Here's my summary of the key events overnight that affect New Zealand.
The number of new homes sold in the US unexpectedly surged to a nearly nine-year high in July. Sales jumped 12% from the previous month and 31% from July last year. The gain came mostly from homes not yet started or still under construction, suggesting a rebound in residential construction investment.
Housing market strength should offset some of the manufacturing drag the US is experiencing. The Richmond Fed manufacturing index and Markit US manufacturing Purchasing Managers Index (PMI) have both eased. While production is rising, growth in new orders and employment are slowing.
It’s a similar story in Europe with services PMIs firm, but manufacturing PMIs easing a touch. At this stage, the eurozone’s economic recovery is looking good further to the Brexit.
In other news, China’s richest man is stepping up his push into Hollywood. Wang Jianlin has told Reuters of his plans to target the ‘Big Six’ movie studios, bringing their technology and capability to China.
His call comes further to his company Dalian Wanda Group already committing several billion dollars towards acquiring Hollywood studios. The changing nature of Hollywood - an institution so stereotypically American - is undoubtedly a space our film industry will be watching.
In New York, the UST 10yr yield has risen since this time yesterday to 1.55%.
The oil price has climbed on rumours Iran might participate in OPEC production cap talks next month. The US benchmark price is up to US$48 a barrel, while the Brent benchmark is at US$50 a barrel.
The gold price is up to US$1,340/oz.
The US dollar has slid as investors anxiously await comments from the Federal Reserve’s chair at the central bank’s annual meeting at the end of the week. The New Zealand dollar is at 72.9 US¢. It’s jumped to 95.8 AU¢, and is up to 64.5 euro cents. The TWI-5 index is 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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15 Comments
FX hedging costs are at their highest since the financial crisis. The three-month JPY/USD forward is now at -39 pips, the lowest since December 2008. The more negative the reading, the more expensive it is for Japanese issuers to swap yen to U.S. dollars. It also means that the shortage of dollars, from a Japanese perspective, has never been greater.
Rising Libor rates could push FX swap rates out further by the end of this year, Sugisaki estimated. "An increase of the cost of funding in CP and CDs would be definitely negative for the banks," he said. "For the Japanese banks, it's going to be very tough."
The strain on short-term funding is not expected to end soon, with Citigroup estimating that three-month Libor could rise another 5bp-10bp before October 14.
In the absence of cost-effective alternatives, Japanese banks will have to continue issuing CPs at a higher cost, pressuring their profit margins, leading to an even greater shortage of US dollars, higher Libor rates, and so on, until the Libor spike spills over across the Pacific and claims its first US and European banking victims. Read more
I guess foreign wholesale funding that the likes of ANZ source is rising in cost as well.
In New York, the UST 10yr yield has risen since this time yesterday to 1.55%.
"It's Gone" - Why Foreign Demand For US Treasuries Has Disappeared
Because its not a consumption good. It doesn't get consumed. Houses wear out over time but your spot on the map doesn't.
So I think its fine to say "look we are doing more building of new houses". Clearly that is an economic activity no different to hairdressing. What doesn't tell us much about whether the economy is going well or not is how many houses we sell to each other and for what price. Minimal real economy going on there.
British workers have suffered the longest fall in wages since Queen Victoria sat on the throne. Between 2007 and 2015, real wages fell by an astonishing 10.4% - the worst fall in any advanced nation other than Greece. Read more
Another successful central bank stimulus escapade?
US housing "surge" all very well but they've only just got back to 1963 levels. And prices are falling.
https://mishtalk.com/2016/08/23/new-home-sales-surge-most-since-2007-me…
TP
ok just because I can - does this sound right:
1963 USA population 189 million with average family size of 3.7 people = 51 million households.
2016 USA population 318 million with average family size of 2.5 people = 127 million households
True headline is "2016 sales levels are less than half of 1963 levels per population". People more mobile these days too?
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