Here's my summary of the key events overnight that affect New Zealand, with a particular focus on the US.
US borrowers rushed to their lenders last week, amid anxiety over new mortgage regulations and following the Fed's decision not to raise interest rates.
Mortgage Bankers Association data shows mortgage applications increased by more than 25% last week, compared to the previous week.
While this is a significant increase, mortgage application volumes are still running historically low.
Moody's rating agency has upheld the US's triple-A rating, citing strong GDP growth and the status of the US dollar as the global reserve currency benchmark.
Moody's, which has never changed the US's rating, indicated its stable outlook means the rating isn't likely to change over the next 12 to 18 months.
However it's noted a downgrade could occur within the next 10 years if fiscal policy doesn't change and US budget deficits and the debt ratios increase.
Oil prices seesawed overnight, closing slightly higher than the previous day.
The volatility was sparked by the released of a US Energy Information Administration report, which shows US crude inventories rose much more than expected last week, as refiners reduced inputs and idled capacity.
This rise in stocks more than offset the fall in crude exports the US reported last week.
The US benchmark oil price is now just below US$49/barrel, while Brent crude is at US$51/barrel.
The gold price is down slightly to US$1,143/oz.
In New York, the UST 10yr yield benchmark has inched higher to 2.07%.
The New Zealand dollar has settled, after spiking against all the major currencies overnight.
It's still up nearly a cent compared to this time yesterday, to 66.2 US¢. It's settled at 91.7 AU¢, after reaching 92.1 AU¢, and is up 7 bps to 58.8 euro cents. The TWI-5 is up to 70.6.
Yesterday's favourable GlobalDairyTrade auction result and a supposedly good outcome from Trans-Pacific Partnership negotiations have prevented the New Zealand dollar from weakening in the same way other currencies have.
If you want to catch up with all the local changes on Wednesday, 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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9 Comments
You are very wrong and very un-informed. Oil production pre 2004 ramped up with demand so the price stayed low. When oil production could no longer keep up and peaked in 2004/5/6 we ration by price so the price went up and up. Until July 2008 of course when it caused the worst financial mess and recession since the Great Depression and we have never recovered and never will.
The Peak oil term is about conventional oil production per day and not about heavy or shale oils so you need to separate out your terms. In terms of soon, well we are on a plateau of ALL oil production ie the shale "boom" has kept us there while conventional oil output is at best flat or more likely declining. This suggests that the plateau can last to 2018 or even 2020 hardly what I class as "any time soon" more like OMG brace yourself, this is going to hurt.
Not about shale. Ha Ha - tell the Saudi's, Russians and the Aussies that. You're such a tease - the pain is always two years for you but never quite arrives.
“The energy position of the globe looks much better" than it did only a few years ago, Daniel Yergin noted in terms of energy supply and costs. The emergence of shale was one of the main triggers of the collapse in oil prices since mid-2014, which has also improved the feedstock position of the European petrochemical industry in ways that were not anticipated a year ago.
He argued that ‘the world has entered a new era in energy terms, with growing global supply surpassing demand from emerging economies as the main influence on markets’, commenting: "We have moved from the defining theme of the oil market being the growth of the emerging markets to its being the dramatic growth of shale.”
He pointed to the robust emerging market growth in the 2004 to 2014 timeframe—China's economy, for example, expanded by 2.5 times while the world economy expanded 27% and Europe, by only 10%. This economic expansion drove increased demand for oil and petrochemicals. Oil prices rose to levels of approximately US$100/bbl in the early part of this decade. These factors fed fears of a shortage and made rising costs a major issue for consumers. "But, during that period, shale was coming, and it has transformed the energy scenario," Yergin said."
http://www.energyglobal.com/downstream/petrochemicals/07102015/Yergin-E…
"LNG producers are forecast to add 50 million metric tons of capacity next year, the largest annual increase in history and equivalent to a fifth of current global demand, according to Sanford C. Bernstein & Co. Prices for shipments to northeast Asia have tumbled by about two-thirds since February 2014 to $6.70 per million British thermal units, according to New York-based Energy Intelligence Group.
Amid the anticipated surge in exports from Australia to North America, prices could fall to $4 by 2017, according to Fereidun Fesharaki, chairman of energy researcher FGE. Long-term LNG contracts for Asia customers are typically linked to the price of Brent, which has fallen by about half over the past year.
Last year, prices jumped to a record $19.70 as China added import terminals, boosting global demand."
http://www.gasprocessingnews.com/news/buyers-market-for-lng-turns-table…
US shale oil stares into abyss with Opec ready push it over
http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/119173…
Even if they manage to hold out - Saudi Arabia will have exhausted it's financial reserves if prices remain as they are for the next 5 years.
Beware of temporary cheap oil.
The First Crack: Deutsche Bank Preannounces Massive Loss, May Cut Dividend
http://www.zerohedge.com/news/2015-10-07/first-crack-deutsche-bank-prea…
How exposed is Deutsche Bank?
Deutsche Bank is sitting on more than $75 Trillion in derivatives bets — an amount that is twenty times greater than German GDP. Their derivatives exposure dwarfs even JP Morgan’s exposure – by a staggering $5 trillion.
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