90 seconds at 9 am: New stimulus

90 seconds at 9 am: ECB fight for bond-buying program; China stimulates; US job growth weak, QEIII expected; NZ$ up to 81.1 USc

10th Sep 12, 8:45am by David Chaston

Here's my summary of the key news over the weekend in than 90 seconds at 9 am, including news it is becoming clear that the 'Draghi put' - where the ECB starts major bond buying program to resue the eurozone - faces severe headwinds. Spain and Italy won't sign away their sovereignty, and Germany is angry.

Markets will now learn that the European Central Bank's bond plan is a wish, not a done deal. Europe's political minefield lies ahead. George Soros said Germany should back the growth measures or leave the eurozone.

In China, inflation has stopped falling and started rising. This comes as China approved plans to build roads, subways, and other infrastructure in a new stimulus program thought to be worth up to 1 tln yuan, although that is only a quarter of what it did four years ago.

China's leaders expressed worry at APEC that the eurozone situation is hitting them harder than they realised - China’s industrial output grew at its slowest pace in three years and President Hu said economic expansion faces "notable downward pressure".

In the US, jobs growth in August was tepid, coming in below market expectations. The US economy is in a rut of marginal growth, and company earnings are starting to sag. Those weak jobs numbers have the markets expecting QEIII from the Fed.

These money printing and stimulus expectations saw the NZ$ rise to well over 81 USc where it starts the week. Our Reserve Bank gets to show how it will respond to thie international headwinds on Thursday with its Monetary Policy Statement, Alan Bollard's final one, so expectations for major changes are low. John Key thinks New Zealand is better positioned that many others to get throught the coming rough patch.

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30 Comments

by Kunst | 10th Sep 12, 9:12am 1347225166

September/ October 2012 - the path into a worldwide recession !

Job growth – ha !: Hardly anyone is taking about massive exports of military equipments of the major economic powers.

Have you noticed how many shops are currently closing in the South Island.

by Gummy Bear Hero | 10th Sep 12, 2:49pm 1347245350

I have noticed , throughout my life , that shops close ...... new ones open ..... others go out of business .....

....... this is not new , Walter ........ it is the healthy functioning of the market mechanism .....

The fact that the government isn't stepping in to bail them out , prop them up , or to nationalise them ..... is also a very good sign .......

by Kunst | 10th Sep 12, 3:56pm 1347249368

Gummy - of course shops come and go, therefore I wouldn’t comment.

The worrying signs are good established shops for years, many since generations with younger, initiative shop- owners with up to 5- 10 staff members are closing. It is definitely a trend. From experience over years retail shops always go first with an upcoming recession

by Christov | 10th Sep 12, 9:29am 1347226156

QEIII expected;....expect away.....factor in away....demand away....just ggget the ttttiming right....or an arguable case for coitus interruptus may land on the table.

by scarfie | 10th Sep 12, 12:10pm 1347235854

Did you catch this one from Zerohedge Count? On why Bernanke can't print, well not in the same manner in which he has to date.

They will at some point have to print in some way or form, but looks like the fiscal ceiling might be the next point to give.

by Christov | 10th Sep 12, 12:58pm 1347238706

Well I have now Scarfo....but it's really just emphasising what i have been posting here from different cut n pastes I have done over the last wee while .

Bernake himself has stated they ..The Fed.. are less certain about impact on liquidity markets..

"the Fed owns all but $650 billion of 10-30 year nominal Treasuries." Also as pointed out above, Twist 2, aka QE 3.5 is already absorbing all of the long end supply. And herein lies the rub. To quote UBS: "Taking out, say, $300 billion in long-end Treasuries almost certainly would put tremendous pressure on liquidity in that market....Ploughing ahead with a large, fixed size QE program could cause liquidity to tank."

In other words, anyone expecting a full blown LSAP focusing only on US Treasurys will very likely be disappointed as the Fed will certainly realize, quite soon we hope, that it has only $650 billion in total 10 year + bonds available in the entire private market!

Aside from the numbers issues, the Fed are obliged to be seen as impartial Pre Election run up...and injection right at this juncture could be percieved to favour Obama..i.e. cannon fodder for the republicans...while the repubs make no secret of Bernake's dispatch should they win.

So for Bernake it's a damned if you do , damned if you don't scenario.

Scarfie, I have always held the opinion ....the reason figures often defy logic and reason is because Human Condition Input Component will allways over-ride the implementation of corrections based purely on the figures, or the facts for that matter......that is why the speculative market functions to the level it does, however dysfunctionaly that is.

by scarfie | 10th Sep 12, 1:07pm 1347239250

Yes I thought you would like that, backs up nicely what you have been saying. Ahh and the human condition, although sometimes a course of action is sort of locked in and no one has the courage to stick their head up and say no. A bit like the mobilisation by Germany for WW1, perfect plan but no one ever foresaw the need to make it go backwards. Sort of sums up our money supply really :-)

by Andy Rodgers | 10th Sep 12, 9:31am 1347226302

David - Surprised that there is no mention of gold this morning. Whenever it fell by $10 or more you were writing about it's collapse. It went up by $35 on Friday to its highest since February and not a single word, very strange.

by steven | 10th Sep 12, 9:52am 1347227520

You are on the wrong site, I suggest TAB.

https://www.tab.co.nz/

regards

by David Chaston | 10th Sep 12, 3:09pm 1347246567

Andy: Not guilty (!) Did you miss this » ?

by @tony | 10th Sep 12, 9:35am 1347226545

When do we start issuing Food Stamps to the most in need (kids!). Food stamps can't be spent on Fags and Beer and, in fact, can be aimed, more speicifially, at locally grown produce (Cauliflower and Cheese etc.) so helping NZ Plc.

When does NZ PLc. issue vouchers, to all NZ'ers (not just Bankers) to drag down the $NZ; specifially vouchers that have to be spent, say 50% have to be banked and used for Debt Reduction [if have debt] and perhaps 50% on "any other goods except fags and booze with a ;) bonus for NZ Made"?

by Gummy Bear Hero | 10th Sep 12, 9:41am 1347226918

What folk in America do with their food stamps is to cash them in on the blackmarket , for a few cents in the dollar , to get money for their ciggies , booze , drugs & McDonalds ......

....... the last thing they want to do , it to use them on anything that comes within a bulls-roar of being labelled as " food ."

by @tony | 10th Sep 12, 12:56pm 1347238586

And if that is illegal....

Not that NZ has a cirminal sytem i guess...

Kill 100 people drink driving and be given a holiday...

by Christov | 10th Sep 12, 9:45am 1347227110

Aw come on there Andy, your a pretty smart guy ,what are you really saying here...? that David has enough pull to have a negative effect on Gold p/oz...? huh really..?

Or because he doesn't give it a headline , buyers wont rush out n grab some, effecting further increase...? really ...David Chaston has that kind of influence...?

Or are you just annoyed at it's sluggishness ,given the forecasts trotted out here as recently as Jan 2012.....and so he becomes a convenient target..., eve think maybe he had some in the eighties...n got to see what his ass looked like on a plate...? ever think that..?

He's not a gold tout , on that he's consisent....plenty of gung ho gold sites out there, but at $35 increase I certainly would'nt join the rush.....

A lotta people out there sweating on positions they have taken in safety or bullish strategy , fiat included.....in every corner of the globe there is captured money in some form or other being sweated on by the position holders to ...? make their fortune...? redeem a previous position.....? find a break even..?

by Gareth Vaughan | 10th Sep 12, 9:52am 1347227549

Haier eyeing full takeover of Fisher & Paykel Appliances:

Fisher & Paykel Appliances Holdings Limited (“Fisher & Paykel Appliances” or “the company”) advises that it has been approached by Haier, a 20% shareholder in the company, expressing an interest in making a takeover offer for the company. In its expression of interest, the potential cash offer price indicated by Haier (which would be subject to conditions) would represent a premium to Fisher & Paykel Appliances' current share price, if an offer were to be made.

No takeover offer has been received by Fisher & Paykel Appliances.

If a takeover offer is received by the company, the board of directors of Fisher & Paykel Appliances excluding the two directors associated with Haier (the “Independent Board”) recommends that shareholders take no action until full details of the Independent Board’s assessment of the offer, including the directors’ recommendation together with an independent adviser’s report, has been provided to shareholders.

Fisher & Paykel Appliances’ advises that Haier requested to undertake limited commercial and financial due diligence to assist it to develop its expression of interest into a complete proposal.

After considering the expression of interest, Fisher & Paykel Appliances agreed to allow Haier to undertake this limited due diligence and as part of this process Haier received an extract from the company’s five year strategic plan which Fisher & Paykel Appliances’ management had recently reviewed and updated. The company’s five year strategic plan contains commercially sensitive information and has been prepared for internal management purposes only.

After Haier advised Fisher & Paykel Appliances that it would be approaching three of Fisher & Paykel Appliances’ largest shareholders over the weekend regarding the possible takeover offer for the company, details from the company’s five year strategic plan have been shared on a confidential basis to those three shareholders.

A copy of the materials provided to those three shareholders is attached to this announcement to ensure all shareholders have access to this information.

There can be no certainty that an offer for shares in Fisher & Paykel Appliances or any other transaction will result.

by Christov | 10th Sep 12, 10:02am 1347228178

Thinking cap on here Gareth . What do think Haier know , that shareholders might not know yet....? This one needs a good probe.

What next, expressions of interest in the Lemon and Paeroa Bottle..?..Buzzy Bee..?

by Gareth Vaughan | 10th Sep 12, 10:08am 1347228502

Some nice product development and IP perhaps?

by steven | 10th Sep 12, 10:11am 1347228703

Price margins?

Where does F&P make its units? mexico? maybe haier has a huge quantity of stock in china it needs an outlet for...bye bye mexico. Lots of over-capacity in the market....some of its has to go.

regards

by Christov | 10th Sep 12, 10:29am 1347229783

Cheers Gareth....I was thinking more along the lines of vulnerability on the part of F and P...as in offers are often timing based .

Hey I had a little heads up on Sat Night regards the new strategy for Air N.Z. with the incoming CEO..ah shivers ,his name just escapes me right now, but downsizing would be an understatement and look for it to happen quickly.....lean n mean. (info solid)

You notice Rob didn't mention it when forecasting a doubling of profit on the next financials.

Way to go Rob.....you knew the strategy long before your departure.....the dole queue lenghtens , the mortgages won't get paid , Australia will get bigger by a few people.

by Gareth Vaughan | 10th Sep 12, 10:44am 1347230685

Well, their biggest market is Aussie and it ain't looking too flash over there at the moment...

by Christov | 10th Sep 12, 10:58am 1347231519

MMMMMM. maybe, but this is Chinese Govt Money looking to position itself .....so not just selling the farm here are we .

http://www.fundinguniverse.com/company-histories/haier-group-corporation-history/

I note even that link is entirely forthcoming with their holdings.

by steven | 10th Sep 12, 10:12am 1347228733

Well haier cant deliver a spare part to R&P in 10months for me....or F&P cant order one correctly, given F&P its probbaly the latter.

ie Given the comments Ive had off F&P "customer care" in the last 10months its obvious there is no love lost with Haier.

Certianly I consider F&P incompetant and have even lied to me for the last 10 months...anyone that cant order the right door handle and lies to me wont be getting busines off me again thats for sure.

regards

by Andrewj | 10th Sep 12, 11:36am 1347233780

Newsprint producer Norkse Skog has confirmed it will halve capacity at its Kawerau mill.

The company has 290 staff at the Tasman mill but is yet to determine how many jobs will go as a result of the move.

It said the closure was likely to occur next year, but "the exact timing and any estimates of the number of employees affected will not be clear until a consultation process with employees is completed".

The company also yesterday announced it would spend A$84 million (NZ$107m) upgrading one of its mills in Tasmania to allow it to produce coated papers for catalogues.

http://www.stuff.co.nz/business/industries/7644920/Norske-Skog-confirms…

by iconoclast | 10th Sep 12, 3:55pm 1347249329

This cannot be good news for Richard Chandler, NZ billionaire, who (recently) invested $150 million in Gunns Timber, a company brought to its knees trying to build a "new" pulp mill in Tasmania.

"Mr Chandler, who lives in Singapore and is worth almost $4 billion, will pay $150 million for 40 per cent of Gunns and the extra $130 million worth of shares will open as a rights issue, available first to shareholders and then to the market".

by Gummy Bear Hero | 10th Sep 12, 7:30pm 1347262237

Richard Chandler pulled out of that deal , back in March , when it became clear that the Tasmanian Greens were hell bent upon opposing Gunns $A 2.5 billion new pulp mill in the Tamar Valley .

by Andrewj | 10th Sep 12, 12:43pm 1347237781

Matariki Wines - a well-known, award winning Hawke's Bay winery - is in receivership.

http://www.stuff.co.nz/business/farming/7646018/Matariki-Wines-in-recei…

Never mind, I hear there is asian interest.

by scarfie | 10th Sep 12, 3:26pm 1347247607

Not a Johnny come lately either, established in 1981. Be interesting to know the detail, i mean it isn't like that had to pay bubble prices for the property and mortgage up to the hilt.

by iconoclast | 10th Sep 12, 3:47pm 1347248836

You could apply the same logic to Crafar Farms. Many of their holdings were acquired pre-2000, and well before the explosion in land prices. They leveraged the foundation properties to acquire later properties. But not completely. Where did the money go ??

by Andrewj | 10th Sep 12, 3:49pm 1347248995

to the banks in interest and then repatriated back to Australia.

by Andrewj | 10th Sep 12, 1:15pm 1347239714

The cold douche begins. Markets will now learn that the European Central Bank's bond plan is a devout wish, not a done deal. Europe's political minefield lies ahead.

http://www.telegraph.co.uk/finance/comment/9531764/Carthaginian-terms-f…

Otsuka Duojinshi

7 hours ago

"It was recklessly irresponsible for EU leaders and authorities to allow the second pillar of the world's monetary system to break down altogether and remain in paralysis for over a year, and we all know was responsible for that epic misjudgement."

Isn't there a missing word in this sentence? . . . we all know ____ was responsible . . .? Any speculation about the missing word - who? that? somebody? A lot of guilty parties.I've yet to see any sign of responsibility; the word austerity is bandied about as some horrifying bugaboo - yet I've yet to see any sign of austerity. The only desire of €U apparatchiks is for status quo ante. They probably bopped on down from Lake Como to visit Monza for F1 after the conference. Maybe austerity in this fantasy world was a lesser vintage of Montrachet.

Please inform me of just what Carthaginian term will ever arise in the real world - what real austerity has been imposed? We have debt bombs ticking the world over. And this credit bubble, while not being pumped up - is certainly is not being deflated - and markets will not abide for much longer.

Tacitus quoted a chieftain about the Punic wars: "they make a desert and call it peace" And while the €U and the €CB would gladly sell their respective populations into slavery in service to their currency putsch - there isn't the tiniest indication that "dangerous antagonisms" and "old tensions and stereotypes" ever went away. There is nothing to re-emerge because nothing was subsumed - just a ten year financial fiddling while the precise ethos of each country partied with borrowed money. The party is over.

1. who: and he means Germany and Merkel

2. probably "precise ethos" is "precious ethnos", but good comment nonetheless.