Here's my summary of the key events overnight that affect New Zealand, with news of another large fall in Chinese equities.
But first, new orders for durable factory goods in the US rose by the most in 10 months in January as demand picked up broadly. They were higher both month-on-month and year-on-year, reversing recent trends.
In Atlanta, a Fed official warned that banks face challenges managing interest rate margins and risks, especially around their exposure to commercial real estate in the period while US interest rates rise. He worries that that institutional memory about how to deal with rising rates has faded. These remarks are all part of a long slow process of market preparation for US rate hikes.
In China, equities dropped steeply late yesterday, down -6.4% in Shanghai and down -7.3% in Shenzhen. The drop has reversed some of the gains made since the Lunar New Year holiday this month.
At the same time, there is a noticeable change of tone from senior Chinese policy makers. Until a few days ago, they made few public statements about their economic stresses and those they did make offered just gloss and spin. But today we are hearing some real public analysis and guidance on how they will deal with it. They are realising that markets can punish them severely in a communications clampdown. But they have a lot of catching up to do to restore credibility.
One option they are floating is a much higher fiscal deficit; debt funding to maintain growth.
China's stumbles are having regional consequences. Singapore's economy grew just +2.0% in the final quarter of 2015 in data out yesterday, +2.1% for the whole year. That's its slowest growth in over 6 years. There is a silver lining however; the improvement from Q3 was sharply positive and a metric markets noted.
In New York the benchmark UST 10yr yield has recovered about half of yesterdays fall to 1.72%. Yesterday, local swap rates fell late in the day and remain at record lows except for the one and two year terms. Those short terms fell as well however. And yields on New Zealand Government 10 year bonds hit a record low yesterday, dipping under 3% for the first time ever.
The oil price is just marginally softer at US$31.5/barrel in the US while Brent is at US$34/barrel.
The gold price is essentially unchanged today at US$1,242/oz.
The NZ dollar is higher this morning but still in that general range. It is now at 67 US¢, at 92.9 AU¢, and at 60.7 euro cents. The TWI-5 will start today at 71.7 its highest in three weeks.
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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8 Comments
A know a few on here follow the P2P space. This may or may not be of interest.
http://www.marketwatch.com/story/online-lender-shares-battered-after-on…
Did I mis-hear Bernard Hickey on ONE news last night
Interviewed about the latest migration stats
I think he said Auckland now has a shortage of 200,000 houses
I believe the comment was that shortfall over the next 30 years
Due to population growth? Immigration will widely fluctuate over that time, surely?
China ........... at what point will the unfolding crisis in China's stock markets impact directly on all the other stock markets ?
The Chinese Stock market itself trades in relative isolation to other markets. It does have some correlation to the HK market as quite a lot of shares have dual quotes in Shanghai(A shares) and HK(H shares) and some funds in stressed markets will sell which in which ever market has the greatest liquidity. In HK the shares have been trading at a big discount to the equivalent mainland H shares.
Where other global markets will be pulled down is the state of the overall Chinese economy and particularly the banking sector and this is the main reason global markets fell around 10% in H2 last year-it was down to the downward revisions of GDP growth in China.
I think there are a lot of bad debts that are yet to be written off by the Chinese Banks. How much longer they can kick the can along the street I don't know.
Did BH really say that?
Where did he get those numbers from.
Someone should ask him
If there was a shortage of 200,000 houses that implies about 1,000,000 people wanting homes in Auckland .
Where are they staying right now?
The city only has about 1,6 million residents , so its almost doubled ????
The comment above makes no sense
Breaking News:
I believe that right now masses of tents are being pitched in the Auckland Domain. Just caught the end of the news bulletin........can anyone update this?
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