Here's my summary of the key news overnight in 90 seconds at 9 am, including news the New Zealand dollar fell below 77 USc in morning trade as the European debt crisis deepened and prices fell a further 6.4% in Fonterra's fortnightly milk powder auction.
See more here on our site on the Fonterra auction result and see below for our long term NZ$ chart. Milk powder prices have now fallen 41% in the last year, far more than the 5% fall in the NZ dollar vs the US dollar over that period.
Meanwhile, more than 700 million euros was withdrawn from Greek banks on Monday as depositers fearing a Greek exit from the euro and a massive devaluation into drachma transferred as much cash as they could to Germany, the WSJ reported.
Depositors fear the value of their savings would be halved overnight if Greece leaves the euro and their euro savings are converted into Drachma.
This came as Greece's President gave up attempts to broker the creation of a coalition government and said fresh elections would be held, possibly as early as June 17. Many are worried Greece's government and its banks will have run out of cash by then. Already Greece's government has started to delay tax rebates and other payments to suppliers. Although Greece did repay holdout bond holders 435 million euros last night, which was almost half its cash on hand. This ensured Greece did not 'hard' default on its debts. It has already 'selectively' defaulted on its debts.
This run on Southern Europe's financial system was played out in Europe's bond markets overnight. Spain's 10 year bond yield spiked to 6.34%, which is widely seen as unsustainable for Spain's government if it lasts for any length of time. Italy's 10 year bond yield also spiked over the key 6% mark. These movements in bond yields are in direct opposition to the fundamentals in their economies, both of which are in deep recession, data released overnight showed.
In contrast, the yield on Germany's 10 year bund yield fell to a record low 1.46% despite better than expected economic growth figures overnight. This blowout in the difference between Southern European bond yields and German yields is a direct reflection of massive shifts of money away from Southern Europe and into the 'safe haven' of Germany, just in case any Greek exit were to spread to the exit of Spain, Portugal and Italy. Already, more than 640 billion euros has been transferred out of Southern European banks into German banks in the last year.
All this drove European stocks around 1% lower and the Dow closed on its lows and down around 1%. Even Gold fell to a fresh four month of US$1,555 as investors feared a deepening global downturn would keep inflation under control.
No chart with that title exists.
16 Comments
Regrettably legislation is presumably required to alter the "rules".
Such action seems beyond the collective brainpower of the Clowns that run the place.
Just remember that John Key is a day trader so everything will come right tomorrow if not by dinner time today.
The 26 Italian banks that got downgraded might have helped her
A Quick note on Bank Downgrades.
http://www.golemxiv.co.uk/2012/05/a-quick-note-on-bank-downgrades/
has a bank run has started in Greece
http://www.zerohedge.com/news/has-greek-bank-run-started
telegraph
Mr Papoulias said he had been warned by the central bank and finance ministry that the country faced “the risk of a collapse of the banking system if withdrawals of deposits from banks continue due to the insecurity of the citizens generated by the political situation”.
http://www.telegraph.co.uk/news/worldnews/europe/greece/9268507/Greece-…
Appetiser cost of Greek exit is €155bn for Germany, France: trillions for meat course
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100017148/a…
Uncle sams going to thrilled about this
Iran accepts renminbi for crude oil
http://www.ft.com/intl/cms/s/0/63132838-732d-11e1-9014-00144feab49a.htm…
That's a qualified statement A.J. as the word "some" becomes the operative word there.
This little extract however could get interesting quickly....
The renminbi purchases began some months ago. Initially the non-barter portion of the transactions were settled in Beijing through renminbi accounts but now, as a result of U.S. pressure, domestic banks such as Bank of China have stopped dealing with Iran, the oil executives and bankers said.
Instead, much of the money is transferred to Tehran through Russian banks, which take large commissions on the transactions, these people said.
Beijing has been trying to get its trading partners to use the renminbi, in effect transferring the exchange rate risk to its counterparties, since the price of crude is set in U.S. dollars [DXC1 81.38 0.63 (+0.78%) ]. It also frees Beijing of the need to hold as many dollars in its reserves.
Iran sells 21 percent of its crude oil exports to China, making Beijing crucial to Tehran’s ability to withstand unilateral U.S. sanctions.
A beter site without the annoying register now for the story...PLUS +
http://www.cnbc.com/id/47333004/Iran_Accepts_Renminbi_for_Crude_Oil
PIMCO's Bill Gross says the debt-fueled global economy faces a big shift, in a new FT column. The always poetic Gross makes this argument with two metaphors.
Read more: http://www.businessinsider.com/bill-gross-euroland-is-just-a-localised-tumor-2012-5#ixzz1uz4NZ0zp
Bill Gross is talking about a replacement global currency(See FT article above)
Robert Fitzwilson is also talking about a reset as being a third way, ie not deflation or inflation but crashing the current system on purpose so that a new one can emerge.
Investors need to consider the possibility that people in control are not simply trying to scare the public as they have done during the last 8 trading days, but a larger plan might be afoot. That plan could be to accelerate the emergence of a new dollar.
Italy's banks shaken as economic slump deepens As Greece erupts, Italy is moving into the eye of the storm. Its economy is contracting at speeds not seen since the depths of the slump in 2009 as draconian austerity bites, greatly increasing the risk of social revolt and a banking crisis.
http://www.telegraph.co.uk/finance/financialcrisis/9268330/Italys-banks…
If you want to know ...this is where the stupid ideas doing the rounds in the Beehive come from~!
"Ministers are considering proposals for a “complete deregulation” of salaries to give schools more power to curb pay rises for the worst teachers, it was revealed.
The Coalition said sweeping reforms were needed because rewards are currently being given to the “great majority of teachers” – creating little incentive for staff to improve." UK
Tiz troo.....one little snotty pommy bureaucrat dreams up some garbage policy and it's National NZ policy the next day....
Down here in Noddyland we have class size BS statements spewing from the bureaucrats and the Beehive...all wrapped in govt spin...designer spin...put a gloss on the BS they said...so we have larger classes that will bring 'better' teaching outcomes for rugrats.....utter shite.
Notice how nobody mentioned the hundred million to be saved each year by slashing the education admin in half....hell we can't cut there....think of the pain....fewer members in the 'Old Boys Club'....
Its a sad fact that primary teaching is a modest income anyway and now they have to fight to keep that. Note the charter schools will allow people to teach with no qualifications and now they are suggesting post grad for state. hmmm
All I can conclude from this sector is I would actively discourage anyone entering as it is been treated as a joke for the benefit of cost cutting and public/private partnerships.
Oh I say...can't allow this sort of thing...think of all those sucking down fat academic salaries in the established institutions...oh no we have to stop this..
."....But the tech world however is full of visionaries intent on disrupting traditional establishments. And now they have set their sights on education.
Click's Sumi Das reports on a Stanford project called Udacity which is already causing ripples around the globe as it aims to make a world class education available to anyone, anywhere, for free."
FOR FREE....arrrrrrrrrrhrhhhhhhhhh.....no more student loan feasting for the parasites....
http://www.bbc.com/future/story/20120516-an-ivy-league-education-for-free
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