Here's my summary of the key news overnight in 90 seconds at 9 am, including news the fear about the European debt crisis returned with a vengeance overnight as open discussion about Greece exiting the euro triggered fears about capital flight inside banking systems across Southern Europe.
European stocks slumped 2-3% and yields on both Italian and Spanish bonds spiked to unsustainable levels of 5.86% and 6.24% respectively. Banking stocks were hardest hit.
European politicians and bankers are now openly talking about allowing Greece to leave the euro, raising questions about what that would mean for Greece and for the banking system in Europe. Fear about a potential overnight devaluation of Greek savings in bank accounts is causing many to wonder if the same would happen in Portugal, Italy and Spain.
Already, more than 642 billion euros of savings in euros has been transferred to bank accounts in Germany from Italy, Spain and Portugal as savers and companies wonder about what a potential breakup of the Euro might mean.
All this fear about financial crisis in Europe reduced appetites for riskier assets and currencies, including the New Zealand and Australian dollar.
The New Zealand dollar fell to a 5 month low of 77.7 USc this morning from over 78 USc yesterday.
However, the Dow fell less than European stocks, closing down 1%. Many investors are wondering if central banks will intervene again with more money printing to keep long and short term interest rates low and bolster stock markets and banking stocks.
But few worries about NZ house prices
Back in New Zealand, however, confidence about house prices surged again over the last three months, the ASB Housing Confidence survey found.
Confidence about house prices rising spread beyond Auckland and Christchurch through to the rest of the country, ASB reported. See more in this BusinessDesk article on our site.
The survey found a net 45% of respondents believed house prices would rise, up from a net 27% in the previous quarterly survey.
Here's what ASB's economist Nick Tuffley said: “More respondents now believe that house prices will rise across New Zealand, rather than just in Auckland and Christchurch where the housing shortage is more evident. Housing market activity has steadily picked up over late 2011 and early 2012, which is boosting price expectations, and this coupled with a lower supply of housing continues to gradually push up house prices."
“House price expectations in Auckland are now the highest since April 2007 – the last time housing market activity surged before OCR increases cooled the market. We expect house price appreciation will continue to be relatively strong in Auckland due to supply constraints.”
He also said: "The very strong level of house price expectations demonstrates that there is a risk of more sustained house price inflation," ASB said in the survey. "The Reserve Bank's deliberations over whether to cut the official cash rate out of concern for the high New Zealand dollar will need to be balanced against the greater risk of sparking a sharper pickup in housing-related inflation."
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