Here's my summary of the key events over the weekend that affect New Zealand, with news a huge bank loan restructuring program may be underway and under the radar in China.
But first, sales of American houses (excluding new one) rose in April for the second straight month, driven by a jump in the Midwest. Their housing demand is firming alongside steady job growth and historically low interest rates. Their median house price is now US$232,500 which is up +6.3% from the same month a year ago.
The wealth effect is gaining traction again. American credit-card balances are on track to hit US$1 trillion this year, as banks aggressively push their plastic and consumers grow more comfortable carrying debt.
Wall Street ended last week with some strong gains.
In China, it seems a huge bank bailout is underway. The government program, which forces banks to write off bad debt in exchange for equity in ailing state-owned companies, soared in value to hit more than US$220 bln by the end of April, up from about US$120 bln at the start of March. But this new 'equity' investment will probably compromise trading bank strength and their profitability. It's an odd solution for a huge issue.
It's no only Chinese banks facing issues. Debt-laden companies are struggling to lock in stable, longer-term financing. A rash of defaults has taken the gloss of their bond refinancing market, in turn making it harder for many companies including large ones to roll over their debt. There will be tears.
There could yet be more tears in Greece too. Their parliament is getting ready to vote on a final package of changes needed to unlock the rest of their bailout deal. The measures being voted on include new taxes on fuel, tobacco, alcohol, the internet, pay TV, hotel stays, cars, changes in property tax, as well as a rise in their GST rate from 23% to 24%. But that is probably not the end of it. The IMF is insisting the EU (that is, Germany) forgive some of the underlying debt. Germany is refusing, at least in the short-term. The IMF's contribution to the bailout deal is in the balance.
In New York the benchmark UST 10yr yield is basically unchanged at 1.84%.
The oil price is still basically unchanged with the US benchmark just over $48/barrel and the Brent benchmark just under US$49/barrel.
The gold price is also unchanged at US$1,255/oz.
And finally, the NZ dollar will start the week at 67.7 US¢, at 93.7 AU¢ which is its highest since February, and at 60.3 euro cents. The TWI-5 index is now at 71.7.
If you want to catch up with all the local changes on Friday, 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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6 Comments
Seriously? with:
Climate change leading to storms that can flatten whole cities and droughts that will cause whole cities and even countries (middle east) to become unlivable. Coastal cities under metres of water...
Venezuela riots food (a taste of things to come)
End of Antibiotics (3 people a second dying by 2050 from what are NOW curable diseases)
Collapse of the whole economic system
Russia poised to take back its former "countries" and trigger a war with NATO
American (and somewhat global) corporate greed, unbounded, forcing the poor and now working class into slavery conditions
China Imploding
...
We may as well be enjoying ourselves at the banks (economists) expense as they bury their heads further into the sand and pretend this is not happening....
http://www.stuff.co.nz/business/world/80255375/Christine-Jia-Xin-Lees-e…
+1
To be fair... some investors are quite ethical.
Investors in ExxonMobil and Chevron are urging them to adopt climate change resolutions at their AGMs on Wednesday. The oil majors look increasingly isolated in their refusal to stress test their portfolios against international climate targets, after miner Glencore adopted a similar proposal last Friday.
http://www.cnbc.com/2016/05/01/norways-oil-fund-to-target-high-executiv…
The world's biggest sovereign wealth fund is launching a crackdown on executive pay, targeting high salaries at companies around the globe in an attempt to exert its influence in a debate that has been gathering pace in recent months.
Norway's $870bn oil fund, which has previously refused to interfere in how much chief executives are paid, has decided that its position is untenable and is looking for a first company to target publicly on pay in the coming months.
The wealth effect is gaining traction again. American credit-card balances are on track to hit US$1 trillion this year, as banks aggressively push their plastic and consumers grow more comfortable carrying debt.
Any cohort will suffice to pick up the IOU baton from the over indebted corporate sector.
Combining all of the corporate cash in the U.S. wouldn’t cover the $1.8 trillion of corporate debt that’s coming due in the next five years, according to a report by Moody’s Investors Service on Friday. That’s because U.S. companies have been borrowing more quickly than they’ve built up the record $1.68 trillion of cash on their balance sheets. And more of that debt comes due sooner. Read more
Keeping up an appearance of wealth is an expensive business.
It's problems like these that can have serious fall out. I'd be more worried about the corporate debt than the credit card debt in terms of stability.
The credit card companies will either extract the money or write off the bad debts. The corporate cash flow could create a disaster leaving investors wondering how they've been mismanaged to the point of near collapse. Alternatively some will have to pay tax on off-shore funds being returned to the US to pay down debt.
e: I'm wondering how many companies are just leveraging up their return on capital instead of making more money (probably most of them).
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