Here's my summary of the key news overnight to keep you up-to-date over these holidays.
In Australia, banking regulator APRA has sprung something of a pre-Christmas surprise on the four pillar banks. They are to be the only ones defined as domestic systemically important banks - D-SIB. Banks like Macquarie, Suncorp, and Bank of Queensland have 'escaped' the designation. This is important because D-SIBs will now be required to hold a lot more capital, so much more that the dividend river that has been flowing from these banks is likely to slow, and affect their share price.
The capital shortfalls involved are big, and one analyst has estimated they could range from NZ$0.5 billion for Westpac up to over NZ$2 bln for Commonwealth Bank.
On this side of the ditch, stronger parent companies will be approved of by the RBNZ, but unless we also follow APRAs lead, the parent holding companies may react by requiring higher returns from their offshore subsidiaries.
Still, markets were prepared for tougher rules from APRA and yesterday share prices actually rose for those four big banks.
In China, the weekend effort to reassure markets about the seasonal liquidity crunch have not really worked. Borrowing costs in China's money market started soaring again, as the central bank's recent fund injection failed to appease jittery investors amid a surge in demand for cash by banks. China flirts with real danger each time this happens. It's this sort of instability that can affect our money markets.
International credit spreads have fallen to a six year low as corporate risk is reassessed by markets. These declines are actually quite impressive. However, it is not sure whether going back to 2007 levels is back to 'normal' levels, or whether this signals a repeat of the easy credit problems that led to the last credit crisis. Whatever the reason, corporate borrowers (and our banks) are paying a smaller premium for their wholesale funds.
American consumer spending rose more than expected, indicating Q4 GDP growth will likely be pretty good and bouncing back from a lackluster October.
Across the ditch, Australian retailers are feeling better too. They have been buoyed by high levels of foot traffic and the solid take-up of new service offerings, including personal shopping in the lead-up to Christmas, but opinions are mixed on whether results from the 2013 holiday season will be brighter than last year.
And here at home, Paymark figures reveal another solid week of Christmas shopping, with spending through the Paymark network up 6.9% year-on-year for the first three weeks of December.
Gold has slipped below US$1,200/oz again. Oil is stronger, especially the US benchmark which is adjusting closer to other benchmarks as American exports become important flows, and the Dow is at another all-time high.
The NZ dollar starts today virtually unchanged at 82.1 USc, 91.9 AUc, and the TWI is at 77.5.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
Merry Christmas everyone. Enjoy your holiday break.
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