Here's my summary of the key events over the weekend that affect New Zealand, with news the impact of a potential Brexit is seriously over-hyped.
But first, in the US, consumer prices were up +2.6% year-on-year for all items except food and energy. This is the core data the Fed uses and is slightly up on the last reading. Including food and energy, prices were up +1.0% year-on-year which was a tick lower than last month. This data actually tipped one US Fed member to change his mind and become a bit more dovish.
Housing starts in May came in +9.5% higher than the same month a year ago which will boost construction for a while yet in the US. But building permits issued for May came in -10% lower than the same month a year ago so that boost may run out of steam in the next year or so unless for building permits are applied for soon.
In China, house price gains are extending into second tier cities, even though they are moderating somewhat in the largest urban areas. In May, 50 of the 70 major cities tracked saw year-on-year price gains, up from 46 in April. Average new home prices have climbed +6.9% year-on-year, up from April's +6.2% rise. This expanding trend creates an interesting problem for Beijing because it is a rare "bright spot" in their economy at present but is also just an asset price bubble when the productive sectors are under pressure. It is hard to see much value in this "bright spot" - other than reinforcing the wealth effect.
The Indian central bank boss has quit, realising he would not get reappointed after it became clear he was being undermined by members of the Indian government at the very senior level. He was increasingly opposed by hard line Indian nationalists, the Indian version of the Trump / Johnson / le Pen forces that are shaking the Western world. However, this resignation has had no impact so far on their currency so far, although markets are closed until about 3pm NZ time today.
In Europe, all the news focus is on the Brexit vote. The IMF weighed in warning of the dangers on a "leave" vote, but mainly for Britain. The French warned the UK would become irrelevant. The Russians are stirring the pot hoping a "Leave" vote will weaken NATO and the EU. But more voices are seeing the risks either way all to the UK. Few now think a "Leave" vote will have much impact on the global financial system.
In New York, the benchmark UST 10yr yield ended last week up +5 bps and back to 1.61%.
The oil price rose marginally over the weekend but is still low. The US benchmark is now just on US$48/barrel and the Brent benchmark just on US$49/barrel. For the first time in a while, we are seeing rises in the number of drilling rigs in action in the US, up +10 in a week. Even though they are only at half the level they were a year ago, that is now four consecutive weeks of rises.
The gold price is marginally higher at US$1,293/oz.
And finally, the NZ dollar will start the week at 70.5 US¢, at 95.4 AU¢, and at 62.6 euro cents. The TWI-5 index is at 73.8. The currency has been remarkably stable since its re-rating higher after the RBNZ MPS. Some think that if the Brexit risks moderate, the NZD could rise by as much as 1c.
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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14 Comments
Rajan resigning could be a big deal. He was one of the very few senior economists who saw the last crisis coming. Interesting that he should be finally culled whereas his idiot contemporaries have prospered. I guess it just doesn't pay to speak truth to power. The corrupt win, it seems.
Australia's delusions run deep - are you sure you are not caught up in the "lucky" country hype?
Australia's loss of economic vigour is measured by the World Economic Forum's Global Competitiveness Rankings. The country fell from 15th in the world in 2008/09 to 21st in 2015/16. Read more
Pffh. Who needs global competitiveness when you can sell a worthless patch of dirt to new residents for astronomical sums and get them to pay the locals top dollar wages to put a house on it. The Aussie economy is less dependent on exports than we are, and much better at running a banking immigration/housing ponzi scheme. Our efforts in Auckland are weak and pale and cringing by comparison.
Maybe it really is a viable long term business model if you don't mind a bit of volatility. Oh, no, what am I saying?
This data actually tipped one US Fed member to change his mind and become a bit more dovish.
There are those who are calling for James Bullard to be fired. While that might be deserved given recent history, I believe keeping his place at the head of the St. Louis Fed will do the world far more good. To recap, in March Bullard was unequivocal that the Fed must raise rates or risk facing “devastating bubbles.” Just three months later, he now claims that the FOMC should raise rates just once more (by 25 bps) and that’s it. Read more
Every Monday we start the week in a world which is in worse state than the previous week, and in a much worse state than a year before. And all government policy (in NZ and overseas) is geared to making matters worse faster.
Atmospheric CO2 June 18, 2016: 406.92 ppm; June 18, 2015: 401.69 ppm; Up 5.23 ppm date-to-date (versus 2005-2014 average of 2.11 ppm) and surging beyond anything within the framework of climate change mitigation. We'll never see 400 ppm again, and may not even see 402 ppm again at the end of the northern hemisphere photosynthesis season.
This is the biggest disaster-in-the-making in the whole of human history, and goes largely unnoticed.
https://scripps.ucsd.edu/programs/keelingcurve/wp-content/plugins/sio-b…
When the peak is reached, it looks like the upper portion of the market is the part which hits the peak first:
http://www.bloomberg.com/news/articles/2016-06-17/san-francisco-s-housi…
Should Britain exit, this may prompt Europe to address the considerable problems of their union before they loose further members and the whole thing degenerates. If they took a positive attitude they they might be able to make enough meaningful changes to attract Britain back into the fold.
Hi David, One of my friend just raised a very valid point. Why has no journalist or anyone in opposition and media have asked for review of the overseas data as the National Party action or inaction on Housing Bubble is based on the that overseas data (3% Overseas buyer) that was released earlier and by the agencies own admission that data was faulty.
If the data is not correct and faulty than the national party policy which is based on that faulty data will also be faulty. So how come no one has ever raised the issue of getting the correct data as am sure Housing Crisis is a major concern to all economically as well as socially and getting the correct information from the buyers should not be much of a task.
Only because it suits the national party to hide behind the faulty data and justify their inaction, should not be acceptable to any journalist and kiwi. In future if the data is collected without manipulation and truth is out and otherwise (which will be) National party instead of being sorry will be themself and blame the agency for the fault as blames lies everywhere except them and their foreign friends.
Please raise issue for the correct data on overseas/Non Resident Buyer and that too without bias as we the New Zealanders have a right to know the truth.
If that data is wrong, The policy of national party to tackle the housing Crisis is wrong.
The question is more relevant now after the admission of Australia and Canada and also has to be something for the banks to take action.
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