Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news stock markets and the New Zealand dollar rallied sharply overnight on some hope that Europe may finally be getting serious about fixing its sovereign debt crisis.
European Commission President Jose Manuel Barroso gave a speech calling for a coordinated recapitalisation of Europe's banks and the early deployment of a permanent and large rescue fund. See more here at Bloomberg.
Reuters reported European banking sources saying Europe's banks would be required to lift their tier one capital ratios to around 9% from 5% currently and that banks would be told to accept haircuts of up to 50% on Greek debt. Reuters' bank capital calculator suggests such settings would require fresh bank capital of 250 billion euros.
Barroso also proposed a ban on dividends for those banks that needed capital and said the banks should use their own private sources of capital rather than rely on government bailouts or the new 'Big Bazooka' bailout fund likely to be created to buy government bonds from struggling governments.
However, this plan is far from agreed and elements of it may need the approval of 17 parliaments. This was reinforced by first the failure of Slovakia to agree to an earlier Greek bailout fund and then a deal done this morning between the government and the opposition to agree the plan. See more here at Reuters.
Also, such bank recapitalisations and the creation of a rescue fund may cost France its AAA sovereign credit rating.
The European crisis will come to a head next weekend (the weekend of the World Cup Final) when a summit is being held in Europe, where it is hoped the key leaders can agree on a 'mega-plan' to take to the G20 summit in Cannes on November 3/4.
European stocks rose around 2.4%, while US stocks were up 1.5% in late trade. See more here at Reuters.
The New Zealand dollar, which often moves in tandem with global stock markets, commodity prices and perceptions for global economic growth, rose to 79.9 USc overnight from 77.5 USc yesterday on the hopes for a European solution.
Meanwhile in America, the Democrat-controlled US Senate has passed a bill that would allow the US government to impose tariffs on the imports of those countries that subsidise their exports by holding their currencies artificially low. This is aimed at China, which protested at the bill's passing.
However, the bill is not expected to pass the Republican-controlled lower House of Representatives and US President Barack Obama is also opposed and has the power to veto any bill passed by the two houses. See more here at BBC.
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