Here's my summary of the key events over the weekend that affect New Zealand, with news there has been considerable fallout from the Fed's timid decision.
But first, a Federal Reserve report out on Saturday showed that as at the June quarter of 2015 American household wealth continued to grow strongly and is now at record levels, mainly boosted by fast rising pension fund, equity values and mutual funds. Also important is that households are not taking on more liabilities which are only at the same level they were at the start of the GFC.
A recent kicker has been the growth of housing values. In fact, for the first time since 2008, year-on-year growth of mortgage debt turned positive ending the longest streak of declining mortgage borrowing in 65 years. (It is very different to New Zealand.)
The benefits are not even however; a Census Department report out late last week on annual data of median incomes for 2014 showed little change from 2013.
Moody's has cut France’s credit rating by one notch to Aa2 and altered its outlook from 'negative' to 'stable'. Low growth and institutional and political challenges to reforms make it unlikely that we will see a material reduction in the government’s high debt burden over the rest of this decade, Moody's said.
And in news just in, the Greeks have re-elected Prime Minister Tsipris and his Syriza Party, embedding the tough austerity 'reforms' recently negotiated.
Related to Europe, American regulators have uncovered a deep-seated and arrogant fraud at Volkswagen. The car firm installed a 'defeat device' - 'liar software' if you will - to deliberately cheat emissions rules in the US. The fallout will be very bad for the car company, as it should be. Fines of up to US$18 bln are possible.
In New York, the UST 10yr yield benchmark came back to earth - down -14 bps - as bond markets think they got a strong 'buy' signal from Janet Yellen's rate-hike 'blink'; it is now down to just 2.13%. Equities everywhere tumbled and we may see similar moves here when markets open. Local swap rates are quite likely to fall sharply too.
The US benchmark oil price fell by -$2, now at US$45/barrel and the Brent benchmark is at US$47/barrel.
The gold price has risen however and quite strongly, to US$1,138/oz.
The New Zealand dollar starts the week also with a bit of a jump. It rose at the close of trading on Friday to 64 US¢, to 89 AU¢, and 56.6 euro cents. The TWI-5 starts at 68.1.
If you want to catch up with all the local changes on Friday, 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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In New York, the UST 10yr yield benchmark came back to earth - down -14 bps - as bond markets think they got a strong 'buy' signal from Janet Yellen's rate-hike 'blink'; it is now down to just 2.13%.
One could surmise dealers are facing collateral calls against deteriorating risk position hedges.
I would have thought the underlying fundamentals call for a review of exit liquidity capacity. Read more
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