90 seconds at 9 am: Tensions shift

Yellen justifies stimulus; US wages rise strongly; Putin shifts stance; HSBC sees profit fall; China and Vietnam tangle; Swaps fall; NZ$1 = US$0.868, TWI = 80.4

8th May 14, 7:21am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of a sudden apparent easing of tensions in Ukraine but a dangerous spat between China and Vietnam.

But first, Fed boss Janet Yellen made it clear this morning that she believes the US economy still requires a strong dose of stimulus 5 years after the recession ended because unemployment and inflation are well short of the Fed’s goals. The especially low American participation rate is clearly worrying her more than their unemployment rate. She also sees faster US economic growth.

In a somewhat surprising piece of data released today, pay in the US increased 2.4% pa in the first quarter, despite a falloff in rising productivity.

In Europe, there has been an apparent policy shift by Russia over the Ukraine; Vladimir Putin has described Ukraine's election on 25 May as a step "in the right direction". And there are reports his troops are pulling back from the border.

Global bank HSBC reported a 20% fall in first-quarter net profit to US$5.2 billion, hurt by a steep decline in earnings from its Asian operations and investment bank.

In China, they have rising tensions with Vietnam, with ships from both nations colliding as they 'protect' their oil drilling operations in disputed South China Sea waters. The map in this report gives a good idea of the potential for flareups with its many neighbours.

Stocks are higher in New York today, oil is up but gold is down sharply, now under US$1,290/oz. One reason may be of new data out in China that demand has fallen for gold bars. UST 10yr bond yields are falling too, currently at 2.59% in late trade.

The recent fall is swap rates here is now becoming quite noticeable. We start today with 5 year swaps back at levels we were at 8 months ago.

On the exchange rate, we start today with the NZ dollar down after Graeme Wheeler's comments yesterday - but actually not down very much - now at 86.8 USc, down against the Aussie at 92.9 AUc and the TWI is just a fraction under 80.4.

If you want to catch up with all the changes yesterday, we have an update here.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »

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2 Comments

by antonymouse | 8th May 14, 11:14am 1399504441

There is an interesting article in last month's GlobalEurope Anticipation Bulletin (GEAB) regarding tensions between the US Europe and Russia.

Here a snippet:

In the present confrontation between Russia and the West over the Ukrainian crisis, the image of the Cold War inevitably comes to mind and the media are obviously fond of it. However, contrary to what it gives us to understand, it’s not Russia that seeks the return of an iron curtain but really the US. An iron curtain separating the old powers and emerging nations; the world before and the world afterwards; debtors and creditors. And this in the crazy hope of preserving the American way of life and the US’ influence over “its” camp in the absence of being able to impose it on the whole world. In other words, go down with as many companions as possible to give the impression of not sinking.

For the US, these are the current stakes in fact: drag along the whole Western camp with them to be able to continue dominating and trading with enough countries. So, we are witnessing a formidable operation of turning round opinion and leaders in Europe to ensure docile and understanding rulers vis-à-vis the American boss, supported by a blitzkrieg to link them permanently with the TTIP and to cut them off from what could be their lifeline, namely the BRICS, their huge markets, their vibrant future, their link with developing countries, etc. We are analyzing all these aspects in this GEAB issue, as well as the subtle use of the fear of deflation to convince Europeans to adopt US methods.

In the light of the extreme danger of these methods used by the US, it goes without saying that leaving the US ship wouldn’t be an act of betrayal by Europe, but really a major step forward for the world as we have already extensively analyzed in previous GEAB issues

http://www.leap2020.eu/GEAB-N-84-is-available-Europe-dragged-into-a-div…

by Henry_Tull | 8th May 14, 12:42pm 1399509751

Goodman Fielder: Is the long and winding road coming to rapid close?

What was:

Goodman Fielder is Australasia's leading listed food company. The company owns a host of iconic brands that generations of Australians and New Zealanders have grown up with and put in their supermarket trolleys every week. Our brands include Meadow Lea, Praise, White Wings, Pampas, Mighty Soft, Helga's, Wonder White, Vogel's (under licence), Meadow Fresh, and Irvines.

using the "you will never take me alive" line as a corporate strategy (against its own shareholders).

Goodman Fielder has stepped up its defence against a $1.27 billion takeover offer by kicking off a sale process for its New Zealand dairy business, which could be worth at least $600 million.

Goodman Fielder has sent out a flyer to prospective buyers and joint venture partners this week and is expected to release an information memorandum before the end of May.

The figures also exclude losses from Goodman’s New Zealand meat business, which was recently sold.....

Credit Suisse has been hired to sell or find a partner for Goodman Fielder’s New Zealand dairy business that may be worth $654 million, reporting by Data Room has discovered.

In February, Sydney-based Goodman Fielder said it was seeking ways to “maximise value” in its New Zealand dairy business. Its investment bankers at Credit Suisse have now distributed flyers to potential partners or acquirers of the second-largest dairy company in New Zealand with average earnings before interest, tax, depreciation and amortization (EBITDA) of $55m a year.

so in the mindst of a seemingly korean wool boom like dairy/produce to Asia type event (once in 60 yrs), the way for professional managers to maximise value is by handing in their badge - where is the love.