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Indonesia open to reviving relationship with NZ beef exporters; ECB says there are too many banks; High prices hamper US home sales; US labour market strengthens 'somewhat further'; UST 10yr yield at 1.61%; oil and gold up; NZ$1 = 73.0 US¢, TWI-5 = 76.1

Indonesia open to reviving relationship with NZ beef exporters; ECB says there are too many banks; High prices hamper US home sales; US labour market strengthens 'somewhat further'; UST 10yr yield at 1.61%; oil and gold up; NZ$1 = 73.0 US¢, TWI-5 = 76.1

Here's my summary of the key events overnight, with news New Zealand's Trade Minister is "cautiously optimistic" there's an opportunity for our beef exporters to revive their relationship with Indonesia.

Having met with his counter-part in Jakarta, Todd McClay says Indonesians are demanding more beef than they're supplying locally. The regulations, which had seen New Zealand's beef exports to Indonesia drop by 80%, have also been changed. Indonesia had once been New Zealand's second largest beef export market. 

The president of the European Central Bank has gone head-to-head with commercial banks. Mario Draghi says their profits are being hampered as there are too many of them, not because of the central bank’s negative interest rate policy. He says the banking sector had “outgrown capital markets” and overcapacity is what’s squeezing their margins.

The number of Americans filing for unemployment benefits unexpectedly fell last week to a two-month low. The moving four-week average was also down, supporting the Federal Reserve's case for a rate hike by the end of the year. Keeping rates on hold yesterday, the central bank said it expected the labour market to strengthen "somewhat further".

High prices and a shortage of supply are locking Americans out of the housing market. New (seasonally adjusted) data shows house prices were up 0.5% in July, while existing home sales were down 0.9% in August.

The National Association of Realtors says the US's healthy labour market isn't creating the activity you'd expect it to. Having peaked in June, sales have inched back as supply isn't picking up to tame price growth and replace what's being sold quickly. 

In New York the UST 10yr yield has dropped right back to 1.61%.

The US benchmark oil price has continued to climb overnight to US$46 a barrel. The Brent benchmark is just below US$48 a barrel. 

The gold price is also up to US$1,338/oz.

The New Zealand dollar has under-performed overnight, despite the US dollar having a generally weaker session. It's dropped to 73.0 US¢, 95.6 AU¢ and 65.2 euro cents. The TWI index has fallen to 76.1.

ANZ economists say it is global drivers that will hold sway, and while the NZD may have some further downside prodding over the coming weeks, the dips will be shallow.

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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5 Comments

Ha. Mario Draghi shows his true Imperial Bureaucracy colours. The opposite from Alan Greenspan with this bombshell:
http://www.bloomberg.com/news/articles/2016-09-22/greenspan-says-he-wou…

Greenspan basically says that the entire edifice of bank regulation is a load of baloney:
“What Dodd-Frank has left us with is a system in which contagious default can still occur, and if that is in fact still the case, it’s done nothing,” he said. “But if you have a high enough ratio of equity to assets, there is no way you get contagious defaults.”

"I would actually go anywhere from 20 to 30 percent of assets for pure equity."

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Oops - internally generated 25% bank risk weightings against 8% tier 1 capital requirements for residential property mortgage assets seems miles away from "20 to 30 percent of assets for pure equity."

The RBNZ expects depositors will cover the risk adjustment with OBR haircuts to their so called "savings", except the risk premium is being denied by laissez-faire regulatory practices while official interest rates head to zero chasing deflation down.

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I can't believe he said it. It blows up the whole conceited mess of the pretence of bank regulation.

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When I did a course on the risk weighting system it was obvious to me that it's not sound. My research field was risk analysis and I'm very sure the people operating these systems at all banks with their own risk team don't have a clue what they are doing.

If banks shifted to a real equity of 20-30% our financial system wouldn't be at risk. Of my wealthy clients none of them are leveraged anywhere close to a bank, it's not rational behaviour.

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Social flow on from high accomodations costs in the UK. "The average child now lives in a neighbourhood where only 5.5 per cent of residents are aged over 65. Back in 1991, that figure was 15 per cent. The pattern is similar for the elderly: with each year that passes, they are less and less likely to lay eyes on any children playing in their local area.

Why is this happening? One major reason is that familiar cancer at the heart of the British economic and social system: spiralling housing costs."

http://www.telegraph.co.uk/news/2016/09/20/the-old-and-young-dont-talk-…

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