90 seconds at 9 am: NZD shifts lower

China stocks dive, no other markets follow; more Panama Papers released; far-right candidates win policy influence; UST 10yr yield 1.76%; oil and gold lower; NZ$1 = 67.7 US¢, TWI-5 = 71.1

10th May 16, 7:34am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news that the Kiwi dollar is possibly shifting to a lower range as commodity prices weaken.

But first, stocks in Shanghai fell sharply yesterday, down a massive -2.8%. And this follows a nearly -3% slump on Friday. Shares locked up at the time of the last big rout a year ago are now free to be traded again. Plus there are investor confidence doubts in the Chinese recovery, and worries about new restrictions on 'speculators'. However, its a Chinese thing. Other equity markets in the region did not go out in sympathy; Singapore, Hong Kong, Tokyo and Sydney were all higher on the day.

Equity prices on Wall Street are also higher in today's trading, driven by gains in consumer and healthcare sectors, and held back by energy and commodity stocks.

Internationally, the Panama Papers affair has widened, with an extended teaser database of documents relating to more than 200,000 offshore accounts posted online. The entire database is of more than 11 mln documents and it is unclear how much more will be released. Anyone can search, but so far very little has surfaced relating to New Zealanders. Radio NZ and Nicky Hager have teamed up to mine what might be there. One News is the other organisation devoting local search resources. The pressure is on to close up the gaming of tax regulations through jurisdictional arbitrage.

The pressure is on democracy as well. Around the world rabid far-right populism and selfish nationalism is in ascendancy, led by the rise of Donald Trump. It is an Eastern European-type theme that started in the Ukraine, has now claimed the Austrian leader, seen a very feral candidate win in the Philippines, and has echoes in our own polls as NZ First rises. It is a trend that probably has some way to go yet, and has the potential to close off much international trade if it keeps gaining momentum as it has. New Zealand will be a clear loser if that is the case. Interestingly though, it does not look like it will be a significant factor in the latest Australian election campaign.

In New York the benchmark UST 10yr yield is slightly lower at 1.76%.

The oil price is lower today with both the US and Brent benchmarks at just over US$43.50/barrel.

The gold price is down very sharply, down US$24 to US$1,266/oz. This is partly just an adjustment to a much stronger US dollar.

And finally today, the NZ dollar will start noticeably lower on that stronger greenback at 67.7 US¢, at 92.6 AU¢, and at 59.5 euro cents. The TWI-5 index is now 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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22 Comments

by xelnaga | 10th May 16, 8:12am 1462824732

I never really thought of Winston that way, but I guess you learn something new every day.

by dictator | 10th May 16, 8:26am 1462825592

It reminds me of the era when globalisation first shut down. I don't want to see world wars breaking out again before things settle down.

by Stephen Hulme | 10th May 16, 8:14am 1462824840

Re global nationalism on the rise: New Zealand is developing it's own version.

But the time for talking is over. We need to stop arguing about the role of offshore investors in this market and focus on the future we want for our children.

And if a collection of blunt instruments is needed to end our collective obsession with real estate – so be it.. Read more

by Sheep Shagger | 10th May 16, 8:24am 1462825485

David, Im sure you had a wee smile to yourself as you threw that particular rock in the pond. Its called democracy and the collective wisdom is starting to question the received doctrine of unfetted globalisation, given the benefits appear to be going overwhelmingly to the ones at the very top. That said you are drawing a pretty long bow comparing Winston to far right extremists.

by murray86 | 10th May 16, 8:41am 1462826468

Totally agree SS. This is not far right populism, it is democracy reasserting itself as the masses begin to wake up to just how corrupt the entrenched political establishment all over the world really is. That fringe parties are getting more traction is more about the quality of choice available rather than ideological swings. If a credible center, anti-corruption, people first party or politician popped up most people would grab him/her with both hands. The problem in NZ is that an independent cannot change the system. it is structured in favour of the politicians, not the people (democracy), so we are reliant on a party who will be willing to challenge the status quo without being too radical, and at the moment NZ First is the closest we have albeit a poor choice IMHO.

by Stephen Hulme | 10th May 16, 10:47am 1462834053

Winston Peters makes it a habit pointing to what is needed rather than what is wished for.

A large proportion of New Zealand's wealth is now being siphoned offshore every year in the form of profits, dividends, fees and other payments. And that tsunami of money flowing out every year accounts for nearly all of New Zealand's chronic balance of payments deficit - running at nearly $8 billion in the year to the end of 2015.

Unless we start to address the foreign ownership issue there is simply no way to tackle New Zealand's massive external debt, now about $150 billion. That is a number our government never mentions - because it reveals their utter failure to rebalance the New Zealand economy on to a long-term sustainable basis. Read more

by murray86 | 10th May 16, 11:09am 1462835359

Agreed, trouble is Winston's attraction to the trinkets and baubles of power.

by Sheep Shagger | 10th May 16, 12:32pm 1462840332

Ive never voted for Winston but am inevitably being drawn towards him by default. I challenge anyone to read Stephen Hulmes link and not consider him to be making a lot of sense. My issue in the past is I found the guy incredibly frustrating because he only seemed to want to fight with the interviewer so I never heard the actual message. Now I am hearing the message and it seems to fit the times. I also think he is gathering a team of capable MPs around him who are adding constructively to the political discourse.

Key will be gone one way or the other in the next couple of years and we will wonder what has happened. His day to day political management is genius but his legacy at this point is an out of control housing market, disintegrating environmental standards, unfunded superannuation commitments, a lessening of NZs reputation as a good international citizen via turning us into a effective tax haven and dragging our heals on climate change commitment, our second city still in ruins, huge debt and foreign owned everything. But hey capital gains have been great, TVs have got really cheap and the All Blacks have had a remarkable winning record... so who really cares.

by Mike B | 10th May 16, 11:49am 1462837758

David is correct - we do not want this far right thing. Much better to have what we have now
Greed and corruption, Inequality, Tax havens, crony capitalism, lies and the demise of democracy.

by Stephen Hulme | 10th May 16, 8:25am 1462825520

For the third time in less than a year on Monday, the People’s Daily published an extended interview with an unnamed official expounding on the policies needed to address challenges facing the world’s second-largest economy. As in similar pieces in January and last May, which both preceded big stock market sell-offs, the speaker sought to clear up what were presented as misunderstandings about China’s policy plans.

Monday’s page-one takeaway: Excessive debt was China’s “original sin” and the country can’t borrow its way to long-term economic health. The message contrasts with what investors have been presented in recent months: a record jump in credit that had helped stabilize the economy and led some to forecast a return to old-fashioned, leverage-based stimulus. Read more

Ain't it the truth?

Under the direction of orthodox economics (the fusion of Keynes and monetarism) the world’s “stimulus” apparatus is making a bad situation worse by (at best) dragging it out far longer than maybe it would have under more traditional business cycle conditions. They do so, of course, under the assumption that 2005 is still an available scenario and thus any weakness is a “temporary” deviation from the path returning there. Belief in the power of “stimulus” to make it happen prevents awareness of what is, again, really a paradigm shift that will not be altered. What we are analyzing, then, is not what awaits but how long it takes to get there and the huge, growing costs to delay what looks only inevitable. Read more

by Afewknowthetruth | 10th May 16, 8:28am 1462825739

'The pressure is on democracy as well.'

It is difficult to think of nations in which money is the main determinant of who acquires political power as democracies.

by Sheep Shagger | 10th May 16, 8:57am 1462827430

Re nationalism and it not being a factor in the Aussie elections, you've got to be kidding. Look at their attitude to illegal immigration. Even for Kiwi's they have no qualms not reciprocating our generous terms to Australian citizens. Look at the measures they have taken to stem foreign investment in their housing market including TPPA concessions. Look at the stopping of the Kidman ranch sale to China. Look at their unilateral moves to stop the rorting of their tax system by the multinationals. Look at the enormous public pressure the Aussie govt has been under to have its new fleet of navy ships and submarines built in Australia even though it would be more cost effective to have them built offshore.

The big difference between here and there is that in Aussie all this stuff is bipartisan.

by Stephen Hulme | 10th May 16, 12:55pm 1462841744

The proposed submarine purchase poses many, as yet, unanswered questions.

The country probably needs a regionally superior cyber-enabled and balanced military force across all services before it needs a force of 12 submarines. We can expect that the Australian government will come to see that. In the absence of a direct military threat to the Australian mainland, the projected submarine spend of A$50 billion is almost certainly unsustainable in political terms. The eventual build through the 2020s and 2030s of new Australian submarines will almost certainly be closer to six boats than 12. Read more

by Roger Witherspoon | 10th May 16, 1:17pm 1462843051

At least they are arguably defensive for an island nation. Unlike NZ who scrapped the defensive jets and bought heaps of armoured vehicles designed for plains warfare in foreign lands.

by Andrewj | 10th May 16, 9:42am 1462830179

EUR/NZD: Lactose Intolerance
http://www.fxstreet.com/analysis/technical-call/2016/05/09/?

by PeterPen | 10th May 16, 10:31am 1462833105

"The pressure is on democracy as well. Around the world rabid far-right populism and selfish nationalism is in ascendancy ..."

The pressure is on democracy by international "leaders" who have systematically perverted democracy into its opposite. Democracy is the rule of the people, not the rule of anti-democratic know it all better "elites, not the overriding supremacy of so-called free trade, and not the rule of real estate speculators or far left multiculturalism ideologists. The people do not want to be ruled by a cynical anti-elite that violates laws, breaks treaties, does not care about the people it claims to represent while pretending to be modern day saints sacralizing the love of illegal immigration, violent religions and non-hetero sexual life-styles.

Donald Trump might reply to you as he replied to the Islam-lover in the Vatican: the day may come when the fanatic preachers of misguided pseudo-religions like multiculturalism will get their hides saved by the last remaining Western powers in the face of IS-type terror and barbarism that is currently spreading around the world courtesy of people like Obama, Merkel and Key.

Boomers got mentally stuck in the 1980s and do not understand the world of 2016. Your mantra is bland, outdated and unconvincing. Your time and that of your heros like the Wall-Street-Clintons, too black to fail Obama, illegal immigrant champion Merkel or the EU dictatorship is thankfully coming to an end. We are all fed up of the staleness of the boomer world with its social responsibility nonsense talk when that generation has both squandered the inheritance of their forebears as well as sold out the future of their children to finance a vulgar and infantile hedonism.

by middleman1 | 10th May 16, 10:59am 1462834777

Yes, I agree. That John Key is definitely in league with ISIS. Are we sure he's not actually the black hooded guy carrying out their beheadings in Aleppo. He does seem to have been out of the country an awful lot lately.

by positivelywallstreet | 10th May 16, 11:07am 1462835237

Seems to be a day for political extremism
It started with the revelation that Winston Peters is on the extreme right.
I cant type for laughing..

by middleman1 | 10th May 16, 11:24am 1462836259

The pope currently off on a Hajj to Mecca and Winstone scouting the country for future gulag sites are not laughing matters.

by positivelywallstreet | 10th May 16, 11:26am 1462836407

Well it is certainly too much for me....

by Gareth Vaughan | 10th May 16, 12:19pm 1462839551

Very interesting development for those following peer-to-peer lending;

"Lending Club today also reported that on May 6, 2016, the board of directors accepted the resignation of Renaud Laplanche as Chairman and CEO. His resignation followed an internal review of sales of $22 million in near-prime loans to a single investor, in contravention of the investor's express instructions as to a non-credit and non-pricing element, in March and April 2016." "Scott Sanborn will continue in his role of President and will become acting CEO, assuming additional managerial responsibilities for the Company. Mr. Sanborn will be supported by director Hans Morris, who has assumed the newly created role of Executive Chairman."

"A key principle of the Company is maintaining the highest levels of trust with borrowers, investors, regulators, stockholders and employees. While the financial impact of this $22 million in loan sales was minor, a violation of the Company's business practices along with a lack of full disclosure during the review was unacceptable to the board. Accordingly, the board took swift and decisive action, and authorized additional remedial steps to rectify these issues," said Mr. Morris.

"We have every confidence that Scott and the management team are well positioned to lead Lending Club forward."
Shares tanked 35%

http://ir.lendingclub.com/file.aspx?IID=4213397&FID=34233669

http://www.cnbc.com/2016/05/09/lendingclub-board-lost-trust-in-ceo-amid-probe-sources.html

by dictator | 10th May 16, 12:26pm 1462839972

P2P lending is very trust based. If the company lacks credibility in its processes then it's worthless. This type of dodgy lending was what happened in China but on a larger and a ponzi scale.