Here's my summary of the key events overnight that affect New Zealand, with news of accelerating currency outflows in China.
But first, in the US interest rates on American fixed-rate mortgages rose to their highest levels in more than two years, sending weekly home loan application activity to its weakest level since early January.
Airfreight volumes are growing faster than analysts expected. Demand as measured in freight tonne kilometers (FTKs), rose an impressive +8.2% year-on-year in October. This was the fastest pace of growth seen in 18 months. Freight capacity, measured in available freight tonne kilometers (AFTKs) increased +3.6% over the same period, so load factors are up. Indicators of forward demand are equally positive. 87% of all airfreight is for international shipments.
Global passenger traffic in October saw demand (measured in revenue passenger kilometers) rise +5.8% compared to the same month last year. However capacity grew +6.3% and and so the load factor slid 0.4 percentage points to 80.1%.
In China, their foreign exchange reserves fell NZ$96 bln last month as their central bank defended the yuan from greater depreciation on the back of accelerating capital outflows. Reserves at the People’s Bank of China fell to just over US$3 tln in November, a decline of -2.2% from the previous month and the largest drop since a -3% fall in January. China's foreign exchange reserves peaked at US$4 tln at the start of 2014 but it has been leakage on a huge scale since then. It has been almost six years since these reserves have been this low. Today's data surprised analysts at the recent steepness of the fall. And it's not going to slow down.
In Europe, the EU competition regulators fined three large banks €485 mln for colluding to fix benchmark interest rates tied to the euro. These were the three holdouts that did not agree to a 2013 settlement with a number of other banks who at the time plead guilty and were fined €1.3 bln. Overnight, JPMorgan Chase was hit with a €337 mln fine, Crédit Agricole was penalised €11 mln and HSBC €34 mln. Those that had settled earlier got a 10% discount. That makes the total penalty in this Euribor fixing case just over €2 bln (NZ$3 bln) for the seven banks involved. Today's three are still protesting their innocence in the case and may yet appeal.
In Australia, the rise of the iron ore price continues unabated, surprising many. It is now over US$82/tonne and at its highest level since October 2014. Resurgent China demand is driving the uplift. This rise will help Australia avoid another GDP decline like we saw in Q3.
In New York, the UST 10yr yield is a sinking today is now at 2.35%. Bond prices are rallying even as equity prices on Wall Street hit new highs.
Oil prices are lower again today, now just over US$50 for the US benchmark, while the Brent benchmark is now just over US$53 a barrel.
The gold price is still yo-yoing at its lower level, and today it is back up to US$1,177/oz.
The New Zealand dollar is yo-yoing as well and now back at 71.6 US¢. On the cross rates it is at 95.7 AU¢, and against the euro up at 66.5 euro cents. The NZ TWI-5 index is back at 77.
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 ».
Daily exchange rates
Select chart tabs
11 Comments
The current economy is nothing like recovery; nothing. But it is and has been full of positive numbers which actually hinder the recovery process. They do so because they cloud the issue as to whether there is anything wrong, let alone anything so serious as to indicate an economy beyond the business cycle. Economists can plausibly claim that there is growth, even though the fruits of actual growth remain viscerally absent from day-to-day life.
http://www.alhambrapartners.com/2016/12/07/now-its-a-boom/
Of course the OPEC agreement wont hold , quite simply these folk cannot trust each other as far as they can spit . Does anyone think the Iranians trust the Iraqi's or the Saudis trust anyone ?
Russia is not in the fold , and America now produces more than it needs , so its a cartel that cannot control the price any longer
The history of OPEC has as much intrigue as that classic in 1001 Arabian nights , called Ali Baba and the Forty Thieves .
OPEC can collude all they want but the world has changed. "Each operator is so small, it can increase production without pushing down the market price. That makes them price “takers,” not price setters. And because shale wells are short-lived, producers don’t have to plan far ahead, says Karr Ingham, a petroleum economist in Amarillo, Texas. Singly the shale busters are nothing. Collectively, their breakneck production is breaking OPEC’s neck. This is the remorseless, leaderless free market at work."
I think it's a safe bet that NZ house prices will continue to fall if China is really serious about stopping capital flight.
"In China, their foreign exchange reserves fell NZ$96 bln last month as their central bank defended the yuan from greater depreciation on the back of accelerating capital outflows".
I predicted that trend four years ago on here. That as the sources of unearned income dry up there will be a hunt for the leakage to stop it. Little by little it will get reined in. A taxing of capital gains is almost certain at some point, when the need for the income outweights the political loss(ie: both parties need it). There will also be an increased battle from various quarters sucking on the tit to get their free lunch. Bankers versus Central Government vs Local Government vs Business vs Investors.
All week we been looking for JK legacy issues.
Does this count?
http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11762347
In short, fundamental changes are unlikely to come from the top because too many powerful interests are benefiting from the current system, despite its obvious flaws. The only hope is for more honest people within the student visa scam to stand up and be counted.
Don't tell me, he voted with his feet.
Yep, a magnificent hospital pass to the new leader it will be. This piece from David Hall sums it up well.
http://www.nzherald.co.nz//opinion/news/article.cfm?c_id=466&objectid=1…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.