90 seconds at 9 am: Key seeks better deal

US house sales surge; new Greek offer promising; China trade NZ's focus; UST 10yr yields rise to 2.35%; NZ$1 = 68.7 US¢, TWI-5 = 72.1

23rd Jun 15, 7:23am by David Chaston

Here's my summary of the key issues from overnight that affect New Zealand, with news of new activity on the New Zealand-China trade front.

But first, in the US, house sales surged to a 5 year high in May as first-time buyers stepped into the market. Existing home sales increased +5.1% to an annual rate of 5.35 mln units, the highest level since November 2009 and 2015 sales are on track for their strongest gain since 2007. This data will be noticed by the Fed.

In Europe, finance ministers there sounded positive after Athens submitted new proposals that would raise some taxes and cut costs by adjusting pensions. These proposals rely on wealthy Greeks paying more tax, something that has not been in their DNA. Still, markets reacted positively to the first set of proposals that everyone could agree on. Eurozone CDS spreads immediately rallied. How important this turns out to be needs to be assessed without the filter of headline fatigue.

Late yesterday, John Key said New Zealand is trying to renegotiate a better FTA deal with China using the most-favoured-nation clauses in the existing deal. This FTA is now 7 years old. At the same time, Auckland Council said it was pursuing US-New Zealand-China feature film co-productions.

Back in New York, UST 10yr benchmark yields rose sharply following the suggestion of a possible Greek resolution, up +9 bps and are now at 2.35%.

US oil markets are marginally higher with the US benchmark price just over US$60/barrel, and Brent crude is now just over US$63/barrel.

The gold price fell -$15 to US$1,185/oz.

The Kiwi dollar has touched a five year low against the greenback this morning with the US currency at its highest level since the Fed review last week. The New Zealand dollar starts today at 68.7 US¢, at 88.8 AU¢, and 60.6 euro cents. The TWI-5 is now at 72.1.

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 today is by following our Economic Calendar here »

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4 Comments

by Stephen Hulme | 23rd Jun 15, 9:26am 1435008384

But first, in the US, house sales surged to a 5 year high in May as first-time buyers stepped into the market. Existing home sales increased +5.1% to an annual rate of 5.35 mln units, the highest level since November 2009 and 2015 sales are on track for their strongest gain since 2007. This data will be noticed by the Fed.

For the 39th consecutive month, home prices rose (by 7.9% YoY) driven by prices rises at the high-end (and a 13.9% drop in prices at the low-end) but NAR's chief economist proclaimed this as sustainable (despite stagnant incomes and home prices about to take out the previous peak) but with 67% of investors paying cash for homes in May, the demand is clearly foreign as Chinese buyers surpass Canadian snowbirds as QE floods out into every asset. Read more

by iconoclast | 23rd Jun 15, 12:21pm 1435018865

Corrupt overseas buyers ramp up property price, burn locals

Foreign Government Money in play

The first hard evidence has emerged of Australian property prices being inflated as real estate is used as a safe haven or money laundering hub by corrupt foreign nationals

The alleged criminal conduct is linked to multimillion-dollar property transactions which drove a group of small Australian tradesmen to the wall and which implicates top Malaysian officials and businessmen. Fairfax Media can reveal that a group of super-rich Malaysian officials, spending their own government's investment funds, have bid up the price of a Melbourne apartment block from $17.8 million to $22.5 million. The extra $4.75 million was then laundered out of Australia and paid as bribes in Malaysia. About $80 million worth of Australian property, including apartment blocks in Swanston, Queen and Exhibition streets in Melbourne's CBD, are implicated in dealings by the same group of high-ranking Malaysians

Fairfax Media go to extreme lengths to verify their facts - so you can believe it - it's not anecdotal

How it's done - listen to the audio
http://www.smh.com.au/national/corrupt-overseas-buyers-ramp-up-property…

by iconoclast | 23rd Jun 15, 1:11pm 1435021864

Another perspective and update - student accommodation - who's buying

Even in Melbourne's booming property market, the $22.5 million price tag for a building designed like an IKEA cupboard seemed well above the odds. That's because it was

An eight-month Fairfax investigation has traced suspicious money flows, court files and corporate records across three continents to uncover why Dudley House's purchase price was so high.

http://www.theage.com.au/national/corrupt-malaysia-money-distorts-melbo…

Anyone doing any investigations in Auckland? - doesn't seem to be

by profile | 23rd Jun 15, 3:12pm 1435029174

Icon - surely this laundering has been done seamlessly for ever and day. Look at the problems Colorado's legit. dope businesses are having with the administration of their cash without banks. Yet in the same country, miraculously, $100 billion of illegal drug works its way through the banking system, every year, without coming up on the radar. Apart from the odd Citi/HSBC scandal where nobody gets handcuffed... Is there anything different about laundering today than there was yesterday or is the only rug left the Auckland housing market?

This article is beautiful - complete with jumbo sized front desks to take all the legit cash. I love how the bank will still take the cash but the punter has to, literally, wash it first. Imagine trying to get rid of $100 billion/annum of the dirty stuff without the help of the establishment.

http://www.slate.com/articles/news_and_politics/altered_state/2014/01/c…

"Much of the money swilling into HSBC from the cartel came through an apparently small exchange house, Casa de Cambio Puebla. The bank would later protest that it knew not whence the money came, but Puebla had been under investigation by Mexican and US Federal authorities for two years when HSBC was caught, for handling a staggering $376bn of suspect money for an American bank, Wachovia. Wachovia was punished with a “deferred prosecution” – a yellow card; none of its employees was arrested.

HSBC carried on, however, through the same exchange house and other channels: a bank it had bought in Mexico, another in California and, it emerged, even through its own branches.When HSBC was caught out, the head of the US Justice Department’s criminal division, Lanny Breuer, said that cartel operatives would arrive at the bank’s branches and “deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows”." And this is in Mexico where only a small fraction of the ultimate street value is captured.

http://www.theguardian.com/commentisfree/2015/feb/15/hsbc-has-form-mexi…