Here's my summary of the key events overnight that affect New Zealand, with news the leverage screws are being applied to globally important big banks.
But first, American stock indexes fell -1% in late morning trading today, their biggest fall in six weeks, as weak Chinese trade data and a cut in the OECD's global growth forecast sparked fears about a global economic slowdown.
The OECD forecast suggests that emerging markets may be in for a rough rise but they also forecast a continuing positive outlook for trade for OECD members. The presumption is that rising interest rates along with low prices for hard commodities will hurt debt-laden emerging markets. They think China's growth will slow from +6.8% this year to +6.2% in 2017. They peg New Zealand growth at +2.3% and headline inflation at +1.8% by 2017.
This comes as global financial regulators published new rules to stop banks from becoming “too big to fail,” which could force the world’s largest lenders to raise as much as US$1.2 tln by 2022 in debt or other securities that can be written off when winding down failing banks. The new rules mean that these institutions must have resources “readily available for bail in” equivalent to at least 16% of risk-weighted assets in 2019, rising to 18% in 2022. That implies an effective leverage rate of only 5.5 times, about half of the leverage banks in New Zealand have.
In Australia, the bank reporting season has kicked off with the local too-big-to-fail ANZ's annual report revealing that CEO Mike Smith had total compensation last year of more than AU$10 mln. The same report shows that ANZ NZ boss David Hisco was paid NZ$4.8 mln. (Page 48.)
Back in the US, their labour market conditions index has come in more positive that analysts were expecting. They were expecting it to fall, but it in fact rose.
In New York, the UST 10yr yield benchmark continued its sharp rise and is now up to 2.37%. Local swap rates jumped in response to the weekend rise on Wall Street and will probably follow again today.
The US benchmark oil price is holding at the lower levels it reached on Friday, now still at US$44/barrel, and the Brent benchmark is at US$47/barrel.
The gold price also held after Friday's drop and is still at US$1,088/oz.
The New Zealand dollar starts today essentially unchanged as well at 65.4 US¢, at 92.8 AU¢, and at 60.7 euro cents. The TWI-5 is at 71.2.
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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18 Comments
" The new rules mean that these institutions must have resources “readily available for bail in” equivalent to at least 16% of risk-weighted assets in 2019, rising to 18% in 2022."
So who's going to be duped into providing this Tier 2 crap capital?
You guessed it - Mums and Dads.
Deflation is hated because it makes debt very hard to repay.
Who would lend to a highly indebted dairy farm with a high cost structure, when you are getting %2 after tax for lending your hard earned cash to them, with a high possibility of an OBR event taking %80 of your money? Or an auckland house owner with his/her job under threat and %90 debt to equity, when you are only getting a return of %2 ?
I can only imagine we are heading straight into a liquidity crisis with serious consequences for our banking industry.
As global temperature busts through 1C of warming:
http://www.theguardian.com/environment/2015/nov/09/worlds-climate-about…
As a consequence of ever increasing CO2:
http://www.theguardian.com/environment/2015/nov/09/earths-climate-enter…
As the governor of the Bank of England flags the economic consequences of climate change:
http://www.bbc.com/news/business-34396961
Great Links.
What people seem to forget is this is average temp rise.
Heatwaves may be 10-15C higher and last a lot longer...
What we see as an "OMG its so hot today" now will end up being a "normal" day in summer....
In a perverse way; It will be the ULTIMATE - "I told you so" to the economists that missed this one as well.
Got to love the models that predict "unknown technology" COULD reduce the problem... and the stupid government that hang onto these "star trek" possible futures as still "possible"...
“The world is a dangerous place to live; not because of the people who are evil, but because of the people who don’t do anything about it.” - Albert Einstein
http://www.scoop.co.nz/stories/HL1511/S00028/climate-change-and-new-zea…
"
The risks of climate change and the danger to the very existence of a number of nations plus widespread human displacement of peoples is going to lead to a security situation of the most serious proportions. While this issue has been raised in the Security Council on four occasions most recently just June this year, while New Zealand was in the chair. The Security Council has failed to grasp the nettle.
If the climate change talks in Paris fail it is likely that in the course of time the Security Council will be confronted with unmanageable geo-political security issues.
"
Na cant happen as Profile said the UN got it wrong, no mass migrations.....oopsie, on the other hand, just look at Syria and its ppl migrating into the EU its just one country, so far.
Funny how many "left wing" predictions are actually coming true, some earlier, some later, but coming true never the less.
What increase in heat waves? Even the EPA doesn't agree with you.
http://www3.epa.gov/climatechange/science/indicators/weather-climate/hi…
Yes increased heat waves,
"Numerous studies have documented that human-induced climate change has increased the frequency and severity of heat waves across the globe. "
of course an attempt to cherry pick yet again by you,
a) The figure is the USA as opposed to globally. So lets not mention the heat waves in Pakistan and india killing ppl?
b) You didnt look too closely as, figure2 actually does show "the land area of the contiguous 48 states with unusually hot daily high and low temperatures during the months of June, July, and August." as getting hotter.
c) Then there are the deaths "Extreme heat events are responsible for more deaths annually than hurricanes, lightning, tornadoes, floods, and earthquakes combined.
- See more at: https://www.climatecommunication.org/new/features/heat-waves-and-climat…
Try harder Steven.
A) I post a 100+ year continental index and you pull out some vague pakistani weather event and call me a cherry picker to boot. Gold. Perhaps if $4billion/day "fighting climate change cash" was spent on clean water and sanitation in pakistan heatwaves wouldn't kill so many people there?
b) yes it gets warmer in an interglacial.
c) cold kills way more people than that combined. Guess they forgot to add that into their comparison.
"More temperature-attributable deaths were caused by cold (7·29%, 7·02–7·49) than by heat (0·42%, 0·39–0·44). Extreme cold and hot temperatures were responsible for 0·86% (0·84–0·87) of total mortality."
http://www.thelancet.com/journals/lancet/article/PIIS0140-6736%2814%296…
This comes as global financial regulators published new rules to stop banks from becoming “too big to fail,” which could force the world’s largest lenders to raise as much as US$1.2 tln by 2022 in debt or other securities that can be written off when winding down failing banks.
Fixes for yesterday's woes - typical.
G-SIB banks have wound down their operations to reflect reality - namely there is no money to be made creating wholesale credit in a market crowded out by grossly incompetent central bank mediocrity.
The consequences are visible for all to see, yet not addressed.
That leaves the downward bend in the global economy preserved alongside the decay in eurodollar function, with nobody apparently appreciating that those are two sides of the same coin and quite out of reach of local central banking. In short, there is no capable “stimulus” that will answer these disparities in China. And, further, it renders yet another monthly chapter in how China’s decline is a reflection of our own (and globally). Read more
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