Here's my summary of the key news overnight in 90 seconds at 9 am, including news that a summit over the weekend in Chicago of the leaders of the world's 8 largest economies failed to make any progress in solving the European debt crisis.
The leaders issued a statement at the end of the summit saying they wanted to keep Greece in the Euro, but that Greece needed to meet its committments. This is essentially sticking with the German line that Greece needs to stick to its austerity diet and just grin and bear its economic pain.
German Chancellor Angela Merkel also restated her position that Greek voters needed to vote for the austerity package in elections on June 17 or else. Some had hoped that other leaders at the G8 may have been able to push Merkel towards some sort of compromise where Germany either allowed a renegotiation of the bailout or encouraged the European Central Bank to help Greece and other Southern European banks cope with a flight of euro deposits out of Italy and Spain and into Germany and Switzerland.
The focus now goes onto elections in Greece on June 17, where pro-bailout parties have been making a come-back, The Daily Telegraph reports.
Meanwhile Facebook's IPO faceplanted late on Friday night, closing barely above its IPO price, but still valued at more than 100 times earnings. Facebook's earnings and revenue growth seems to have stalled as it has yet to find a way to put ads on its mobile platform and it can't get into the world's biggest internet market -- China. See more here at Bloomberg.
Meanwhile, Chinese Premier Wen Jiabao said over the weekend China would focus more on economic growth than containing inflation, raising hopes that China was about to ease policy to boost growth in Australasia's largest trading partner. See more here at Bloomberg.
The comments came after fresh data showing falling Chinese house prices and rising unsold stockpiles of new cars. See more here at Bloomberg.
China is the key player for New Zealanders to watch in the gathering economic storm coming from Europe. China was able to turn its economy around quickly in late 2008 and early 2009 after the Lehman collapse slammed global trade. The initial signs this time around is that China may not be able to turn around its economy so quickly again, given inflation pressures and a fractured leadership transition.
The New Zealand dollar weakened over the weekend to be under 76 USc at 75.7 USc in morning trade.
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20 Comments
Oil price sliding still......I wonder how long it will be before Saudi squeaks and drops oil production.
Rock and a hard place springs to mind, Saudi et al need >=$100 to survive and the world needs <$80.....to survive....mutually exclusive.....
regards
What a lot of people don't seem to get is that it's the marginal cost of producing barrels of oil that is critical. I think many also believe that oil prices will come down to whatever the market will pay, which might be very very wrong indeed. Consider where the average production cost for a company is $40 a barrel, and the cost of producing barrels at the marginal end is $100. When people are willing to pay $110, then no problem. When people will not pay even $100 then the company will not drop it's price as that would cost them money, instead they reduce production.
More worryingly, this may somehow be spun into a believable reason for the US to invade Iran.
What is the marginal cost of oil around the planet at present anyway?
Seems its $100....what that really means is we probably wont see the real impacts for some years as marginal fields being brought on line now that cost $100 will be slowed or even never be done. By this I mean there is a faulty assumption out there that no matter what the price of oil ppl will buy it, "they will adjust". While ppl might be able to economies cant...So the producers are saying to themselves right now (I assume) no worries if its $90 or $100 or $110...the price will rise and we will get a return.....What ASPO is saying is there will be huge volatility in price, from $140 to $40 is quite possible. So at some point its going to dawn on these marginal players that getting oil at >$90 isnt going to payback and not do it...or they will go broke, or they will be subsidised by the tax payer....
The only non-marginal play of size I know of is Iraq. Iran is actually in decline, invading wont see much more bpd on the open market. So its most likely the US military will be used as the funnel to get the oil to the USA...same in Iraq...
regards
Steven
The $100 or $120 is really an economic representation of OROOI (Oil returned on oil invested), ie what proportion of the $100 is directly proportional to the 'price of oil', I know that a lot is written on EROEI but this allows substitution and masks the inevitable impact of the positive feedback loop that falling ERORI has, in the short term the damage wrought on the economy by high oil price will relieve the pressure but in the medium term as the 'cost' of new production becomes more significant the price will rise, so I expect very volitile oil pricing in the next few years, maybe 'Economists' should study nyquist plots?
I don't expect Iraq or Iran to improve the situation, hard to produce oil in a warzone, how many times has the gas line between Egypt and Israel been sabotaged in the last 12 months?
Interesting times
Neven
,Colin a couple of finance guys were debating the value of FB on a telegraph article , Im trying to find it, anyway they thought it would come down to $20 this week and had a value around $5. Not so good for Morgan Stanley. Then one said his daughter works for Santander bank in the Uk, she told him its about to go' tits up'. Love to be a fly on the wall Monday morning at the Morgan stanley , what the hell do we do now, meeting
And investors want to get into bed with this guy - its has one of the most optimistic projections in history, a P/E which is insane, the CEO/owner could not give a rats about the other investors and has a significant history of treating minority investors and 'friends' with contempt.
The Hoodies and the Wedding are all big one finger salutes to investors(suckers)
http://www.huffingtonpost.com/2012/05/16/people-mark-zuckerberg-burned_n_1518702.html#s=978078
This stock is an absolute loser, I'd love to short sell this to single digits
Just look a Myspace, old Rupert paid $580m for it and it sold last year for $30m
Nope not risk either Steven........although the flight back to yen is having an effect as such...the direct corelation is to the U.S. WMP...prices ,as they fall dramatically so to does the NZD ....as they rise the so too does the NZD...the historicals back it up......so too will that big F'er in the hedge....Do they move enough to affect the NZD.?..you bet your sweet bippy they do.
The Great Treasure Hunt of 2012 continues
JPMorgan has lost a ton of treasure and is trying to get it back, while lots of other hedge funds are also trying to get to the treasure before JPMorgan gets to it.
BEN DAVIES
There is an ever-present systemic risk growing in Europe, plus severe doubts about JPM to contain their issues – so a coordinated effort by central banks to backstop the global economy draws nearer.
Any fund manager worth his salt knows the first loss number presented by JPM is not the last but what will final tally be and what risk to the financial system? By observing credit markets and positioning we can see it is not pretty. Others are taking the other side of this risk. If it stinks, it can get really foul. Well, it really stinks.
JESSE'S CAFÉ AMÉRICAIN
I keep coming back to William K. Black's explanation for this enormous attraction to multi-trillion dollar bets at JPM
"Financial institutions such as JPMorgan love to buy derivatives because they are opaque, create fictional income that leads to real bonuses and when (not if) they suffer losses so large that they would cause the bank to fail, they will be bailed out."
William K Black
The more I look into this and think about it, the more that Barack Obama's 'favorite banker' looks like Enron in their heyday.
I wonder how far the US will go to prevent the failure of their 'best bank' from spoiling the grand illusion, and how many lives of the poor and the middle class will be sacrificed to the god of greed and power.
The html editor at interest.co.nz does not always work properly.
My last sentence is in italics but this gets lost after save is clicked.
Tabs seem to get lost also.
I switched to the plain text editor but nothing obvious appears.
I give up.
Maybe updating to a later version of the html editor could improve things.
On the other hand if I pasted more to a plain text editor before pasting to the interest... rich text editor it might work better.
cheers
Despite assurances that the UK subsidiary is not exposed to Spanish problems, anxious savers worried that they could lose their money took to Twitter to say they would be 'closing their accounts'.
Santander customer Sarah Buckley wrote: 'Suspect I am not the only person Googling ''Should I take my money out of Santander?'' this morning.'
Another added: 'Attempts to close my Santander account must be taken to the next level.'
While one wrote: 'Oh my god. Concerned to see the Spanish Banks are in trouble. We got quite a bit of savings tied up in Santander! Do we move it? Advice needed.'
Meanwhile, British customers withdrew about £200 million ($316.4 million) from the U.K. arm of Spain's Banco Santander SA on Friday
http://online.wsj.com/article/SB100014240527023040194045774162002227877…
Millions of British bank customers felt the effects of the eurozone turmoil today as Santander became the latest giant to be hit by the debt crisis
http://www.dailymail.co.uk/news/article-2146112/Spains-banking-crisis-r…
The WSJ on Facebook:
Facebook Inc.'s FB +0.61% disappointing public trading debut could have a ripple effect on everything from IPO valuations to venture-capital funding in the months ahead, especially in anything related to social media.
The company's much-hyped IPO had increased both in price and in the size of the offering to accommodate expected investor demand after months of anticipation. But the shares ended up struggling to stay above the initial-public-offering price Friday, closing up less than 1%.
"The circus left town and look at how they left the campgrounds," said John Fitzgibbon, president of research site IPOScoop.com. "It's a sobering experience."
http://online.wsj.com/article/SB100014240527023033605045774127441597895…
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