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US Fed lists rates first time in almost 10yrs; US housing surges; Eurozone economy improves; China expects +6.8% growth; oil prices still falling; UST 10yr yield 2.30%; NZ$1 = 67.7 US¢, TWI-5 = 73

US Fed lists rates first time in almost 10yrs; US housing surges; Eurozone economy improves; China expects +6.8% growth; oil prices still falling; UST 10yr yield 2.30%; NZ$1 = 67.7 US¢, TWI-5 = 73

Here's my summary of the key events overnight that affect New Zealand, with news we have liftoff.

Today the US Federal Reserve started raising its official interest rate. The new rate is 0.50%, up +0.25%.

Janet Yellen's press conference will be dissected for its tone and future guidance. But the Statement says that future rate increases will be gradual and slow.

Of course, that leaves the enormous cash injection that is QE in place. Once it starts raising rates, the Fed must then make more decisions on how to drain markets awash in that cash which is propping up asset bubbles, and, further down the road, how to shrink its swollen balance sheet. But today is the first step; all about raising the cost of money on a path back to 'normal'.

But the equity markets are clearly not worried; this morning they are all trading higher.

In other news, American new-housing starts rebounded in November from a seven-month low and building permits surged to a five-month high. American news wasn't so positive on the factory side however; industrial production declined in a Fed survey, and is still expanding in another key survey although growth is slowing noticeably.

Across the Atlantic, the factory picture is much more rosy. The Eurozone economy saw a solid end to 2015, with robust growth leading employers to take on extra staff at the fastest rate in over four-and-a-half years.

China's annual economic growth is likely to slow to +6.8% in 2016 from an expected +6.9% this year, the People's Bank of China said in a working paper published overnight.

In New York, the UST 10yr yield benchmark rose following the Fed announcement is now at 2.30%. Swap rates in New Zealand rose in response to yesterday's strong rise and are now at five month highs.

The US benchmark oil price fell yet again today, now just under US$36/barrel, while the Brent benchmark is just over US$37/barrel. Remember, at the beginning of October, US oil prices were touching US$50/bbl.

But the gold price has jumped today, up US$13 to US$1,076/oz.

The New Zealand dollar is still holding its higher levels, now at 67.7 US¢, at 94 AU¢ and at 61.9 euro cents. The TWI-5 is now at 73. The last time the TWI-5 was at 73 was in June.

If you want to catch up with all the local changes on 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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27 Comments

0.25%. So it begins.

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Place your bets on how high and when it drops back,

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Can you be a bit more specific and spell out which trading platform the punters should choose to realise your bet?

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Just comment on where you think it will be then.

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I never speculate that far into the future, when there are so many opportunities that are laden with real time information today.

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and that is where so many ppl fail, too few consider the longer term.

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Tell us how.

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Long term trends like Peak oil, demographics, hunger and loss from from CC. These will stack up against your short term outlook.

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Can't see this peak oil on the horizon.

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You are mis-reading a short term temporary glut due to lack of demand / ability to pay with a geological fact that the above mentioned event will make more severe when it eventuates, which is in a handful of years or so.

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What lack of demand? Oil demand growth has been pretty steady since '08. Accelerating even in last 4 quarters.

https://notalotofpeopleknowthat.files.wordpress.com/2015/12/image108.png

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fed finally moves, still dovish, they only moved because the credit markets forced them to as they could see that ZIRP was moving us towards a lot of over priced assets.
will be interesting to see how the RB react around the world

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as a normal rule, dont we normally foolow suit??

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Would be surprised if we did. We are still 5x what the US are currently. Move up would push NZD higher which they are trying to avoid.

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the fed is so fake, this rate hike is foolish (for the US) as Yellen admits inflation is still well below the desired target yet she raises rates and the reason for the rate increase seems to be employment numbers which were clearly phoney. remember people the US is the biggest debtor nation in history with 19 trillion US$ of debt that can NEVER be payed back (would you loan money to someone in that much debt) the only reason the US$ is the reserve currency (which is under pressure) is because the US is willing to go to war with anyone that threatens that situation...

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Actually no, not really.

1. The total US debt is actually around 64 trillion, not counting unfunded future liabilities. www.usdebtclock.org (Perhaps you just mean federal government debt).

2. There is only one government I can think of in the last 200 years that actually paid back its debt. Basically no government pays off its debt, the US government debt levels (%GDP) aren't much different than most other countries.

3. The actual reason the USD remains the reserve currency is that it is the only one with deep enough capital markets for world capital to park in. Trade flows are only a small amount of funds sloshing around the world. The US has one big advantage going for it, its not the EU (who don't have a single sovereign debt market so their currency would never even compete for reserve status). Its reserve status is not under pressure at all.

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A lot of that future spending however is its military commitments.

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Medicare is the largest item by far, followed by social security second, and defense is a distant third.

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Indeed....sounds more like the numbers Ive seen.

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That is about 100% of GDP, if however they chose to tax the super rich and corporations properly a lot of their problems would be eased.

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Its well over 100% by the time you add in state debt and local government debt. Also about a trillion of GDP is fake - like imputed rent for people who own their own home. So total government gross debt to GDP is more like 127%. But its fiat money and more can be created so easily, so they don't need to raise taxes on the super rich or corporations (which will not happen anyway as they would just move HQ offshore as a lot of their corporations are multi-nationals).

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US tax is catching up with the offshore thing....it will come, it has to.

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State and local is probably more of a concern I suspect, lots of debt no ability to pay it.

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Well, at least they are not Germany, the savior of Europe, where half the local governments are bankrupt or close to it... which bring us back to there is no real viable alternative to the USD as reserve currency... nothing at present comes even close.

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MoM has a pertinent, pre-raise note here: http://maxedoutmama.blogspot.co.nz/2015/12/its-august-2007-in-recession…

And, DC, yet again need those double quote characters around "Chinese data" - the recent 'revelation' that various local governments basically made sh*t up in terms of growth numbers and other "data", should be the clue here...

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FED "LISTS" rates...Do not quote me, but are they???

Hubble, Bubble. Toil and Trouble.

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