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US house prices, demand rises; MSCI adds China to EM index; NZ up in social progress; Chinese target food companies; UST 10yr yield 2.15%; oil and gold fall again; NZ$1 = 72.2 US¢, TWI-5 = 76.7

US house prices, demand rises; MSCI adds China to EM index; NZ up in social progress; Chinese target food companies; UST 10yr yield 2.15%; oil and gold fall again; NZ$1 = 72.2 US¢, TWI-5 = 76.7

Here's my summary of the key events from overnight that affect New Zealand, with news a new wave of Chinese investment in food companies is coming.

But firstly in the US, existing-home sales unexpectedly rose in May following a notable decline in April. Low inventory levels helped propel the median sales price to a new high while pushing down the median days a home is on the market to a new low. Their median price is now US$252,800 (NZ$350,000) which is up +5.8% from the same month a year ago and is the 63rd consecutive month of a rise. In that market, their own industry body says this track is "not sustainable".

And for the first time, US stock index provider MSCI has agreed to include China's mainland domestic shares in its emerging markets index. The MSCI Emerging Market Index currently has about US$1.6 tln tracking it. This decision could prompt changes to how Chinese companies are run, and how Chinese policy makers reform their stock market, even if the initial amount of capital inflows won’t be large in global terms. It is a small step, but many observers think it signals a significant shift. It had an immediate impact yesterday with the Shanghai index rising as nearly every other market fell. Even with the tiny first step, just to start as much as US$10 bln will be flowing into Chinese shares over the next year. Inclusion in this specific will likely draw some KiwiSaver funds into the realignment.

Another one of those international benchmarking surveys was out overnight, the 2017 Social Progress Index. This has New Zealand's score rising and now has us 9th equal with Australia (whose raw score also rose, but their rank was unchanged while we are up from 11th last year). We came in below seven European countries and Canada. We scored creditably high on most measures, some surprisingly strong. But we were let down by affordable housing.

Update: In yet another ranking, the Mercer cost of living series shows Auckland the 61st most expensive global city and Wellington the 86th. Last year Auckland ranked 98th and Wellington ranked 123rd.

In Australia, at an Agi-Investor forum in Melbourne, it is claimed that Chinese investor appetite for food companies, especially dairy, is about to grow strongly again. And local regulation pushbacks are not deterring the fundamental interest from these Chinese investors. High-quality food, with high regulatory, biosecurity and environmental standards are all an important part of the attraction. And a key appeal was that freehold land could be bought in perpetuity.

In New York, the UST 10yr yield is a tick lower today at 2.15%.

The price of oil is down sharply again today and is now under US$42.50 a barrel, while the Brent benchmark is now just on US$44.50. That is now a ten month low and the biggest first half slide in more than 20 years. The rise and rise of unsold inventories, including crude stored in tankers at sea, is behind the drop. Fast-rising output from places like Libya are upending this market.

And the price of gold is lower as well, down another -US1 to US$1,242/oz.

But the Kiwi dollar is little changed at 72.2 USc. On the cross rates we are higher at 95.7 AU¢, and 64.8 euro cents. The TWI-5 index is at 76.7.

Stay tuned for the RBNZ OCR decision at 9am. We will have the full details.

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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34 Comments

And our foolish dedication to a "free" market, we will just roll over and let foreigners take control of our industries. Stupid, stupid, stupid. Did I mention stupid?

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It's not stupid. It's the same with other countries, Aussie, Canada, Sweden and more. If the whole world is so stupid why don't you live in Mars?

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5 zip. (so far, anyway)

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I tend to agree with you, Double-GZ, but with some reservations.

These days we do live in a global economy. Technology is making that increasingly possible.

We need to at least acknowledge that the barriers between countries are slowly, but surely, being broken down.

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If we all have a share in it, but if it just big fish swallowing up the little fish, then it is not a good thing, at all.

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Well there's certainly a lot of land acquisition for farmland going on, check out the Bloomberg report and the global map.

China Spins a Global Food Web From Mozambique to Missouri
https://www.bloomberg.com/news/features/2017-05-22/china-spins-a-global…

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There is a strong counter trend where the people prefer to have more control over their destiny and are rejecting the globalisation narrative. We are already starting to see the break up of the EU, Soviet Union is long gone and it's not inconceivable for some states in the US to break away. People want to trade and travel but control of your own destiny is a powerful force (and rightly so) - much to the annoyance of the Globalist New World order types. Some very shady, dangerous characters in that camp Soros and the war criminal Blair for example.

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Lots of countries roll over for this DGZ. However it remains fully stupid.

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So, in DGZ's opinion, Australia and Canada and Sweden all being stupid makes it OK for NZ to be stupid

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Thats correct the sheeple specuvestor approach is not limited to just housing. It transcends mere physical boundaries. More yang than yin.

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Not stupid DGZ, understandable. The 'Free Market' was an invention of Milton Friedman in the 60s and the yanks forced it on the world because it allowed their multi-nationals freer access and control of bigger markets. They even forced the overthrow of a democratically elected President in South America (Allende) because he wasn't buying into it, and supported Pinochet . And we all know how well that turned out. In the meantime though Maggie Thatcher held him up as a shining example.

Because of the sheer size of the US economy then and through to the 90s at least, most countries had little choice but to get on that bandwagon or get steamrollered into a long lasting poverty. Those in power protected their interests with a vengeance.

the problem today is how to fix the damage it has caused?

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Milton Friedman invented the free market?
What the hell are you talking about?

"The problem today is how to fix the damage it has caused?"
The problem what has caused? The free market?
I can tell you right now that the free market hasn't caused any issues, whatsoever.
The issues have been created by the lack of a truly free market - arbitrary legislation, rent seeking, etc. And, most importantly, silly liberals who don't understand what the free market actually is but insist on berating it.

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nymad,

You are quite right re Milton Friedman. What interests me about you post is just what you mean by 'the free market'. Markets are a construct and require regulation to work. Someone-governments-have to make and enforce the rules of the game. For their to be a 'free market', there have to be rules around such things as Property-what can be owned and by whom. Contracts-what can be traded and on what terms. Enforcement- who and how enforces these rules. Monopolies- what degree of market power is to be permitted. These can be thought of as the building blocks on which the 'free market' can be constructed.

Based on your post,I am not at all convinced that you know what the 'free market is,far less how it can be manipulated to favour some interests over others.

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Okay, so isn't that exactly what I meant by "arbitrary legislation, rent seeking, etc."?
I'm sorry if you didn't understand that part.

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Or the fact that it is not free because the big players manipulate it. Regulation is required to put the brakes on that who would bend it to their own will. Who was the billionaire who tried to force a run on the pound or the dollar some years ago - that is the attitude I am talking about. Some times it is not individuals, but companies and/or countries like China and the US using their economic might to bludgeon smaller economies into line. No for all they call it "free" it has never been free because the design was to allow the big players to manipulate it.

And yes these "neo-liberal" economic policies were began by Milton Friedman in the 60s, and have been the basis of most western economic policies since. Roger Douglas introduced them here. Maggie Thatcher in the UK and so.

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"Those in power protected their interests with a vengeance." Still doing so in little ol' NZ !

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National must be sick and tired of hearing about rich foreigners buying up our country and charging us to live here

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... it seems as if the Gnats are too busy getting on with bugging the staff in their electorate offices to notice that the country still has an economy ...

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PocketAces the debt burden must be getting to DubleD
Yesterday he said he was glad I was out of NZ & today he wishes you on Mars !
Certifiable✅

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The price of oil is down sharply again today and is now under US$42.50 a barrel, while the Brent benchmark is now just on US$44.50. That is now a ten month low and the biggest first half slide in more than 20 years. The rise and rise of unsold inventories, including crude stored in tankers at sea, is behind the drop. Fast-rising output from places like Libya are upending this market.

Maybe global demand is weak because those capable of financing economic growth see none ahead? Their preference is to fund liquid assets guaranteed by sovereign taxpayers and their private commercial derivatives, for the less discerning.

Confusions reigns - U.S. financial conditions have loosened to the easiest levels since August 2014, in large part thanks to tighter credit spreads, according to a Federal Reserve Bank of Chicago index. The gauge suggests conditions have only been easier 76 times in 2,320 weeks of data from 1973. New York Fed President William Dudley said Monday that “essentially what’s happened is we haven’t actually tightened financial conditions” as the U.S. central bank has raised interest rates. Read more

Previously, ZeroHedge reports this morning on some (more) interior confusion by economists at one of the big banks. The Fed has “raised rates” and yet according to their calculations, all their calculations, financial conditions are for them paradoxically easier. Read more

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"global demand is weak because those capable of financing economic growth see none ahead"

Very true. Lack of demand for new debt is slowly crashing commodity prices.
A big problem for the viability of capitalism.

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By the way Chinese who are buying US property today are buying at the wrong point in the cycle
oh I forgot ..... I'm writing to Aucklanders who believe there is no cycle other than perpetual motion !

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Good to know that Northern Lights knows better than all the Chinese buying property in the US. If only these poor Chinese had access to Interst.co.nz

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I'd suggest NZ's future will contain some extreme reactions to displacement.

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Their median price is now US$252,800 (NZ$350,000) which is up +5.8% from the same month a year ago and is the 63rd consecutive month of a rise. In that market, their own industry body says this track is "not sustainable".

Hmmmmm....

Divide widens between housing haves and have-nots Read more

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The Chinese are very smart and have a long view. They can see the value of food supply and control of it. It's going to determine the course of global history, and the pressures are already coming on.
As for New Zealanders, no long view, don't understand ownership and control, so will sell the worlds most valuable assets for nothing much at all.
Go figure.

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Having the world's largest population to feed and having experienced famine in living memory no doubt helps concentrate the mind as well.

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A2 seems to have the right attitude. Not sure about the long view..trash your water, soil, atmosphere..then look to buy overseas food producers, can't end well.

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Acknowledged frazz. It's a good point. However the Chinese are more recently becoming very interested in food safety, and being the industrious folk they are, might even leave us behind. It's a very late start with that one, but watch it change.

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It will not be long before the Aussies wake up and grant only 99 year leases to foreigners , instead of Freehold Title as is currently the case .

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And if Aussie does that, our 'government' will just stand there slackjawed with their fingers up their noses while the overspill floods in here.

It's a bloody disgrace that we haven't at least matched our policies to Australia's.

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It looks most like moral corruption stemming from vested interest.

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New Zealand slowly becoming a very violent place to live, and a few band aids like giving Police guns won't help. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11880180

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Is that a silencer on the AR14? Considerate of the police to not want to wake the neighbours up when making an "arrest".

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