US jobless claims fall; China stops reserves drain; Piketty calls for higher immigration; Aust. construction slips; UST 10yr yield 1.70%; oil down, gold up; NZ$1 = 67.7 US¢, TWI-5 = 70.9

Here's my summary of the key events overnight that affect New Zealand, with news that currency outflows from China seem to have slowed.

But first, in America the number of Americans filing for jobless benefits fell more than expected last week, suggesting their labour market continued to strengthen despite unspectacular economic growth.

In China, the country’s foreign exchange reserves grew in March for the first time in five months. Those reserves are a rough proxy for money moving in and out of the country, so it appears officials have stemmed the outflow for now. But without the effect of a devaluation in the Yuan, they would have had to report another month of outflow, although one of about US$25 bln and much less than the monthly US$100 bln or so they had reported in January and February.

French economist Thomas Piketty, whose 2014 book highlighted the problems of inequality, has launched a new campaign to get Europe to increase its immigration targets to at least 1 million extra people per year.

They will probably come by air. Global passenger air traffic in February had strong growth in demand for both domestic and international travel. Total revenue passenger kilometers (RPKs) rose +8.6% compared to the same month last year. Growth in the Asia-Pacific region was up more than +11%, and the Indian domestic market grew a staggering +25%. However airplane capacity is growing even faster and so overall load factors slipped slightly.

In Australia, construction activity slipped in March to a 13-month low on the back of weakness in home building and declining engineering work.

In New York the benchmark UST 10yr yield is down sharply to 1.70%. We will no doubt see this trend in local swap rates later today, pushing them down to deeper record lows. At some point one bank will use them to drive our fixed mortgage rates lower (and deposit rates the same way). There has been an eerie calm in bank pricing of mortgage rates recently, unjustified by either swap rates or credit spreads.

The oil price is back down to US$37/barrel in the US, while Brent is at US$39/barrel.

The gold price is up +US$15 to US$1,238/oz.

And finally, the NZ dollar will start today a little softer at 67.7 US¢, at 90.2 AU¢, and at 59.5 euro cents. The TWI-5 index is at 70.9.

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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20 Comments

"French economist Thomas Piketty ... has launched a new campaign to get Europe to increase its immigration targets to at least 1 million extra people per year."

Guess what, genius, they are coming anyways even without your "campaign" and way more than a million a year, and half of them are illiterate and the most of the rest are at primary school level.

Can anyone explain to me why anyone would listen to this ivory tower French public servant? Oh, he discovered inequality and wants to deal with it in French public service style, i.e. through a Socialist centralized bureaucracy? Since when does Socialism work? Our problem are Socialist central bank politicians who waste our money on keeping failed companies and failed states alive.

"Since when does Socialism work?" The problem in todays politics, is that people confuse anything that is not right wing with socialism. What should be a point of discussion is "how do we keep, and/or create jobs to enable the majorities of our populations to keep occupied and maintain a reasonable living standard?" A big problem with this is that globalisation and free trade agreements undermines this principle and multi-national conglomerates have too much influence to protect their monopolies and influence. How do we get governments to put the brake on that?

Also, the overall European predicament is made much worse by population increase. .

He's actually a Professor of Economics not a public servant. Everything you have said has nothing to do with what he is actually suggesting.

Given that in his book Capital in the 21st Century he does point out that immigration does diminish per capita GDP that's more applicable to NZ. Even reading the article population growth in the EU is surprisingly low, so low that it's actually a problem. I only read the article as it appeared to be the opposite of what he wrote in his book.

I agree we should stop socialism. It's time to cut off all the beneficiaries. The largest cost and easiest target to start with is pensioners. If they want to eat they can beg in the streets like everyone else. Of course that will drive inequality even further. It is also a violation of human rights but when has socialism ever worked, when has working as a team ever benefited society?

Also in your comments it's the first time I've heard of central banks being called socialist.

They (central bankers) certainly redistributed wealth based upon a narrow redefinition of what constitutes inflation, with interest rates cuts.Thus fueling an orgy of cheap mortgage credit to create an asymmetrical gain to those best placed to take advantage of the resultant property price rises.

Furthermore, in their haste to relieve the rentier class of their unearned interest they passed enormous wealth to the narrow cohort of bond dealers, funded by taxpayers.

Federal Reserve purchases of mortgage-backed securities (MBS), for example, should raise the prices and lower the yields of those securities; moreover, as investors rebalance their portfolios by replacing the MBS sold to the Federal Reserve with other assets, the prices of the assets they buy should rise and their yields decline as well. Declining yields and rising asset prices ease overall financial conditions and stimulate economic activity through channels similar to those for conventional monetary policy. Read more

The part of Bernake's blithering that you quoted says it all. They made capital gains from the OCR drops, and rebalanced their portfolios accordingly. The only stimulus that occurred was collecting capital gains to then reinvest in other existing financial instruments, not in new issues of bonds or shares.

What affected the collapse of Long Term Capital Management wasn't that they were over leveraged and opening risky positions with inadequate market data, it was that the Fed wasn't providing enough support of the financial bubble via a liquidity trap.

Has the Fed ever been a supplier of liquidity - seems to me H3 discloses inert Fed Reserves, exchanged for bonds, sitting idle at the various regional offices on behalf of the recipient banks. Banks have failed to initiate the 10% reserve multiplier factor to demand more than the paltry amount currently required. Read more

This German economist says each refugee will conservatively cost 450,000 Euros. You will need to use google translate. It is staggering. Ah the power of the Internet!

http://www.focus.de/finanzen/videos/ifo-chef-sinn-warnt-jeder-fluechtlin...

Here an Iraqi father threatens to have his whole family run down if he doesn't get the house he was 'promised' before he left Iraq. And only his second day in the city:

http://ndp.fnp.de/lokales/wetterau/Sitzstreik-Fluechtlinge-fordern-eigen...

I wonder what the equivalent cost per immigrant is to NZ.

Re the Iraqi father and his"promised" house. No wonder there are so many battles in the area if this is an example of their irrational behaviour. Who would want them in their country?

What's been going on is that people smugglers are telling people that Germany is the promised land and when they turn up they find it's a bit shit. There's been quite a few turn up, then decide to raise money for the plane ticket to leave again.

The media isn't telling the whole story.

Given that, it is still very ungrateful and irrational behaviour and points to the sort of ethos that justifies murdering other people for their different religious beliefs. He should be escorted straight back to Iraq; besides which as he is from Iraq and has probably paid for the services of a people smuggler, is he a genuine refugee.

There has been an eerie calm in bank pricing of mortgage rates recently, unjustified by either swap rates or credit spreads.

Reactions in Europe are direct - lower interest rates, lower bank share prices. Much the same for ANZ

But first, in America the number of Americans filing for jobless benefits fell more than expected last week, suggesting their labour market continued to strengthen despite unspectacular economic growth.

I wonder if this is coincidental with the major revival of Fed funded consumer debt uptake ahead of the election. Read more

No doubt our regulator/Government will be asking the same questions........

http://www.bbc.com/news/business-35989915

Penguin we will get the "Nothing to see here, let's move on..." approach from this government.

The Panama Papers scandal is not something that is going away. Apparently there is more information to come out in coming weeks including info from the BVI's.
They are pretty stupid if they think the whole thing will blow over.

Yeah? anything change after the spying ramifications? I think they doubled down on that didn't they? Even in this country. We are dealing with people who think they are above the law in every respect Penguin. They don't flinch easily unless hit with a ton of bricks.

News item on Aljazerra this morning said that the sale of luxury yachts and cruisers in China had fallen dramatically.
Reason given was that the wealthy Chinese are to scared to spend on luxury items because the purchase may bring them to the attention of the Govt.

Anyone in the Offshore Trust industry must be in a state of paranoia whether it be beneficiaries, bankers, lawyers or trustees.

It would only be the beneficiaries. The other you mention are well aware of how to cover their rear ends.