Bernard Hickey details the key news overnight in 90 seconds at 9am in association with the BNZ, including news Japan's Prime Minister Yukio Hatoyama Hayotama has resigned after just 8 months in the job. He was the 4th Japanese Prime Minister in less than 4 years. This pushed the yen lower against many currencies, including the New Zealand dollar. The NZ dollar rose to 63 yen, but is still well below the 72 it reached a few weeks ago. See below for a full interactive chart.
Yen falls vs NZ$ after Japanese PM resigns; Dow up 2% on US rebound
Hayotama was the leader of a new left-leaning coalition that had taken over after decades of centre-right LDP rule, but was weakened by a decision not to kick America out of its base on Okinawa and a financial scandal.
Meanwhile, Bloomberg reports US stock markets rose as much as 2% in late trade after news of better home sales and renewed hopes for America's economic rebound. There's also an element of a rebound on the stock market after it had fallen 11% since late April.
In Britain, Prudential Plc faces big losses and the resignation of its French-African CEO Tidjane Thiam after the failure of its US$35.5 billion deal to buy AIA's Asian unit. Prudential faces US$450 million in break fees. Bloomberg reports, the British life insurer had asked for a price reduction near the end of the deal after shareholders demanded a cut. AIA Asia was part of the US government-owned AIG group.
Meanwhile in New Zealand, the Kiwi dollar firmed back over 68 USc overnight after news commodity prices increased across the board in May to record highs versus the US dollar and the New Zealand dollar. Investors are also preparing for the strong chance of a hike in the Official Cash Rate next Thursday when the Reserve Bank next makes its decision.
So what?
The New Zealand dollar is still relatively low versus the Yen so the strength overnight won't hurt exporters too much. The longer term worry is around the Japanese economy, which is still the world's second largest, although less important for New Zealand than it used to be and less important than China. Japan just can't seem to reform itself out of its two decade-long stagnation and this resignation is a confirmation Japan is stuck in the mire. Exporters should avoid it where possible and look to China instead for growth and open-ness.
The US stock market bounce is just that -- a bounce. Its economy, and particularly its government, remains mired in debt and it will be hamstrung for many years by de-leveraging.
The collapse of the Prudential deal is of interest to AIA employees and customers in New Zealand.
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