90 seconds at 9 am: Aussie changes

90 seconds at 9 am: Q1 US GDP revised down; QE for longer; Pimco loses on higher rates; PBOC calms markets; IT shift to NZ; NZ$1 = US$0.778, TWI = 73.5

27th Jun 13, 8:44am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news the US economy did not grow as fast as first thought in the first quarter.

American consumer spending and business investment were revised sharply downward.

This revision helped markets in the sense that it is becoming clear the Fed's tapering is still a long way off. QE will be around for a while yet.

The Dow rose more than 1% and is now well above the 14,900 level in mid-day trade, but gold fell again, and is now down below US$1,230/oz.

In Europe, Mario Draghi has also signaled that his QE will be around for a long time yet. There is no talk of tapering there.

The big euro area concern is rising interest rates, something that is driven by US Fed settings and something that can do great damage to deficit reduction plans in the stressed southern European nations.

It's not only countries being caught by rising rates. Bond king Bill Gross and his Pimco funds are among the hardest hit from bonds' recent declines, a sign the selloff has caught some of the most trusted hands in the investing community. Apparently Gross didn't act aggressively enough on his own advice.

In China, the central bank has continued to supply liquidity to its nervous banking market and rates have fallen back for the 4th straight day.

In Australia, the change of prime minister there overnight has seen little reaction on currency markets. News away from politics may have more relevance for Kiwis. Firstly, Qantas has broken ranks and succumbed to pressure on credit card fees for online transactions. It's junior brand Jetstar says it is reviewing its fees too.

Secondly, there seems to be a shift of IT staff underway from Australia to New Zealand. Our IT sector is growing and we seem to be ahead in the UFB race, drawing companies to switch to this side of the ditch. It would be unwise to overstate this, but the latest migration data also showed more inbound Aussie based migrants along with less Kiwis leaving.

The NZ dollar starts today at 77.8 USc, 84.0 AUc, and the TWI is at 73.5.

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12 Comments

by powerdownkiwi | 27th Jun 13, 9:03am 1372280629

Interesting discussion in our household this morning: Amy Adams saying that any GM decisions were Central Govt, and simultaneously, Key sniffling that hookers were a local govt responsibility.

Came to the conclusion that Adams - despite the current nature of the EPA - was correct; the reason being that you get cross-border pollination, say Cant'y to Otago. So it needs to be National.

That left the possibility of cross-border pollination via illegal orgasms. Maybe Key was wrong; anyone else noticed he's virus-inflicted this morning?

by Von | 28th Jun 13, 4:19pm 1372393176

I have to know PDK - did Key say the words "illegal orgasms" or is it yr typo? I'm still laughing - I thought prostitution was legal!

by waymad | 27th Jun 13, 9:30am 1372282226

DC, I keep word-searching for 'unexpectedly' in the news round-ups - it's not there this morning.

Unexpectedly.

by Stephen Hulme | 27th Jun 13, 10:14am 1372284891

This revision helped markets in the sense that it is becoming clear the Fed's tapering is still a long way off. QE will be around for a while yet.

Apologists and reality are flying about all over the place. - Nonetheless, as I noted last week:

In plain and simple terms there is not enough projected US Treasury issuance to add to outstanding publicly held positions whereby the Fed can maintain the purchase progam without destabilising the liquidity preference for US Treasuries. Read background story

In short, there is a unprecedented "quality" collateral shortage

by powerdownkiwi | 27th Jun 13, 10:27am 1372285650

http://contextearth.com/

collateral shortage.

by steven | 27th Jun 13, 10:45am 1372286758

So not enough 1s and 0s floating about?

Im kind of quessy curious what happens if/when all the money in bonds and financial instruments of destruction panics and tries to exit the make believe world of finance into the real world of actual goods and assets. Goods and assets that cant justify ie give a return on their present value let alone an even more inflated one due to the above running around buying them.

regards

by Stephen Hulme | 27th Jun 13, 11:24am 1372289051

Yep, securitising the repayment cash flow on borrowed money to buy things we think we need is not a secure platform upon which to plan a life. And yet we have our home grown version in the form of covered bonds just waiting to execute carnage. Title to property will pass to another when, as you imply, the system implodes - checked your mortgage lender to demand if your mortgage is part of the covered bond pool, thus exposing your house and land to an unfortunate and certainly unwanted change of ownership? - have you made provision for such outcomes? It's only the best mortgages that are chosen with about 50% or less owing.

by steven | 28th Jun 13, 2:43pm 1372387418

I think Ive answered this elsewhere? in the event the bank goes under my mortgage as indeed everyone elses is is sold to the highest bidder by the receiver, I or any other mortgagee dont get a look in except if I move banks and pay off the receiver (or the new bank does on my behalf). With a covered bond who "I" go to is actually known...or fixed...

regards

by Wolly | 27th Jun 13, 11:24am 1372289060

"American consumer spending and business investment were revised sharply downward" but yesterday we were told recovery and growth in Obamaland was underway...all positive...happy happy...

by Ergophobia | 27th Jun 13, 2:10pm 1372299043

US spending "revised sharply downward" - the timing of these announcements is obviously orchestrated, as also their content! The UK, apparently tomorrow, is going to airbrush away its double dip recesssion from history. Amazing that "economists" still take all these official numbers seriously.

Ergophobia

by goNZ | 27th Jun 13, 2:13pm 1372299187

and thats before the consumers cop the effects of carbon taxes and banning coal !

by steven | 28th Jun 13, 2:46pm 1372387567

Coal is a pollutant, its a pollutant because it causes damage, so its being banned to prevent damage. Like smoking cigarettes...the damage is terminal but some decades off...so its being priced out.

regards