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BNZ Weekly + Offshore Overviews, 27/11/08

Welcome to the November 27 2008 editions of the BNZ Weekly Overview and Offshore Overview.

The week started off very badly internationally with fresh worries about world growth leading to relatively sharp declines in sharemarkets. But over the weekend the announcement from President-elect Obama that he is considering a fiscal stimulus plan aimed at creating 2.5 million jobs, plus new liquidity injection measures from the Federal Reserve aimed at household finance, and the bailout of Citigroup have seen things improve marginally. We have also seen a proposal for a fiscal package in Europe and announcement of easing fiscal policy in the United Kingdom.

Here in New Zealand the bad news for the week was Fonterra's announcement of a reduction in its forecast milksolid's payout for this year but apart from that fresh news has been relatively light on the ground. Wholesale interest rates have changed only marginally from a week ago with the markets pricing in an expectation that next Thursday morning the Reserve Bank will cut its official cash rate at least 1% with a mild possibility they will do more than that. The market expects the current 6.5% cash rate will be close to 4% in the middle of next year

The Kiwi dollar has finished close to 55.0 US cents this afternoon but traded below 52.0 cents during the week. The trend still appears downward but volatility is likely to remain massive.


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