
Paul (deficits don't matter and noone understands debt (but me)) Krugman:-- Actually deficits do matter.
As a Nobel economist, and in the tradition of economists everywhere "I am the only one who is right"
Right now, deficits don’t matter — a point borne out by all the evidence. But there’s a school of thought — the modern monetary theory people — who say that deficits never matter, as long as you have your own currency.
I wish I could agree with that view — and it’s not a fight I especially want, since the clear and present policy danger is from the deficit peacocks of the right. But for the record, it’s just not right.
http://krugman.blogs.nytimes.com/2011/03/25/deficits-and-the-printing-press-somewhat-wonkish/
Ponzi schemer who allegedly defrauded South Canterbury Finance pleads guilty, SFO says:
Former Datasouth Group (Datasouth) director, Gavin Clifford Bennett (53), today pleaded guilty to charges brought by the Serious Fraud (SFO) Office relating to a $103 million fraud involving a Ponzi-style scheme.
Mr Bennett was convicted on six representative charges under the Crimes Act relating to approximately 900 separate incidents of dishonestly using a document, and a further two charges of false accounting.
SFO Chief Executive, Adam Feeley, welcomed the guilty plea saying, “The collapse of Datasouth was a significant event in the Christchurch business community and caused widespread losses. Mr Bennett’s guilty plea brings to a satisfactory end one of SFO’s largest investigations in recent times.”
The Datasouth Group offered technology hardware for lease through Datasouth Business Solutions Limited, and provided finance for the technology leasing solutions through Datasouth Finance Limited.
The SFO alleged that between April 2005 and March 2011 Mr Bennett created false documents relating to the lease of IT equipment to fraudulently obtain funds from South Canterbury Finance totalling approximately $65 million.
It was further alleged that Bennett falsified entries in Datasouth Finance financial statements by an estimated $38 million in order to retain the ongoing finance facility.
Mr Bennett used the dishonestly obtained funds to repay earlier false lease agreements in a manner similar to a Ponzi scheme.
Loan funds were also applied to meet business expenses and personal expenses.
Between April 2005 and March 2011 a total of approximately $7.8 million was paid either to personal New Zealand and Australian bank accounts controlled by Mr Bennett or applied to business credit cards that Mr Bennett used for personal expenses, though a small portion of that amount was used for genuine business expenses.
Significant areas of personal expenditure by Mr Bennett include:
· the rental for two luxury residential apartments in the Rocks, Sydney (A$463k);
· Regular payments to various female companions totalling (A$900k);
· Food and beverages (A$429k), a significant amount of which was spent at Hemmesphere bar and restaurant Sydney);
· International air travel for Bennett and on occasions various companions totalling (A$161k) including to Argentina, New York, Hong Kong, Las Vegas, New Caledonia, Rio de Janerio, San Francisco, Paris and London;
· Jewellery and flowers (including purchases at Tiffany & Co) (A$16k);
· Corporate car taxi expenses (A$53k); and
· Clothes and apparel (including purchases at Louis Vuitton, Cartier, Chanel, Giorgio Armani, Barney’s and Bloomingdales New York, Victoria’s Secret, Paul Smith, Gucci, Jimmy Choo, Harrods London) (A$163k).
The resulting financial loss to South Canterbury Finance was at least $23 million.
Datasouth went into liquidation in March 2011, leaving all 31 staff without employment.
Mr Bennett was remanded in custody for sentencing on 3 May 2012.
Mr Feeley said that while the guilty pleas in the Datasouth case avoided the time and cost of a trial, the SFO still faced the prospect of an extraordinarily busy year of fraud trials.
“We currently have 28 cases before the Courts, with a further 31 cases under investigation.”
“The volume of cases underscores the need for SFO to continue to work closely with other agencies and receivers and liquidators to ensure that the public has confidence that fraudsters are being brought to account.”
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