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House sales in US boom, China's growth forecast downgraded, business investment contracting in Aust, yuan may become global reserve currency, NZ$1 = 71.8US¢, TWI-5 = 76.4

House sales in US boom, China's growth forecast downgraded, business investment contracting in Aust, yuan may become global reserve currency, NZ$1 = 71.8US¢, TWI-5 = 76.4

Here's my summary of the key issues from overnight that affect New Zealand:

The number of previously owned homes sold in the US hit a nine-year high in April. The index used by the US's National Association of Realtors to assess house resales, was up 14% from April last year, and has increased year-over-year for eight consecutive months. 

Despite low inventory levels putting upward pressure on house prices, economists are still expecting this growth to continue in coming months. 

While other US data showed an unexpected increase in new applications for unemployment benefits, filings remained at levels consistent with a tightening labor market.

HSBC has cut its forecast for China's GDP growth for 2015, from 7.3% to 7.1%. It says export growth has been weaker than expected so far this year - a reflection of softer external demand and a strong yuan. It also believes more aggressive interest rate easing policies are needed to support growth. 

China's currency, the yuan, is touted to join the US dollar, euro, pound and yen, and become a global reserve currency this year. The International Monetary Fund hinted at the promotion this week, saying it no longer considers the yuan undervalued. It'll make a decision on the matter in October.

Across the ditch, business investment is contracting at its fastest rate in more than five years, and won't improve any time soon, according to the grim results of the latest capital expenditure survey. The Australia Bureau of Statistics says private sector March-quarter investment in buildings, equipment, plant and machinery dropped 4.4% from the previous three months, and 5.3% over the year.

In New York, the UST 10yr benchmark yield is down to 2.14%.

The price of oil has inched up overnight to US$58/barrel. Brent crude is at US$63/barrel.

The gold price is also up slightly to US$1,189/oz.

The New Zealand dollar starts today weaker than this time yesterday. It's dropped to 71.8 US¢ and 65.6 euro cents. Even though it's strengthened slightly to 93.9 AU¢ over the past 24 hours, it's nearly a half a cent weaker against the Australian than it was yesterday afternoon. The TWI-5 is at 76.4.

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 today is by following our Economic Calendar here »

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11 Comments

its funny even they have steady slow growth they have the jitters so bad every little cough and its a race for the door.

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You mean, that twitter post doing the rounds that shows a graph of the fall in the Shanghai Composite falling 6.5% on 30/5/07 ( just before the GFC hit) and similarly yesterday - 28/5/15 - when it spookily fell... 6.5% ?

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You'd think that a daily market drop of 6.5% might raise a few more eyebrows than what is being seen today. Perhaps it is just me...

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Wow, words fail me. Who still falls for 'investment opportunities' with 100% returns in a few months. Hahahaha.

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Auckland Property Investors?

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Property investment isn't a ponzi scheme. It takes skill and dedication to be successful. I'm still waiting for Auckland property prices to go down. Just saying...

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That's exactly what every Ponzi scheme investor said. Until it did.

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Golden Glow Vitamin Company, based in Brisbane, have now stopped trading. My family has been buying wholesale from them for as long as I can remember.

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Just a bit more on this. It seems it may be a case similar to the banana problem Kate linked to yesterday. Golden Glow have been squeezed out by the bigger chain stores selling cheap and killing margins to the point they can no longer make a profit.

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Property sales may be rising in the United States, but who is buying the houses?

"Over the last two years, private equity firms and hedge funds have amassed an unprecedented real estate empire, snapping up Spanish revivals in Phoenix, adobes in Los Angeles, Queen Anne Victorians in Atlanta, and brick-faced bungalows in Chicago. In total, Wall Street investors have bought more than 200,000 cheap, mostly foreclosed houses in some of the cities hardest hit by the economic meltdown....It wants your rent check, too. In November, after many months of hype, the firm released the first-ever rated bond backed by securitized rental payments."

What could go wrong? Nothing, hedge fund investors assures us. "Asked why the public should expect rental-backed securities to be safe, the hedge fund investor responds, "Trust me.""

http://www.motherjones.com/politics/2014/01/blackstone-rental-homes-bun…

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