Here's my summary of the key news overnight in 90 seconds at 9 am, including news US stocks were down around 0.4% in late trade after data showed American manufacturing contracted in November.
US businesses have warned fears about the US government going over the fiscal cliff on January 1 have dampened their investment and hiring plans.
The Institute of Supply Management's (ISM) index for US manufacturing fell to 49.5 in November from 51.7 in October. Any reading below 50 is seen as a contraction. Economists had expected expansion in November. See more here at Bloomberg.
The weak US manufacturing figures offset signs from China over the weekend that its factories were growing output at their fastest rate in 7 months.
Global business leaders and markets are now firmly focused on the prospects for America's economy to increase taxes and cut spending automatically without a deficit reduction deal that both Republicans and Democrats can agree on. The budget contraction would carve as much as 4% off US GDP and push it back into recession.
There were few signs overnight of any break in the deadlock. US Treasury Secretary Tim Geithner warned overnight that Republicans would be blamed if America went over the fiscal cliff, while Republican Leader John Boehner has said Barack Obama is wasting time. See more here at Reuters.
Meanwhile, the NZIER's shadow board of the Reserve Bank of New Zealand says it continues to favour holding the the Official Cash Rate at 2.5% when new Governor Graeme Wheeler releases his first full Monetary Policy Statement (MPS) on Thursday morning and makes his second OCR decision. However, the board made up of 10 economists, academics and business leaders said the decision was finely balanced with the boad placing a 40% weight on a cut being appropriate. The shadow board says what it should happen, rather than what it thinks will happen. Economists widely expect the RBNZ to hold at 2.5% on Thursday.
Across the Tasman, the Reserve Bank of Australia is widely expected to cut its Official rate by 25 basis points to 3%, increasing the relative attractiveness of the New Zealand dollar against the Australian dollar.
The New Zealand dollar has risen from 76.5 Australian cents to 78.5 Australian cents since August, although it is off a brief high of 80 Australian cents in early October.
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(Updated with more detail.)
7 Comments
The fiscal cliff for those not "over it " yet is being fitted with a fiscal bungie as we speak.
Yes, you take the plunge, get the bounce, dangle screaming for joy, and wait for the taxpayer to haul your fat stupid joy riding ass out of the chasm once more.
Merry Christmas Wall St.
Obama caved in 4 years ago when he agreed to renew the sunset clause on the "Bush Era" tax-cuts. He capitulated again last year when they extended them again, agreeing instead to lift the Debt-Ceiling from $14 trillion to $16 trillion. There's nothing more dangerous than a trapped skunk that has been painted into a corner. Do you really think he will cave in again?
"Fiscal cliff" is a manufactured crisis.
The US has the ability to create credit without limit. Remember credit is not money. We use debt as money.
In the US system the Treasury simply creates treasury notes and the Federal Reserve bank monetizes it. At suppressed interest rates.
There is no limit to this system.
Cheers
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