90 seconds at 9 am: China speculates

US confidence slumps; Australia's leading index rises; rumours of new China QE; crowd funding of property investment in Australia, UST yields, oil, gold unchanged; NZ$1 = 77.3 US¢, TWI = 80.9

29th Apr 15, 7:16am by David Chaston

Here's my summary of the key issues from overnight that affect New Zealand, with news of some very major changes overnight, none of which involve Greece.

American consumer confidence unexpectedly slumped in April, according to a widely respected survey released overnight. This has unsettled markets mainly because of the size of the fall which retraced all the prior month's gain, and more.

At the same time, the same group released its leading indicator survey for Australia and that showed gains. Small ones, true, but gains none-the-less.

The effect on currency markets has been direct. The US dollar has fallen, the Aussie has risen. And that has shifted relationships for the Kiwi dollar. We are now at our highest level against the greenback, the Chinese Yuan and the Japanese yen in three months, our lowest against the Australian dollar in six weeks.

Back in the US, their homeownership rate has slipped to a 25-year low, but continued strong gains in the rate which Americans are establishing households supported the view that the housing sector will boost their economic growth this year.

In China, rumours that the People's Bank of China is planning to boost liquidity have sparked speculation that China may start its own new quantitative easing program. The Shanghai stock market went crazy on the suggestion, rising +3% yesterday.

In Australia, an interesting property financing development has been reported. Diversified property group Mirvac has teamed up with online funder VentureCrowd on a new investment platform that could challenge the role of banks in financing new developments. Mirvac's use of techniques such as P2P or crowd funding is likely to give those sectors a turbo-boost given the heft Mirvac can bring to the concepts. It has the ability to be a game-changer for everyone involved, including banks who could be the big losers.

Back in New York, the UST 10yr benchmark yield is marginally higher today at 1.95%.

The US oil price remains at about US$57/barrel, while Brent crude is also stable at US$65/barrel in trading today.

The gold price is another key commodity with an unchanged price today, still at US$1,205/oz.

As we noted earlier, the New Zealand dollar starts today rising again. It is at 77.3 US¢, which is up almost +1c from where it was this time yesterday, at 96.4 AU¢ which is almost -1c lower, and 70.3 euro cents. The TWI is at 80.9.

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

by skudiv | 29th Apr 15, 7:52am 1430250750

Sum ting wong in China?
Historically, electricity consumption and economic growth in China have been very closely linked. "From 2005 to 2013, the average elasticity of electricity demand was 1.09, meaning electricity demand was up about 1.09 percent for every percent rise in GDP," Fridley wrote in an email. "In 2014, that number fell to 0.51, the lowest in this 10-year period. During the economic crisis of 2008, it did fall below the average, to 0.60, but quickly rebounded to above 1."
http://resourceinsights.blogspot.co.uk/2015/04/chinese-energy-figures-s…

Some would say that the market is efficient and a drop in prices will lead to a reduction in supply. Instead what we are facing is an increase in supply for commodities and many other goods, as lower prices translate into lower cashflow, forcing producers to increase supply to meet credit requirements. Which keeps prices low.
On the other side of the equation we are told that high prices will lead to a reduction of demand. Instead, in Auckland property rising prices have lead to an increase in demand, pushing prices up even further, fueling even more demand.

The laws of economics are not like gravity, it'll be interesting to see how all this ends.

by Alter Ego | 29th Apr 15, 8:53am 1430254392

The Consumer Confidence Trick is to overload them with debt and keep them in hock for the rest of their lives.

Unfortunately it applies to most of us.

by OMG_WTF | 29th Apr 15, 9:55am 1430258151

Got out of that trap with the divorce in 1985 and never looked back.

by King of the whiners | 29th Apr 15, 9:32am 1430256744

Well worth cogitating upon:
http://www.telegraph.co.uk/finance/comment/jeremy-warner/11569329/Jerem…

''We live in an “extend and pretend” world in which economies pathetically fight between themselves for any scraps of demand. One burst of money printing is met by another in an ultimately futile, zero-sum game of competitive currency devaluation. As if on cue, along comes another soft patch in Britain’s economic recovery, with first-quarter growth quite a bit weaker than expected. Like a constantly receding horizon, the point at which UK interest rates begin to rise is pushed ever further into the future. It's like waiting for Godot.'''

by Stephen L | 29th Apr 15, 10:18am 1430259535

Two broad questions come to mind as a result of this colossal bond buying. What should a small country like NZ do in response? Are we losing market share of wealth, assets, and productive industries by not taking part? I would contend that we are.
Separately, Helicopter Ben as an academic talked of printing money and chucking it out of a helicopter- hence his nickname. Arguably when central banks print money and "loan" it to their respective governments this is exactly what they are doing, given in most cases recently, these "loans" will never be repaid. Why are more governments not taking this route of printing, rather than the "zero interest rate encouraging more private debt" route that most have taken? I have read that monetising of public debt is "illegal". Who says it is illegal? Is that an individual country decision and law, or an international treaty? If it is a treaty, how have countries got around it when they have done it- apart from the pretense that they will repay the money to themselves? Have these countries been captured by their commercial banks? I understand there is significant moral hazard whichever route is taken, but the current route of loading up with real debts given they involve third parties, seems the least optimal option, as deleveraging it all will inevitably be very messy..

by Stephen Hulme | 29th Apr 15, 10:37am 1430260629

Joe Doe US citizens are not feeling the rewards of Federal Reserve money printing antics.

US Census released its latest homeownership data, which confirmed that for what is left of America's middle class, owning a home has become virtually impossible, with the homeownership rate tumbling from 64.0% to 63.7%, which is tied for the lowest historic print since the first quarter of 1986, with the only difference that then the trendline was higher. Now, as can be seen on the chart below, it isn't. At this rate, by the end of the 2015 and certainly by the end of Obama's second term, the US homeownership rate will drop to the lowest in modern US history.

There is no surprise why this is happening. As Bloomberg notes, "entry-level buyers are struggling to save enough money to purchase homes as gains in U.S. real estate prices outstrip increases in wages, while mortgage lending remains tight. The median household income in March grew 2.1 percent from a year earlier while the median home price gained 7.8 percent in the same period. Last year, the share of home purchases by first-time buyers fell to the lowest level in almost three decades, according to the National Association of Realtors."

“The No. 1 issue in the housing market right now is wages,” said Jay Morelock, an economist with FTN Financial in New York. “For the housing recovery to be sustainable in the long run, we have to see wages increase at a faster pace.”

Now that, as we have shown previously, is a big problem especially for non-supervisory workers in America, whose nominal wage growth is now rapidly approaching the level last seen just after the great financial crisis. Read more

by Mike B | 29th Apr 15, 10:24am 1430259889

David i have just gone into my account and now i cannot go back and look at past comments. Is this the way it is now?

by Henry_Tull | 29th Apr 15, 6:28pm 1430288928

massive, who was the bright spark that thought that a "user requirement" or "enhancement"...

We looked at the search function on top right.
1. search by user name /content shows articles, with link, but not by date record it seems (and doesn't seem by alpha either) - Q what basis used?
2. search by user name / site, is trash, static text that seems to mean nothing
3. search by user name/ user goes to what MB discussing.

Q: has access to the old data base been broken?

by iconoclast | 29th Apr 15, 3:49pm 1430279392

Here is the other side of Dr Eric Crampton's growth story - a cancerous canker

Auckland is now a casino for investors - who would live there

Basel Brush 19/01/2015
On our morning walk ... Property after property (up to 70% of them) show signs of unkempt verges, once tidy hedges now growing wildly and uncut lawns strewn often with junk. Add the deteriorating exterior paintwork
http://www.interest.co.nz/opinion/73606/property-council-blasts-propose…

two otherguys, 21/04/2015
Once owned and occupied a house in Hillcrest on the North Shore for 15 years. 10 minutes from the CBD. More desirable now than then. All the neighbours kept their places neat-n-tidy, lawns always mown, everything spick and span. Went back for a look-see, to revisit old memories. Now, most of the street looks like a street of rentals. Scruffy, tired, run-down, unkempt. Wouldn't live there now
http://www.interest.co.nz/property/75084/academics-say-unprecedented-re…

NZherald 29 April 2015
It's a growing problem
Overgrown sections are second only to (for sale) signs as the hottest topic of complaint calls
massively overgrown properties, six-foot high grass and multiple rubbish in the yard and harbouring vermin and risking neighbours' health
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11440062

NZherald 29 April 201
New Zealand is the second-cheapest country in the world for Chinese property shoppers but also one of the most popular, according to information gathered from a Chinese real estate site
The Wall Street Journal reports, information from online real estate portal Juwai.com found the Chinese are looking for New Zealand places selling for an average US$599,523, only outstripped by the cheapest, Australia, at US$546,705.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=114…