90 seconds at 9 am: Lurid details of ANZ dealers exposed

Indonesia, Korea and the UK all review rates; German growth rises; US prices fall; ANZ accused of dodgy behaviour by dealers; UST 10yr yield 2.07%; oil up, gold down; NZ$1 = 64.7 US¢, TWI-5 = 70.3

15th Jan 16, 7:24am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news of a set of central bank decisions overnight.

The central bank of Indonesia cut its benchmark rate by -0.25% yesterday to 7.25%, but said this was not the start of a general easing plan.

The Korean central bank decided to hold its benchmark rate unchanged, but it has trimmed its growth forecast. And the English central bank sat on its hands as well, pushing back its promised rate hike.

Germany said its growth rate picked up slightly in 2015, now up to +1.7% pa. Analysts expect it to grow at a slightly faster rate in 2016.

In the US, data there shows jobless claims slightly higher last week. Data also showed producer prices falling sharply, although not quite as steep as analysts had expected. But lower prices has some Fed officials scratching their heads.

Back in New York, the UST 10yr yield benchmark has fallen yet again in mid-day trading today and is now at 2.07%. Local swap rates fell yesterday following Wall Street down, and will no doubt do so again today.

In Australia, lurid details of a 'toxic culture' in ANZ's fixed income dealing rooms is getting a public airing in a Sydney court. Banker behaviour is in the spotlight again and the examples are getting ever closer to home.

Crude oil is making a [very minor] recovery and is now just over US$31/barrel. It is probably worth noting however, that as the investment in the oil patch dives, investment in the renewable energy sector hit a record high of US$329 bln in 2015. China took the lead with double the investment levels of the US. This transition explains a lot about the sudden shrinking of oil and coal's prospects. And it is another example of fast adaption.

The price of gold is down to US$1,081/oz today.

It's been a variable night for the Kiwi dollar but it starts today lower, settling in after yesterday morning's falls. It is now at 64.7 US¢, now at 92.7 AU¢, and at 59.5 euro cents. The TWI-5 is pretty much unchanged at 70.3.

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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30 Comments

by Afewknowthetruth | 15th Jan 16, 7:52am 1452797579

' investment in the renewable energy sector hit a record high of US$329 bln in 2015'

That figure sounds impressive until you divide it by world population (7.4 billion) and get a per capita figure of $44.per annum.

'China took the lead with double the investment levels of the US'

This confirms that the western model is to remain locked into fossil fuel use and forget about the future. Indeed, the drop in fossil fuel prices over the past 18 months has encouraged even more squandering of oil reserves and faster polluting of the planet.

https://scripps.ucsd.edu/programs/keelingcurve/wp-content/plugins/sio-b…

405/406ppm later this year
.

by steven | 15th Jan 16, 9:03am 1452801821

Maybe because China's major cities and capital are becoming un-livable? unlike the USA. Also no vested interests with $s to lobby, but it looks like there is very rapid change underway,

http://thehill.com/policy/energy-environment/265786-ny-gov-aims-to-phas…

by Neven911 | 15th Jan 16, 9:47am 1452804454

Have you noticed the fault in the train of thought here? Renewables are an nenergy source that can replace fossil fuels as an energy source, coal & oil are fossil fuels ergo renewables will replace demand for oil. There is no direct connection between a solar panel and the uses for oil currently so they have minimal impact.
The current oil price is a temporary glut until the frackers get fracked, nothing more.
The concern to me is that even with the world awash with cheap oil and a couple of proxy wars to fuel munitions demand the world is still stagnating.
Limitis to growth?
Neven

by dtcarter | 15th Jan 16, 1:27pm 1452817659

"There is no direct connection between a solar panel and the uses for oil currently "

Say watt?

So a kilojoule of energy produced by a solar panel doesn't replace demand for coal and diesel from thermal powerplants?

by Neven911 | 15th Jan 16, 1:58pm 1452819513

Oil is not coal last time i looked and the amount of electricity from oil fired plants is minimal, in all likelyhood they are peaking plants that can't be replaced by an intermittitent (solar/wind) or slow runup (coal) plants or they would have by now

by steven | 15th Jan 16, 2:33pm 1452821597

Actually it looks like wind and solar are a lot more useful in adding to the base load than expected. In some ways you are correct, ie if we dont have peaking plants we can afford to run then what? well not function is the answer.

by dtcarter | 15th Jan 16, 3:52pm 1452826334

oil makes up 5% of electricity generation worldwide.

what is it that stops hydro being used as a peaking plant. Why we can open and close flow gates almost as fast as ramping up a gas plant? We'd need to increase the size of the storage lakes as more and more intermittent sources came online.

by Ms de Meanour | 15th Jan 16, 5:00pm 1452830432

Either it is not the most effective and efficient way of responding to peak demand, in which case the market stops it, or Government regulation, perhaps (eg) due to concerns about the environmental effects of damming rivers, stops it.

If there is no such regulation and if it is the most effective and efficient way, then nothing stops it.

by steven | 15th Jan 16, 2:24pm 1452821083

No actually it is you who are faulty in thought in this instance. a) renewables ie biofuels cannot replace any liquid transport fuel as their EROEI is 1.5 to 1 at best. b) batteries? well just wonder where we get the electrical energy to charge them from without massive investment to create plant to do so. c) How big a battery would a long distance 38tonne truck need?

by Afewknowthetruth | 15th Jan 16, 10:13am 1452806031

I think the key to that move is 'New York only gets about 1.3 percent of its electricity from coal';.

And very likely the coal-powered stations are very old and would require expensive maintenance-replacement.

Few people understand the concept of energy density, i.e. that oil and coal are by far the most energy-dense substances available, which is the very reason the global economic system has been unable to decouple from them, despite all the 'alternatives' being readily available since the 1960s.

Covering a quarter of the planet with solar panels and windmills would not replace present fossil fuel energy consumption.

And you cannot make steel or cement (or numerous other 'essentials') without liberating massive quantities of CO2 into the atmosphere: liberation of CO2 is inherent in the basic chemistry of the processes.

There is no way out of the trap humanity has created for itself -other than a return to pre-industrial lifestyle, and who is going to vote for that?

by Ms de Meanour | 15th Jan 16, 11:11am 1452809467

You may have problems with nuclear energy generation and you are entitled to that opinion, but to pretend it doesn't even exist just makes you look ignorant

by scarfie | 15th Jan 16, 11:38am 1452811135

What is the energy density of nuclear power? How much uranium left, also a finite resource?

by dictator | 15th Jan 16, 12:27pm 1452814053

You can use a breeder reactor to make more fuel from thorium or uranium 238. Not a shortage more of a political and social problem. There's a lot of discussion around developing thorium reactors that are safer and don't produce weapons grade material.

Fusion reactors would tip the balance and would be able to provide a lot of cheap energy. It's just we don't have any fusion reactors than produce net energy at this time. This could change in the next 10-25 years, but I've already spent most of my life waiting for them to become a reality.

There's no point treating nuclear fuels as a finite resource at this time.

e: The energy density of uranium is many orders of magnitude higher than fossil fuels. About 10 MJ per gram.

by steven | 15th Jan 16, 2:39pm 1452821991

The chinese are going hell for leather into thorium, the US is going to rue the day Nixon show their research down, probably us here in NZ as well.

by profile | 15th Jan 16, 6:00pm 1452834024

"The second phase of a five-year trial-operation of thorium based nuclear fuels is now under way. The consortium established* in 2011 and led by Thor Energy is undertaking a sophisticated test-irradiation campaign in order to quantify the performance of the fuel and to qualify it for commercial use. "
http://thorenergy.no/second-round-of-thorium-test-irradiation-underway/

by steven | 15th Jan 16, 2:38pm 1452821926

BWR and PWR should indeed not exist due to their horrendous decomm costs and problems. Now Thorium holds a lot of promise but that is 10 if not 20 years away. On top of that we have a liquid transport fuel problem and nuclear while possible needs a lot more infrastructrure, Trillions of it. and who can afford to pay it?

by Ms de Meanour | 15th Jan 16, 3:48pm 1452826135

"Nuclear while possible needs a lot more infrastructure" - more than what? More than wind farms?

Certainly, decommissioning and infrastructure costs should be built into calculations as to whether to build nuclear. If those costs are greater than the value of the energy that a nuclear plant will deliver during its active life, then the plant will not be built. No need for governments to intervene, economics will deal with that point.

by profile | 15th Jan 16, 4:43pm 1452829392

Unless you make steel or concrete using charcoal of course. Brazilian charcoal pig iron is a net negative CO2 system and produces surplus electricty to boot. So if one is worried about these things just buy Brazilian and sleep easy - sparing the rest of us the tirades.

Windmills/solar a really average idea broadly speaking - not very off rabid greens will admit it.

by murray86 | 15th Jan 16, 12:12pm 1452813136

"This confirms that the western model is to remain locked into fossil fuel use and forget about the future. Indeed, the drop in fossil fuel prices over the past 18 months has encouraged even more squandering of oil reserves and faster polluting of the planet." or is it that China had no renewable energy sources and is in catch up mode? While the west has a long way to go there is significant investment in renewable even in the US (great spreads of wind turbines in California for example).

by dtcarter | 15th Jan 16, 1:38pm 1452818327

China has loads of renewables already, they are not in catch up mode, they are leading.

They produce twice as much renewable as USA, including over 50% more solar.

21% of electricity generation is renewable vs 12% for USA

https://en.wikipedia.org/wiki/List_of_countries_by_electricity_producti…

by Stephen Hulme | 15th Jan 16, 9:23am 1452803031

In Australia, lurid details of a 'toxic culture' in ANZ's fixed income dealing rooms is getting a public airing in a Sydney court. Banker behaviour is in the spotlight again and the examples are getting ever closer to home.

Yes indeed.

It is a great shame that five years after the beginning of the eurozone sovereign and banking crisis, the eurozone is still dealing with banking crises in a manner that is inconsistent, unfair and amateurish. We collectively — investors, bankers, regulators and governments — should aspire to much higher standards and avoid populist short-cuts that will inevitably result in protracted litigation. Read more and more from NZSF

P.S. AFR is in need of sub-editor oversight.

by dictator | 15th Jan 16, 10:12am 1452805931

Where can I sign up for one of these unethical and unprofessional ANZ jobs. Drugs, sex and market manipulation sounds like great fun at the expense of Australia and New Zealand.

by Keyser Söze | 15th Jan 16, 10:36am 1452807416

Happy New Year everyone!

David Chaston or anyone else know when the REINZ data released? They are really taking their sweet time with it this month.

by Simon | 15th Jan 16, 11:05am 1452809127

yeah thats what im waiting for.. and the index data only comes out in articles written by people who have access and rights to that info... Last 2 months have seen auckland price index fall close to 6% (thats 36% p.a fall). If demember data doesnt show a break in this trend I think the whole country has cause to worry.

QV data is months old so only just bringing in a few Nov sales in it's decemeber data so the 0.16 dec price rise actually represents sales in october, nov mainly; Next month QV index for Auckland will be down 1-2% as post IRD restriction sales are included in data.

by dtcarter | 15th Jan 16, 1:45pm 1452818717

The REINZ data will be for December, which along with January is notoriously fickle due to light volumes.

by King of the whiners | 15th Jan 16, 10:44am 1452807888

US jobless claims - actually the data indicates that the moving average turned in October and has been drifting higher - see graph in: http://www.bloomberg.com/news/articles/2016-01-14/initial-jobless-claim…

Certainly the bottom seems to be in for jobless claims in this cycle.

by Stephen Hulme | 15th Jan 16, 11:23am 1452810192

Data also showed producer prices falling sharply, although not quite as steep as analysts had expected. But lower prices has some Fed officials scratching their heads.

This market measure, the Fed’s preferred number, is saying in 2016 that there is little to zero faith in either the economy or monetary policy in either the short-term or beyond it. If this was just some cyclical, garden variety recession developing forward rates would, as 2007 and early 2008, remain undisturbed. That they are sinking and sinking fast of late suggests, strongly, that pessimism is deep and structural. Read more

by two otherguys | 15th Jan 16, 2:22pm 1452820963

The Trump Effect

For a decade, wave after wave of Americans have echoed a simple message: The deck is stacked

They may not agree on who stacked the deck, but they all know the game is rigged

The (political) elites (urged on by the financial elites) write rules that lock themselves in while keeping the masses out. How do they do it? Through sleight-of-hand known as complexity and confusion. The US, founded as "a government of laws, not of men," has become a government of incomprehensible laws. Lawmakers devised impenetrable regulatory systems rigged to be exploited by those blessed with elite degrees, ample time, and sizable budgets. Pundits, analysts, lobbyists and academics ensure that no issue in the public eye ever makes sense. Or disappears from the public eye inside 24 hours

https://au.finance.yahoo.com/news/donald-trumps-gift-america-160148673…

by MortgageBelt | 15th Jan 16, 3:32pm 1452825152

Food prices in NZ falling. In Dec alone a .8% fall.
CPI predicted to fall .3 for the December quarter.
http://www.stuff.co.nz/business/75926446/drop-in-price-of-chicken-and-m…

When will inflation meet the 2% PTA?

Or is NZ aiming for -2% now?

by steven | 15th Jan 16, 3:58pm 1452826725

So I would have expected with xmas spending an uptick? and a re-dip in the first quarter of this year? So a bigger down to discover in April?

Just how long can the RB continue to fly blind?