Here's my summary of the key news overnight in 90 seconds at 9 am, including news the People's Bank of China has eased monetary policy and eased rules on capital and rate setting in a bid to stimulate the flagging Chinese economy.
China cut its 1 year loan rate by 25 basis points to 6.31% and cut its deposit rate to 3.25% from 3.5%. The move surprised some economists who expected China to hold off a full easing until next year. China has already reduced its reserve requirements for banks, giving them more room to lend.
The People's Bank also eased restrictions on lending and deposit rates, opening up China's tightly controlled banking system to more competition. It also delayed moves to impose tougher capital requirements, again giving the banks more room to lend. See more here at Reuters.
Stock markets initially rallied overnight on the Chinese move. The FTSE 100 closed up 1.2% and US stocks rose as much as 1.1% through early trade.
But US stocks dipped in late trade after US Federal Reserve Chairman Ben Bernanke was surprisingly circumspect about the prospect for more easing. Stock markets have rallied this week on hopes for concerted central bank intervention to calm the Euro-zone crisis and boost slowing growth in America. The S&P 500 closed flat. See more here at Bloomberg.
Speaking to Congress, Bernanke said the central bank had options for easing, but he did not spell them out. Some had hoped for more specifics about either a third round of Quantitative Easing (money printing to buy government bonds) or an extension of the bank's 'Operation Twist', where it sells shorter term bonds to buy longer term bonds. See more here at Reuters.
Gold fell US$43/oz or 2.7% to US$1,590 on reduced prospects for more US money printing, Oil (WTI) fell 1.6% to US$83.62 on disappointment about the lack of immediate moves to stimulate the US economy.
Meanwhile, German's Angela Merkel said overnight Europe was ready to act to stabilise the Eurozone as Spain's credit rating was cut 3 notches by Fitch and it prepared for a bailout of its banking system that the IMF estimated could cost 40 billion euros. See more here at Reuters.
Bernanke also warned that an approaching 'Fiscal Cliff' could hurt the US economy. Tax cuts are due to expire and defence spending is due to be slashed automatically at the end of this year unless Congressional leaders can agree a new longer term budget deficit reduction plan. Early signs are the political leaders are unlikely to come to a deal any time before the Presidential and Congressional elections in November. See more here at Bloomberg.
Elsewhere, the Bank of England held its official rate at 0.5% and left its programme of quantitative easing unchanged at 325 billion pounds, as expected. Britain's inflation rate is above its targets, despite very weak economic growth, leaving the central bank little room for more easing. See more here at Bloomberg.
Disappointment over a lack of US central bank intervention saw appetites for riskier assets come off through the morning. This dragged the New Zealand dollar below 77 USc. It was around 76.7 USc in mid-morning trade.
No chart with that title exists.
28 Comments
Well Count might be back on track for his NZD short :-P, or did you get closed out?
Bernard I spent yesteday helping a friend unload his container of solar equipment from China. As a sole trader he speaks to every customer and told me that in the last year he is noticed a unusual, and increasing, number of Americans wanting off the grid systems for remote locations around New Zealand.
Maybe it isn't just Asian interests pushing out the locals from Real Estate.
...... interesting comment that Gummy saw yesterday : Each of us has 200 billion " Shakespearean " atoms in our bodies ! ........ this is an estimate of the number of atoms which William Shakespeare himself had in his body during his lifetime , or were merely breathed out of him , which are now within the bodies of each one of us , living today ! .....atoms that exited him in gaseous , liquid , or solid waste matter ... .
.... 20 billion of them wee " Williams " will exit you today !
Which makes one feel like putting quill to parchment and letting the muse run riot , until you realise that you also contain 200 billion atoms of Adolf Hitler ......
...... can I borrow an up to date street map of Warsaw , anyone ?
GBH...I've been exhaling at both ends for as long as I can remember when around people who may influence outcomes in my favour, all to no avail.......in fact it tended to alienate me on occassion, say, when sharing a cab or wotnot.
The particles , it seems wouldn't take leaving me to brood over theories of conspiracy on their part as adept breath-holders....not wanting to share my genius and therefore torment.
Well as they say ...a burden shared is a burden halved, I'm off to catch someone unawares.!
Apt.
“This goodly frame, the earth, seems to me a sterile promontory, this most excellent canopy, the air, look you, this brave o'erhanging firmament, this majestical roof fretted with golden fire, why, it appears no other thing to me than a foul and pestilent congregation of vapours. What a piece of work is a man! how noble in reason! how infinite in faculty! in form and moving how express and admirable! in action how like an angel! in apprehension how like a god! the beauty of the world! the paragon of animals! And yet, to me, what is this quintessence of dust?”
...... that last bit , Count ..... was that from the Green's Party manifesto ?
Not wishing to cast dispersions upon your mathematical ability , but a burden shared is not a burden halved ..... it's a burden doubled ! .....
....... hmmm , think I just sucked in some ancient King Herod particles ...... the new architecture of Christchurch should be stunning , but you'd better lock up the kindergartens .... ... .
Good greif GBH...you have inadvertently solved the mystery of breath-holders. So in an effort to lighten my load as it were, I was in fact seeking to burden my fellow persons in equal proportion...? Lesson learned...I shall secrete and exhale with more consideration in future.
Quantum physics has never been my thing....I remain tortured.
On to the Greens manifesto....Yes, I suppose they would see political terrain as some kind of "Hamlet " awaiting rescue of their chasity by some good fellow named Robin........but alas they are destined to dine with pigs untill they themselves are indistinguishable....
When you get a little dirt on your hands boy.
wrt China this from Steve Keen's blog last weekend:
http://www.debtdeflation.com/blogs/2012/06/03/the-end-of-the-communist-dynasty/
There is a crisis of confidence unfolding in China that is likely to end in a full scale capital flight and a disorderly collapse in both economic and political cohesiveness. The lowering of the reserve requirements for Chinese banks, while reported in the media as a loosening of credit, is more likely an early sign of capital flight. Similarly reflective of this, are the large increases of gold purchases by Chinese citizens who have few diversification options away from the RMB...
... The Chinese economy is in the final stages of largest Ponzi scheme ever devised. Minsky outlined three distinct phases in the credit cycle: In the first phase known as the hedge phase; economic actors borrow money to invest in order to create goods to sell for profit. In the second stage, the speculative phase, more economic actors join the economy, borrowing money to invest in assets in the expectation that these assets will rise in value. In the last stage, known as the Ponzi stage, economic actors borrow in the hope that conditions will improve. This borrowing is designed to avoid insolvency during what is perceived or hoped to be a short to medium term setback in economic conditions.
If anybody thinks that china's rate easing is going to save itself and the rest of the world, he's going to be greatly dissappointed.
China's past two reserve ratio easing is a result of capital flight, not credit easing for stimulus purpose. The latest rate easing is a result of excessive interest burden on unpaid loans. Not a measure to increase loan to the economy. How could banks increase loans when they just rolled over a couple of hundred billions of unpaid and unpayable loans from the SOEs ?
China is just following the usual US and EU practice of "extend and pretend"...but they are at the end game of this con....so it won't last long.
Cheers......welcome to the new world of less everything.
A Bloomberg commentator out of Sydney 2 days ago suggested an ongoing breakdown in the most senior parts of the Chinese Government with factions in major dispute as to future policies. He imitated the out come will be very bad. Andy Xie has a couple of opines suggesting major reform is needed in China via a reduction in the role of the state less taxes less Govt involvement as the only means of progressing forward. This may well be too much for the hardliners of the People Party.
http://english.caixin.com/2012-06-04/100396776_all.html
The Aussie backlash against Kiwi's is starting to boil over
http://au.news.yahoo.com/today-tonight/latest/article/-/13876274/aussie-jobs-for-kiwis/
Mainstream Media is wipping up, Aussie's over Kiwi's taking there jobs. This could be the start of something nasty.
Yep Goldenfox ,as I posted a coupla weeks back it would only take a small downturn in China to set off ripples of fears for job security and availability in Australia.......it's what happens if this mood gains momentum.....if our pending unemployment problems return home.......
N.Z. Inc. will be in deep stuch..!
Oil and gas exploration tenders open
The opening of the 2012 oil and gas tenders announced today by the Ministry of Economic Development is an important step towards realising the potential of New Zealand’s oil and gas resources, Energy and Resources Minister Phil Heatley said today.
“Although oil and gas have been successfully and safely extracted in Taranaki for several decades, as a country we are still at a relatively early stage in the development of our oil and gas resources.
“We will benefit hugely from the investment of more companies who have knowledge and experience in global exploration and the production of oil and gas, in addition to the current players,” he said.
Oil and gas exploration companies have until 15 October 2012 to submit exploration work programme bids for one or more of 23 onshore and offshore areas, covering just over 40,000 square kilometres of offshore seabed and over 3300 square kilometres of land in Waikato, Taranaki, Tasman, the West Coast and Southland.
“The Government is committed to long-term responsible management of our oil and gas resources. This will create jobs, increase incomes and raise our standard of living.
“We are focused on managing these resources for the benefit of all, including future generations,” the Minister said.
“New Zealanders want jobs and economic growth but want to be sure that any development of our oil and gas resources is done in a safe and environmentally responsible way.
“Alongside the exploration permit process we are making big improvements to the wider regime. These include environmental legislation for the Exclusive Economic Zone, now in Parliament; reviewing the Crown Minerals Act and health and safety regulations for petroleum operations; and a new Code of Conduct for minimising disturbance to marine mammals from acoustic survey work.
“These projects will ensure exploration activity in New Zealand is conducted to the highest standards.”
After the bids for exploration permits close on 15 October, the Ministry will evaluate all bids and the Government expects to award exploration permits by the end of the year.
Information on the tender is available at www.nzpam.govt.nz/cms/petroleum/block-offers.
because the Greens are gaining in voters traction maybe while National loses?
As the third next biggest party, one thats to the left of National and Green and gaining voters, strikes me its PR spin / damage control as much as anything.
In terms of the exploration it will be fasinating to watch how this goes (or not). I think its telling that despite all the complex technology and drilling at limits going on elsewhere, NZ is too small for anyone (or at least the majors) to bother with. I cant believe that anyone the size of say Exxon (or even mid tiers) would stay away from an english speaking, politically stable and keen to sell country unless they have looked and cant find anything of note....probably then a waste of time.
regards
"Bernanke Speech Template
Blah blah blah, stimulus if needed, blah blah blah, fiscal cliff, blah blah blah, not now, blah blah blah, full employment, blah blah blah, depressed housing, blah blah blah, encouraging signs, blah blah blah, recovery,blah blah blah, maintain highly accommodative stance, blah blah blah, no inflation, blah blah blah."
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