90 seconds at 9 am

90 seconds at 9 am: Aussies cut rates 0.5%, bigger than expected; Dow surges to highest since 2007, Fonterra auction weak again

2nd May 12, 8:47am by David Chaston

David Chaston details key news overnight in 90 seconds at 9 am including news that Australia's central bank cut interest rates by a hefty half-percentage point late yesterday, signaling a shift in its focus away from fighting inflation and toward safeguarding growth. Disappointing housing trends probably tipped the decision to go for a big cut.

The Australian Treasury department remains bullish on the future of Chinese demand for Australian resources and agricultural products, saying China's appetite for commodities will keep rising until the early 2020s. Some have worried about the China boom running out of steam, but that is not the way the Australian government sees it.

In the US, the Dow rose 124 points, or 1%, hitting its highest level since December 2007. This was driven by surprisingly strong US domestic manufacturing activity.

Oil prices jumped more than $2 per barrel. Gold was unchanged.

An official gauge of manufacturing activity in China showed improvement in April, but economists cautioned the overall economic outlook remains unclear.

Closer to home, today's Fonterra auction saw prices fall another 2.4% and dairy prices are now at their lowest level since August 2009. They have fallen one third since the last peak in 2011.

Dairy prices weren't the only rural commodities to fall. Grain prices are weakening on reports of very big wheat and corn harvests in the US and big harvests in Europe and Australia.

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7 Comments

by Basel Brush III | 2nd May 12, 9:13am 1335906830

Down the slippery slope?

by Stephen Hulme | 2nd May 12, 9:59am 1335909556

In more ways than one.

Is shooting the messenger a way to solve forgiven debt issues.

I am sure all ratepayers will follow the outcome with interest. Future liabilities are assured.

by powerdownkiwi | 2nd May 12, 10:09am 1335910145

The ratepayers of Dunedin should sue those boys for our money back.

It's them went into debt. It's us who paid.

They're not doing it for altrusitc reasons, that's for sure.

by Stephen Hulme | 2nd May 12, 1:40pm 1335922826

“Curiouser and curiouser!”

by powerdownkiwi | 2nd May 12, 2:09pm 1335924581

I have little respect for Butler - in my opinion she attacked the persona, when she had a winning position (as has been proven). She lost by a few votes to Paul Hudson, who is well associated in the public mind with City Holdings. The Thursday before elections closed, City Holdings had a large ad in the ODT. If I'd been her, I'd have sued the ODT for a re-run of the election. You have to ask the question: Who OK'ed that? Presumably the buck stops with the Editor.

But the article you refer to, is interesting indeed, as is the Oaten comment.....

Looks to me that the theory is 'if you're going down, come out swinging'.

by Andrewj | 2nd May 12, 9:32am 1335907978

A friend send me this about the dairy auction,

>>>>

Hi.

Fonterra was hoping prices would be up a bit at this auction. The

average winning price is down 4.7%, 16% over two auctions and 41% from

1st of March 2011. Again a very low participation rate from an increased

pool of qualified bidders.

Longer dated prices are a little higher than short but it is clear from

the weighted averages that volume is concentrated short - July

delivery.

It was really stupid/delusional tying long term contract prices to

auction prices. Fonterra's payout next year will be under, and possibly

well under, $5.00 unless the NZD falls significantly.

by iconoclast | 2nd May 12, 10:35am 1335911738

The Bank of Queensland is the first of the banks to announce its response to the latest RBA rate cut, opting to pass on just 35 of the 50 basis-point cut.