90 seconds at 9 am: The NZD keeps on rising

American household wealth dips; China car sales surge; shipping industry downgraded; Woolworths in court over unconscionable behaviour; UST 10yr yield 2.22%; NZ$1 = 67.6 US¢, TWI-5 = 72.6

11th Dec 15, 7:25am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news the Kiwi dollar is rising despite what the RBNZ would like to see.

But first, according to a Federal Reserve report released today, Americans lost nearly US$1.2 trillion in wealth in the third quarter as their shaky stock market contributed to one of the largest declines in household net worth since the economic recovery began.

In China, a tax break has seen new car sales there surge in November. Monthly sales rose to 2.2 mln, up +24% year-on-year in November, the largest monthly increase in nearly two years. The growth was largely due to the government cutting the 10% per cent purchase tax in half on small cars.

China's lower growth track and economic transition will pose particularly significant risks for the shipping industry, especially dry bulk and container shipping. The rise of airfreight driven by online shopping isn't helping either. These risks have seen ratings agency Fitch put the whole sector on a negative outlook. Container shipping is suffering from a surge in capacity; it rose +9% in 2015 and will rise another +6% next year, they say, far outpacing expected demand growth of more than +3% in 2016.

The Australian competition watchdog has launched legal action against supermarket giant Woolworths for unconscionable conduct over its dealings with suppliers. The accusation is they used stand-over tactics to wring payments from suppliers to make up for a profit shortfall in their business. The ACCC has taken similar action against rival Coles, and they say the Woolworths action is shameless because it went after suppliers with arbitrary demands while the legal case with Coles was in the courts and in the media spotlight. Woolworths operates the Countdown chain in New Zealand. New Zealand's competition regulator turned a blind eye to similar complaints against Countdown here.

In New York, the UST 10yr yield benchmark rose marginally today and is now at 2.22%.

The US benchmark oil price is down yet again, now just under US$37/barrel, while the Brent benchmark is now under US$40/barrel.

The gold price slipped as well, now at US$1,072/oz.

The New Zealand dollar has not responded in the way the RBNZ would have wanted. Following the OCR cut, done in large part to get the dollar down, it rose in trading yesterday, and kept its upward bias overnight. It is now at 67.6 US¢, at 92.7 AU¢ and at 61.8 euro cents. The TWI-5 is now at 72.6 and its highest in six weeks.

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

The easiest place to stay up with event risk today is by following our Economic Calendar here ». And today is the last day to vote in the Flag Referendum.

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11 Comments

by MortgageBelt | 11th Dec 15, 7:56am 1449773770

High NZD: Where else in the world can you get such high returns/interest rates in a stable democracy/economy?

by Country boy | 11th Dec 15, 8:05am 1449774320

The RBNZ are struggling to understand the basics of monetary economics

by MortgageBelt | 11th Dec 15, 8:12am 1449774754

Combined with a Govt bent on tight fiscal policy

by Roger Witherspoon | 11th Dec 15, 9:59am 1449781184

Deliciously ironic. Mr Grumpy says NZD still too high but he won't do anything much about it, so the NZD goes higher.

Bill "we are working very hard on the problem" knows excessive immigration is pushing up house prices and unemployment and overcrowding and squalor and indebtedness and asthma, but won't do anything about it either. So immigration hits new highs.

You can't beat the public sector for delay and inaction and prevarication and indecision and consultation whilst keeping a close eye on the problem and watching very carefully.

by Triple | 11th Dec 15, 8:11am 1449774667

Wheeler hardly tried to talk the NZD down yesterday.

by Pureant | 11th Dec 15, 9:35am 1449779728

On the 1.3trillion loss:
Major stock indexes in the U.S. plunged sharply in late August. So far in the fourth quarter, stocks have regained most of their lost ground, so the decline in net worth may prove fleeting.

by Chris-M | 11th Dec 15, 11:33am 1449786797

Re Woolworths unconscionable stand over tactics. Not only did the competition regulator turn a blind eye to this sort of behaviour in NZ. The National Government created a plum job for Shane Jones who was the only opposition MP making a noise about this and other similar anti competitive behaviour. The really disturbing thing is that none of his fellow opposition MPs or has said a thing either before during or since this episode. Similarly the media have also very quickly turned a blind eye to the issue in NZ. This is yet another glaring example of just how crooked government (of all colours) is in NZ.

by KH | 11th Dec 15, 9:52am 1449780744

In Australia Woolworths is "shameless". In New Zealand the same behaviour is quite acceptable to our government. "Standard Business Practice" I suppose.

by Chris-M | 11th Dec 15, 10:57am 1449784659

Re falling oil price and rising dollar. The price of regular petrol should now be below $1.41 per litre.

Further to my previous questions about the inevitable (and government confirmed) large increases in the fuel company profit margins, increases in profit and therefore the large increase in company tax that they should be paying. (but are they or are they transferring the profits overseas?) I seem to remember that all the oil processed through Marsden is imported and all the oil from our oil wells is exported. Similarly I was told that all our LPG is exported and the LPG that we are sold comes from Australia (can this really be true) No doubt the Oil companies will have a hundred reasons to muddy the waters and bamboozle officials, but another possible and more likely reason might be that this enables them to transfer profits overseas more easily. Is this yet another example of the government turning a blind eye to practices that rip off the people of NZ and once again one has to ask what is their motivation?

by David Chaston | 13th Dec 15, 7:44am 1449945880

1. Yes. NZ crude tends to be exported. It is not a grade that can be processed at Marsden Point, and besides the markets for end-use of this crude grade are tiny in NZ.

2. The margin rise started when NZ-owned Infratil and the NZSuperFund bought the Shell retailing operation. Z has the largest market share (closely followed by BP). The irony is, when the NZ liquid fuels market was supplied almost exclusively by foreign multinationals, margins were very low. (So low in fact, Shell decided it didn't want to be in the market.) Now we have a major NZ stake through a public listed company and our soverign wealth fund, all NZ owned, margins go up and up.

All this happened, however, in a falling price environment. So little push-back. Will be interesting to see the public reaction when prices start to rise. Might have to wait years for that however.

by steven | 11th Dec 15, 2:39pm 1449797997

Excellent....roll on sales on Amazon.