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US grows strongly in Q3; lowest jobless claims in 14 yrs; oil output surges to 30 yr high; banks back in firing line; Brazil raises rates, gold sinks; NZ$1 = US$0.785, TWI = 76.5

US grows strongly in Q3; lowest jobless claims in 14 yrs; oil output surges to 30 yr high; banks back in firing line; Brazil raises rates, gold sinks; NZ$1 = US$0.785, TWI = 76.5

Here's my summary of the key news over night where its all about the US today.

The American economy grew at an annual rate of +3.5% in the third quarter, a better figure than economists were expecting. It had grown at an even faster +4.6% annual pace in the second quarter.

These Q3 numbers were driven in part by an unusual spurt of federal spending, combined with strong exports, along with investment in business equipment, but the numbers showed that consumer demand (PCE) did not grow quite as strongly, perhaps hinting at some loss of momentum.

In fact, last week, initial jobless claims in the US were marginally higher. Still, over the past month fewer Americans filed applications for unemployment benefits than at any time in more than 14 years.

Wall Street rose, and gold sank. Oil also slid as the Federal Reserve ended its bond buying and American oil production surged to the highest level in more than 30 years.

The NY Times is reporting that just two years after avoiding prosecution for a variety of crimes, some of the world’s biggest banks are suspected of having broken their promises to behave, prompting prosecutors to revisit earlier settlements.

There are some big-name banks involved, including Standard Chartered, Barclays, and UBS. Auditing firm PwC is also drawing the ire of regulators for fudging reports on alleged bank sanctions-breaking activity. This may become a big story in the next week or so.

The only notable news outside the US today comes from Brazil where there was an unexpected jump in their official interest rates. Brazil’s central bank increased its benchmark rate by 25 basis points to 11.25%, surprising analysts who had predicted no change following their recent federal election.

In New York, UST 10yr bond yields have slipped following the US GDP announcement today and are now at 2.29%.

The oil price fell and is now just above US$81/barrel with the Brent price just under US$87/barrel. American output data released earlier today shows strong gains in their domestic production.

The gold price also fell sharply again and is now below the US$1,200 level at US$1,196/oz.

We started today with our currency holding its sharply lower level of the past few days. It is now at 78.5 USc, at 88.9 AUc, and the TWI is at 76.5.

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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6 Comments

So NZ stops hiking, NZD can stop rising maybe fall, then as NZD falls we import inflation, then we hike rates again...... Either way we're doomed to suppress the general economy & consumer spending.... Japan here we come .... 

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The jump in GDP was due to the increase of defence spending  ,  30billion the most since 2008 all thanks to their war on terror and the pressure to go in and clean up their mess.

Of note also was that the Fed had this information and still severed ties with QE.

More QE ahead folks late 2015 ???? 

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More QE ahead, more ZIRP,  more war in the Middle East .  

Back to 'normal' economic settings not for now.  

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Does it count as growth when your increase in debt exceeds the GDP figure? My guess is that US GDP growth of 3.5% was bought with US Debt increase of twice that. Bit like increasing the value of your house by 100k after spending 200k... can't end well!

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US grows

 

China slows

 

Europe is sick as a dog

 

... and , most importantly , Jesse Ryder is back in the Black Caps ... over all , going into the weekend , I'm a happy wee Gummy Bear ...

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For rubber booted corporate finance buffs here is something for the weekend:

Linked is a detailed and current Productivity Commission Rreview of dairy in Oz. Fonterra collects say 17% of the raw milk there. 

http://www.pc.gov.au/projects/study/business-costs/dairy-manufacturing/report

http://www.pc.gov.au/__data/assets/pdf_file/0009/149841/dairy-manufacturing.pdf

 

so, given the structure of the industry there

Q: How does Fonterra make a commercial return from the assets held in Oz?

for background:

AUSTRALIA

Normalised EBIT in Australia was $37 million lower than last year as a result of margin squeeze in the consumer brands business. This was due to significantly higher input costs  driven by high global commodity prices and competitive pressure that constrained our ability to pass these on....... .... our existing supply base grew production by two per cent year on year. This was supported by our commitment to ensuring our suppliers are profitable. We have done this by maintaining cash flow leadership for farmers and ensuring they have innovative, industry-leading support services to manage risk and grow their farm businesses...... http://www.fonterra.com/wps/wcm/connect/5623a8fc-b787-43aa-95a2-d8d45fd82e83/Fonterra+Annual+Review+2014.pdf?MOD=AJPERES   Oceania (formerly ANZ): Represents Fast Moving Consumer Goods (FMCG) businesses in New Zealand (including export to the Pacific Islands) and all FMCG and ingredients businesses in Australia (including Milk Supply and Manufacturing). It includes foodservice sales in Australia and New Zealand (except for foodservice sales to Quick Service Restaurants), and RD1.

http://www.fonterra.com/wps/wcm/connect/25050b8c-0661-4811-a8f0-8f134fa6d804/Fonterra+Financial+Statements+2014.pdf?MOD=AJPERES

reportable non-current assets Australia NZ$ 1,022 million. (down 25m yoy)

Geographical segment external revenue Australia NZ$ 1,666 million (down 186m yoy)

 

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