Here's my summary of the key news overnight with news the price of mineral commodities are falling fast.
First up however, the American economy grew at a much faster pace than initially thought in the third quarter. Their 'second estimate says Q3 growth was +3.9%, up from +3.5% in the initial estimate and beating market expectations handily. Remember second quarter growth was also revised higher to +4.6%. The US economy is large enough to go its own way and withstand slowing global demand.
This unexpected result has had an impact on markets everywhere. Stocks are higher, bond yields are lower, and oil and gold are lower.
Meanwhile overnight the OECD said the global economy will gradually improve over the next two years but Japan will grow less than previously expected while the eurozone will struggle with stagnation and an increased deflation risk. It sees China's growth edging down while growth in India, Indonesia and South Africa picking up.
Iron ore traded below US$70 for the first time in five years as rising low-cost supplies by the world’s top miners widen a global glut amid slowing demand from China, the biggest user.
In Australia, their big four banks are tipped to raise NZ$145 billion from wholesale markets over the year to June as lenders use cheaper global funds to fuel domestic lending competition, most of which is for their mortgage market. That would make it their biggest splurge since 2009-10. And it comes as Chinese banks are looking to expand aggressively in the Australian domestic markets.
Stocks might be rising in New York, but UST 10yr bond yields have fallen and are now at 2.30%. We saw similar falls in wholesale swap rates in New Zealand yesterday.
The oil price fell sharply overnight and not only on the surging US dollar. It has fallen to under US$75/barrel and the Brent price is now below US$79/barrel. Venezuela has said it will not cut output as part of an OPEC response to low prices.
The gold price which is now at US$1,195/oz.
The NZ dollar starts today quite a bit weaker against the US dollar and euro but noticeably stronger against the Aussie. We are currently at 78.0 USc, 91.6 AUc, and the TWI is at 77.9.
If you want to catch up with all the changes from 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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3 Comments
Re Japan / Euro mess and China slowdwon , are we seeing the Unintended consequences of QE?
Gillian Tett of the Financial Times in London recently interviewed Alan Greenspan and asked him about QE .
His response was interesting, he basically said it had too many pitfalls and said it may come back and bite us.
I think the Japanese and Euro problems are directly linked to these dumb policies , and we now have more debt that 2007/8 .
Russia is also in big tRouble , Nigeria's currency , the Naira collapsed overnight ( Africa's largest economy and most populous country could implode with more coups and instability) , Brazil is on an economic knife edge , Argentina is still in perptetual limbo from the last ongoing crisis , Australia is dependant on mining and is staring down a barrel, I dont understand whats going on in India , but there are problems there too . Turkey is in turmoil , as is the rest of the middle east .
We are in unpredicatable times .
Probably a good time to be right here in good old New Zealand where everything seems tickety -boo ( for now )
Boatman thanks for that. My understanding from following this website over the last several years is that the outcome you describe was not "uninitentional" it was "intentional" . It was intentional as it would apparently give a better outcome in the short term for most . Scary!! Yes NZ still in a better position than most
Boatman. Thanks for that. My understanding from following everything over the last several years is that QE was intended to achieve this. It was not "unintended" Not sure on why or how. Apparently this is a better outcome than without QE. Scary stuff!!. Yes and once again our basic agricultural type economy will keep us better than most
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