Here's my quick summary of the key overnight news you need to start your day.
The US dollar is falling sharply against other currencies, and commodities like oil and gold are up in US dollar terms although stable in other currencies. The trigger was strong Chinese export data, and a small rise in first-time claims for the unemployment benefit.
The ECB held its rates unchanged overnight and claimed the euro zone economy will recover later in 2013 and that there are already some signs of stabilisation. The Bank of England also held its rates unchanged. Mario Draghi even claimed there is "positive contagion" happening in Europe.
Meanwhile, the Spanish Treasury raised €5.82 billion from the sale of three bonds, exceeding its upper target of €5 billion. The auctions included a new two-year note with so-called collective-action clauses limiting investors’ rights to oppose writedowns. Markets took this as a 'success' for Spain, even though they lose on the terms.
In China, Fitch is reported to have warned that there is a 60% chance of a downgrade in China's sovereign credit rating by one notch to A+ from AA- because of concernes about unsustainable local government borrowing and the risks to Chinese asset backed securities. And overnight, Fitch cut South Africa's rating one notch to BBB.
But the big Chinese news was the data out showing how strong Chinese exports were in December. They were up 14% from a year earlier, and credit was up 28%. The signs are there that the Chinese economy is growing strongly again, and because exports recovered so strongly, that means that demand from other countries, especially the US, is recovering.
That will help Australia and is one reason why their exchange rate is rising. A halo effect seems to apply to New Zealand and we rose yet again.
The NZ$ opens today at 84.4 USc, 79.7 AUc and the TWI is at 75.6. That is another big rise against the US dollar, but virtually unchanged against the other currencies we monitor.
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6 Comments
The central bank governors and heads of supervision that oversee the Basel Committee on Banking Supervision agreed to a very substantial softening of prospective global liquidity standards. This development is bullish for the international banks and for the global economy and markets.
The revised standards include a very welcome four-year delay in the date when they are to be fully enforced, moving it to 2019.
The most important, and also somewhat controversial, revisions concern the definition of "high-quality liquid assets" that banks will be required to hold as a buffer against a future crisis. The definition had been very tightly drawn, to include only government bonds, cash, and central bank reserves.
Now it is much broader, including also corporate bonds rated A+ to as low as BBB-, AA-rated residential mortgage-backed securities, and even certain equities.
Softening the standards should ease the current problem, particularly apparent in Europe, of banks seeking to amass liquidity to meet the anticipated future regulations to the detriment of lending to businesses and consumers.
HGW
"Positive contagion"...got to be laughter across Europe..
Although to be fair to this banking bureaucrat, he is trying to inject life into a corpse riddled with excessive debt and rotting in a sea of political socialist idiot behaviour going back decades.
Expect more 'happy talk'....because there can be nothing else....you are expected to feel positive and if we all feel positive then the debts and related shite will positively go away....not
China exporting? It must be by air, then. Have a look at the Baltic Dry....
http://etfdailynews.com/2012/12/13/baltic-dry-index-report-shows-the-gl…
T'aint exporting by ship, that's for certain.
SH - fair comment. I was thinking in 2007-8 volume terms - that kind of shipping, we are not seeing. Of course a minor up-tick can be had by sea.
I just get a bit short with the continued cherry-picking of short-term data without relation to the bigger picture. We are going to see a fair bit of that optimism-slash-propaganda in the next few years.
Good Shanghai graph, thanks. Says it all.
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