Here's my summary of the key events over the weekend that affect New Zealand, with news of more weak data out of China.
But first, this is the week that the US Fed will issue its latest assessment - and all eyes are on whether it will hike rates. It has signaled that a hike is on the table although markets are very unsure if it will be this upcoming meeting or a later one this year. We will know on Friday morning.
The problem for the Fed is that if it really wants to hike, it has to account for a substantial lag time before its actions take effect. The longer it delays, the stronger its labour markets get and wage rises are already pushing the upper end of its inflation goals. These seem odd things to note after nearly a decade of non-existent inflationary pressure. The Fed will be well aware that the past is no indication of what may happen in the future.
The Chinese slowdown is one of the reasons things may get delayed however. Data out over the weekend showed that industrial production came in much lower than expected in August, even though it was marginally better than in July. Investment levels also disappointed.
Concerns about China are also core to the latest BIS assessment of the world's banking systems.
We will have some important news locally as well. On Wednesday we get the results of the next dairy auction. Dairy futures pricing suggests another positive improvement.
The same day the second quarter current account data will be out. This does not move markets the way it used to but a worsening trend is anticipated, to -3.8% of GDP.
And on Thursday, the economic growth number will be out for the June quarter. A year-on-year level of +3% is expected, somewhat better than most of our trading partners - except the US and China of course.
In New York, the UST 10yr yield benchmark ended Friday lower, now at 2.19%.
The US benchmark oil price is also lower, now at US$45/barrel and the Brent benchmark is at US$48/barrel. North American rig counts continue their fall and some analysts are talking a US$20/barrel oil price.
The gold price is down as well, now down to US$1,104/oz.
The New Zealand dollar starts the week at its lowest overall level since December 2011, now at 63.2 US¢, at 89.1 AU¢, and 55.7 euro cents. The TWI-5 is now at 67.5.
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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12 Comments
In New York, the UST 10yr yield benchmark ended Friday lower, now at 2.19%.
Inexplicably, the same as the outright swap quote and closing on the 30 year which is currently 29bps points below it's supposedly risk- free benchmark. Which IOU poses the greater risk, the interbank unsecured credit market or the US Treasury? Read more
BIS is right to remain concerned.
" if the 30-year swap spread was negative that might suggest the "market" thinking about a bankrupt US government."
Debt is a future call on money which is an IOU for work/energy and effectively oil is gone in 30 years, ergo 30 year US treasuries wouldnt seem likely to be paid back in real terms if not outright default as there will be no energy to pay it with..
While keeping it simple is usually the best way, only looking short term means you can box yourself into a corner and then cannot avoid the longer term trend/failure even after it becomes visable. I suppose its like playing chess those that can think 5 moves ahead are highly likely to beat those who can only see 1 move ahead. The 1 move aheaders seem to be very much the financial types who think they can just jump ship to something else to make money/not see losses. That didnt work out to well for the first class passengers on the Titanic, got the request in for your favourite tune, deckchair sorted?
Sure a short term financial crisis that drops us into a Greater Depression can overwhelm the longer term trend and that is how it will be I suspect. Somehow I think many financial whizzkids are bright enough to see such a financial mess coming but dont want to comment/admit it especially as their own actions have contributed, but then no one is innocent.
Reader comment on one of the UK's Guardian's articles on Germany now closing its borders in response to the European migrant crisis (having only just last week proclaimed everyone is welcome):
''It's like a teenager announcing a house party on Facebook and wondering why 5000 have turned up and trashed the place.''
Just the start. Saudi has apparently taken in 2.5million Syrians, I wonder how many are Christians.
http://peakoil.com/publicpolicy/saudi-arabia-says-it-has-taken-in-2-5-m…
This global warming thing is worse than I thought. What sort of world are we leaving our children?
"The FAO index of global food includes prices for grain, meat, dairy, edible oils and sugar. The gauge has fallen for 10 months in the longest slide since 1998.An index of grain prices fell 7 percent to a five-year low. The FAO raised its outlook for global wheat and coarse grain production in 2015-16 on larger harvests for South American corn and European wheat, it said in a separate report.
“In real terms, we’re not much higher than we were at the start of the century. Quite a striking divergence from what people were expecting a few years ago.”
http://www.bloomberg.com/news/articles/2015-09-10/food-prices-drop-most…
Oh dear, bored so you thought you would troll for a bit? Not sure what you are implying here but you seem to be either confused or aiming to confuse, I'd bet on the latter.
While we will see a long term trend of food shortage develop when the fossil fuel energy needed to produce it declines (as population increases), that doesnt mean we wont see a short term trend in the opposite direction caused by a recession. Lots of examples of this like oil and milk it seems, it is known as volatility.
Up to you, take the data and info and plan your business/life is as you see fit.
so how long before 'to rent' turns into 'for sale'? And it wont be just holiday homes.
http://www.stuff.co.nz/business/farming/71974601/farmers-dairy-payout-d…
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