Here's my summary of the key issues from overnight that affect New Zealand, with news the Aussies may be about to tighten bank capital rules.
Firstly, the latest US Fed statement was a tame affair. They are sitting pat while the effects of a flat first quarter works its way through the US economy.
Advanced first-look data out overnight showed that the US economy barely grew in the first quarter - it was up at an annual rate of just +0.2% in that period, set back mainly on adverse weather conditions and a surprisingly strong savings rate. That follows a +2.2% economic growth level in the final quarter of 2014.
The Fed sees the slowdown as 'transitory'.
American consumers stayed at home. In fact, they are getting into the habit of saving more, it seems. Their personal disposable incomes in the February data released overnight were up +4.5% above the same month a year ago, whereas their personal consumption expenditures (PCE) were up a more modest +3.3%. Their personal savings rate of +5.8% in February was the highest it has been since the end of 2012. This data may help explain why their economy sagged in the March quarter but their stock markets boomed.
The savings data may also explain why their housing market is picking up. House sales rose in March to their highest level since 2013, a positive sign for their housing market and showing it is emerging from a soft patch.
Across the Atlantic, the ECB released data the showed loans to private sector companies rose in March for the first time in three years and apparently the end of a long credit squeeze. It also adds to signs that euro zone banks are recovering from the crisis that began in 2008.
In Australia, APRA, their banking regulator said is willing to act "sooner rather than later" to require the big four banks to hold higher capital against mortgage lending. It is a move the RBNZ should be working towards as well. The low capital requirements needed to support mortgage lending is a key reasons for both sharply rising lending for housing and dangerous levels of bank leverage.
Australia is also facing a glut of over-built apartments, something that could have credit consequences here.
Back in New York, the UST 10yr benchmark yield jumped today and is now at 2.07%. The rise was a result of the dovish Fed statement. We are likely to see similar rises in the New Zealand swap markets later today.
The US oil price inched higher to US$58/barrel, while Brent crude is also slightly higher at US$66/barrel in trading today.
The gold price fell to US$1,202/oz. There was a big gold-swap deal reported overnight between CitiBank and Venezuela, one done at a discount. Venezuela is having trouble buying its groceries.
The New Zealand dollar starts today off of yesterday's recent highs. It is at 77.1 US¢, at 96.1 AU¢, and 69.4 euro cents. The TWI is now at 80.5.
If you want to catch up with all the local 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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9 Comments
In my view its all got a very ominous feeling to it. Its just hanging there. As though all it needs is a tiny little trigger to precipitate a massive correction.
I would say that means testing of superannuation based upon house valuation in Oz is one such event that might precipitate some sort of correction. Maybe not a large as a more global one would be.
American consumers stayed at home
...Their personal savings rate of +5.8% in February was the highest it has been since the end of 2012. This data may help explain why their economy sagged in the March quarter but their stock markets boomed.
I think it had more to do with corporations levering up to finance stock buybacks and payout more in dividends. Individuals are recorded net sellers.
Corporate activity in early 2015 supports our view that the S&P 500 will return more than $1 trillion of cash to investors this year. We forecast an 18% surge in corporate buybacks and a 7% increase in dividends in 2015. S&P 500 repurchase announcements YTD in 2015 have totaled $265 billion, 59% higher than during the same period in 2014 (a 29% rise excluding GE). Read more
Remember all the bull on this site from the second half of last year about how the fall in the oil price was going to be a huge shot in the arm to the US economy?
LOL. One small problem. Much of the growth in the US economy in the past few years has been due to the boom in the shale oil ponzi. Take that away (and investment in that area has collapsed in the past 3-4 months) and suddenly the Emperor has just his panties on.....
''Corporate fixed investment decreased at a 2.5 percent annualized pace in the first quarter, the biggest decline since the end of 2009. Spending on nonresidential structures, including office buildings and factories, dropped 23.1 percent, the most in four years.
The decline reflected weakness in petroleum exploration as oil companies slashed budgets on the heels of plunging crude prices. Spending on wells and mines fell at a 48.7 percent annualized rate in the first three months of the year, the biggest drop since the second quarter of 2009, when the economy was still in the recession.
Halliburton Co., the world’s second-biggest provider of oilfield services, has said it expects to reduce capital spending by 15 percent this year and accelerated the pace of job cuts ahead of its takeover of Baker Hughes Inc.''
http://www.bloomberg.com/news/articles/2015-04-29/economy-in-u-s-stalls…
Interesting thought. If so the effect will be short lived. Petrol has bounced, now at $2.03 (and there is another 3c coming I would think). Back to $2.06? Just 10c or so below where it was 6 months ago, pretty much all the fall has been reclaimed. All those babbling about inflation being dead - the petrol price has bounced well over 10% in the past few months, the RBNZ won't be worried about undershooting inflation targets in due course.....
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