Here's my summary of the key events overnight that affect New Zealand, with news the Aussies are bringing in criminal sanctions for financial market manipulation.
But first, according to one influential survey, American factories ramped up activity in September, shaking off a one-month contraction. But in another similar survey, the gains were recorded in August with September showing the slower expansion.
Perhaps American car sales trends will influence their factory data in October. Major car-makers reported lower September sales today despite high discounting, as pickup truck volumes fell for both GM and Ford. The pace of sales however remains historically strong, but dealership traffic is leveling off after more than six years of steady growth. Against the trend, Tesla delivered a record 25,000 all-electric vehicles in the period. It is still a minnow, however.
Globally, factory expansion remained in low gear, with the Eurozone still reporting modest gains, Japan improving marginally, and China stagnating. The ASEAN countries are making gains, driven by the Philippines which is at a record high, Vietnam and Indonesia. Thailand, Singapore and Malaysia are all in fact contracting slightly.
In Europe, an ECB official has warned that negative interest rates may be inherently damaging to the financial system without actually delivering benefits to borrowers.
In Australia today, we will get the first of the four sessions grilling their bank CEOs, starting with Kiwi Ian Narev of CBA. We will have live-stream coverage. None of them know what the parliamentarians will throw at them and each will need to respond for an amazing four hours. It has all the hallmarks of a medieval inquisition.
Ratcheting up the pressure, the Aussie government has announced tougher standards for bankers, signaling it will apply criminal sanctions in future for things like interest rate manipulation.
In New York, the UST 10yr yield has risen again today and is now at 1.62%.
The US benchmark oil price is a little higher too, now at US$48.50 a barrel, while the Brent benchmark is now just over US$50.50 a barrel.
The gold price was down yet again however, now at US$1,309/oz.
The New Zealand dollar is a little lower today than yesterday but still in a narrow range, now at 72.7 US¢, and on the cross rates it is at 94.8 AU¢, and 64.8 euro cents. We should also note that this morning, the Kiwi dollar is at its highest level ever since the 1985 float, against the UK pound at 56.6 British pence. It's fall was triggered by the announcement of an actual Brexit date. It was a unilateral announcement without any EU access deals and will put Britain in a tough place in any future negotiations. The NZ TWI-5 index is now at 75.8.
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
The British pounds fall against the NZD since 2000, the pound having halved in value, or alternatively the NZD having doubled in value paints the picture of ever changing currency markets . With only air below the NZD looks set to appreciate towards the 1975 lows over the coming months. At some point the GBP will become cheap. A Brit having migrated to New Zealand circa 2000 , having purchased a home and wishing to return back to the UK would be doing a very fine dance
In New York, the UST 10yr yield has risen again today and is now at 1.62%.
Are foreign central banks divesting themselves to meet domestic bank needs?
While this measure hasn't risen to anywhere near levels seen either during the global financial crisis or at the height of the 2012 sovereign-debt crisis, recent moves in this gauge of European borrowers' dollar-funding costs have been much sharper than usual. The 3-month EUR/USD cross-currency basis traded at minus 60 basis points on Friday, its widest closing level since July 2012. It had eased slightly to minus 55 bps by Monday 6:38 a.m. ET.
Similarly, the cost to borrow dollars in exchange for yen — another gauge of dollar-liquidity conditions in the global banking system — rose markedly last week. The 3-month USD/JPY cross-currency basis traded at minus 79bps on Monday, its widest since at least August 2011, indicating rising cost of procuring dollars for yen-denominated investors.
European banks have, in recent years, made only modest demands on the European Central Bank's dollar-liquidity facilities. Last week dollar borrowing at the ECB’s auction jumped to its highest in four years, with euro-area banks borrowing $6.35 billion. Read more
Coming- ready - or -not .............
I get the horrible feeling we are in the VERY EARLY STAGES of a credit squeeze which , if it starts , could see our credit driven boom go pop , and see the Kiwi$ lose some of its shine.
There are too many things moving around in the shadows :-
1) The Federal Reserve will have to tighten at some point
2) China has all sorts of dark looming problems
3) Domestically the Chch rebuild has peaked
4) Auckland houses are now so expensive, people will soon stop buying them because the Banks will become gun-shy and tighten lending . That leaves only Chinese syndicated buyers , and they too could have issues soon
5) There are all sorts of problems in the construction sector where wages rates have reached unsustainable levels , and the materials -supply cartel have pushed prices too high .
6) Household debt fueled spending is going to be the first to see a slowdown
Lets not kid ourselves , these good times cannot go on forever
One for the 90 seconds posssibly missed is overnight Canada tightening both foreign purchasing rules/exemptions but more importantly domestic lending requirements in regard to stress testing mortgages. I recall Graham Wheeler having visited Canada a few months ago.
I see REUTERS has put out a piece in the past 12 hours that Chinese cities are " tightening curbs to deter a property bubble "
Interesting , the narrative suggests that China is more concerned about the bubble than its economic growth targets and the measures could see " China unlikely to stimulate economic growth further' ..... suggesting this will at the expense of market sentiment in the long run .
Interesting .
Now I know that China is an enigma wrapped in mystery for the rest of the 4 Billion people on the planet , and these measures could have no effect at all , but I would not bet on it .
Brilliant moves i love vancouver
http://uk.businessinsider.com/canada-announces-new-measures-to-slow-dow…
(Reuters) - Canada will close a tax loophole and introduce a stress test to insured mortgage lending in an effort to boost the stability of the housing sector, the government said on Monday, its latest move to cool a market that some have called a bubble.
The key tax change is aimed at foreign investors who critics believe have inflated housing prices, particularly in Vancouver and Toronto. British Columbia in August introduced a 15 percent tax on overseas buyers in Vancouver that has already slowed sales.
Finance Minister Bill Morneau said that while believes the overall housing market is "sound," he wants to ensure rules that allow a capital gains tax exemption are being used fairly and only by homeowners selling a primary residence.
Soaring prices in Canada's two most expensive markets, Toronto and Vancouver, have raised concerns about a possible bubble and speculation by overseas buyers, mostly from mainland China. The cost of homes in Toronto and Vancouver have more than doubled in the last 11 years.
@Joe Public , LOL every Government on earth is doing something about their QE fueled housing bubbles, except ............ dozy old New Zealand .
China , Canada , Australia , Turkey , Brazil , most of the OECD and parts of the EU all have measures in place.
Why do we always wake up when its too late, and have have this backwater approach to everything ?
Sooner or later if we keep banging on about the overseas buyers ramping up property prices I'm beginning to believe that this Government will be forced to do more.Whether that's a CGT that's more punitive or the Govt focusing on working visa short term non residents buying up must be addressed.
Or am I deluded?
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