sign up log in
Want to go ad-free? Find out how, here.

US confidence rises; Greeks enrage creditors, set vote, impose capital controls; China cuts rates as stocks crash; BIS warns again; Aussies die faster; UST yields rise; NZ$1 = 68.3 US¢, TWI-5 = 72.3

US confidence rises; Greeks enrage creditors, set vote, impose capital controls; China cuts rates as stocks crash; BIS warns again; Aussies die faster; UST yields rise; NZ$1 = 68.3 US¢, TWI-5 = 72.3

Here's my summary of the key issues from over the weekend that affect New Zealand, with some very big issues to cover today.

But first, American consumer sentiment rose in June to the highest level since January, suggesting that spending would strengthen this year. The respected University of Michigan survey showed its index rose to 96.1 this month, from 90.7 in May.

It is likely that American jobs data out on Thursday will confirm their labour markets are growing strongly again. That means the Fed is likely to raise rates. And that will have a big influence on our swap markets.

Across the Atlantic, Greek lawmakers on Sunday authorised the Prime Minister to hold a referendum on July 5th over the EU bailout terms, enraging their creditors and increasing Greece's chances of exiting the euro zone. The Prime Minister said he will campaign against it.

He also demaded the ECB support the Greek banks while the run on them is intensifying; but they refused to do so. And these angry creditors refused to extend the June 30 due date of their loans to accommodate the referendum, leaving it facing a default that will almost certainly push it out of the euro.

And then earlier today he announced that Greek banks and their stock exchange will be shut on Monday, and he has imposed capital controls, taking the standoff to a dangerous new level.

This car crash is not likely to have much influence on our markets but contagion among southern European country bonds is expected.

Staying in Europe and largely unnoticed, the Bank of International Settlements issued yet another strong warning on the dangers of low interest rates and the distortions they are causing the global economy.

Elsewhere, and in somewhat of a surprise announcement, the Peoples Bank of China cut lending rates for the fourth time since November and reduced the amount of cash that some banks must hold as reserves. It is stepping up efforts to support an economy that is headed for its poorest performance in over 25 years. They also injected NZ$7 bln into credit markets, a move made more important given the -7% drop in their stock markets on Friday. Their unhealthy stock market bull run is probably over.

Chinese economic trends will affect Australia, and New Zealand indirectly.

In Australia on Friday, there was data showing unexpected weakness in their population growth. A surge in deaths and a slowdown in births and immigration has produced their weakest population growth in eight years, placing a cloud over official growth forecasts and increasing the chances of more interest rate cuts.

And in Melbourne and Sydney, their housing markets are showing non-seasonal signs of cooling quickly. Maybe those demographic details are starting to bite.

Back in New York, UST 10yr benchmark yields rose sharply and are now at 2.47%. Expect that jump to be reflected in local swap rates today, especially at the long end.

US oil markets are basically unchanged with the US benchmark price just under US$60/barrel, and Brent crude is now just over US$63/barrel. Their rig count actually rose last week, the first time in quite a while.

The gold price is also unchanged, up marginally at US$1,174/oz.

The Kiwi dollar starts the week lower at 68.3 US¢, at 89.5 AU¢, and 61.2 euro cents. The TWI-5 is still at 72.3. Keep an eye on the euro which might be especially vulnerable this coming week.

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

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

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

27 Comments

Greece will prevail for the time being. They have implicit support from Russia, links with China, and have the Western historic linkage, and a charismatic popular Prime Minister. With gateway access to the troubled Middle East. There is more to intention and survival than financial issues. He may also win support from a few EU countries.

Up
0

could this be another leman brothers everyone thought it was just one company going bust and it lead to the property bubble in the USA bursting
Russia does not have the money bail to Greece at the moment they are in recession.
china also has its own problems they are papering over.
http://www.cnbc.com/id/102793289
I expect all share markets today to be well down.
as for it being the beginning of GFC2 I hope not with the amount of debt this governments has run up 96 B and still climbing

Up
0

No it won't be another lehman brothers, the Eurogroup have spent a long time making sure all the greek debt was offloaded from private banks onto public institutions. The ECB will suffer the loss and they are printing money right now so perhaps they just need to speed up the printing a notch.

Up
0

To be more accurate, the European worker/Labourer (Greeks included) will suffer the loss and any consequences. We can't have the actual scumbags responsible for bad lending suffer any losses now can we?

Up
0

Wah, my shares are down today due to Greek tragedy...

Up
0

great time to buy, should have seen it coming and had the cash on the side waiting

Up
0

Reposition part of your portfolio to an Ouzo producing company. They will be consuming plenty to blank out the unfolding nightmare.

Up
0

"Suddenly,every (European) country was Germany. That had not been part of the plan", says Dietrich Von Kyaw, who was Germany's ambassador to the EU in the 1990s. "We didn't understand or foresee that due to this wonderfully successful-appearing monetary union everybody would get similar conditions as Germany would." http://www.bbc.co.uk/news/world-europe-16834815

And yet we are asked, told, to believe that today, they do understand what they are doing, when in the past the same institutions didn't? Look at the mess! Show me that someone understands what's is going on, or going to happen, and I'll show you a modern day equivalent of Dietrich Von Kyaw. Only a wholesale restructure of ALL global economic and financial systems can sort this entangled wreck out. The longer it takes to be done - as we can see today with Greece - the worse it is going to be - for ALL of us....

Up
0

Vladimir Bukovsky, a Russian dissident, during the Soviet Union era, made a remarkably prescient prediction on the fate of Europe when he took part in an interview about the European Union bureaucracy and its resemblance to Soviet institutional structures, back in 2006.
http://www.brusselsjournal.com/node/865

"It looks like we are heading towards some kind of collapse, some kind of crisis. The most likely outcome is that there will be an economic collapse in Europe, which in due time is bound to happen with this growth of expenses and taxes. The inability to create a competitive environment, the overregulation of the economy, the bureaucratisation, it is going to lead to economic collapse. Particularly the introduction of the euro was a crazy idea. Currency is not supposed to be political.

I have no doubt about it. There will be a collapse of the European Union pretty much like the Soviet Union collapsed. But do not forget that when these things collapse they leave such devastation that it takes a generation to recover. Just think what will happen if it comes to an economic crisis. The recrimination between nations will be huge. It might come to blows. Look to the huge number of immigrants from Third World countries now living in Europe. This was promoted by the European Union. What will happen with them if there is an economic collapse? We will probably have, like in the Soviet Union at the end, so much ethnic strife that the mind boggles. In no other country were there such ethnic tensions as in the Soviet Union, except probably in Yugoslavia. So that is exactly what will happen here, too. We have to be prepared for that. This huge edifice of bureaucracy is going to collapse on our heads."
http://www.brusselsjournal.com/node/865

Brace yourselves my friends, we may be in for a rough ride.

Up
0

Road's been bumpy for a while, now.

Up
0

"bound to happen with this growth of expenses and taxes. The inability to create a competitive environment, the overregulation of the economy, the bureaucratisation, it is going to lead to economic collapse."
These are very telling words I have thought for a while that our little bureacracy we have going here is getting more and more ridiculous, comical to the point that the path we are heading is getting more and more obvious.

Up
0

"e Bank of International Settlements issued yet another strong warning on the dangers of low interest rates and the distortions they are causing the global economy"

More blind experts.
The new normal is low interest rates, especially until the debt burden is realigned with incomes.
Yet the experts at the Bank of International Settlements think that whats happening is "distortions"....just because it's not "high interest forever" which is what their theories and models are based on.

Up
0

Today 29 June 2015
Wall of Chinese capital buying up Australian properties

James Tee, an ethnic Chinese property developer whose business specialises in "capital expatriation" – that is, getting money out of China and into his property developments in Malaysia – told Fairfax Media the exodus of capital from China was accelerating, thanks to the government's anti-corruption drive. We have been tracking this for two years says Tee.

outflows from China are compounded by the flight of capital out of Canada which is now "bursting" to find a home in Australia

http://www.smh.com.au/business/comment-and-analysis/wall-of-chinese-cap…

Up
0

The interesting bit is the restrictions in Canada are having an effect - with implications for NZ

All depends on who is doing the interviewing and asking the questions

Up
0

C'mon, Johnny and the Nats are too busy working out colours for our new flag,
Talk about playing with yourself while NZ burns, these guys have got it down to T.

Up
0

PM of parnell said this morning the greek situation wont affect NZ,
Hmmm where have i heard him say before nothing to see here all is good.
im sure the sheeple will believe him again

Up
0

He just smiles and lies through his teeth..

Up
0

Blink and you wouldn't have even seen this happen
4 x 1 Million Dollar homes installed in a weekend
Try putting your NIMBY hat on - just for a moment
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=114…

Up
0

I just read that article and thought to raise it to your attention iconoclast

Up
0

Actually the flag is just a smokescreen. They are actually very busy boys, flogging off the family silver.

"Hundreds of New Zealand's state houses could be sold to Australians, Bill English said this morning.

Appearing on TV3's The Nation this morning, Finance Minister Bill English said it was possible state houses could be sold to an Australian company."
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11472186

Up
0

Could the Chinese government stop letting the money out, effectively collapsing our property markets? For as the money flees China, their own economy could collapse.
http://www.nytimes.com/2015/06/27/business/international/chinese-stock-…

Up
0

USA will not allow Greece selling themselves to Russia. And the pressure is on Merkel.

Having said that, there is no country in EU more interested in the Euro survival than Germany.

Thanks to the Euro Germany is able to export high technology in a low currency. Without the Euro and considering their huge trade's surplus, a German independent currency would be 30%-40% higher than the Euro.

Allowing Greece to step out of the Euro (or kicking them out) would be the beginning of the end for the common currency AND for the current strong economy in Germany. Lets not forget that Germany comes from a reunification where suddenly the currency of the East had the same value as the currency of the West. It was the Euro and their lending of invented money (no, it didn't come from German's savings. That's a myth) what allowed them to pay their costly reunification. Does anybody think that the Spanish construction bubble was fuelled by German's savings? And the lending to Greece so they could buy weapons and technology to France/Germany?

So my opinion as a European that thinks the Euro was a big mistake and who has absolutely no European sentiment (if such a thing exists at all..) is that Germany won't allow Greece to leave and will give them whatever they need. Obama will make sure of that.

..and if they leave the Euro, I really hope Spain, Portugal and Italy are next.. and only Spain or Italy alone are 8-10 times Greek's economy.

There was no need to create a common currency other than to make big corporations richer at the expenses of loosing sovereignty.

Up
0

Lucky we aren't talking about a universal currency and the required loss of democracy..
We should all be aware of how we are heading slowly towards this. Our financial systems over burdened with debt, the gradual erosion of conservatism, patriotism and responsibility.

Up
0

We may not be, but the Business Round Table wrote a policy brief back in 2001, which proposes a currency union with Australia, and it is even now available on the NZ Initiative's website which implies they continue to endorse the policy.

"We agree with Grimes
et al, (2000) that Australia is the only feasible partner for a monetary union with New Zealand. Monetary union requires the partner countries to agree upon the constitution of the new central bank. Australian and New Zealand governments have already shown they can cooperate on implementing many policies that have proven to be of mutual benefit, including reducing or removing barriers to
trade in goods, services and financial assets and allowing the free movement of people
between the countries. The shared history, language and legal frameworks of the two
countries would also facilitate monetary union."
http://nzinitiative.org.nz/site/nzinitiative/files/publications/publica…

Up
0

It doesn't sit well with me, at all.
I'd like to think we can have our political, economic and social arguments and own the consequences as a community, society and country. The bigger the councils, corporations and governments get, the worse it all seems to work.

Up
0

some of the neighbouring countries banks have tighten credit lending it will be interesting to see if the ECB injects liquidty to make sure the banks keep lending to each other

Up
0

Shanghai tried the dead cat bounce but are currently down 6.7%. There goes another $700bn.
A billion here, a billion there, at some point the effect will explode in NZ.
How do people sleep at night - at some pt cash is king will be riding back into town on his white horse?

Up
0