Here's my summary of the key issues that affect New Zealand overnight with news of a giant budget proposal from the US Federal government.
In the US, President Obama has proposed a nearly US$4 trillion budget package which is a bit over 20% of GDP, aimed at improving their roading infrastructure and boosting the middle-class, at a cost of tax increases on large businesses and the wealthy. 54% of the spending is for healthcare and social security programs, 15% is for military programs and 16% is for income security programs.
Back in today's economy, American construction spending in December rose from a revised-higher November but came in under expectations. For all of 2014, spending on construction was +5.6% more than for 2013 at a level approaching US$1 tln.
The release overnight of the US personal income and expenditure data has shown the extent and power of the recent oil price falls on household budgets. In December incomes rose +0.3% from November, but expenditures fell -0.3%, giving consumer spending power a sharp boost. This effect is expected to grow in coming months. This is the core real inflation and incomes data that the Federal Reserve prefers over the more traditional CPI data.
The push to get the Trans Pacific Partnership trade agreement is heating up so that it can go before the US Congress well before next year's Presidential election campaign. The American's think a deal is close and doable and there are high expectations Obama will get 'fast-track' authority to push it through.
Today we get the latest Reserve Bank of Australia rate decision and markets genuinely don't know what is coming. Their forward pricing assumes a rate cut, but not necessarily at today's meeting. But governor Glenn Stevens could well opt to change his previous guidance given the stuttering state of Aussie economic prospects. We will know at 4:30pm today.
In New York, benchmark UST 10 year bond yields are up slightly today at 1.68%. It is likely we will see a reactive shift locally when New Zealand swap markets open here.
The oil price rose price rose again, this time more modestly, up to US$49/barrel with Brent crude at US$54/barrel. Speculators are in the market now, betting we have reached a floor. There was an equivalent jump in energy stock prices overnight.
Gold didn't get the same support and is down to US$1,274/oz and its price is meandering.
We start today with the New Zealand dollar at slightly higher levels. It is up to 73 USc, at 93.4 AUc and the TWI is now at 76.2.
If you want to catch up with all the changes yesterday we have an update here.
The easiest place to stay up with event risk is by following our Economic Calendar here »
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13 Comments
Chuckle, so now negative economic news is competely ignored because it doesnt fit with the narrative?
What about the big miss on the US ISM manufacturing index? Expected at 54.9 (itself a fall from the previous 55.5) it actually sunk dismally to 53.5?? This has been in decline since it was over 58 in November.
Still, others think it worthy of coverage (slowest US manufacturing growth in a year):
http://www.bloomberg.com/news/articles/2015-02-02/manufacturing-in-u-s-…
Indeed amazingly some are even realising the cause (the collapsing US shale oil ponzi):
''In fact, companies reporting quarterly earnings are predicting not robust times ahead but rather tepid profit growth, with a cornerstone of those forecasts being a drop, not a rise, in capital expenditures, or capex.
Goldman Sachs lowered its capex forecast from a gain of 6 percent to a decline of 3 percent, a stunning turnaround that the firm attributed primarily to weakened energy companies that have suffered from oil's decline. The number represents the worst figure since the financial crisis days of 2009.
"We expect total energy capex will collapse by 25 percent in 2015," Goldman said in a report for clients. "The sector accounts for 33 percent of S&P 500 capex and should drag total S&P 500 capital expenditure growth into negative territory."
http://www.cnbc.com/id/102388826
Not that you would guess any of this from coverage here......
Rules to run a financial site online,
a) Only post short term gains so things look good, you want ppl to visit and feel happy to invest, click on adverts etc.
b) Dont do in depth analysis that would make a) look bad.
c) Get lots of bouyant it will be all right (yes a bit of a pun) people to write articles and interview, see a).
The thing is confidence, you need to have people investing so you get the revenue. If you post doom and gloom people will not come and in turn the adverts will drop off as your advertisers turn away.
The good news is it isnt as biased as say the NBR and indeed many others. The strange thing is if you take the ethos of there is always an investment strategy even in a down market then there must be ways to report on them. eg investing in receiverships who apparantly do well in a recession.
Re ISM, fair enough.
The reason I didn't include it is that there were two US factory surveys out overnight, the ISM and the Markit PMI. The Markit one is internationally comparative with dozens of like surveys in other countries. The two results seemed to cancel each other out ...
Markit PMI came in at 53.9 vs expected 53.7 and 53.7 last month
ISM came in at 53.5 vs 54.5 expected and 55.1 last month.
The Americans follow the ISM one more because it has a longer history, but I prefer to follow data that is more internationally comparable because that is more relevant for a NZ audience.
But because I only have 90 secs I dropped this because both surveys cancel each other's trends out. There was more interesting stuff around. And besides, American media and other local commentators covered it. I try to find stuff you might not always see elsewhere. We are not trying to be a wire service.
So the interesting thing is the BDI should be a leading indicator of booms and busts. meanwhile for oil the speculators are jumping in thinking less rigs means less oil which will push up the price, except if we really do have a recession going on there wont be the demand. I wonder what the NET effect will be.
Oil is showing a 7% gain so that is all specualtion? a clear demonstration on how the markets are making money off the real (manufacturing) economy if so.
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