Stockmarkets rebound; Europe vs. Germany

US share markets rallied last night rebounding from Monday’s big sell off with US housing data helping the equities recover. The S&P 500 recovered 0.5% of the 1.6% it lost the previous day, whilst house prices fell at their slowest pace in over a year. However, consumer confidence also fell on continued concerns of the impact of the European debt crisis. In Europe, European leaders continue to face obstruction from Germany on plans to have joint & several sovereign liabilities.

US residential house prices fell by its slowest pace in over a year, coming off 1.9% year on year vs. expectations of a 2.5 % drop and after decreasing 2.6% the previous month. The slowing decline is another sign that the US housing market is starting to stabilise and the Fed’s efforts are having an impact on promoting the housing sector. Whilst the news was seen as a positive, it was tempered by US consumer confidence which fell for a 4th consecutive month and its lowest level this year. The Index showed it fell from 64.4 the previous month to 62, whilst expectations were for it to fall to 63.5.

In Europe, Germany’s Chancellor Angela Merkel remained defiant over the issue of joint liability, saying that she expects no shared debt liability in her lifetime, stating that in Germany after 60 years there isn’t joint liability, and that she doesn’t see it in Europe either. Her comments come in response to European Union President Herman Van Rompuy who released a ’10 year road map’ focusing on common banking supervision, deposit insurance as well as a criteria-based and phased move toward joint debt issuance. Furthermore, he wanted limits on annual budgets and debt levels of nations that use the Euro. On the issue of preferred creditor status relating to the European Stability Mechanism, Merkel refused to comment as she will also be pressured on the subject at the summit. The main topic will surround whether seniority should be changed and whether Germany will surrender preferred status on rescue loans to Spain’s banks.

Finally, in New Zealand, it was confirmed yesterday that Graeme Wheeler would replace the outgoing Reserve Bank of New Zealand Governor Dr. Alan Bollard. Bollard has been in charge for 10 years and will step down after his final policy meeting in September. New Zealand’s Finance Minister Bill English said of Graeme Wheeler, who is a former World Bank Managing Director of Operations, ‘given his experience and standing, combined with his technical and leadership qualities, the board considered that he has all the qualities required to become governor and chief executive of the Reserve Bank. Mr. Wheeler’s extensive experience makes him a highly respected figure in world financial markets and within New Zealand and we were fortunate to have someone of his calibre available for this important role’.

In the markets, the Kiwi has climbed above .7900 against the USD, but has slipped slightly against the Aussie sitting just above .7850. Against the Euro, it has moved above .6300 as the graph shows, whilst vs. the JPY it remains fairly constant just off 63.00.

On going European concerns represent a good opportunity for Importers