Here's my summary of the key news overnight in 90 seconds at 9 am, including news of good American jobs indicators.
The flash US factory PMI was released overnight and it has held close to its 4 year peak. The European version saw a rebound, especially in its services sector, but France continued its contraction.
The number of Americans filing new claims for unemployment benefits fell to the lowest level in more than 8 years last week, suggesting the labour market recovery was gaining traction. It was February 2006 when it was last at this level. The US labour market seems to be gaining traction; the next marker will be rising wages. Meanwhile a sharp fall in new home starts for June is being brushed off by observers.
The rising US economy, and the growing expectation that interest rates will start to rise, is putting pressure on the junk bond market. This will have implications for NZ's richest man Graeme Hart and his giant Reynolds Group who are very exposed to junk debt yields.
In Australia, their top Treasury and regulatory officials are concerned that record low interest rates could destabilise their financial sector. It is predicted many homeowners will struggle to service their mortgages when interest rates start to rise. They see parallels between now and the period before the 2008 GFC.
Lower swap rates are happening here too, allowing banks the opportunity to offer reduced fixed rates. Yesterday both ANZ and ASB raised their floating rates in line with the OCR increase, but many borrowers have already bolted from floating rate arrangements, and more will no doubt do so again because fixed rates are now lower than variable out to three years, almost four years.
UST 10yr yields rose to 2.51% in late trade this morning. The oil price fell on both benchmarks and now at US$102/$107; gold is lower at US$1,297/oz.
We start today with the NZ dollar significantly lower after the OCR signals, down more than 1c on the day. We are now just under 85.8 USc, at 91.1 AUc. The TWI is at 79.9.
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 »
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7 Comments
In Australia, their top Treasury and regulatory officials are concerned that record low interest rates could destabilise their financial sector. It is predicted many homeowners will struggle to service their mortgages when interest rates start to rise. They see parallels between now and the period before the 2008 GFC.
of course....
Austrailia and NZ have not learnt.... This modern form of keynesism has an end.... The GFC was a paradigm shift ..which we could have learnt from.
One day we will have our own version of the "liquidity trap"....
Thats right cowboy..... but it aint happening.
credit growth 6% GDP growth 3%. ( Im guessing those numbers )
And the supposed wealth is kinda tenuous...as many home owners in America found out..
NZ has not learnt...
Each cycle it takes more credit to generate GDP growth...... each cycle requires lower interest rates to keep the game going..
The increasing debt servicing burden relative to income..... makes the outcome kinda inevitable..in my view..
There has not been that much deleveraging , around the world, from what I can see...???
NZ is in the midst of another credit growth cycle... the opposite of deleveraging
just my view..
A weak credit growth cycle though Roelof. Ironic that the above news is about Australia since NZ is in the same boat. It's only our best friend Janet across the Pacific that's kept the wolf from the door.
We can escape to the refuge of fixed rates for now but wait till she lifts the US base rate.....
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