US labour markets stronger; Greece makes IMF repayment; France investigates HSBC; Moody's says NZ doing well; gold price falls; euro slumps; NZ$1 = 75.4 US¢, TWI = 80.8

US labour markets stronger; Greece makes IMF repayment; France investigates HSBC; Moody's says NZ doing well; gold price falls; euro slumps; NZ$1 = 75.4 US¢, TWI = 80.8

Here's my summary of the key issues from overnight that affect New Zealand, with news New Zealand got a positive review from Moody's.

But first, the number of Americans filing new claims for jobless benefits rose less than expected last week and previous weeks data was revised lower. The four-week moving average of these unemployment benefit claims has now hit its lowest level since 2000, suggesting an abrupt slowdown in job growth seen in the March non-farm payrolls report was unlikely to be repeated.

Overnight, Greece made a crucial €450 mln payment to the International Monetary Fund, but it remained unclear whether Athens can satisfy sceptical creditors on economic reforms before it runs out of money in the next week. The payment may have used up all its liquid resources.

However there are also reports the ECB has raised its emergency funding for private Greek banks as the local bank runs intensify.

In France, HSBC says it has been placed under formal criminal investigation by French magistrates over alleged past tax-related offenses at its Swiss private bank.

Moody's overnight gave the New Zealand economy praise saying they expect our economy to tick along nicely with solid +3.2% growth in 2015.

Construction will drive domestic demand. The external sector will be a drag because of falling dairy prices however. They also forecast inflation will remain low and the Reserve Bank will keep rates unchanged in 2015. 

In New York, the UST 10yr yield was virtually unchanged overnight at 1.93%. 

The US oil price is also unchanged today at US$51/barrel and Brent crude at $57 a barrel. 

The gold price has kept falling however and is currently at US$1,194/oz.

The New Zealand dollar will start today higher at 75.4 US¢, still very high against the Aussie at 98.2 AU¢, and the TWI is just on 80.8. We also have hit further all-time record highs against the sinking euro and the NZD is now at 70.9 euro cents.

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

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

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9 Comments

Moody's overnight gave the New Zealand economy praise saying they expect our economy to tick along nicely with solid +3.2% growth in 2015.
 
Unless, of course, one falls into that low income group (the majority) that is unable to service existing debt structures and has to rely on ever expanding current account deficit foreign financing sources to pay that which is due today,  Capitilising interest costs with higher house prices via bank loans is not an economy.
 
Moody's report says that when compared to other similarly rated sovereign issuers, New Zealand's economy has demonstrated a track record of faster and more stable growth, which counterbalances its economic weaknesses, namely the small size, high concentration and relatively low income levels in comparison to other Aaa-rated sovereigns. Read more

Capitilising interest costs with higher house prices via bank loans is not an economy.
 
Nicely put. National seem to be following Labour's well trodden path to household debt maximisation. Presumably $200,000,000,000 of unrepayable household debt isn't enough?
 
My current thoughts are this continues for a few more months (12?) as momentum in Auckland carries house prices further into the realms of fantasy. At some point reality (ie dairy price halving) catches up (presumably by the NZD halving in purchasing power). People in cities have no idea where their wealth comes from so they assume it is because they are very clever and sophisticated and will just keep coming.

"People in cities have no idea where their wealth comes from so they assume it is because they are very clever and sophisticated". Thanks for that, nice to start the day with a smile.

Like "Think Big" only without the nation building assets, or the skilled engineering contractors.
 
On the ag side

Over  the  last  two  decades  bank  lending  practices have  changed  quite  dramatically  with  the  advent  of  long  term  interest  only  lending.  Initiated  by  PIBA,  this became  the  mainstay  of  Rabo’s  credit  policy.  It  proved  to  be  extremely  popular  compared  to  traditional  Principal  and  Interest  repayment  programs

.  

The  majors  were  hesitant  to  adopt  this  practice  and  consequently  Rabo’s  market  share  grew  rapidly  in  the  decade  following its acquisition  of  PIBA.  We  did  adopt  a  similar  policy  at  NAB  although the  credit  function  took  some  convincing.  The  logic  was............
 
http://www.agriculture.gov.au/abares/outlook-2015/Documents/mcarroll.pdf
http://www.agriculture.gov.au/abares/outlook-2015/Pages/Program.aspx
 
Note lending more is not banking innovation, or maybe it is.
 

Bought to you by the guys and girls that didnt see the GFC coming or its effects.

Watch this space for the inevitable current account blow out as a onsequence of current settings. Low inflation whihc is no longer the issue and no manufacturing - Great outcome.
 
We have seen less than US $ 0.50 twice in the last 10 years. Maybe here we go again !

As and when the NZD reaches USD 0.50 we will probably get all the inflation we could possibly wish for. Until then lets party on by burning the capital we inherited (ie production related assets).

oh but you are a 'drill baby drill" person, only now you are not?   So to be clear its great our forebearers left us some assets yet you did advocate burning through them in just your generation, only now you are not?
If (when) we see 0.50 that should be because all the "loose" money has run back to the USA where it feels "safe"  due to a global event of considerable magnitude (think 2nd Great Depression).  At that point assets values will be slashed and I find it in-conceivible that we will be in an inflationary event that can be delt with by raising the OCR.
 
 

Deutsche Bank facing a big fine - http://www.cnbc.com/id/102574756