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A review of things you need to know before you go home on Monday; Spencer warns, China carnage, oil drops, Glenbrook worry, swaps flatter, spreads widen, NZD adjusts

A review of things you need to know before you go home on Monday; Spencer warns, China carnage, oil drops, Glenbrook worry, swaps flatter, spreads widen, NZD adjusts

Here are the key things you need to know before you leave work today.

TODAY'S MORTGAGE RATE CHANGES
There are no changes to report today.

TODAY'S DEPOSIT RATE CHANGES
There are no changes to report today.

REGULATOR FEAR
The Reserve Bank said today that the sharp rise in the number of smaller residential investors in Auckland relying on credit is a risk to the market. They have some scary stats to report.

MORE CHINA FEAR
The Shanghai stock market index has now erased all its gains year to date. The index is now trading at 3,222, down -8% for the day and now down -0.1% for 2015.

COMMODITY FEAR
The US oil price has today dived below US$40/barrel. As this is written, it is US$39.30, a major move south and its lowest level since 2009. But the gold price, which had moved to US$1,160/oz late last week has not responded in an inverse way. When Europe and Wall Street wake up, expect trouble.

JOBS FEAR
Bluescope Steel has said it is reviewing the viability of the NZ Steel plant at Glenbrook (p43). If that was to happen, the company says, up to 1,000 jobs could be lost.

WHOLESALE RATES FLATTEN
Swap rates fell -3% at the long end and -1% at the short end today. The 90 day bank bill rate was up +1 bp to 2.92% The 2-10 curve is now the lowest it has been since early June. Not only that but the credit spreads banks are having to pay is now rising quickly. That cost is now +20% higher than it was over the same time. So despite falls in base wholesale rates, not all of it is available to pass on in retail rates.

NZ DOLLAR SOFTER
Following the RBNZ/Spencer speech (or is it the Chinese jitters?) the NZD has fallen (after rising over the weekend) against the greenback. It is now at 65.8 USc, higher at 91.2 AUc, and lower against the euro at 57.4 euro cents. The TWI-5 is at 70. Check our real-time charts here.

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End of day UTC
Source: CoinDesk

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38 Comments

Looks like the Shanghai Exchange was placed in a trading halt for the day

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You sure it is not just the regular morning/afternoon session break? They do have a set break each trading day (I believe the Japanese market does the same).

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Once all stocks limit down they effectively are in a trading halt anyway

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It's their regular lunch break at the moment (see hours here: http://english.sse.com.cn/tradmembership/trading/trading/markethours/), but with the way things are going, I wouldn't totally discount the possibility of a trading halt.

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It looks like we are ramping up for some climate change.

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Global cooling!

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I am referring to the economic climate.

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The demise of NZD against JPY has barely batted an eyelid. We're talking about the basket case of the global economy and our currency has been falling against the yen since the start of the year.

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I am not surprised, JPY is the safe haven, private Japanese are still rich (+75% GDP NIIP), even thought public finances look dire (about 240%), Japanese government Bond holders are a loyal bunch.

NZD is privately risky (-70% GDP NIIP),

https://en.wikipedia.org/wiki/Net_international_investment_position

Whenever sentiment goes bad JPY strengthens, NZD falls

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I'm not surprised either. It's just people think I'm mad if I mention that Japan is still a creditor nation.

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Given a substantial El Nino event is now certain, and given this weather patterns association with drying in the east of NZ one would hope the fire service will be making plans

In the US there is mounting concern about the increasing incidence of fires:
http://www.cnbc.com/2015/08/19/what-the-wildfires-are-costing-us.html

''Vast swaths of America are on fire—there are currently about 95 large fires active across 10 states—but this year is no anomaly. The number of wildfires touching more than 50,000 acres has been increasing over the last 30 years, and the total acreage burned this decade is more than double the area burned in the 1990s. ''

Seems it is increasingly a global problem:

http://www.cnbc.com/2015/07/16/wildfire-seasons-are-longer-almost-every…

''Ecologist and fire scientist Matt Jolly and his colleagues say the average duration of annual wildfire seasons lengthened almost 20 percent between 1979 and 2013, and the amount of land vulnerable to burning almost doubled. The team published its results in the journal Nature Communications this week.''

All that extra burning caused by a warming/drying climate, putting even more carbon into the atmosphere. Must be one of those funky positive feedback loop thingies them pesky scientific folk keep muttering about....

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If you dont do any planning and taking of action that saves you a huge amount of $s and if the worst happens you scream at your your MPs who call a drought due to exceptional circumstances and you get the Govn to bail you out? Really I wonder why more are not allowed to go to the wall.

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not sure if there were govt bail outs for drought affected regions.which ones did you have in mind?

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New Zealand is not as affected by El Nino as some other countries. It is a regular occurrence every 3-7 years. It's effects last about one year.

http://www.niwa.co.nz/our-science/climate/information-and-resources/cli…

Every time it happens, its always preceded by the claim that 'this time its the worst'.

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Wow things are getting nasty in the US alright. It's hot out there I tell you. I hope someone thinks of the children.

"The July contiguous U.S. average temperature was 73.9°F, 0.2°F above the 20th century average and ranked near the middle in the 121-year period of record."

And don't fret Whiner those forests are doing ok.

"Plants are growing more quickly than people can cut them down, with fields and forests on the advance across the planet."

http://www.ncdc.noaa.gov/sotc/national/201507
http://www.theaustralian.com.au/news/health-science/forests-and-fields-…

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dp

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To all the doomsters that have made wrong prediction after wrong prediction, may I remind you:

China is a super power and will replace the US soon- Hahahaha.
Gold is a safe haven - Hahahaha
Peak oil is here - Hahahahaha.
Inflation is upon us - Hahahaha.
The US is broke - Hahahaha.
Auckland property prices will go down - Hahahaha

MMT sends its regards. Have a nice day.

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I'm a doomster and I've said none of those. My forecasting record stands up pretty well I would say.

I am on public record declaring that Dr. Bollards interest rate hike and the National Party's promise to lower income taxes were both mistakes because a financial crisis was imminent both would have adverse impacts on people's incomes and the government's balance sheet, respectively. (Kiwiblog, 2007)

I predicted that the financial crisis would lead to a crash in commodity prices, which did take place in 2008. This was when many people at the time were suggesting that oil production had peaked and the oil price would reach $150 a barrel.

btw. MMT is about government financing. It says precious little about the wider economy. It also overlooks the importance of balance of payments, perhaps because of its American bias. Perhaps to American MMT'ers the balance of payments have little material importance when your currency is the world's reserve currency, but little 'ol New Zealand does not have that particular luxury.

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China's carnage doesn't seem to be getting much coverage here, but I'm just back from aus and they are really worried across the ditch

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And kiwis are pretty naïve if they don't think trouble in Aus spells some trouble for NZ

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a least in aussie there government has been trying to address the house bubble and APRA and the banks have been putting in measures to shore up their banks

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Its 11.00 pm ( Auckland ) on Monday 24 August , and this is A BLACK MONDAY unfolding ............an absolute rout in world stock markets

FTSE loses GBPOUNDS 40,000,000,000 (40 Billion Pounds in a few short hours )

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at the moment its a correction if it carries on for another week then you need to worry as it will turn to crash.
if that happens it could lead to crashes in other areas.
my view is it is a correction that is needed and will flatten out and become a bear market.

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NZ market usually reacts badly to an international rout - Tuesday could be very black on the NZ market.

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Sharetrader, they are not calling it BLACK MONDAY, cos it's a kinda cute and catchy phrase.... there is going to be carnage and blood on the floor.... this is devastating for NZ and the world as a whole... this is no 'correction.'

http://www.cnbc.com/2015/08/24/wall-street-prepped-for-meltdown-as-futu…

But don't panic our PM is "cautiously optimistic' she'll be right, here in NZ.After all, we have dairy and Auckland's eternal house price boom! What could possibly go wrong?

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No chance of the Fed hiking in the USA now or even during 2016. Should see swap rates tumble over the next few days & 3.5% or lower mortgage rates in NZ within a matter of weeks. Is this the start of GFC 2?

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am watching the carnage live, it's like a slow motion train crash and I just can't take my eyes off of it - http://www.theguardian.com/business/live/2015/aug/24/global-stocks-sell…

Latest: €400bn wiped off biggest European firms today

European stocks face biggest fall since 2009

It gets worse and worse....

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Getting back to levels seen a year ago, is not carnage, it's an MSM beat up.
http://finviz.com/futures_charts.ashx?p=d1&t=ER2
http://finviz.com/futures_charts.ashx?p=d1&t=YMhttp://finviz.com/future…

Carnage will be when PE ratios return to some kind of normality, when companies get trashed for stock buy backs, when the B/S stops and HFTraders pack up and get out of Dodge.

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Andrewj, that data line is damn near vertical. I reckon its carnage already. It took months for stock values to go up, but little more than weeks to nosedive.

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I don't think it's carnage yet, but i do think it's coming.

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http://finviz.com/futures.ashx

Andrew, carnage is here now.

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Only if it goes on all week, levers will be getting pulled as we talk.

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Do we believe NZSF's, Adrian Orr can pull enough to save Bill English's butt. Hard to tax losses.

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toilet levers?

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Other's are dumping USD assets in favour of more trustworthy destinations. Read more

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You know how I know this is going to be a significant 'correction'? Okay, I'll tell you....Too many people are yelling at me me that's it's going to be all ok... while they glance furtively around with a bit of a wild look in their eye....
Steven I agree... but you know the real rich never see jail!

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agree.....pity they wont see jail.

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