By Paul McBeth
Friday 28th November 2008
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European stocks gained on optimism government moves to shore up the financial sector and stoke economic growth will gain traction. The DAX 30 rose 2.3% as German unemployment fell, while the FTSE 100 climbed 1.8%. The Reserve Bank of New Zealand will review the official cash rate next week and is expected to cut it by 100 basis points to 5.5%.
“It’s too early to tell if there’s a bear market rally,” said Imre Speizer, currency strategist at Westpac. The markets’ stability is “definitely for the short-term.”
The kiwi rose to 55.37 US cents from 54.84 cents yesterday, and increased to 52.81 yen from 52.12 yen. The fell to 83.91 Australian cents from 84.03 cents yesterday, and jumped to 42.894 euro cents from 42.44 cents.
Speizer said the kiwi dollar may trade between 54.50 US cents and 55.50 cents today and is likely to resume its decline in coming weeks. US financial markets are close for the Thanksgiving Day holiday.
The ongoing weakness of the New Zealand economy has most economists forecasting the Reserve Bank will cut the OCR by 100 basis points next week, but there is a “growing minority” who are calling 150 points, Spezier said. A 150 basis points cut would be “happy for the markets,” while the expected 100 point cut would be “slightly disappointing.”
In July, Governor Alan Bollard embarked on the steepest series of rate cuts since the implementation of the OCR in 1999 as he moved to protect New Zealand’s economy, which entered its first recession in nine years.
Yesterday’s monthly trade figures showed the annual deficit widened to $5.22 billion from $5.05 billion as oil prices pushed up import prices. The National Bank of New Zealand business confidence survey fell to levels not seen since the period immediately following the 1987 sharemarket crash.
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