90 seconds at 9 am: ANZ probed over manipulation

US building permits rise strongly; markets await Fed minutes; Russia's big bond failure; China's big rail route; ANZ's big black eye; NZ$1 = 78.6 USc, TWI = 77.9

20th Nov 14, 7:20am by David Chaston

Here's my summary of the key news overnight with news that ANZ is being investigated for rigging Aussie interbank interest rate benchmarks.

But first, American building permits issued in October are at a 6½ year high, suggesting the housing market there is still recovering well. This data was well above expected levels and financial markets noticed. In addition, construction starts for single-family homes rose for a second straight month.

Backing up this trend is news that mortgage applications are picking up recently.

However, markets are awaiting the release of the minutes of the last Federal Reserve meeting (8:00am, now released - the Fed is upbeat on the US economy, but seems in no rush to normalise rates while inflation is low.) and that will set the tone for the rest of the days trading. American markets have been positive overnight with positive earnings reports, especially by retailers.

Overnight Russia tried to sell US$100 mln in government bonds but there were buyers for only US$10 mln in its first debt auction in six weeks. Investors are shunning Moscow's debt amid an intensifying conflict in Ukraine and a bear market in oil.

In China, people think big these days. Yesterday they launched a new scheduled freight train service from the coastal port city of Yiwu ... to Madrid in Spain. That's a piece of impressive ambition.

In Australia, seven traders at ANZ have been 'stood down' after being investigated by ASIC possible manipulation of interbank interest rate benchmarks.

In New York, UST 10yr bond yields rose in mid-afternoon trade to 2.35% ahead of the release of the latest set of Fed minutes.

The oil price is rising today, but not aggressively. It is now just above US$75/barrel with the Brent price above US$79/barrel.

There has been some interesting action on the gold front overnight. It has risen to now just on US$1,194/oz but has been very volatile and will no doubt be like this until the Swiss vote on December 1 our time. In a poll out overnight, support for adopting a gold standard in Switzerland is waning, with only about 38% in favour. This is down from 44% in the previous poll.

The NZ dollar is softer today as the USD strengthens and the implications of falling dairy prices sink in. We are starting at 78.6 USc, 90.1 AUc, and the TWI is at 77.9.

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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5 Comments

by dtcarter | 20th Nov 14, 10:02am 1416430946

Think big alright. China has various to build a high-speed rail connection to Europe to speed up that freight service.

http://www.nce.co.uk/china-considers-high-speed-silk-railroad-to-europe…

http://geopoliticsrst.blogspot.co.nz/2012/05/china-and-turkey.html

Alternative route through Russia.

http://www.dailymail.co.uk/travel/travel_news/article-2796861/plans-unv…

Meanwhile back in little old Auckland, we've just given up on rail to the airport. Picking a route to designate is just too hard for us apparently. http://transportblog.co.nz/2014/11/18/what-is-happening-with-airport-rail/

by Stephen L | 20th Nov 14, 12:41pm 1416440492

The following article may be interesting to those interested in QE and how it works.

Jeremy Warner in the Telegraph on money printing

There is apparently a debate looming in the British Parliament on the subject. Warner's piece is against the idea of money printing by the Reserve Bank- he prefers it to be done solely by the commercial banks, based largely on the argument that that is largely how it's always been done, and for the most part, that has worked.

He hasn't actually presented any coherent argument against some alternatives, for either the Eurozone or anywhere else.

The following paragraph was telling:

At last week’s Inflation Report press conference, I asked the Governor of the Bank of England, Mark Carney, if there were any circumstances in which he would consider it appropriate to print money to pay for the deficit – so-called helicopter money. Absolutely not, he said, before going on to explain that it would be a slippery slope which was almost certain to end in uncontrolled, if not hyper, inflation.

Any keen observers will be aware that the BOE has in fact printed £375 billion in the past few years, precisely to fund some of their deficit, albeit in a circuitous manner where there is a pretense that it will be paid back. Hint: It will never be paid back.

Carney at least gives a clue as to why central bankers resist the idea- they don't trust the politicians. Fair enough you may say, but there is no other economic reason. Notably an independent central banker could easily give limits to the amount he was willing to fund, based on estimates of inflation and any other stipulated targets. There need not remotely be an unlimited licence to spend by governments.

It will be interesting to see how the parliamentary debate pans out. Given the conservatives are in power, and fractional banking, with QE and low interest rates blowing asset bubbles but not much else, where those bubbles enrich the already asset rich, and especially the highly leveraged asset rich, the status quo is likely to prevail.

by steven | 20th Nov 14, 1:30pm 1416443414

Except QEing isnt the same as straight up money printing is it?

I find it interesting that the inflationistas wail about how we'll see significant inflation, constantly pronouncing that QEing is money printing, somehow glossing over such minor details that is isnt along that narrative.

"not much else" so despite QEing we have little inflation globally and in fact looks more like dis-inflation. However somehow the very reason for QEing to avoid deflation isnt mentioned. Even here in NZ where we are not QEing/printing much at all and have a "high" OCR...very little inflation.

"dont trust the Pollies" too bloody right, nor these pundits, ffs ppl pay to listen to these jokers.

regards

by Mike B | 20th Nov 14, 1:51pm 1416444696

Hi Stephen L - I dont particularly agree with J Warner. As i see it there are two main problems.

1) - They have made money a monopoly controlled by banking cartels.

2) - Governments and Councils cannot control their spending

Back in the early days of settlement in America. As the people moved across the new frontier and set up new settlements. There was no monopoly on money and anyone could set up a bank. These banks had their own currency and gave out high risk loans, but it succeeded in getting new settlements up and running.

I believe we have to make a decision. Should money be a monopoly run by banks or should we allow anybody to create their own currency? (maybe we have with Bitcoin)

If money is a medium of exchange, then who creates that medium is unimportant, so long as it works

Alternatively we can, as now, allow banking cartels to continue controling a monopoly on our money system.

We cannot trust, overspending, governments to control a money monopoly

Should we have an independant, elected group, to control a monopoly money system?

Remember, your deposit is no longer safe in the bank. If we had independant banks, each issuing their own currency, then some, maybe many, will go broke and you will loose your deposit. Is that any different to now?

As for government spending - only a proper written constitution can solve that problem.

by Boatman | 20th Nov 14, 1:38pm 1416443932

Auckland Council has a $100 , 000 , 000 . 00 ( One hundred million Dollar ) blowout on IT

What on earth is going on with these people ?

Heads must now roll