Here's my summary of the key events overnight that affect New Zealand, with news dairy prices have inched higher today.
In today's dairy auction prices were marginally higher overall, up +1.6% in USD terms but with a concurrent fall in the currency, up +2.8% in NZD terms. Today's result was bolstered by a better WMP price which was up +2.4% in USD terms. However none of today's results will be enough for any dairy company to revise its payout forecast and the season's results will remain on a knife-edge (or 'finely balanced' as a corporate might say). SMP prices were virtually unchanged.
In other news, the US trade deficit fell from a near two year high in February as slowing domestic demand weighed on imports and stronger global growth boosted exports of American goods. The changes from the same month a year ago were minor however, although there was a +5% growth in services exports in the month compared with the same month a year ago, pushing up their US$21.4 bln surplus in services. The final data on February durable goods orders also came in better than earlier signaled.
And a prominent regional Federal Reserve boss has quit after admitting he leaked inside information in 2012. The Richmond Fed President said he was stepping down effective Tuesday in a letter that revealed his involvement in an alleged leak of confidential Fed information.
In Germany, their second largest retail bank has told its workforce that it will be cutting almost 8,000 jobs. A shift to new technology is behind the mass change; robots are descending on banks.
In Australia, their central bank governor has come out strongly against 'negative gearing'. He says it is fueling an unhealthy investor appetite for interest-only home loans and has slammed banks for signing up people for loans who should not have them. (Negative gearing is an extreme leverage strategy where you take out a loan on a property where the income from it is not enough to make the loan payments. Income from other sources, tax loss benefits, or capital gains then are used to make up the difference.)
In New York, the UST 10yr yield is unchanged today at 2.35%. Local swap rates are now the flattest they have been all year following yesterday's fall.
Oil prices are up today to just on US$51 for the US benchmark, while the Brent benchmark is just over US$54 a barrel. Falling US crude stocks are said to be behind the change.
The gold price is marginally higher again, up another +US$2 to US$1,254/oz. At that level we are now +8% higher than at the start of the year.
And the New Zealand dollar starts today lower at 69.8 USc, a three week low. On the cross rates the Kiwi dollar is up to 92.2 AU¢ and against the euro is at 65.4 euro cents. The NZ TWI-5 index is at 74.9.
If you want to catch up with all the 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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18 Comments
Oh yeah ... indeed ... In 1984-5 in Australia .. Paul Keating then Treasurer of the then Labour Government .. cancelled negative gearing .. he re-instated it 1 year later ... because too many negatively geared investment properties were emptied out of renters and sold ... loud screams were heard
neg gearing on investor housing should be long gone, but when you have those in charge making the laws partaking in the practice (from all political parties) it will not change
in short it is a subsidy that favours one group of people (investors) over another (owner occupier) when it comes to buying and owning a house.
If the capital gain was taxable then the mechanism would hardly be viable. Negative gearing only works mainly through tax breaks being available. Even so in normal circumstances, if the tax system is effective, the balance sheet is served better by making a profit and paying tax rather than taking a loss and getting a tax rebate. This government, ie Corporate New Zealand, will do nothing. We as taxpayers are considered no more important than any minority shareholder in any big corporate.
Is this the future? Renewable energy to Hydrogen and then water as the only emission.
https://www.youtube.com/watch?v=gahmKOUXzks&feature=youtu.be
It's not a very efficient process with only about 30% of the renewable energy returned by the hydrogen. Electric cars are much more efficient in this respect. However, it could be a good use of excess solar production (e.g. mid-summer at midday when no-one is home) once their is a grid surplus. The other option is to pump water back into reservoirs with this excess (about 70-80% efficient).
In other news, the US trade deficit fell from a near two year high in February as slowing domestic demand weighed on imports and stronger global growth boosted exports of American goods.
Hmmmmm...
Though February’s exports were almost 5% more than in February the year before, they are 4% less than in February 2012. After five years, the US is still exporting a smaller amount than it did just after the events of 2011. The global economy simply fell off after that point and has never been restored – what recovery there might have been up to that point was rudely terminated. Read more
Speculators are betting heavily on higher US short term rates, meanwhile, the Federal Reserve is signaling they might slow down rate hikes and replace it with balance sheet reduction?
“The Fed has been a whole flow of mortgages for many years. And when the Fed buys mortgages, they don’t hedge any of the extension duration characteristics of mortgages… If the Fed stops buying mortgages, the private sector will have to start buying those mortgages, just as yields are going higher (ie: away from the average coupon). As you do that, those mortgages extend pretty quickly in duration. In that environment, those private sector holders have to hedge that duration extension risk by paying swap. So not only is the Fed making the private sector buy more duration as the mortgages extend that increases rapidly, and so I think two things happen. The curve sells off and steepens, and this becomes a good catalyst for what has been a very distorted swap spread curve (usually swaps trade at a lower yield than bonds, LIBOR risk should trade at a higher risk than government risk.)”
I have spoken about the strange anomalies in the swap market before - “How many other could never happens are out there?”. Heck, I even chronicled how, like an idiot, I was buying the swap spread “Only for the bravest and stupidest”
Back then I didn’t have a reason to bet on a return to normalcy except that negative swap spreads were dumb. But now I have a catalyst. The Fed’s shift in policy should cause the previously negative swap spreads to expand back to more normal levels. Read more
I will be voting based largely on credible housing and immigration policies and commitments. Lack of action in these two areas over recent years has been a joke and kiwis are and will pay the price. I suspect there will be a lot of other voters also influenced by housing and immigration.
The difference - NZer's remain silent
Fonterra and other major brands accused of extortion by pushing payment dates out to 120 days and then pushing short term loans onto their business customers to keep them afloat
http://www.smh.com.au/small-business/finance/pretty-close-to-extortion-…
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