Here's my summary of the key events from overnight that affect New Zealand, with news the price of Brent crude has sunk to an 11-year low. It's fallen to US$36.04 a barrel, while the price of US crude has hit a seven-year low just under US$34 a barrel.
Global oil production is running close to record highs, with the US oil rig count bouncing back up this week, Russian production at its highest point since the collapse of the Soviet Union and output from OPEC peaking. More barrels are also poised to enter the market from Iran, Libya and the US.
Analysts say last week's Fed interest rate hike, which has strengthened the US dollar, making oil consumption more expensive for other countries, has also weighed on the crude price.
In other news, there are signs banks may struggle to sustain their record high profits. Despite increasing their profits slightly in the third quarter of the year, to $1.696 billion, PwC says net interest margins have continued to decrease and lending growth has slowed. It says competition in the lending market has intensified with banks offering record low mortgage rates to attract customers.
Corporate lending growth has also slowed, with mortgage lending growth surpassing it for the first time since the first quarter of last year. This is despite market speculation the Auckland property market is cooling down.
Looking to Europe, analysts says regulation, anaemic economic growth and technology changes will force banks across the continent to find more savings in 2016, with jobs likely to be the biggest casualty. Ten of the region's biggest banks have announced staff cuts of 130,000 since June, yet investors believe the industry will need to slim down further and faster to boost profits.
In New York, the UST 10yr yield benchmark has inched down to 2.19%.
The gold price has risen to US$1,080/oz.
The New Zealand dollar remains relatively strong, boosted by strong migration and tourism stats our yesterday. It's strengthened against the US overnight, reaching 67.7 US¢. It's up 6bps to 94.4 AU¢, and remains stable at 62.0 euro cents.
The Aussie dollar has been weakening since the Fed hiked interest rates last week. The oil price plunge is also likely to weigh more heavily on the Aussie and US currencies than the New Zealand dollar. The TWI-5 has increased to 73.1.
If you want to catch up with all the local changes from 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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12 Comments
Re: Banks - With the pressure on net interest margins, net interest income growth was primarily driven by a fall in interest expense which has decreased by $108 million (3.3%) to $3.2 billion, driven by favourable funding conditions.
In plain English, State enforced interest rate suppression.
...financiers can borrow essentially unlimited sums at rates far below what savers can get. As a direct result of ultra-low rates for banks, corporations and financiers, even high-earning wage-slaves cannot outbid the financiers for productive (i.e. income-producing) assets. Read more
Thanks for another great link Andrewj.
Wilkerson is another articulate American who this time is able to condense and expose convoluted US foreign policy for what it has truly become. We can add the War on Drugs as another abysmal failure as it's just an extension of their foreign policy.
The US defence industry is so vast that it is essential that there is strife either genuine or created in various parts of the globe. The US economy demands it to be this way.
There is little hope for change other than it coming from two potential presidential candidates. The radical options of Trump or Sanders would likely be rejected by a scared American people intent on maintaining the status quo.
US state funded risk free Christmas present for foreign global banks.
....a riskless "profit" handout for foreign banks, subsidized by the most famous US "public" institution - the Federal Reserves - amounting to approximately $11 billion in just one year. Read more
Howzat
AndrewJ, Henry_Tull, Casual Observer, Belle, Redcows, Tim12
For all the agriculture people and those reliant on Fonterra
Get an eyeful of this
http://www.smh.com.au/business/woolworths-to-tap-chinese-consumer-by-se…
Woolworths is going all out to capture the profits on milk powder and infant formula - they will squeeze the suppliers based on volume deals, freight it to china and sell direct themselves at top-dollar
Fonterra will be in there, down the back somewhere, sucking on the hind-teat
and some thought the international harvester company (IH) was no more
https://www.youtube.com/watch?v=lnQMOyGeP_I
its the pubs and gambling (gaming?) machines/side agreements that not always show front and centre. (imagine if one picked up Z.).
so they must think the step to cyber space is a no brainer.
pity the ss'er, are these the steps Fonterra saw coming when it sold the yogurt brand businesses in OZ this month?
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