Here's my summary of the key news overnight to keep you up-to-date over these holidays.
In Japan, December factory data showed some sustained growth in the sector in December. Production increased at a good pace boosted by another rise in new orders. Factory jobs are rising with the latest growth rate the fastest since May. The depreciation of the yen is raising pressure on prices with input price inflation accelerating to an 11-month high.
China has dropped decade-old quotas limiting exports of strategically important rare-earth minerals that sparked a global trade dispute and led the world to reduce its reliance on Beijing’s control of supplies.
Germany’s inflation rate fell to 0.1% pa in December, raising the odds that consumer prices in the eurozone fell for the first time since the depths of the financial crisis.
In Russia their currency is still falling, although in thin trading volumes. Of more interest however is the international mystery that has captivated Moscow’s investment community. The founder of Blackfield Capital, once one of Russia’s hottest hedge funds, has vanished along with all the firm’s assets of about US$20 mln.
In Australia, borrowing by households and businesses rose an impressive +5.9% in the year to November, according to the latest data released by the RBA. These are higher rates of increase than for the same period a year earlier and are the highest in six years. The revival in Australian credit growth, and a weakening currency that does something to improve the competitiveness of Aussie manufacturers, may allow the RBA to hold rates unchanged for longer after cutting its benchmark interest rate to a record-low 2.5%. It won't hurt bank profitability either.
Meanwhile, the Australian manufacturing sector shrank in December - something it has been doing almost continuously since 2011.
There was news in the beef market overnight because the US has ended a 15 year ban on imports from Ireland due to mad-cow restrictions. This is the first European country to get the all-clear. The US imported a bit over 1 mln tonnes of beef in the first ten months of 2014 and New Zealand was the second largest supplier after Australia. Now the Irish will be seeking a share of a very lucrative trade.
The selloff in global oil markets showed little signs of slowing in the new year with US crude breaking below $50 a barrel briefly, the first time since April 2009, on fears of a supply glut. The benchmark US price is now just on US$50/barrel and the Brent benchmark is just on US$53/barrel. High demand for heating oils during their very cold winter is having no impact on prices at all.
American carmakers reported strong December sales overnight, boosted by these falling fuel prices, but industry executives and analysts cautioned that growth would slow this year after five years of rapid recovery from their recession.
New Zealand car sales for December should be reported today.
Gold prices rose by about $10/oz to US$1,195/oz.
UST benchmark 10yr bond yields sank overnight and are now at just 2.04% which is their lowest level since 2012. In New Zealand, interest rate swaps saw more yield falls. Now the 1-5 curve is now just 22 bps and the 2-10 is just 26 bps, both new 5 year lows.
The NZ dollar was steady overnight as it has been for the past three sessions. It starts today at 77 USc. We are also at 95.1 AUc and the TWI is at 78.8.
The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here » Have a fun, safe New Year celebration.
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The founder of Blackfield Capital, once one of Russia’s hottest hedge funds, has vanished along with all the firm’s assets of about US$20 mln.
Chump change.
Citigroup... swaps... Citigroup... swaps...
and a lightbulb click, because we remembered that it was none other than Citigroup that crafted the legislation on the swaps push-out provision which passed Congress without nary a peep from either side of the aisle, and which put taxpayers on the hook for FDIC-insured derivative exposure - and in Citi's own case a soaring $70 trillion as of September 30, 2014: Read more
information arbitrage, its always been like that - yours mine done shag....
Those that use the bank's balance sheet to generate profit are referred to as balance sheet traders and, according to the Australian Financial Review, the practice of "front running", or trading ahead of large customer orders, remains prevalent in Australia.
Read more: http://www.smh.com.au/business/comment-and-analysis/swap-bill-fixing-a-scandal-in-waiting-20150105-12i6cl.html#ixzz3Nz3fV9NWOne of ANZ Banking Group’s most senior traders has been suspended during an investigation by the corporate watchdog into possible manipulation of the bank bill swap rate.
Etienne Alexiou, who heads balance sheet trading and helps oversee a portfolio worth more than $120 billion, was one of seven traders suspended in mid-November.
http://www.afr.com/p/national/anz_traders_sidelines_during_asic_APszTSfptipc3I1S2RS2IP
Top bank traders can earn over $5 million to $10 million a year. RP Data records show that on March 28, Mr Alexiou paid $7.2 million for a home in Wunulla Road, Point Piper, one of Sydney’s most expensive suburbs. He was previously a trader at Deutsche Bank.
Commonwealth Bank traders Marten Touw and Vincent Hua reportedly earned more take-home pay than then chief executive Ralph Norris before their departure from the bank in 2007.
The coming European monetary crack-up is rooted in the fact that the ECB’s financial repression and ZIRP policies have—like everywhere else—-destroyed honest price discovery in Europe’s
http://davidstockmanscontracorner.com/europes-monetary-madhouse/?utm_so… massive sovereign debt market.
It is clear that many operators within the "finance industry" exist only to hoover up funds from the greater many others and put it out of reach into secure non financial assets for the exclusive benefit of the very few fortunate enough to get the ball rolling with their inheritance or first big deal. They provide no service or product which improves anybody but themselves and do so to the detriment of those who can least afford it.
Unfortunately they pay handsomely the actors posing as leaders to say and do what is required to manitain this position and employ PR people to ensure the word issued is what should be heard to support this.
Until leadership is no longer politics and all financial ties linking leadership and commerce are cut the people will remain a resource for the rentiers to milk as they please.
If you just imagine for a moment the sheer numbers of highly educated folk who have taken this path and the resources they have absorbed to get there, then think what they may have turned their hands to instead of this wasteful pursuit of wealth for wealths sake you may see how petty is their existence. Sad really, they get a lot of press, but I find it all very distasteful.
I don't know, but it was a discussion amongst parents at a private school when discussing career prospects and university subjects for their children. Was relayed to me by my ex in concern of my son, but we have an interest because out daughter is just about complete a triple degree in chemical engineering, mathematics and geology.
For a longer view on interest rates,
http://krugman.blogs.nytimes.com/2015/01/05/thinking-about-internationa…
"If you look at the expected inflation implied by yields on inflation-protected bonds relative to ordinary bonds, they seem to imply roughly 1.8 percent inflation in the US over the next decade versus half that in the euro area, which means that the inflation differential explains about 60 percent of the interest rate differential."
So expectation is inflation very low for a decade, and hence interest rates? the free market cannot be wrong can it?
Europe now in a zero bound trap?
"But one thing is not a risk, because it has already happened: the euro area has entered a Japan-style deflationary trap."
and yet more on lower for longer,
"And if you look at the implied market forecast, it’s truly disastrous. Right now, German 5-year bonds offer a yield of zero — an implicit firm forecast that Europe will be in a liquidity trap for the foreseeable future, while 5-year index bonds are yielding about -0.35 percent. That’s telling you two things: investors see so little in the way of profitable investment opportunities that they’re willing to pay the German government to protect their wealth, and they expect something like 0.3 percent inflation over the next five years, which is catastrophically below target."
http://krugman.blogs.nytimes.com/2015/01/05/europes-trap/?module=BlogPo…
following news that farmers in China are not happy, here are some numbers showing WMP makers are bleeding
After experiencing a shortage of milk supply in 2013, many domestic farms in China have stepped up their expansion and raw milk supply this year. However, with declining market demand and considerable imports, raw milk prices, coming from a high last year, have taken a dive this year.
Due to the steep fall in imported milk powder prices, the cost of homemade milk powder is about 10,000 to 20,000 yuan (US$1,612-US$3,224) higher than imports per metric ton, causing some domestic dairy enterprises to suffer huge losses and forcing some middle and small milk powder manufacturers to suspend production and buy raw materials, an industry expert said.
http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1102&MainCatID=&id=20150103000087
nice photo of the World of Food Beijing expo
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