90 seconds at 9 am: Positive surge

Canada hold, likes US gains; American job opening hit record high; markets surge except Wall Street; debt test coming; UST 10yr yield 2.23%, oil and gold lower; NZ$1 = 64 US¢, TWI-5 = 68.8

10th Sep 15, 7:14am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news of positive sentiment surging through global markets.

Today is of course the day the New Zealand Reserve Bank makes its latest Monetary Policy Statement. They may not share all that positivity. We will have all the details here at 9 am starting with their press conference live.

But already today another central bank has completed a review - Canada - and they held their official rate unchanged at 0.5% despite an economy that is absorbing an energy sector correction. They noted China's stresses but said they liked the improvements in the US because they will bolster their own economy.

And this morning, American data showed job vacancies surged to a record high in July as employers appeared to have trouble filling positions, the latest signal of an increasingly tight labour market.

Around the world, stock markets are surging. They are up a remarkable +8% in Japan, up +4% in Hong Kong, up +2.3% in Shanghai. On Wall Street however, they are fractionally lower as markets there start to fret that the good economic news will means higher interest rates soon.

And with a US$4 tln mountain of debt maturing over the next five years, corporate reliance on cheap money is about to get tested. Higher rates will likely means more sensible asset valuations. The over-payers will get exposed.

In New York, the UST 10yr yield benchmark is up again today, now at 2.23%.

The US benchmark oil price is lower today, now at US$44/barrel and the Brent benchmark is at US$48/barrel.

The gold price is falling sharply, now down to US$1,103/oz, as risk concerns recede.

The New Zealand dollar starts today higher with a further rise across the board, at 64 US¢, at 91.1 AU¢, and 57.3 euro cents. The TWI-5 is now at 68.8 and its highest in nearly two weeks.

Tune back in at 9 am for all the details on the RBNZ's September Monetary Policy Statement.

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 »

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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24 Comments

by MortgageBelt | 10th Sep 15, 8:04am 1441829076

Inflation rate = .4%. Wage growth = 1%
Floating mortgages = 6.2%
That is quite a gap.

by David Chaston | 10th Sep 15, 8:20am 1441830032

Well that is miles off ...

CPI non-tradables = +2.1% pa
CPI less food & energy = +1.1% pa (std policy benchmark)
Wage growth = +3.2% pa = Average ordinary time weekly earnings (by FTE)

1 year fixed rate mortgage = 4.35%

Practical real-market gaps pretty normal.

by MortgageBelt | 10th Sep 15, 8:30am 1441830609

http://www.rbnz.govt.nz
Inflation = .4
http://www.stats.govt.nz/browse_for_stats/economic_indicators/prices_in…
Annual wage growth = 1.6
Floating Mortgages = one of the highest in the developed world 6.15 plus

by Grant A | 10th Sep 15, 9:00am 1441832450

Yes, and to add to that, the fact that many NZ borrowers do not seem to understand, or wish to understand despite repeated clarification for them, we operate in a small illiquid little NZ interest rate market in a country full of non-savers that need to access a third of their funding from overseas to satisfy their insatiable appetitte for debt, borrowers who demand lower and lower rates as they struggle with its affordability. Some people really love to cheery pick their comparisons don't they David, and still expect to retain creditability and keep commenting on the market.

by Stephen Hulme | 10th Sep 15, 9:28am 1441834099

... we operate in a small illiquid little NZ interest rate market in a country full of non-savers...

And yet we don't prohibit the export of valuable capital out of the country gained by an unprecedented scale of profit gouging from an authorised Australian banking cartel.

ASB's annual ordinary dividends almost trebled to $1.14 billion from $400 million in the June 2014 year and were just $130 million shy of the level paid in the previous four years combined. The annual dividends were equivalent to 135% of ASB's $846 million cash profit. Read more

by Grant A | 10th Sep 15, 10:27am 1441837649

True Stephen, but for us Kiwis it's a bit like the Silver Ferns situation, if you don't want funds heading off overseas, and want to own your own businesses, front up with you own capital - something a bit foreign to us really especially if you ewamnt a world class banking system. By the way, what was ABS's return on capital in comparison to others ?

by Stephen Hulme | 10th Sep 15, 10:36am 1441838164

Higher than ROW according to BIS - you can look it up.

by Henry_Tull | 10th Sep 15, 10:48am 1441838887

and done so by over lending - on a scale never seen before.

by Andy Rodgers | 10th Sep 15, 11:48am 1441842484

and with the approval of the RBNZ

by Grant A | 10th Sep 15, 5:58pm 1441864708

Mid range of the NZX in recent times but maybe thats changed

by MortgageBelt | 10th Sep 15, 5:25pm 1441862711

Freudian slip 'cheery pick'. Yes, happily data mining! Lol
Credibility ... Sp.

by steven | 10th Sep 15, 11:16am 1441840563

A fiddle? why remove food? I can understand removing energy so you end up with core or something close to it.

but not food from CPI.

Inflation rate 0.4% a "recovery" from 0.3%. But some of that is petrol so....its not "real" ie wages driven inflation.

by Stephen Hulme | 10th Sep 15, 8:22am 1441830140

And this morning, American data showed job vacancies surged to a record high in July as employers appeared to have trouble filling positions, the latest signal of an increasingly tight labour market.

Seems that disposable income available to be spent also remains tight. View evidence.

by King of the whiners | 10th Sep 15, 8:29am 1441830565

Mounting evidence that the Syrian civil war (with its knock on effect of a tidal wave of economic migrants/refugees into Europe) had its genesis in the climate change induced mega drought that gripped the region in the period 2006-2010:
http://www.nytimes.com/2015/03/03/science/earth/study-links-syria-confl…
Interestingly at the Pacific Leaders conference yesterday the leaders of Kiribati, Tuvalu and other low lying atolls condemned NZ and Australia for not doing enough in response to climate change and also flagged up the risk of large scale migrations around the Pacific as the effects of climate change multiply.

John Key's response (caught on TV1 news) was classic:

"Realistically, you're so far into the future that's not an issue that we're going to face in the next year or two," he said.

There you have the man and his political party summed up in a couple of phrases.

by Stephen Hulme | 10th Sep 15, 8:36am 1441830983

LOL - an inveterate kick the can down the road kinda fella - is that not what NZers voted for?

by PeakEverything | 10th Sep 15, 11:03am 1441839810

I think most New Zealanders would agree the future isn't happening now. Besides it a decent boat trip to New Zealand, most of them won't make it anyway.

by steven | 10th Sep 15, 11:23am 1441840990

Right now its ordinary poor ppl. What happens when we see ship's captian's/crew load their families onto a cargo ship and head this way? or a navy with an escaping Govn on board? I mean Syria is just the start, a trickle.

by OnwardsUpwards | 10th Sep 15, 12:26pm 1441844770

If that happens then our navy must open fire on them and sink their boat.

by steven | 10th Sep 15, 12:29pm 1441844981

Hmm interesting.

BTW did we buy guns for our ships?

by OnwardsUpwards | 10th Sep 15, 12:59pm 1441846742

No, we didn't buy machine guns for our ships. I was thinking the captain could make machine guns sounds over a megaphone. That will sort those refugees out for looking for a safer life.

by iconoclast | 10th Sep 15, 1:11pm 1441847504

Have you ever seen youtube demonstration of MV Blue Marlin?

One day, someone with a few smarts will hire MV Blue Marlin to load 20 or so rickety boats and 1000 boat people, travel to a location 50 kms of the northern tip of NZ and unload its cargo - all the way from Indonesia bypassing AU altogether

https://www.youtube.com/watch?v=ba7eOMhtu9I

and here's how it works
https://www.youtube.com/watch?v=eOyzL7_iEkw

by steven | 10th Sep 15, 11:20am 1441840846

and Labour? they want a "just" environmental policy whatever the hell that is. I assume that means one that doesnt cost NZers jobs or their lifestyle.

Strikes me as 2 peas in a pod and holding 80%+ of the vote. Also NZF is there (8%?) also so must be close to 90% of the vote. ACT well yes, if the Conservatives had got in that would chop the Green's a bit. So 90% of the MPs / parties in parliment will do not much as a similar % of voters seem to not care a fig, bound to end well.

by Stephen Hulme | 10th Sep 15, 8:32am 1441830743

n New York, the UST 10yr yield benchmark is up again today, now at 2.23%.

It would seem fears of PBoC QT are not assuaged by the tentative return of Chinese corporate USD debt issuance.

Improving market sentiment has Chinese banks and companies restarting their offshore-debt engines—but given the economy’s struggles to revive, this comes at a price.

Chinese U.S.-dollar bonds dominate Asia’s $874 billion bond market, but issuance ground to a halt for almost a month as China’s worst stock selloff in years, the devaluation of the yuan and a succession of weak economic numbers damped investor appetite for the country’s debt. Read more

by head_down_bum_up | 10th Sep 15, 9:03am 1441832580

seem rbnz have already released their press statement....2.75% it is...

http://www.rbnz.govt.nz/news/2015/mps-10-sept-2015.html