90 seconds at 9 am: NZ$ at 79.4 USc

90 seconds at 9 am: US stocks erase early losses on hopes for iPhone 5 next week; US manufacturing contracts unexpectedly; ECB 'Big Bazooka' decision looms; Milk powder prices up 6%

5th Sep 12, 9:01am by Bernard Hickey

US stocks erase early losses on hopes for iPhone 5 next week; US manufacturing contracts unexpectedly; ECB 'Big Bazooka' decision looms; Milk powder prices up 6%

Here's my summary of the key news overnight in 90 seconds at 9 am, including news US stocks erased their earlier losses to close flat as Apple shares rose after it announced an 'event' for September 12 where it is expected to unveil a thinner iPhone 5 with a bigger screen.

See more here on US stocks from Bloomberg.

See more here on the Apple 'event' on September 12 from Reuters.

Earlier, Institute of Supply Management (ISM) figures for US manufacturing showed a worse than forecast contraction in August, the third consecutive fall. See more here at Bloomberg.

The numbers came as concerns grow the global economy is experiencing a syncrhonised slowdown similar to that seen in late 2008 and early 2009. Chinese manufacturing also contracted at the fastest rate since early 2009 and the Chinese economy appears to be having a hard landing rather than a soft landing.

European stocks fell around 1% with the focus on the European Central Bank's (ECB) decision due late on Thursday night New Zealand time on whether to unleash its 'Big Bazooka' of buying Southern European bonds to ease pressure on those governments and stress inside the Euro-zone. See a preview here from Reuters.

The next week to 10 days is shaping up as a crucial one for global financial markets. The ECB's decision will be closely watched with much expectation of a big bond buying announcement. Then key US jobs figures are due on Friday night New Zealand time. Next Tuesday night the German Constitutional Court will rule on the future of the main European bailout fund. Next Thursday night the US Federal Reserve makes its next monetary policy decision and is also expected to indicate new stimulus.

And we shouldn't forget our own Reserve Bank makes its next Official Cash Rate decision and releases its September Quarter Monetary Policy Statement (MPS) next Thursday morning, which will be Alan Bollard's last as Governor before he retires on September 25 and is replaced by Graeme Wheeler.

Meanwhile, the New Zealand dollar was weak at two month lows of around 79.4 USc in morning trade. See more here from BNZ's Mike Jones on our site.

The Australian dollar has been weaker in recent days as investors think about the implications of China's hard landing for Australia's economy. Yesterday Western Australian iron ore miner Fortescue Mining announced it was slashing its investment plans, adding to mining project delays in recent months worth around A$100 billion. See more here at Bloomberg.

The Reserve Bank of Australia held its official rate at 3.5% as expected yesterday afternoon, but it noted the slump in iron ore prices. See more here at SMH.com.au Economists expect the Reserve Bank will have to cut its OCR again in coming months. See more here at Bloomberg.

Elsewhere, Fonterra's GlobalDairyTrade platform held its fortnightly milk powder auction overnight. Prices rose a further 6% overnight. See full results here at Global Dairy Trade

(Updated with more detail)

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11 Comments

by David George | 5th Sep 12, 9:15am 1346793330

Just as well the dairy prices aren't too bad. OTOH some very scary prospects for the Aussie mining sector.

"I am very pessimistic about hard commodity prices and expect them to drop substantially further in the next two to three years.　 1/Production capacity for hard commodities is rising much too quickly, in a belated response to the unexpected surge in demand just under a decade ago. 2/Expected economic growth rates in the country that has been biggest source of new demand – virtually the only source – have fallen sharply and commodity prices have fallen with them.　 Historical precedents and the arithmetic of rebalancing suggest, however, that the current consensus for medium-term Chinese growth is still too optimistic.　 Expected growth rates will almost certainly fall further in the next two years. 3/Beijing has finally become serious about rebalancing China’s economy, and rebalancing means shifting Chinese growth away from being disproportionately commodity intensive.　 Instead of representing 30-60% of global demand for most hard commodities, Chinese demand will shift to a more “normal” level.　 Remember that even a very limited shift – from 50% of global demand, for example, to a still high 40% of global demand – represents a sharp drop in global demand. 4/There has been so much stockpiling of commodities and finished goods with implicit commodity content in China that the country could well become a net seller, and not net a buyer, of a wide variety of commodities in the next few years. This combination of factors – rising supply, dropping demand, and lots of inventory to work off – all but guarantee that the prices of hard commodities will collapse.　 I expect that certain commodities, like copper, will drop by 50% or more in the next two to three years." Read more at http://globaleconomicanalysis.blogspot.co.nz/#ID3H79ikAVT8vDsX.99

by scarfie | 5th Sep 12, 9:16am 1346793375

An interesting apple iphone story. Although I wonder if the FBI really have the resources to digest the data from 12,000 devices.

by steven | 5th Sep 12, 9:32am 1346794364

"the global economy is experiencing a syncrhonised slowdown similar to that seen in late 2008 and early 2009." - Just look at the baltic dry index...

http://www.bloomberg.com/quote/BDIY:IND

and hugh's link for asis at the tElegraph,

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100019794/a…

regards

by scarfie | 5th Sep 12, 9:27am 1346794045

Bernard it was disappointed to hear the other day that you axed Iain Parker. I my opinion he was one of the more valuable contributors here. Has he not served his penance? Can you not let him back on? Assuming he would want to of course.

On a positive note Iain has a news feed on facebook to rival interest.co. The economic news has shown a marked increase in the last month to two on social media. More people are starting to take notice, I assume as they lose their jobs and go looking for answers.

by Kate | 5th Sep 12, 10:19am 1346797170

I always read his posts too and found his links very educational.

I think the problem for Iain was the likes of Gummy Bear and followers relentlessly taking the mickey whilst Iain was trying to educate others about what he saw as a huge social injustice.

It's like playing serious drama against a likeable clown.

by steven | 5th Sep 12, 10:36am 1346798196

likeable? oh....

regards

by Andrewj | 5th Sep 12, 9:59am 1346795971

http://www.golemxiv.co.uk/2012/09/spain-bad-banks-assets-losses-and-lie…

by steven | 5th Sep 12, 10:45am 1346798732

This is so funny,

"First let’s deal with what a bad bank actually is and does.

A ‘bad bank’ isn’t a bank. It’s an ‘Asset Management’ company. A company is created, which buys all the rotten, failed, toxic, non-performing loans which Spain’s banks and it’s Caja’s have on their books. The company then ‘manages’ these assets. There, all better now?

8><--------

So how is it going to work, exactly? Well according to Spains Minister for the Economy,Minister Luis de Guindos, speaking at a news conference last Friday,

The aim is for private investors to take a majority stake in the bad bank ."

So private investors are uh really, really stupid? FFS a comedy show doesnt have better lines than this...

Conclusion this bozo thinks/knows voters are that stupid....

regards

by Christov | 5th Sep 12, 11:18am 1346800735

Top post ,BTW Steven...yes I think you captured the sense of contempt perfectly......sadly Private Investors keep giving them reasons to hold us in contempt.

I didn't know IainP got axed.....what was his indiscretion , I mean apart from epic posting.

I agree Kate.....but always thought Iain could have cut it down to absorbable proportions , as well , like there are just so many hours in a weekend and too many things to do.

by scarfie | 5th Sep 12, 7:30pm 1346830228

Something that might of attracted a defamation action apparently. Don't know why Bernard was worried, if anyone sued then we could just set Walter on to them. I don't know why but I just have this image of him throwing bricks through windows :-) CiC of Bernards Army we could make him.

by Christov | 5th Sep 12, 11:12am 1346800330

Quite a dilema for the RBA....eh Big B ( BTW I hope you burned Amstrongs cycling manual for beginners)

Oh yes back to the RBA.....captured money putting upward or sustained pressure on the AUD. Bond spreads not going to help either.......all against a backdrop of falling commodity prices....talk of base cuts up to 100BP by April 13 ...50bp....by Christmas citing a wait and see policy to the overall impact on total Exports ,China's slowdown ( largely) has caused.

Even at three percent , it wont cause flight, well not sinificant anyway barring a major contraction in the economy.......so not a lot of manoeuvre space there for the RBA.....so...

Captured money....ah yes...hmmmm....um lets see now....does that printer still work..?