Here's my summary of the key news overnight in 90 seconds at 9 am, including news Chinese Premier Wen Jiabao has announced at the Communist Party's annual Congress that China's growth target would be cut to 7.5% from the 8% set in 2005.
China would also reduce its emphasis on foreign capital inflows and exporting, and increase its emphasis on boosting internal consumption and imports. See more here at Reuters.
The news dragged down currencies sensitive to expectations about global growth, including the New Zealand and Australian dollars, and pulled both European and US stocks lower.
The New Zealand dollar fell to 82.1 USc and fell more than a yen to 66.8 yen.
China's central bank also said it was considering widening the band in which the Renminbi currency floats, helping to liberalise the currency somewhat. However, at the same time, the renminbi was allowed to fall the most since November 2010, suggesting China is comfortable with a lower currency. This is exactly the complaint many western countries have made about China, in that it artificially suppresses its currency to support its export sector. See more here at Bloomberg.
US and European stocks fell 0.6% overnight on concerns about global growth triggered by the announcement from China, which has been the world's biggest source of growth for the last four years. The news could be good for New Zealand in the long run if China can encourage consumption and more imports by its growing middle class. However, in the short run, slower growth in China may suppress demand for New Zealand's and Australia's commodity exports and prices.
Meanwhile, European services sector output fell by more than expected, reinforcing fears that Europe's economy is sliding towards recession. See more here at Bloomberg.
Also, concerns about Greece's bailout deal have returned with fears creditors may not agree to a planned debt restructure before a Thursday deadline.
Greece has even threatened to force through a 70% plus haircut if the required 75% of creditors don't sign up in time. That could trigger Credit Defaul Swap contracts and unsettle financial markets. See more here at Bloomberg.
No chart with that title exists.
24 Comments
Low yields, instead of fostering capital gains for investors via the magic of present value discounting and lower credit spreads, begin to reduce household incomes, lower corporate profit margins and wreak havoc on historical business models connected to banking, money market funds and the pension industry. The offensively oriented investment world that we have grown so used to over the past three decades is being stonewalled by a zero bound goal line stand. Investment defense is coming of age.
http://www.pimco.com/EN/Insights/Pages/Defense-March-2012.aspx
A great article also from Pimco explaining the ticking time bomb that are the Target2 imbalances within the eurozone:
http://www.pimco.com/EN/Insights/Pages/TARGET2-A-Channel-for-Europes-Capital-Flight.aspx
Skudiv
Cheers. I mentioned Bill Gross' newsletter about the Zero bound problem in my Feb 9 Top 10
cheers
Bernard
Australian Retail and Housing Bloodbath Coming Up
http://globaleconomicanalysis.blogspot.co.nz/2012/03/australia-services-index-plunges-to.html
Spain's sovereign thunderclap and the end of Merkel's Europe
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100015432/s…
Wolly, interest rates are on the up in the UK, its not going to be inflationary,, yet.
>>>>
You may have noticed a number of UK/Euro banks putting up their mortgage-lending rates yesterday. The standard claim across the piece was that the price of ‘funding’ money for lending had increased.
There’s an oddly vicious circle to this spin – as indeed there is with most banker ‘explanations’. Zirp has meant very few retail customers placing deposits with the banks. Zirp was allegedly done in the US and UK to create cheap commercial loans, but we’ve known for years that that’s bollocks: it was done to give hugely over-leveraged banks a margin on sovereign debt purchase…and multinationals cheap money to take to the bottom line, give out dividends, and thus keep the Dow and FTSE nice and buoyant.
http://hat4uk.wordpress.com/2012/03/05/ezone-ltro-sensation-as-data-sho…
I have a friend in California who has lived for 5 years in a large house without making a single mortgage payment to the bank, even worse she has rented the house out for most of that time and lived on the procedes. Its good to see Zerohedge pick up on it. A lot of hard working Americans are starting to get pissd with the banks over these free loaders, while they toil to pay the rent.
http://www.zerohedge.com/news/couple-lives-13-million-4900-square-foot-…
Dutch Freedom Party pushes euro exit as €2.4 trillion rescue bill looms The Dutch Freedom Party has called for a return to the Guilder, becoming the first political movement in the eurozone with a large popular base to opt for withdrawal from the single currency.
http://www.telegraph.co.uk/finance/financialcrisis/9124815/Dutch-Freedo…
China is to hike its spending on agricultural research by more than one-half as part of a $195bn drive to spur domestic food production, and stem its increasing dependence on imports to meet surging consumption.
http://www.agrimoney.com/news/china-hikes-farm-science-budget-amid-$195…
".. Arquimedes Nganga accused religious leaders of decieving him into following false beliefs, causing him physical harm and destroying his life.
Nganga quit playing football at the age of 25 when he converted to the Baptist faith and despite never earning more than $NZ386 a month playing in Portugal, claims he was stripped of his potential to earn $NZ38,000 a week.
"I could definitely have had a long career in the Premiership," Nganga said.
http://www.nzherald.co.nz/sport/news/article.cfm?c_id=4&objectid=10790160
Hey....there must be thousands of ex Labour Party members who would relish a chance to be paid damages by the Labour Party for all the deception over the decades....
This is a pretty good example of why govt and local govt should not have vested interests in business...
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10790164
it is also a good answer to those who fluff on about the govt printing to invest in infrastructure...back to my point....who decides what to throw the printed loot at....imagine the auckland council having control over printing.,,,,see anything different to the Beehive having control of the presses?`
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