Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news European leaders agreed overnight on a 'Marshall Plan' to try to stop the European sovereign debt crisis spreading to Italy and Spain.
The deal involves using a bailout fund to help extend the terms of loans and lower the interest rates for the PIGS (Portugal, Ireland, Greece and Spain) in an effort to make their high public debts repayable over time. See more here at BBC on the basics of the deal.
However, the deal doesn't address the core weakness at the heart of the Euro zone, which is a lack of a common fiscal policy to match its common monetary policy.
That would require the creation of a central authority to control tax rates and spending across the Eurozone and the issuance of commonly rated and low interest rate bonds.
However the deal does involve Greece having a 'selective default' on its debt, a move the European Central Bank has warned about in the past. It has yet to comment publicly on the deal. See live coverage here at The Guardian.
The hopes for a Euro debt plan helped boost stocks in Europe and the United States overnight and also lifted the Euro. See more here at Reuters on the euro's rise.
See more here at Bloomberg on the 1.2% rise in US stocks.
This move to a 'risk on' stance on global markets boosted The New Zealand dollar to a fresh record high of over 86.4 USc. The New Zealand dollar also rose to 73.8 on the Trade Weighted Index and to 79.9 Australian cents.
Meanwhile, Chinese factory output fell in July for the first time in over a year, the HSBC Purchasing Managers' Index measure shows. China is trying to slow its economy to control inflation and many hope it can achieve a soft landing that allows it to continue growing and keep commodity prices high. See more here at The Australian on the Chinese slowdown.
The Australian and New Zealand economies are now dependent on this 'Goldilocks' outcome (not too hard a landing and not too soft a landing) for the Chinese economy.
Meanwhile, there are conflicting signals coming from the US government about whether it can raise its debt ceiling in time to avoid a default of the world's biggest economy on August 2.
US President Barack Obama and Republican leaders in Congress are reported to be in talks over a new deal, but nothing has been finalised and the clock is ticking. See more here at New York Times on the prospects for a deal.
See more here at Bloomberg on no deal being done.
However, Standard and Poor's has warned there is now a 50/50 chance of it downgrading America's AAA credit rating within the next three months. See more here at Reuters.
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