US incomes rise, spending flat; US factories expand, China's contract; China arrests 21 in P2P fraud; UST 10yr yield 1.94%; oil down, gold up; NZ$1 = 65.1 US¢, TWI-5 = 70.6

US incomes rise, spending flat; US factories expand, China's contract; China arrests 21 in P2P fraud; UST 10yr yield 1.94%; oil down, gold up; NZ$1 = 65.1 US¢, TWI-5 = 70.6

Here's my summary of the key events overnight that affect New Zealand, with news of a huge new Chinese fraud.

But first, American household incomes rose +0.3% in December from November according to data released today. That caps a long string of steady rises at about that monthly level. But those same households did not increase their spending, which suggests a widespread level of caution, although November spending data was revised up - so the caution may only be a short-term reaction.

January data pointed to an improvement in business conditions across the American manufacturing sector, with output and new orders both rising at faster rates than those seen at the end of 2015. However, manufacturers remained cautious in terms of their staff hiring and inventory levels last month. Worldwide, manufacturers remained subdued at the start of 2016.

That was in part because Chinese factories slipped further into contraction at the start of 2016, with both output and employment declining at slightly faster rates than in December. Total new business fell to its weakest rate in seven months, with a faster decline in new export work.

Chinese authorities have arrested 21 people in a NZ$11 bln fraud that used a peer-to-peer operation where more than 95% of the 'investment opportunities' were fake. The scandal is affecting the whole legitimate sector.

None of today's negative news is likely to influence the RBA when they review their cash rate target later today. Almost everyone reckons that benchmark rate will stay unchanged at 2%.

In New York, the benchmark UST 10yr yield has fallen today and is now at 1.94%. Yesterday, local swap rates started out weak, and went lower across the board as the day wore on. If today's benchmark falls on Wall Street hold, we will likely see our local swap rates fall even further. Our five year swap rate is now at a record low, below levels we saw in the GFC. (But not so of other swap rates however but we are approaching that with them.)

A meaningful gap is opening up again between the US WTI oil price and the Brent benchmark, both of which have fallen sharply today. The US price is down to US$31.70 while Brent is down to US$34/barrel. It was those factory PMIs that turned the tide.

The gold price is going the other way, now up to US$1,126/oz.

The Kiwi dollar starts today higher at 65.1 US¢ its highest in ten days, at 91.9 AU¢, and at 59.7 euro cents. The TWI-5 starts today at 70.6.

If you want to catch up with all the local changes on Friday, we have an update here. And here is the Monday update.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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2 Comments

I see the $7.6bn in the Chinese Ponzi scheme was largely invested in property. I wonder whether it was property in or out of China?

300 Scientists Want NOAA To Stop Hiding Its Global Warming Data

Hundreds of scientists sent a letter to lawmakers Thursday warning National Oceanic and Atmospheric Administration (NOAA) scientists may have violated federal laws when they published a 2015 study purporting to eliminate the 15-year “hiatus” in global warming from the temperature record.

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Of the 300 letter signers, 150 had doctorates in a related field. Signers also included: 25 climate or atmospheric scientists, 23 geologists, 18 meteorologists, 51 engineers, 74 physicists, 20 chemists and 12 economists. Additionally, one signer was a Nobel Prize winning physicist and two were astronauts.

http://dailycaller.com/2016/01/28/300-scientists-want-noaa-to-stop-hidin...