US consumer debt growth rises; RCEP challenges India; China car sales plunge; Aussie home loan growth jumps; UST 10yr yield at 1.62%; oil up and gold lower; NZ$1 = 64.4 USc; TWI-5 = 69.6

US consumer debt growth rises; RCEP challenges India; China car sales plunge; Aussie home loan growth jumps; UST 10yr yield at 1.62%; oil up and gold lower; NZ$1 = 64.4 USc; TWI-5 = 69.6

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Here's our summary of key events overnight that affect New Zealand, with news China's favoured multilateral trade deal is now at the sharp end of negotiations and things aren't looking too positive.

But first, the level of consumer debt in the US rose more than expected in July, up +US$23 bln to US$4.08 tln. A rise of +US$16 bln was expected and slightly more than the +US$14 bln in June (which was revised lower).

The Regional Comprehensive Economic Partnership (RCEP) ministers meeting is underway in Thailand and we are represented by Damien O'Connor. These negotiations are at a critical stage, almost ready to discover whether this version of multilateralism (China's answer to the TPP) has legs or not. The big sticking point is India. They are resisting getting rid of tariffs on Chinese goods for strategic reasons, and they feel they have a lot to lose against Australia and New Zealand in horticulture and dairy. India's commitment to FTA's like the RCEP is being questioned and they are being challenged to commit or leave the group. The most likely outcome is that they will walk away, reducing the number of countries involved to 15 and removing -11% of the combined GDP. At the meetings so far there has been little progress. RCEP talks are supposed to be completed by November.

Yesterday, equity markets came in with a lackluster performance and today Wall Street is heading the same way; little changed. European markets were generally lower although the German DAX did post a +0.3% gain. Shanghai also rose and by a larger +0.8%, but few other equity markets managed notable changes. The S&P500 is down -0.2% so far today.

In China, August car sales fell -10% from the same month a year ago. This is the 14th decline in the past 15 months.

In Australia, July home loan growth surged and it probably grew as fast in August. After being down an average of -14% on a year-on-year basis in each of the first six months of 2019, July came in just -3% lower than the same month a year ago. On a seasonally adjusted basis, that represents almost a +4% rise from June. First home buyers are being given the credit for the turnaround.

And staying in Australia, the headlines read "Westpac slashes mortgage rates to 50 year lows". Sounds interesting - until you realise Aussie home loans all come with fees. And when you match their "comparison rates" with equivalent New Zealand rates, you realise a two year fixed rate at Westpac New Zealand will be at 3.59% (with minimum 20% equity) whereas the equivalent one in Australia using their cheapest 'package' will cost you 3.95% - provided you have at least 30% equity.

The UST 10yr yield is up +6 bps and now at 1.62%. Their 2-10 curve marginally more positive, now, at +5 bps. Their negative 1-5 curve is narrower at -29 bps. Their 3m-10yr curve is also narrower at -44 bps. The Aussie Govt 10yr is up +1 bp at 1.08%. The China Govt 10yr is up +2 bps at 3.04%, while the NZ Govt 10 yr is down -2 bps, now at 1.16%.

Gold is lower again, down -US$3 to US$1,503.

US oil prices are up more than +US$1 today and now just over US$57.50/bbl. The Brent benchmark is also up at just on US$62.50. The new Saudi oil minister has just agreed to new OPEC output cuts.

The Kiwi dollar is firmer today, now up to 64.4 USc. On the cross rates we are back down to 93.7 AUc. Against the euro we are up at 58.2 euro cents. That has firmed the TWI-5 up to just on 69.6.

Bitcoin is now at US$10,254 and that is down -1.4% from this time yesterday. The bitcoin rate is charted in the exchange rate set below.

 

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31 Comments

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Interest rate cuts v gathering recession- temporary respite til November

11
up

Without having much detail to go on, it looks like India are actually using tariffs for the purpose they are originally designed and intended for - to protect their own industry and employment from being undermined by foreign companies. NZ goods may always have access but priced higher than local made ones, which emphasises that we must focus on the best of quality so that any market we develop gets very good value for money. Competing at the cheap end never works well. Forcing them out of the RCEP will not be a good outcome, and the other countries should start recognising the consequences of globalisation and the 'free market'. NZ lost thousands of jobs to these and we need to find a way to unwind this impact. So we could learn from India.

The ideal trade zone for us is with like minded democratic countries with similar legal systems. The only problem with this is the US, as it is so much more powerful than the other reasonably democratic countries, they tend to bully their mates. I'm sure a mechanism to prevent this can be found.

My preferred outcome in all these trade talks is a free trade zone on a similar basis to the Commonwealth, ie, you MUST be a reasonably well functioning democracy to join, and if you that comes into question you are suspended. The example is Fiji, after the coup the Commonwealth suspended their membership; whereas, the UN continued to fund the military regime as paid mercenaries. The UN has a lot of nasty bastards as members as the only criterion for membership is that you are in charge, however murderous your regime is.

Roger, in one post you have nailed the issues with both the WTO and the EU. Top job.

I'd add though to prevent the dislocation of heavy industry there is a third criteria - countries with a similar GDP per capita / average wage. The point being that there is little benefit to the man on the street if his job evaporates care of a large corporate moving their entire production to a lower cost country.

Good thoughts R&G... WTO should have tiered levels of tariffs, based on things like the average wage i.e. the cheaper the wage the higher the tariff. Thus incentivising countries to lift wages and improve the quality of life for their people.

And don't forgot the UN motto: "let's hold committee meetings until They're All Dead'.....

India has 30% of the world's bovines (cattle and buffalo) yet produces only 21% of dairy and a small percentage of beef.

From a global environmental perspective, it would be good to get rid of some of those low-producing methane emitters and let more efficient producers supply the dairy they need.

Is everyone getting their small overseas goods in before 1 Oct? Not far away now.

Hosking needs to get an order in of plastic ducks. His ranting in the Herald needs to be prefaced with the words "Paid advertising"
Herald is becoming a joke with its smalltown unbalanced reporting. Jack Tame is the go to person now for any debates that might come up in the election next year.

To be fair, they have some really good journos too. Fallow, Wilson, Young.

13
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So glad they added the premium cost to NZ Herald - stops me reading so much more trashy stories in the morning - I can do that on stuff.

Thanks. Should be able to stock up on a few more pairs of running shoes before then.

Those car sales data from China don't really suggest all is swell there do they?

Another small tick down in new car sales month on month vs August 2018. Source MIA.

Some interesting questions here;

Gareth - Thanks for this information. To answer Jamil Anderlini's question: The National Party has been under the control of the CCP for quite some time.

I am aware that interest.co.nz is a non-partisan news website , and refrains from political commentary , but luckily for free speech, us plebeian members of the chattering classes can comment on the mess we have found ourselves in .

This Government is in an utter shambles .

The 3 coalition members cannot agree on anything , its easier to herd cats than get consensus.

Winston simply says NO , the Greens have resorted to guerrilla tactics to get their way , ambushing Ardern regularly when she is on the back foot , and the Labour party have shown they cannot even organize a piss-up for its youth , without criminality , sexual abuse allegations and all manner of obfuscation by the leadership .

So lets unpack the mess .

EDUCATION :-
NOTHING has replaced standards measurement for school kids . Free fees for first year was a bribe that failed . Teachers are up in arms and qualified teachers can earn more answering the phone as a receptionist in my practice than as a teacher. Charter school which ave a place

HEALTH :-
Where do we start ? Grandiose policies are not being implemented , budget allocations have gone nowhere and there is a disconnect between policy announcements and implementation. We see evidence of protest populism driving policy such as the cancer issue , and its awful to see this disease being used a political football

HOUSING :-
Another spectacular shambles , Kiwibuild/rent/buy/lease has turned out , as I predicted before the election, to be both a pipe-dream , and a windfall for failing developers in that they can get rid of unsold stock (AT A PROFIT TO BOOT) .

The Government had and still has not well documented plan or blueprint or strategy document , and thinking we would miraculously build 100,000 houses when we have a skills and manpower shortage , was just delusional .

ENVIRONMENTAL ISSUES :-
Decisions are being taken on the fly with no thought to the consequences , such as the banning of oil and gas exploration, without consultation . Banning plastic shopping bags which make up less than 2% of the plastics we use . Taxing imported diesel Utes used by the productive sector as environmentally unfriendly .............. WTF ?

TAXES :-
The obsession with new taxes , levies , tarriffs and the like is beyond belief . The markets and the business community does not know what will come next , and as we all know markets dont like policy uncertainty

BUSINESS CONFIDENCE :-
Unsurprisingly , business confidence has suffered

BUMBLING FROM ONE SELF-INDUCED CRISIS TO THE NEXT .......... this seems to be the only thing the Government has succeeded in doing

... for the sixth time since 2013 a ship of eco-warriors on route to the Arctic have been blocked by sea ice in the Arctic Sea , on their way to proving global warming is for real ... and not just another scaremongering tissue of lies ...

After 19 hours stuck in sea ice , the S.S. Malmo with 16 passengers finally freed herself ... and resumed her fossil fuel powered journey to prove how dangerous fossil fuels are ...

No doubt a windmill powered helicopter. Or perhaps a buttered toast-cat array. "All 16 Climate Change warriors were evacuated by helicopter in challenging conditions, all are safe. 7 crew remains on board, waiting for Coast Guard ship assistance."

Simon at the Centre is an interesting pic. I know what you're trying to imply, but IMHO it's better to be talking to them that shooting at them. If you value the dignity of the human being then the CCP is the current centre of global evil & doing a fine job at it as well. Poor ol Moscow can't get a look in these days.
However, in saying that, I must confess to not really fully appreciating what it takes to run a billion plus people country, especially with their history, so maybe state fear & violence is actually how they hold it together. Back to the pic, managing this key relationship is this nation's greatest challenge this century, especially with their arch enemy USA taking a hard nosed approach & supported by Australia recently which is very brave of them considering how close their respective economies are tied together. Perhaps there's an opportunity for us (NZ Inc) in the middle there somewhere, but it's going to take courage, global smarts & lots of talking, which may be where Simon sees himself, who knows? A third party negotiator? I hope it pays well.

I don't trust bridges as far as I can throw him when it comes to China relations. CCP interference with national is rife, not just via donations. Anne Marie Brady posted this Chinese idiom this morning :

"吃人家的嘴软,拿人家的手短
'If you eat other people's food, your mouth will be soft; if you take their gifts, your arm will be shortened.'

In other words, there is so such thing as a free banquet or trip."

Best to be Switzerland when it comes to USA/China/Australia and their dodgy dealings. You're never going to win trying to get amongst that rubbish. Just make good products that we have advantages in that people want to buy.

Switzerland is interesting. Ferociously nationalistic, highly democratic (based on referenda, the only fully functional direct democracy), surrounded by enemies but protected by a wall of mountains, oh, and high GDP per capita.

Funny that isnt it. Nowadays in most of the western world, the idea of nationalism is deemed forbidden . How dare a country protect their own interests right?

You bigot!!

Checkmate lol

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