Here's my summary of the key news overnight to keep you up-to-date over these holidays.
The US is ending the year on a very big high.
Stock markets have surged overnight to new all-time records. The Dow is over 18,000 for the first time ever and the broader S&P500 is at 2085, also a record.
The trigger for today's surge is the final result for US Q3 economic growth. It has been revised up sharply to +5% pa. and that actually tops the impressive Q2 estimate of +4.6% pa. It is the fastest rate of growth in more than ten years.
Driving the result was a fall in imports, a rise in Federal government spending, and an impressive rise in real PCE (personal consumption expenditure). There is something for everyone to like in this result, especially the markets.
Backing up the data and showing the good vibes are continuing, a respected consumer sentiment survey jumped in December to its highest level in nearly eight years on cheaper petrol and better job and wage prospects.
At the same time, some other housing data was off the pace - this US recovery is happening without housing being the driver. Sales of new-build single-family homes fell for a second straight month in November, a sign that the housing market recovery remains fragile.
Also not as positive, the Commerce Department said overnight that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, was unchanged after it downwardly revised the prior month. Capacity issues may be getting closer for the US.
In France it was announced (quietly) that they are letting their 75% tax on the super-rich expire at the end of 2014. Apparently it has seen talent and capital flight, and it has raised virtually nothing. It appears to have been a bit of an own-goal and the French economy has not benefited either.
In China, Shanghai stocks sank yesterday in the market’s second worst percentage decline of the year, with steep declines for banks, energy firms and construction companies.
In Central America, a start has been made on building a second and competitive canal between the Pacific and Atlantic through Nicaragua. The Chinese-led project is not without controversy however. If it gets completed it will be an engineering wonder, but doubt abound about its local environmental impacts.
In Australia iron ore prices extended their price falls to the lowest level in more than five years amid concern that slowing steel demand in China may hurt consumption in the world’s biggest user just as rising supplies deepen a glut.
Locally, holiday spending on the Paymark network for the first 22 days of December is up +4.6% on the same period last year with a total of $3.9 bln spent. The total number of transactions processed for the period totals 76.2 million compared to last year’s figure of 71.6 million, representing a +6.5% growth.
In the oil markets, prices rose slightly. The benchmark US price is back up to US$57/barrel and the Brent benchmark is just on US$61/barrel. Oil started the year at US$98.40/barrel.
Gold is down, holding its lower level at just US$1,178/oz. Gold started the year at US$1,205/oz.
UST benchmark 10yr bond yields are up today to 2.20% today. New Zealand swap rates rose yesterday and may do so again today. Two year swaps started the year at 3.88% and today are at 3.85%.
The NZ dollar starts today at 77 USc after starting the year at 82 USc, we are at 95.2 AUc today after starting the year at 92.3 AUC, and the TWI is at 78.5 compared with 77.6 at the start of 2014.
Merry Christmas everyone.
The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »
| PAYMARK regional data (1-22 Dec 2014 versus same dates 2013) | ||||||
| Volume (million transactions) | Value of spending ($millions) | |||||
| Region | 2013 | 2014 | Volume Difference | 2013 | 2014 | Value Difference |
| Auckland/Northland | 28.15 | 30.22 | 7.40% | $1,503.20 | $1,581.50 | 5.20% |
| Waikato | 5.34 | 5.7 | 6.80% | $269.10 | $278.30 | 3.40% |
| BOP | 4.6 | 4.92 | 7.00% | $237.20 | $248.20 | 4.60% |
| Gisborne | 0.7 | 0.73 | 4.10% | $32.80 | $33.20 | 1.20% |
| Taranaki | 1.72 | 1.75 | 1.90% | $84.50 | $84.00 | -0.60% |
| Hawke’s Bay | 2.09 | 2.17 | 3.50% | $102.90 | $105.30 | 2.30% |
| Whanganui | 0.77 | 0.83 | 6.80% | $34.50 | $35.80 | 3.80% |
| Palmerston North | 2.23 | 2.33 | 4.20% | $120.20 | $123.10 | 2.40% |
| Wairarapa | 0.67 | 0.72 | 6.00% | $33.10 | $34.30 | 3.40% |
| Wellington | 7.81 | 8.07 | 3.30% | $362.10 | $367.60 | 1.50% |
| Nelson | 1.39 | 1.49 | 6.70% | $73.00 | $79.10 | 8.30% |
| Marlborough | 0.79 | 0.83 | 5.20% | $42.80 | $44.70 | 4.40% |
| West Coast | 0.44 | 0.46 | 4.70% | $25.40 | $25.60 | 1.00% |
| Canterbury | 8.22 | 8.71 | 5.90% | $432.70 | $450.10 | 4.00% |
| South Canterbury | 1.11 | 1.15 | 2.90% | $63.90 | $63.40 | -0.70% |
| Otago | 3.56 | 3.86 | 8.50% | $189.90 | $204.70 | 7.80% |
| Southland | 1.65 | 1.67 | 1.00% | $90.30 | $88.10 | -2.40% |
| ------------------ | ---- | ---- | ------ | --------- | --------- | ------ |
| New Zealand | 71.6 | 76.23 | 6.50% | $3,726.40 | $3,897.30 | 4.60% |
Daily exchange rates
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18 Comments
The trigger for today's surge is the final result for US Q3 economic growth. It has been revised up sharply to +5% pa. and that actually tops the impressive Q2 estimate of +4.6% pa. It is the fastest rate of growth in more than ten years.
Hmmm.
In short, two-thirds of the "boost" to final Q3 personal consumption came from, drumroll, the same Obamacare which initially was supposed to boost Q1 GDP until the "polar vortex" crashed the number so badly, the BEA decided to pull it completely and leave this "growth dry powder" for another quarter. That quarter was Q3. Read more
Which makes me wonder if the Bank of Japan antics are more of a factor in the reecent rounds of record stock market prints. Read more
I read your link to Zerohedge and Tyler Durdens exposition etc etc
Sometimes his stuff is hard to understand .. and this is one of them
Sufficient to say he dwells on the fact that "statistics" can be re-arranged by putting some of the fat from the good times into a bottom drawer, and, then at sometime in the future pull it out of the bottom drawer and slap it back on the menu, without explanation. Then of course there is the propensity to revise, again without explanation
That is one of the reasons I have suggested (in the past) that our "authorities" should be required to simultaneously publish counter-balancing data that provides a sensitivity test to both data series so "people" can make up their own mind whether to accept or reject the data
ie
Unemployment monthly survey data series
When the unemployment survey data is published is should be immediately followed by
(a) The number of new registered unemployed receiving unemployment benefit
(b) Same as the US weekly New Jobless Claims series
(c) number of registered unemployed who have ceased receiving unemployment benefit
GDP - Gross Domestic Product
This is a quarterly data series
IRD should simultaneously publish the amount of GST received for the same quarter
(a) Received
(b) Paid out
(c) Net
GST receipts is a proxy for GDP
Comment was made last week how Bill English, Treasury and Bernard Hickey all waxed eloquently how the economy was growing yet Bill English announced a $`1 billion turn-around in the deficit to a negative position of minus $750 million attributing is to a huge drop in Income Tax receipts and GST receipts - one contradicts the other
And yet all 3 of them waxed on the one hand and never questioned it on the other
Take note of this -
because it will become more significant in the future - and remember you read it here first
Sooo... they pulled out the credit card and went a little stir crazy. Dis aint real wealth. Its a money vortex based upon the continuing abuse of the exhorbitant privilege of having control of the worlds Reserve Currency. Print and spend. How fast is the US deficit growing now....?
If I was to use my credit card I could boost my household activity, but i would have to repay this debt, and at interest rates that I can't manipulate.
The rest of the world pays the price of this faux recovery. The buck will stop and when it does the the black swan will be competing for airspace with all those chickens coming home to roost!
"In France it was announced (quietly) that they are letting their 75% tax on the super-rich expire at the end of 2014. Apparently it has seen talent and capital flight, and it has raised virtually nothing"
Who could have guessed... oh yeah...everyone.
But tax evasion was ok : ""But in most cases, it was discussed with their company and agreed to limit salaries during the two years and come to an arrangement afterwards," he told Reuters by telephone."
The performance of the American economy bodes well for the world's economy in the future.
Once again, all the doom, gloom and despondency mob on interest.co.nz completely underestimate the capacity of the human spirit.
And, while I'm at it... OPEC suggests oil prices will fall even further than they already have.
Where are all the "peak oilers" now then.
Looks like they have jumped off that band-wagon.
Merry Christmas to all!
Ignorance is bliss in your case it seems. How well the US economy is doing is make believe. A one off cost of mostly obamacare being added to GDP and musch of the rest is due to crazy wall street. main street on the other hand still seems poorly off.
Peak oil and unstable and volitile oil prices are an expected consquence of, not a proof against. Simple, the current fall in price is similar to what occured with Ngas in the USA, a temperaory over-supply of US tight oil into the world market is partically responsible. The rest of the effect rest points at another global recession, just what the split of responsibility is should become apparent next year.
Where are all the "peak oilers" now then.
We're still here, just watching as the world economy continues to await the ever-elusive 'recovery'. Wasn't it meant to happen in 2009? Then that became 2010, then 2011, 2012, 2013, 2014. Perhaps 2015 is your year? I'm sure DC thinks so!
It's almost like something is 'impairing' the recovery. Economies are essentially the result of production, distribution / trade, and consumption of limited goods / services. What commodity are the above dependent on, could it relate to energy perhaps? After all, energy is the ability to do work, and nothing happens without energy input. Nah, forget that.
Meanwhile central banks around the world are busy printing dollars and trying to keep the illusion of growth going. All the while the real economy (physical) is completely out of step with the financial system.
For the record, world oil production (excluding US) has been flat for 10 years despite record high prices (see here). If this doesn't strongly suggest near-term peak oil to you then I don't what does. Tight oil from the US has been masking decline, although this looks to be short lived (est. peak ~2016-2020). Unfortunately the tight oil (shale) bubble is now in the process of bursting (or will need to be bailed out by the FED) as the increase in production from the US, coupled with the world economic depression, has collapsed the current oil price. The current price is now significantly below the break-even cost of most oil producers. Seeing as a lot of tight oil was unprofitable at $100 / barrel and was largely subsidized by junk lending and artificially low interest rates, this does not bode well at $60 / barrel.
Don't worry though, oil majors and minors are already cutting capital expenditure and halting the future development of oil projects. I'm pretty sure this is going to be good news for the oil supply in 1-2 years time and may lead to a strong price increase. The alternative is lower price due to economic contraction and demand destruction as consumers lose further purchasing power secondary to worsening job prospects and debt (already happening). I wonder which way the price will go in the near-term? Peak oil.... who would have guess it'd already make life so difficult (and to think, production is flat currently, imagine the fun we'll be having when the decline sets in!). Merry Xmas and best wishes for economic recovery in 2015 (it's gotta be this year ;-))!
Pay Attention
Making sense of OPEC's oil strategy
OPEC's decision to maintain production is similar to the actions taken by Rio and BHP to drive out high-cost producers of iron ore
These are the OIL WARS
Headline paywalled article by Stephen BARTHOLOMEUS in today's Business Spectator
http://www.businessspectator.com.au/
hmm Im not so sure its a strategy as an event they find themselves in. The shale oil players have over-produced like they did for Ngas and collapsed the price, so I'd class that as the first shot in the oil wars, in effect themselves in the foot. Probably expecting it seems for OPEC to wind back output and let the shale palyers cream it. Looks like OPEC etc is having none of it and is going to simply outlast them.
Apart from the US shale boom it looks like the world may have indeed conventional crude oil peaked.
http://crudeoilpeak.info/us-shale-oil-growth-covers-up-production-drop-…
On top of that,
"Oil prices fell steadily last week closing at $57.81 in New York, and $61.85 in London. Traders say the decline was due largely to new downward revisions of official forecasts for oil demand in 2015."
http://www.resilience.org/stories/2014-12-15/peak-oil-review-dec-15
With prices like these any new oil (which will have a price around $80~90/pre barrel) makes no sense to pay to extract at $60 or less.
So low prices will make the decline sooner and I suspect faster.
I think you will find that Peak Oil is more of a process than an event, and that by putting the word 'cheap" in the middle you may understand it better.
Then theres that magical thing called the US Economy.....
"Think about this for a minute. Allegedly the US is experiencing economic recovery. Normally with rising economic activity interest rates rise as consumers and investors bid for credit. But not in this “recovery.”
Normally an economic recovery produces rising consumer spending, rising profits, and more investment. But what we experience is flat and declining consumer spending as jobs are offshored and retail stores close. Profits result from labor cost savings from employee layoffs.
The stock market is high because corporations are the biggest purchases of stock. Buying back their own stock supports or raises the share price, enabling executives and boards to sell their shares or cash in their options at a profitable price. The cash that Quantitative Easing has given to the mega-banks leaves ample room for speculating in stocks, thus pushing up the price despite the absence of fundamentals that would support a rising stock market. ..." etc Paul Craig Roberts.
Any commentary regarding US economic performance should look at the whole picture not just the fabricated statistics. Its one sick puppy by any historical measure, but OK I guess by the current hysterical measures.
Well, I am sitting here, "having a drink on the House"
It is Christmas Eve, all is write with the World, interest.co.nz has done its best to remain impartial, getting rid of those who disagree with them and encouraging those in Property Investment, the only "Game in Santa's Sack", Due to The FED pumping and not dumping Q.E.
So I will give a toast "To Absent Friends", they know who they are. And it ain't "Big Daddy".
Luckily I do not run in those "Circles"
To all the Nay Sayers, inflation is a wonderful thing, In fact I will lever off another CAP.
It helps ease the uncertainty and the Bubbles add a little Festive Spirit.
(Unlike Big Daddy, and his Crony Capital, No Auckland mainly where they know no bounds and can lever off any Cap they like.)
Until most become tenants in our own Land, that is.
Everyone else can believe in Santa Claus, I believe in reality.
Ever since 2008 and the Criminal Classes really took over from Jesus and started laughing, all the way to the Bank.
Even the Pope is a tad outraged at all the largesse and can see is cohorts for what they really are..
Christian Militia are killing anyone who gets in their way.
The other Religions will kill any kid who gets in their way.
Despots cannot take a joke.
Merry Chrismas, one and all.
Let us hope for a Happy New Year. And keep the illusion going.
A present from Santa. Probably, also " on the house".
Let us pray he does not drink and drive, this Christmas, or it could all come crashing down.
Crony Capitalism is here to stay. And they are all away with their ill-gotten gains and never mind the poor, for the holidays. Never mind the "Savers", never mind the young who think leveraging off the Cap and equity is never ending,
I Salute ye. 50 months interest free.
Go baby go.
Hic. I hope that is not the start of the hiccups.
That's all folks.
And only one beer. Cos I gotta be a Good Santa, tonight.
And may I say coming down the Chimney is hard going, in these modern damn houses. No flu. But I am wary of Ebola. Ye gads. Those slums are spreading like wild fire.
Mostly because of the Leaders and Despots...no matter the price of Oil and Gold.
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