Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that record high yields at an Italian bond auction have again refocused global market fear on the chances of a Eurozone financial meltdown leading to a global economic downturn.
Italy sold 3 billion euros of government bonds at an auction overnight at a record high interest rate of 6.29%, which is up from 5.32% at a similar auction a month ago.
Italy has to roll over more than 200 billion euros of government bonds in the next 12 months and a continuation of interest rates this high is widely seen as unsustainable.
Spanish bond yields also rose to more than 6% for 10 year bonds and the spread vs German bunds rose to a record high 432 basis points. A spread of more than 450 basis points is widely seen as fatal for any economy in Europe trying to avoid a debt spiral towards national bankruptcy. See more here at Bloomberg.
Meanwhile, there were fresh signs the financial turmoil in Europe is spreading to the underlying economy. European factory output fell more than 2% in September from August, which was its biggest fall since early 2009.
European stocks fell 1.5% overnight and the Dow was down 1% in late trade. See more here at Reuters.
The San Francisco Federal Reserve released a survey showing it expected a more than 50% chance of a US recession by early 2012. See more here at Reuters.
The OECD said its series of leading indicators now showed all the world's developed economies were headed for a synchronised slowdown. See more here at Reuters.
Elsewhere, German Chancellor Angela Merkel warned that Europe faced its toughest time since World War II as it struggles to keep the Eurozone together. See more here at Reuters.
However, her own Christian Democratic Union party has pushed for Eurozone countries to be given the ability to exit. See more here at Bloomberg.
Meanwhile, US President Barack Obama has called again for China to let its yuan strengthen vs the US dollar, saying 'enough is enough' and that China needed to act like a grown up economy. See more here at Reuters.
The New Zealand dollar was sharply lower at around 77.8 USc, having been as high as 79 USc yesterday morning after stronger than expected retail sales figures for the September quarter linked to the Rugby World Cup.
No chart with that title exists.
29 Comments
"Yesterday, insurers and government and Christchurch City Council officials tried to explain the green-blue classification, but faced tough questions from the crowd of about 50 homeowners"....
Party time for engineering firms....kaching....$$$$$$$$$$$$$$$$$$$$
Now those in yellow zones with blue ground overlaying brown are expected to wait until the pink zone is turned into purple and that will mean their yellow is now deep brown.
Any reds still not fully awake to having been made orange will at midnight turn into lemons.
Should a red or a blue be in charge of the colour committee...what colour committee?...the one established to provide places for party hacks to pretend they can solve the issue of chch ground being a bog waiting for a quake. Salaries will range into the high hundreds of thousands. The positions are expected to become permanent.
yet its very low...
450 in sept 2009 v 45 now....
http://www.econbrowser.com/archives/2008/09/understanding_t.html
Gummy,
the moral is never waste a dead horse. A few years ago the wife and I were staying a couple of days in Venice in a tourist apatment. She said lets cook our own dinner. Went to a butchers shop, bought some unusually lean meat, then outside I looked at the sign, sure enough they only sold horse meat. Trigger wasn't too bad as I recall.
Your friend, rich or poor,
OMG
According to bigdaddy, olly's chum, Europe bounced back in one day last week and there's no crisis. And Roger kerr said everything is looking ok. And key is all smiley and confident. So with all these legends saying everything is ok there is really nothing to worry about
Postergate..........
" Greens co-leader Russel Norman says he's "incredibly disappointed" that an attack on National billboards arcoss NZ was done by the partner of his executive assistant".sic herald
"The Greens had previously denied involvement, however, Dr Norman told media this morning Green Party member Jolyon White, the partner of Dr Norman's executive assistant, was the person who coordinated the defacing."....The cost of repairing the billboards has been put in the tens of thousands and we know who will have to pay the bill...and be prosecuted for criminal damage.!
"Labour's six-point plan for jobs:
* A savings scheme that will provide new investment for New Zealand businesses;
* Support innovation to develop new products to sell to the rest of the world;
* Change monetary policy to support exporters against a volatile New Zealand dollar;
* Help unemployed youth into training and apprenticeships; * Stimulate the economy by putting money into the pockets of those who need it;
* Making Kiwi jobs a consideration when issuing government contracts.
http://www.scoop.co.nz/stories/PA1111/S00283/labours-six-point-plan-for-jobs.htm
See...it's so easy when all you have to do is make promises....and forget about the 9 years you wasted...causing the current debt problems...aint that right Phil?
By the way PHIL....where will you get the money from, that you are promising to put into the pockets of those who need it?
A brilliant piece...
http://maxkeiser.com/2011/11/12/ote131-on-the-edge-with-charles-hugh-sm…
regards
Utopian Germans risk full-blown EMU depression The relief rally from technocrat takeovers in Italy and Greece has already wilted, once again reviving the elemental question of whether Germany will go beyond rhetoric and commit its full strategic power to halt Europe's debt crisis. http://www.telegraph.co.uk/finance/financialcrisis/8890144/Utopian-Germ…
moraymint
I'm in no doubt now that the euro currency is destined to collapse. I'm hoping like hell that the EU will follow that preposterous currency down the pan. If it doesn't, then those 300 million souls I mentioned are going to get real nasty over the next decade as their standards of living plummet and the gap between the haves (Europe's politico-bureaucratic mafia, the bankers, the corporate elites) and the have-nots (the rest of us) widens by the year.
Come on you bond traders (representing the proxy self-interest of 300 million citizens), strut your stuff. Expose the insolvency of so many of Europe's nation states; expose the insolvency of the banks standing behind them, demanding moral hazard; do us all the favour of the century; destroy the euro; destroy the EU.
The sad thing is that it will now indeed come down to market forces to wipe out the insane political construct that is euro-economics, rather than the politicians of European (and British) democracies who have ridden rough shod over the wishes and interests of their electorates. A shocking indicment of our colluding, inept, self-serving and shameless political caste.
PS As you might have guessed, I'm with the Germans (and, I believe, against AEP) on this one. To have the ECB print euros on a galactic scale would result in the mother-of-all catastrophes for 300 million European citizens, and more besides. The reason is that we stand no chance, repeat no chance, of ever re-establishing Industrial Age rates of economic growth. Consequently, printing trillions of euros would quite simply wipe us all out for ever and a day. It would be the last great act of utterly pointless defiance; Weimar on steroids, and the Germans damned well know it. Globalisation is dead. The 21st century will be the Age of Reckoning. We're on the cusp of a new economic paradigm: the economy as an energy construct ... and no amount of money printing is going to change that. Sorry Ambrose.
David Tepper; A seller, in 95% of the stock issues he holds, and complete liquidation of his financial stock holdings ( BoA, Citi etc). And let's remember that in September, he'd already started selling...
NA, I was having a laugh yesterday when I looked at this article on Michael Moore's house in the States. Not a bad house for 900k, what would it be worth here?
http://www.dailymail.co.uk/news/article-2060704/Occupy-protests-Michael…
That looks like Blanket Bay in Glenorchy ! . So I'd guess a tad more than $900k... ( even without the 'New Zealand' premium added in...).
Austerity arrives in Australia.
An interesting debat with AEP in the telegraph article i posted above
Of course Germany has a "problem". It flooded Southern Europe with cheap capital and destabilized their economies, and is now trying to lock in a permanent currency advantage for trade reasons. (some call this predatory, I am willing to allow that this was unintended)
Germany is the problematic country, more than any other.
It is has flagrantly breached the "spirit" of EMU by running a massive and chronic current account surplus, forcing others to run a deficit. Takes two to tango.
EMU must break into viable parts. The only way this can be done is for the stronger half to leave.
If we do it your way, we blow up the world -- and Germany in the process.
Gemma_Laming
23-14-11 Walt KowalskiOne of the unspoken problems here is that if Greece has a hard default, then there will be the feared credit event.
Triggering CDSs on Greek debt at $300bn is one thing, but triggering 25-40 times that amount given the side bets on Greece's debt is not sustainable.
Somehow, the banks need reigning in. Insurance is one thing, gambling is quite another.
If the German bloc leaves EMU, Italy will enjoy a large (de facto) currency devaluation and keep its euro contracts in tact.Viability would be restored. There would be no need for defaults, and no CDS trigger.
Germany would have to recapitalize its very poorly regulated banking system, just about the worst regulated in the world. Pitiful.
(What was BaFin doing, and the Bundesbank? Gar Nichts)
It might cost €100bn,or €200bn. Cheap at the price.
Gemma_Laming
4-15-11 AEPThankyou for your response. You say something very interesting: Germany's poorly regulated banks. Now, internally to Germany, they are pretty strictly regulated. The problem for the Germans is when these private institutions start dealing outside Germany, where German law has no force to act. I will ask you to detail your assertion about these poorly regulated banks. For the average person in the street, it is extremely tightly regulated.
That is the problem as I see it - and bringing the eurozone into a financial "level playing field" along with Germany, would help matters somewhat. It would regulate capital flows between countries without affecting the way people live in those countries.
After all, a Spanish private bank is a private bank pretty well like any other on the planet. That is why it is so easy for them to pack up and leave if they don't like a place. Regulating the actions of a private bank will not affect the Spanish way of life.
I would like your views on the weak regulation of German banks though. You have gotten me there.ambrose_evans_pritchard
Read Beatrice Weder di Mauro interview in the Suddeutsche Zeiting on Monday morning. Fascinating.She makes the point that risk adjusted capital is 2pc, should be 5pc. ( I write this from memory)
Others have made the same point. It is why Schauble, Elmar Brock and others ruffle feathers over here when they allege -- and continue repeating -- that this whole crisis was caused by Anglo-Saxon banks.
Well yes, they behaved badly, but euro-banks are off the charts with a loan to deposit ratio of 1.2. There lies the mega-crisis.
When all this is over, the failings of the German banking industry will eclipse the local dramas in Greece and such places.
This is at root a German crisis too.
Gemma_Laming
22-14-11We need to do a little clearing up here: what actually is going on?
We have two halves of Europe - on the one hand strict banking regulations, and on the other weak banking regulations.
Look outside Europe for a moment: where do you see strict banking regulations? Norway. Norway is doing just great, thankyou*.
Where do you see slack banking regulations? America. We all know that America isn't doing that well at all, right?
The solution that is needed is to sort out the debt structures, a degree of forgiveness here and some tough decisions in FFM.
There is no other way, unless we all want to pay evermore increasing levels of already unpayable interest to private banks. Many of whom have already been bailed out by us the taxpayer. This is utter madness. For AEP to say that Germany is risking this is nonsense.
It is the unwillingness of the private banks to face up to the reality of what they have concocted.
(*Before you go on about Oil, look at Sweden, Denmark: outside the EU yet doing just fine).
Gemma,This has gone way beyond banks. Powerful macro-economic forces are at work.
Europe is hurtling into a deflationary disaster.
If you go back to 1931 you would be amazed how many people were still rabbiting on about the inflation risk. Many of those in Germany in the Bruning administration making such arguments would soon be shot -- literally -- as the effects of their policies destroyed Weimar.
German democracy died because of deflation, not inflation. The Germans have forgotten that.
They are now imposing exactly that outcome on the South.ambrose_evans_pritchard
The great inflation was in 1923. Much the same happened in France, Belgium, and Poland. Essentially the middle class was badly hit in all countries. Nothing special about Germany in that respect (10,000pc inflation is the same 100,000,000,000pc inflation. It makes no difference at that point)Germany recovered very fast and then had a roaring credit boom in the late 1920s (financed by excess US capital under the deformed Gold Standard, a near exact replica of German finance for Spain under the deformed EMU Standard),
The Bruning deflation was in 1931-1932. It was the July Reichstag elections in 1932 that killed Weimar. The Nazis and Communists together won half the seats.
There are masses of books. I like Eichengreen's Golden Fetters for the macro analysis, and Lords of Finance is a good read.
If you want to go much further, you need to read German
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