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90 seconds at 9 am: US consumers are spending; Paul Volker is warning; China is buying; the Kiwi is rising; NZ$1 = US$0.839 TWI = 79.1

90 seconds at 9 am: US consumers are spending; Paul Volker is warning; China is buying; the Kiwi is rising; NZ$1 = US$0.839 TWI = 79.1
15th Jan 14, 7:47am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news the Kiwi dollar rose sharply overnight.

But first, in America a gauge of consumer spending rose more than expected in December, suggesting their economy gathered steam at the end of last year and was poised for stronger growth in 2014. This was despite the snowed-in conditions which essentially killed off new car sales in December. Business inventories also rose a small amount.

American small business confidence was up more than was expected despite their lobby group's grumbles.

The US housing markets have been doing well recently. But weaker demand by financial companies that have been snapping up thousands of homes on the cheap could fuel a future fall in house prices, the chief economist of Fannie Mae has warned.

Paul Volker is also issuing a warning, this time on the funding practices in the giant US$4 tln US local authority funding markets. He wants the SEC to be given oversight powers over this sector.

Across the ditch, China's Bright Foods has snapped up another Australian dairy company.

In Japan stocks there suffered their worst day since August after a bad session on Wall Street, leading Asia lower, as the Nikkei was hit by a strong yen and weak economic data. The same forces saw the Australian sharemarket shed NZ$26 billion in a day in its worst trading since September. By comparison, the local NZX adjustment was minor.

This morning the S&P500 has recovered much of Monday's loss although the Dow's regain is more modest. These gains have taken the wind out of gold's recovery. After hitting US$1,255/oz, the precious metal is now down to $1,245/oz. The benchmark US oil price is up slightly from its recent lows. Brent crude is down on the day but still with a US$15/barrel premium over its American counterpart.

The NZ dollar starts today quite a lot higher at 83.9 USc, 93.5 AUc, and the TWI is at 79.1. That's the second highest the TWI has ever been since our currency was floated 28 years ago. The fast rising strength against the Aussie dollar is today's main driver and you have to go back to 2005 to find levels like today's.

If you want to catch up with all the changes yesterday, we have an update here.

The easiest place to stay up with today's event risk is by following our Economic Calendar here ยป

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9 Comments

by  Boatman  |  15th Jan 14, 10:44am 1389735898

The Kiwi$ is too strong for our manufacturing export and tourist sectors and if we ever get to Parity with the Aussie$ it will be a game changer . We may find we are able to import Aussie Beef , Lamb and apples, as it would be cheaper than local produce .

Wait until Fonterra realises  someone could even airfreight fresh milk here from Aussie and undercut the local retail milk price. 

Then the Government will come under pressure to weaken the currency .

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by  Stephen L  |  15th Jan 14, 12:00pm 1389740442

The rise in the NZD seemed very predictable, assuming no intervention by the RBNZ to match most other central banks managing their currencies down. At a minimum it seems likely the RBNZ will delay interest rate rises to partially compensate.

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by  Basel Brush III  |  15th Jan 14, 12:00pm 1389740449

NZIER and the bankster economists (?) all seem to be caught up in the same hype.

Perhaps it is time that they realised much of the improvement centres around the Chch rebuild  and inflated milk powder prices.

I still see NZD at circa 75c later this year when some of those chickens lose their heads.

Property prices ultimately are based on owner "stickiness"which is highest for owner occupiers (falling) and lower for investors (rising?) and lower still for overseas speccys who will exit the market in droves once they see the light.

Nuff said by me.

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by  Grant A  |  15th Jan 14, 12:01pm 1389740495

The problem Boatman is that an exchange rate is is not sector specific (how can it?), its an average across a whole economy, and often out of sync with the economy in the short-term. The facts are that NZ's terms of trade are at 40 years highs, so on average it deserves to be on or close to its highs although some sectors such as manufacturing may be finding if difficult Int'l visitors arrivals are up 30% in the past decade so not sure about tourism?). If what you say proves to be correct, in fact even possibly before that if the market sees it starting to happen, the market will correct the exchange rate. Sure the Govt may come under pressure if theres a delay in that, but in truth there's bugger all they can do to influence that. 

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by  Boatman  |  15th Jan 14, 4:10pm 1389755419

@Grant A , you are correct in that the market will adjust our currency in due course . I am also aware of the causes of the high Kiwi$, with TOT at a high , and a relatively high yield on cash when compared to the US , UK , Japan and Eurozone ( which stimulates the carry trade) .

Luckily we have flexible markets and a robust economy that will ensure things dont get ou-of -kilter for too long .

Its the pain in the meantime thats a problem.

Even with tourism up 30% we need to be cognisant that we have had the World Cup and a favourable exchange rate over the past 10 years .

We now have the Kiwi $ at 2 to the GBP whereas it was at 3:1 , and UK tourists now complain that we are an expensive destination . German and Dutch toursits will also feel this .

Chinese , Korean and Japanese tourists are generally package tourits and in a different league in terms of per capita spend

 

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by  Andrewj  |  15th Jan 14, 12:39pm 1389742781

Thje government is pouring a lot of money into the economy to make us all feel good.

 

Public debt climbs by $27m a day

 

Government debt has reached $60 billion, having climbed $27 million a day since John Key became prime minister - and forecasts show it will rise for years to come.

Despite tax revenue being higher than expected and expenses lower in recent months, Treasury figures show net Crown debt reached the highest yet at $60,015,000,000 at the end of September.

 

http://www.stuff.co.nz/national/politics/9380846/Public-debt-climbs-by-27m-a-day

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by  steven  |  15th Jan 14, 1:04pm 1389744277

One of several such events that will cause a Greater Depression, so a huge tax income loss and we will stagger...and have to riase taxes and balance the books.

it wont be pretty.....no more new houses for sure.

regards

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by  Andrewj  |  15th Jan 14, 1:11pm 1389744686
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by  steven  |  15th Jan 14, 1:02pm 1389744169

Neg tax revenue does that  to you.  So its not pouring it in, its maintaining it.

regards

 

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