Here's my summary of the key news overnight in 90 seconds at 9 am, including news the Australia-China free trade agreement talks may falter at the finish line.
But first, the ECB reported on its October meeting early this morning. They said a plan to begin buying private-sector assets this month would have a "significant impact" on the eurozone economy, but it left open questions about how big the program would be.
They are targeting a pool of €1 tln, (about NZ$1.6 tln) of securities tied to bank loans, known as asset-backed securities and covered bonds. Analysts expect them to buy about €200 bln but are doubting whether that will be enough to revive bank lending and prevent the eurozone from slipping back into recession.
The euro-centric IMF is warning that we are entering a 'new mediocre era' of low growth for a long time along with heightened risks. Christine Lagarde made the warning as she signaled cuts to the IMF global outlook for 2015.
In Australia, it looks increasingly like they may not end up with their own FTA with China. Unless there are major concessions on farm products the Aussies may walk away from these negotiations, according to reports. If that turns out to be the case, New Zealand's well entrenched deal will become a lasting advantage.
In China, they may have a big trade surplus in goods, but we should also note that they run large deficits in services. In August they had a US$21 bln services deficit, and that compares with their US$49 bln trade surplus.
In the US, new orders for American factory goods posted their biggest decline on record in August, 'payback' for an aircraft-driven jump a month earlier.
Excluding that impact, the data was unchanged.
On Wall Street stocks have moved back into positive territory, although markets are now awaiting tomorrow's American Non-farm Payrolls data release. The pre-cursor ADP series suggests it could be quite good this time.
In fact, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, a sign their labour market may be tightening.
More impressive is to look past the seasonally adjusted data - these numbers are falling very quickly.
UST 10 yr yields have slipped slightly today to 2.42% reflecting the eurozone concerns. New Zealand swap rates start today at their lowest level since November 2013.
And the oil price fell again and is now under US$91/barrel - at one stage overnight it was below US$90 - with the Brent price under US$93/barrel. The Saudis have decided to defend their market share against Iran and Iraq, and Nigerian oil that used to go to the US needs to find new buyers now that surging US output has made them an exporter. Russia is awash in oil too. Supply is overwhelming the slowing growth in demand.
Gold has had a small fall to US$1,213/oz.
We start today with our currency still unmoved by the dairy auction. In fact, if anything, there is a bit of a rebound going on. The NZD now up to 78.8 USc - that's a rise of almost 1c overnight - at 89.6 AUc, and the TWI is at 76.7. Markets are looking past the WMP price.
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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The European Commission may be conceding to corporate interests in controversial trade negotiations
http://www.commondreams.org/news/2014/10/01/leaked-ttip-documents-revea…
Where are all the NZ bank economists that were so confidently telling everyone that interest rate hikes were going to occur right through 2014, more hike supposedly in December 2014, then the OCR was supposed to be 4.5% by early 2015?
Are they going to acknowledge that their predictions were incorrect?
What percentage of home loan borrowers made decisions based on their confident assertions.?
When will the next round of 'Calls for interest rate hikes' from banks?
What benefit did the NZ economy get from the 4 rate hikes in 2014? Is there now an acknowledgement that NZ operates in a global environment is oversupplied, experiencing deflation, zero interest rates, QE, and destabilisation?
What behaviours is the NZ wage earner with a mortgage now acting economically, - less spending, more caution, less borrowing, etc. - these may be individually useful, - but the overall effect on small business, retail etc?
What is the inflation outlook for the best 18 months?
Where are all the NZ bank economists that were so confidently telling everyone that interest rate hikes were going to occur right through 2014, more hike supposedly in December 2014, then the OCR was supposed to be 4.5% by early 2015?
They are attending the same seminar vying to explain: -
About 36 months ago Ireland’s two-year notes were yielding 14% and its government and the Brussels apparatchiks were scrambling with tin cup in hand to stave off disaster. Now their yield is negative 0.01%. Read more
And of course this nonsense: -
The reverse repo program was supposed to provide “aid” toward establishing a hard(er) floor for rates. It obviously failed with the persistent spikes in repo fails, which denote effective repo rates at something between 0% and -3% (and closer to the latter than the former). Collateral, that interbank currency, is not getting out of the Fed “silo” (its vast SOMA holdings) to conduct business as needed. Read more
US needs to find new buyers now that surging US output has made them an exporter.
In case you think US is a net oil exporter DC, you do realize they still import ~6.5 million barrels each day to meet their consumption. Hopefully you don't mean 'net exporter' or your statement is misleading (unless you are referring to refined products rather than crude oil, or their small recent exports abroad - while still importing oil themselves).
We start today with our currency still unmoved by the dairy auction. In fact, if anything, there is a bit of a rebound going on. The NZD now up to 78.8 USc - that's a rise of almost 1c overnight
Yep, but the NZD amount of US sales at that new low auction price just got smaller - right?
I guess those still trading what were once called markets can expect another unmerited NZD overvalued rant at any moment from the TPTB.
with those interest rates how can it do anything but go up. IIRC Fundamental FX is low money supply equals higher $ demand. Increase money supply, it devalues existing holdings and $ falls. Since NZ money is governed by OCR, high OCR, higher interest = tight money supply = high dollar.
The Rabobank news on the price is terrible. sub $5?? no way are famers making equitable yield on that payout. What worries me about that, is fonterra selling at that price...but if they get seen trying to cross-subsidise by higher margins in the infant formula range, then the customers of their infant formula company (...hmm Beingmate? is it visible to the Chinese authorities and watchers?)
if the customers of that infant formula think that they are paying higher prices to cross-subsidise the gDT international trade ... then laws similar to that used in China recently to fine many foreign "price gougers" may be used again Fonterra. As Fonterra already has one strike (melamine) they may be seen as un-repentant and disrespectful, which could result in forfeiture of assets and fines, including foreign equity holdings. Why would our government allow such a thing? Fonterra is privately owned, which gives the govt distance, and it is likely that in a gesture of good faith and no-hard feelings the foerign government may forgive some government paper debts....
JP Morgan now estimating 76 million households and 8 million businesses were comprised in cyberattack.
http://www.bloomberg.com/news/2014-10-02/jpmorgan-says-data-breach-affe…
If ebola becomes a problem in western countries, as is predicted here and here. Then this reuters article predicts the following. "We would expect global economic activity to decline, raw material prices to collapse, risk aversion to rise, monetary policy to ease, and interest rates to fall."
Perhaps John Keys wish to have NSDUSD at 0.65 isn’t so far-fetched.
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