Here's my summary of the key news over the weekend with big news about credit risks from around the world.
In a surprise move on Saturday, the Chinese central bank cut its benchmark interest rates. The cut is part of a wide effort by China to support their economy as its long running expansion slows.
The move also represents a change of strategy by the bank which until now had resisted rate cuts fearing they would make their debt problems worse. But the slowing growth situation clearly means they need to take the risks involved. Tougher credit access for smaller businesses may be a casualty, although they are saying they will address that risk.
In Australia, AMP Capital is warning that their banks could face a larger than expected capital call during a housing crisis than official stress tests predict. They say official stress tests did not account for the impact on mortgages that did not default, and that a severe fall in house prices could push more than half of borrowers there into negative equity.
And in the US, both lawmakers and regulators are starting to think seriously about unwinding a decades-old 'reform' that lets banks run merchant-banking operations. Both a very senior Federal Reserve governor and the head of the Senate banking committee have started discussing the rollback. Rorting of some commodities markets has prompted the rethink.
And finally over the weekend, ECB boss Mario Draghi signaled the ECB is preparing a new round of monetary stimulus to jolt the flagging eurozone economy. Their big concern is the deflation risk that is both a symptom and cause of the eurozone's inability to achieve any meaningful growth. Draghi said they would "do what we must to raise inflation and inflation expectations as fast as possible." And the EU itself is also planning a big fiscal stimulus package.
In New York, UST 10yr bond yields ended last week unchanged at 2.31%.
The oil price starts today slightly higher. It is now just under US$77/barrel and the Brent price is now just below US$81/barrel. Apparently Iran has proposed a 1 mln barrel/day cut off OPEC's production in an effort to get the cartel to respond meaningfully to the supply surge and demand leveling.
The gold price rose as well and is now at US$1,200/oz.
The NZ dollar starts the week a little stronger yet again when it opens this morning. We are starting at 78.8 USc, 91 AUc, and the TWI is at 78.5.
If you want to catch up with all the changes from Friday we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »