90 seconds at 9 am: US consumers pull back

Earlier US rate rises?; US consumers restrain themselves; UK banks take hits; China to end farm subsidies; TWI record; NZ$1 = US$0.87.7, TWI = 81.5

27th Jun 14, 7:28am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news second quarter consumer spending in the US is lower than expected.

But first, one of the voting FOMC members said overnight that he expects the US Fed to start raising its benchmark policy interest rate in the first quarter of 2015, far earlier than when most others have assumed.

American consumer spending rose less than expected in May, prompting economists to downgrade estimates for second-quarter growth.

There is little doubt their economy is expanding however. Another report on overnight showed the number of Americans seeking unemployment benefits fell again last week. It's just expanding slower than may have been assumed.

It's not been a good night for UK banks. First Barclays is facing a lawsuit in New York for its 'dark pools' trading. Other banks have suddenly started draining these pools, trying to distance themselves. And Standard Chartered Bank is warning of sharply lower earnings.

And China announced overnight that it is phasing out its decades old farm subsidy system.

China also said it has uncovered US$15 billion of loans tied to illegal gold-financing deals since 2012, a finding that could add to wider concerns over its metal-backed financing issues.

Equity market prices are falling in New York. The S&P500 and Dow are both lower in late afternoon trade, and yields on benchmark UST 10 yr bonds are also down sharply, now at 2.52%. Oil and gold are also both lower today.

The US dollar is weaker, especially against the Kiwi dollar. In fact we start today with the NZ dollar at yet another record post-float high on the TWI after a strong showing against nearly every other currency. We are now at 87.7 USc which is a rise of a full cent since Wednesday, and 93.3 AUc. None of the individual pairs are at a record but the overall set as measured by the TWI is, now at 81.5.

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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1 Comments

by Gareth Vaughan | 27th Jun 14, 11:39am 1403825990

John Key welcomes annual two way trade with China exceeding $20b;

Prime Minister John Key has welcomed today’s release of statistics that show two-way trade with China has exceeded $20 billion on an annual basis for the first time.

“In 2010, two-way trade was worth $10 billion; and our exports to China were $4 billion. At that time, the then-Chinese Premier Wen Jiabao and I agreed on the ambitious target of doubling two-way trade to $20 billion by 2015,” says Mr Key.

Statistics out today show that New Zealand is now exporting more than $11 billion worth of products to China, and two-way trade has already surpassed the goal of $20 billion.

Mr Key says; “The growth is showing no signs of slowing and that is why in my visit to Beijing in March, President Xi Jinping and I set an ambitious new goal for trade. We are now aiming to reach two-way trade of $30 billion by 2020.”

New Zealand’s economic relationship with China has deepened markedly in recent years.

“We have seen rapidly escalating demand from China as people have become wealthier, and naturally turn to higher quality products. As a high quality food producer, New Zealand is well placed to help meet that demand.

“This Government is committed to ensuring we have the right resources in place to support this growth and recognise the ever-increasing importance of the China market.

“That is why we have recently increased our personnel working on the China relationship, both in China and back in New Zealand.

“The New Zealand government and Kiwi exporters are committed to continuing to improve our relationship with China, because it creates jobs and increases incomes.

“Reaching the $20 billion target ahead of schedule shows that our investment in this market is paying dividends.”