Here's my summary of the key events overnight that affect New Zealand, with some big news out of China.
But first in the US, real estate sales contract volumes to buy previously owned homes fell to their lowest level in a year in January amid a persistent shortage of properties for sale, which could slow their housing market ahead of the spring selling season. Prices, however, were up +8.3%, their fastest gain in nearly a year.
We have been reporting the worrying trend in China of the President there tightening his personal grip on the instruments of power. One possible reason may have become clearer overnight. China said it expects to lay off 1.8 million workers in the coal and steel industries, or about 15% of the workforce, as part of efforts to reduce industrial overcapacity. The potential for social unrest from such a large move is high. Although no time-frame was given, it seems a bold move to tackle major overcapacity in those industries and address the pollution they cause.
Also in China, their central bank has cut their reserve ratio requirement, that portion of capital banks must hold to back up its lending. The cut was from 17.5% to 17% and still one of the highest levels in the world. For comparison, the New Zealand uses a more layered system of ratios but the minimum capital adequacy ratio here is set at 8%, which every bank easily exceeds. This Chinese action is expected to add about US$100 bln of stimulus. This move sends all sorts of interesting signals, not the least of which it seems to renege on promises made at the G20 in Beijing just a few days ago.
Argentina looks like it may be able to put its decade-plus legal issues behind it that were sparked by its 2001 default. Although the final details are not all agreed with everyone, it appears the New York fund managers have essentially won their case for repayment. Argentina had asserted its rights to heavily discount its obligation even to creditors who would not take their earlier 'offer'. It looks like an international bond contract is enforceable, even against sovereign nations, and even by Wall Street 'vulture funds'. Argentina will need to change its domestic laws to settle the dispute.
We probably should also note that the Eurozone has tumbled back into deflation in February, solely on the back of lower energy prices.
In New York the benchmark UST 10yr yield is essentially unchanged in mid-day trading at 1.75%.
The oil price is a little higher again today at US$34/barrel in the US while Brent is at US$36/barrel.
The gold price is also up, US$12/oz higher at US$1,232/oz.
The NZ dollar will start today at 66 US¢ and lower than this time yesterday mainly because of the weaker local business confidence data, at 92.3 AU¢, and at 60.7 euro cents. The TWI-5 will start at 71.1.
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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