Here's my summary of the key news overnight in 90 seconds at 9 am, including news analysts are cutting back sharply their expectations of Chinese growth.
In a major new look at China's prospects, the Conference Board is seeing a sharp slowdown of growth over the next 10 years and a struggle to push through necessary reforms. They also see a 'nose-dive' in Chinese productivity mainly because the big infrastructure investments they are making no longer generate meaningful returns.
This less-than-optimistic review comes as the Chinese leadership is meeting to find ways to maintain the momentum of the past decade.
But one long-term beneficiary the researchers see - foreign firms operating there. Later today there will be a raft of important data releases in China including Q3 GDP and retail sales.
In Hong Kong, the WSJ has a report that says "Hong Kong Chief Executive Leung Chun-ying said the poor and working class would dominate elections if the government met the demand of student protesters and allowed candidates for the city’s top post to be nominated by the public." It does make you wonder if it is an accurate report, but if so, it is a remarkable insight to what China is afraid of.
In Europe, French ministers are pressing Germany to put in place a three-year, €50 billion stimulus program, but the effort is likely to deepen the confrontation over economic policy between Paris and Berlin because the Germans will only do it without more debt, an impossible constraint for France.
By the way, it has probably been a poor month for icon investor Warren Buffett. Firstly his stake in British retailer Tesco tanked after tales of dodgy accounting, and now his investment in IBM losing him more big bucks as the icon tech giant tosses out its earnings forecasts as its markets move faster than they can respond.
In New York, however, stocks are up in mid afternoon trade.
UST 10yr yields have started the new week virtually unchanged at 2.20%. In New Zealand this morning we start with wholesale swap rates higher, but only back to where they were at the beginning of last week.
The oil price is now under US$83/barrel with the Brent price now just under US$86/barrel.
The gold price is up, now at US$1,244/oz.
We start today with our currency level higher today. The NZD is up to 79.7 USc with some international analysts suggesting it could go 1c higher soon, at 90.7 AUc, and the TWI is at 77.2.
If you want to catch up with all the changes on Friday 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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Here's something from ANZ's morning focus note;
ECB STARTS BOND PURCHASE PROGRAMME.
Bloomberg news has reported that the ECB has bought covered bonds, citing “people familiar with the matter”, because there was no formal announcement. Nonetheless, everybody is talking about it and it is understood that they acquired the short dated bonds from two of France’s large banks.
It marks what could be the start of a EUR 1 trillion journey if they go the whole hog. But as we noted in yesterday’s market focus, some troubling signs are emerging in sovereign bond markets in Europe again, with peripheral yields up again today (but not as high as they got amidst last week’s melee).
Having made no progress on getting debt to GDP down (euro area debt to GDP stood at 92.6% in 2013 as compared to 66.0% in 2007), it is crucial that Europe keeps funding costs down, especially given that growth is flagging (last recorded at +0.7%y/y in Q2) and a budget balance of -3.0% of GDP.
This is not the stuff of sustainability, but that’s nothing new. What is new is that markets seem to be flexing their muscles and gritting their teeth again. It could get ugly, so hang on to your hats (and don’t discount the value of NZGS bonds!).
In New York, however, stocks are up in mid afternoon trade.
A pale imitation of the Nikkei 225 ramp (~4.0%), engineered by yet another government orchestrated intrusion into what used to be a price discovery mechanism.
Japan’s $1.2 trillion retirement fund will increase its allocation target for shares to about 25 percent from 12 percent, the Nikkei newspaper reported without attribution.
The Government Pension Investment Fund will also boost its holdings of foreign bonds and stocks to about a combined 30 percent from 23 percent, while reducing domestic notes to the 40 percent level from 60 percent, the Nikkei reported on Oct. 18.
Investors are awaiting any word from the GPIF on its new allocations after a government-picked panel advised it to reduce bonds to boost returns. Takatoshi Ito, a member of the panel, said his personal recommendation is to increase the target for Japanese and foreign stocks to about 25 percent each and cut notes to around 35 percent. Read more
Question David
Daily you mention WTI West Texas Intermediate and Brent prices
Australia doesnt do much refining these days and imports most of its petroleum from Malaysia and that uses the TAPIS benchmark price
Often WTI and Brent can and will move while TAPIS can remain static or go the other way
What feedstock does NZ use?
The correct benchmark for NZ is usually a Dubai light index, I believe. But as I don't have 'live' or timely data for those prices (only delayed weekly prices), I report WTI and Brent movements as a bit of a proxy. The WTI price has suddenly become quite an international marker now given the US is now exporting. And a couple of years ago, major infrastructure work was done at the Midland TX pipeline exchange point that allowed mid-American crude to flow south to the Galveston port. That change allowed large US crude shipments to be available on the international market, and is a major reason WTI and Brent prices have come much closer.
Some NZ product is priced on refined product benchmarks out of Singapore. That involves refinning demand-and-supply issues which as you note can move independently of core crude prices. Nothing is simple, but for 90 at 9 I try to focus on the core international drivers. I only have 10 secs or so for this ...
think its,
http://en.wikipedia.org/wiki/Dubai_Crude
as its sour like our imports? and indeed may well be.
Though our exports are classed as sweet and fetch a premium?
US "exporting" is interesting,
http://oil-price.net/en/articles/partial-lift-of-crude-oil-export-ban.p…
Unless you have newer info? the ban is still in place.
regards
The future of Auckland
Astute observation about Hobsonville between Marcus Lush and Bernard Hickey this morning
Side-by-side housing. 8 Houses where once there would have been 2
Rates have skyrocketed 50% in Hobsonville
With tight density ACC extracts $ zillions in rates
Limited infrastructure to show for it
Where's the money going?
Slums of tomorrow?
http://www.radiolive.co.nz/AUDIO-MARCUS-LUSH-Radio-Lives-Finance-man-Be…
And migration travelling at 6125 for the month for an annualised rate of 73500
http://interest.co.nz/news/migration-adds-another-45414
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