Here's my summary of the key events overnight that affect New Zealand, with news the US economy seems to be firing on all cylinders ahead of the holiday season.
However, consumer spending rose only a very modest +0.1% in October from September in the US as households took advantage of rising incomes to boost savings to 5.6%, their highest level in nearly three years and the highest ever in dollar terms. This suggests only moderate American economic growth in the fourth quarter. Impressively, disposable personal income is up +3.9% from the same month a year ago while personal consumption expenditure is up +2.7%. (This data is buried deep in their release.)
Equally impressive, sales of newly built single-family home sales surged in the US October which could allay concerns of a significant slowdown in housing.
And continuing the very positive theme, business spending surged, and durable goods orders soared in October. This is suggesting the worst of the drag from a US strong dollar and deep spending cuts by energy firms is over. It is very hard not to be impressed with this data.
And the trend is reflected in their labour markets. The number of Americans filing for unemployment benefits fell more than expected last week, drifting back to near 42-year lows as their labour market conditions continue to tighten.
All this is ahead of the huge Thanksgiving holiday and shopping weekend that is about to kick off in the US. Financial markets will be closed over this period and trading will be thin and diverted to Frankfurt and London.
In China, and during their big early October sell-off, its biggest brokerage, Citic Securities, overstated its derivative business by US$166 bln (NZ$250 bln) from April to September, according to the country's securities association. While the 'error' has since been corrected, bosses of the firm are 'under investigation'.
And the flood of money out of China is changing. It is shifting from being from individuals to 'investors'. Specifically, Chinese insurance companies expect to spend US$73 bln into overseas property over the next five years, mainly commercial property of course.
Yesterday, I suggested that the shooting down of a Russian fighter by Nato-member Turkey would raise risk aversion sentiment. In a surprise to me, it didn't. The financial world ignored the tensions, brushing them off as an item of only minor interest.
Still, in New York, the UST 10yr yield benchmark slipped again, slightly, to 2.23%. NZ swap rates have held, but risk premiums as measured by CDS spreads are marginally higher, up 5% from the start of the month.
The US benchmark oil price is slightly lower now, just under US$43/barrel, while the Brent benchmark is just under US$46/barrel. Even oil markets ignored the Nato-Russia tension.
And the gold price is softer, now at US$1,072/oz
The New Zealand dollar starts today at 65.7 US¢, at 90.7 AU¢, and at 61.9 euro cents, all at slightly higher levels than yesterday. The TWI-5 is now at 71.4.
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
Select chart tabs
9 Comments
'In China, and during their big early October sell-off, its biggest brokerage, Citic Securities, overstated its derivative business by US$166 bln (NZ$250 bln) from April to September, according to the country's securities association. While the 'error' has since been corrected, bosses of the firm are 'under investigation'"
What does this tell us about ANY data coming out of China.
Ooooooo this is going to cost....
UN: 2015 warmest year on record:
http://www.cnbc.com/2015/11/25/2015-to-be-the-warmest-year-on-record-un…
'Scientific evidence shows that extreme weather events like heatwaves and drought have increased by as much as 10 times as a result of human activities, the WMO report added.'
2011-2015 warmest 5 year period on record:
http://www.theguardian.com/environment/2015/nov/25/climate-change-makes…
Stop worrying so much King, it's bad for you.
Watch this and see how they fiddle with the figures and stats to make it look worse than it is.
Lies, Damned Lies, and Global Warming Statistics
https://www.corbettreport.com/lies-damned-lies-and-global-warming-stati…
Don’t you hate when Fox News and the other MSM spin-meisters use simple tricks to skew and misrepresent data and statistics? How about when the World Meteorological Organization does it? Or NASA? Or the Journal of Climate? Or GISS? Join James for today’s thought for the day as he shows you some of the grade school level parlour tricks the global warming alarmists use to misrepresent their data and bamboozle the public.
Impressively, disposable personal income is up +3.9% from the same month a year ago while personal consumption expenditure is up +2.7%
Hmmmmm.
Consumer spending inched up last month, rising at a rate well below expectations, as cautious Americans saved more of their growing incomes, the Commerce Department said Wednesday.
Personal consumption expenditures increased just 0.1% for the second straight month. Economists had expected a 0.3% increase.
The slow pace of spending by consumers — a category that accounts for about two-thirds of U.S. economic activity — could be a warning sign to Federal Reserve policymakers as they consider whether to hike a key interest rate next month. Read more
The Atlanta Fed takes an ax to its Q4 GDP forecast, smashing it to cycle lows following this morning's unexpected weakness in consumer spending. Read more
Interesting to see the substantial changes being made in the UK in the way that landlords and the 'buy to let' market are taxed. The UK exchequer has decided that 'landlordlism' has received too many tax benefits in the past (and of course represents a worthwhile area from which to raise revenue). The new regulations might even slow house price inflation....
a) Landlords are due to get a lower rate of tax relief on mortgage payments.In his summer Budget, the chancellor said that landlords would only receive the basic rate of tax relief - 20% - on mortgage interest payments, a change being phased in from 2017 (many had been able to claim at the higher rate of 40%)
b) Buy-to-let landlords will also be hit by a change to Capital Gains Tax (CGT) rules.
From April 2019, they will have to pay any CGT due within 30 days of selling a property, rather than waiting till the end of the tax year, as at present.
c) Buy-to-let landlords and people buying second homes will soon have to pay more in stamp duty, the chancellor has announced.From April 2016, those in England and Wales will have to pay a 3% surcharge on each stamp duty band.
The amounts involved are not insubstantial - for example measure c) would raise £1bn extra for the Treasury by 2021.
http://www.bbc.com/news/business-34922738
There is a ton of un-taxed revenue flowing through the NZ housing market........
Commodity prices are plunging, the dollar is powering higher, the yield curve is flattening, ObamaCare is collapsing, global trade is plummeting and terrorism is spreading across the globe. The high yield credit markets are sending distress signals and 10-year swap spreads are negative. Energy companies are going out of business faster than you can say “frack” and trillions of dollars of European bonds are again trading at negative interest rates. The world is drowning in more than $200 trillion of debt that can never be repaid while European and Japanese central bankers promise to print more money and the Federal Reserve is being dragged kicking-and-screaming into raising interest rates by a paltry 25 basis points. Accurate pricing signals in the markets are distorted by overregulation, monetary policy overreach and group think. Hedge funds are hemorrhaging and investors, desperate to generate any kind of nominal return on their capital, continue to ignor e the concept of risk-adjusted returns. Some market strategists believe this is a positive environment for risk assets; I am not among them.
Companies in the United States have taken advantage of low interest rates to issue record levels of debt over the past few years to fund buybacks and M&A. This has driven the total amount of debt on balance sheets to more than double pre-crisis levels. However, cash flows have not kept pace, resulting in leverage metrics that are the highest in 10 years.
http://ggc-mauldin-images.s3.amazonaws.com/uploads/pdf/OTB_Nov_25_2015_…
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.