Here's my summary of the key events overnight that affect New Zealand, with news there are early signs of stress in apartment markets on opposite side of the globe.
But first, Wall Street swung into positive territory earlier this morning as Janet Yellen said the Fed should proceed "cautiously" with its interest rate hikes, because inflation has not yet proven durable and there is a backdrop of global risks to the American economy. Other Fed speakers are counseling staying on the rate hike path.
Meanwhile, the data out today was pretty positive. American consumer confidence jumped in March as optimism about the short-term outlook for the their economy rose. The Conference Board’s index of consumer confidence rose to 96.2 in March from an upwardly revised 94.0 in February. And the S&P/Case Shiller composite index of house prices for 20 metropolitan areas rose +5.7% in January on a year-over-year basis, matching the increase the month before and only marginally less than expectations.
In England, their central bank has started raising its 'counter-cyclical capital buffer' from zero to +0.5% by March next year, and signaled it would then rise to 1% later. Their objective is to ensure banks can provide lending and other essential banking services in times of financial stress. The move sends a clear signal that they are facing such a threat.
In Australia, an independent group of well-connected 'wise men' has said the country’s eight straight budget deficits and four more on the horizon are “alarming” for a growing economy that’s approaching 25 years without recession. Their solution mirrors that offered by the opposition Labor Party: raising their capital gains taxes and limiting negative gearing. And this comes as worrying signs rise in the Melbourne apartment market with prices dropping by up to -30%. (And something similar may be starting in Miami, FL. too)
Locally, keep an eye out today for the February building consent data, especially that for Auckland.
In New York the benchmark UST 10yr yield has slipped in the opening session today and is now at 1.86%.
The oil price has also weakened further and is now at US$38/barrel in the US, while Brent is just on US$39/barrel.
The gold price starts a little lower too, now at US$1,217/oz.
But the NZ dollar will start today almost 1c higher at 68.5 US¢, at 89.9 AU¢, and at 60.8 euro cents. The TWI-5 index is now up to 71.9.
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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17 Comments
Like it does in NZ if you own property in a trust; losses can only be used to offset future gains on the same property, not carried over and taken off your annual income every year. They'll call it ring fencing losses.
Would have a huge effect on auckland property. Older investors who are positively geared over their entire portfolio will be uneffected. Likewise, smarter investors who only buy in the regions where rent covers interest, rates and insurance will be positively geared from the get go, so will be uneffected.
So they're talking LAQCs? When I had my properties I worked on the principles of all costs covered by income. Because I was in a region where CG hadn't occurred significantly for about 30 years it was never factored in. Never could understand the few I knew who seemed to deliberately operate at a loss. At least one I knew tried to explain it to me, but I believe he was being BS'd by his accountant, or didn't understand what he was being told. Last I heard he was struggling.
In New York the benchmark UST 10yr yield has slipped in the opening session today and is now at 1.86%
Rather a dash to government cash - 3 mth US TBill rates trading at yields below the Fed Funds floor signifies financial difficulties are in the mix of price discovery factors.
In England, their central bank has started raising its 'counter-cyclical capital buffer' from zero to +0.5% by March next year, and signaled it would then rise to 1% later. Their objective is to ensure banks can provide lending and other essential banking services in times of financial stress. The move sends a clear signal that they are facing such a threat.
The threats are well established.
Lenders are charging higher interest rates for development loans for London luxury homes as slumping commodity prices and increased taxes deter overseas buyers, fueling concern the market is oversupplied.
Debt funding construction of the costliest homes has increased by about 75 basis points to 3.75 percentage points over benchmarks since January, said Randeesh Sandhu, chief executive officer of residential development lender Urban Exposure Real Estate Plc. For large projects in central London, financing costs have risen the most since 2012 over the past six months, said William Newsom, a senior director at broker Savills Plc. A basis point is 0.01 of a percentage point.
“Everyone is freaking out,” Sandhu, whose firm has loaned close to 1 billion pounds ($1.4 billion) to developers, said in an interview. “There has been nervousness for a while in the super prime market and there is also now nervousness in prime." Read more
Gold currency anyone?
"The NATO overthrow was not for the protection of the people, but instead it was to thwart Gaddafi’s attempt to create a gold-backed African currency to compete with the Western central banking monopoly".
https://www.intellihub.com/declassified-emails-reveal-nato-killed-gadda…
Gaddafi was nowhere near as bad as the western press makes him out to be.
Watch this little clip....
Truth about Gaddafi's Libya that NATO, CNN, BBC, Al Jazeera & CO Keep Hidden
As Stephen points out above, it's not just Melborne and Florida where apartment prices are crashing...
Check London.
Auckland does not have any oversupply issues... yet
http://www.bloomberg.com/news/articles/2016-03-29/lenders-freak-out-at-…
Sydney, Melbourne and the Gold Coast have a long history of apartment crashes over the years through over building and easy finance.
I was caught up in one in Sydney the 1970's which cost me dearly ( lesson learned) then another in the 1990's where I flew to the Gold Coast to help out a Kiwi who was two million dollars under water through rash apartment purchases ( I go him off) . Then there were others. NZ is in a different position because we are not in the "over built" stage - yet. The apartment market here has had its severe crash a few years ago, so now it's catch up time.
War is very profitable for the US.
https://nz.finance.yahoo.com/news/u-sold-33-billion-weapons-203804015.h…
Pat Buchanan agrees with you Justice.
http://buchanan.org/blog/trump-right-nato-125052
The first NATO supreme commander, Gen. Eisenhower, said in February 1951 of the alliance: “If in 10 years, all American troops stationed in Europe for national defense purposes have not been returned to the United States, then this whole project will have failed.”
Japanese elderly with no retirement funds committing crimes to get INTO prison for life support.
https://nz.finance.yahoo.com/news/why-japan-elderly-committing-crimes-1…
Bit surprised by the Melbourne flat market falling as far as being suggested. If that is the start of the Aussie housing correction then mortgage borrowing over here is likely to tighten.
More negative news out of China
Beijing, Mar 29, 2016 (EFE via COMTEX) -- Chinese iron and steel company Dongbei Special Steel Group Co. Ltd that supplies to Chinese companies constructing space vehicles, aircrafts and high-speed trains, missed the payment of a $131 million debt, four days after the company's chairman, Yang Hua, allegedly committed suicide, South China Morning Post reported Tuesday.
The case exemplifies the financial problems afflicting China's heavy industries, many state-run, amid the current slowing down of its economy.
Dongbei Special Steel, based in the northeastern city of Dalian, also said in a statement to the Shanghai Clearing House it was unlikely to meet the payment of another debt of $156 million, due on April 5.
The case is one of the first in which a state-run firm has missed a debt repayment in the interbank bond market, as until now local governments, who normally manage firms with major financial problems, had taken measures to prevent such a thing from happening, fearing a domino effect.
This is, however, the eighth missed payment in the Chinese debt market this year, and according to analysts, is a reflection of the growing dangers faced by the financial sector amid problems of overcapacity and a sluggish economy.
This month, sausage maker Nanjing Yurun Foods, and iron ore company Zibo Hongda Mining too had missed their payments, the South China Morning Post reported. EFE
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