90 seconds at 9 am: Banks given message

US jobless claims below expectations; BofE holds; Aussie full time jobs 'surge'; AU banks told to end sales commissions; UST 10yr yield at 1.54%; oil up, gold down; NZ$1 = 72 US¢, TWI-5 = 75.5

15th Jul 16, 7:26am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news public pressure may be finally weighing on banks to change their questionable selling practices.

But first, the number of Americans filing for jobless benefits unexpectedly held steady near a 43-year low last week, pointing to further momentum in their labour market after job growth surged in June.

Good corporate earnings reports, including by banks, is helping push Wall Street even higher today, breaking yesterday's records.

The Bank of England wrong-footed investors by keeping interest rates on hold overnight, but it did hold out the prospect of a stimulus package soon - possibly as soon as next month - to help their economy cope with Britain's decision to leave the European Union.

In Australia, their unemployment rate rose slightly in June to 5.8% (NZ is 5.7% at the last reading; we won't get out June data until early next month), although a surge in full-time jobs may take some pressure off their central bank to cut interest rates further.

And staying in Australia, their bankers lobby group has engaged a former auditor-general to review their industry practices. Aussie bankers are desperate to avoid a Royal Commission into their behaviour and industry culture, and the 'independent review' by Ian McPhee is their way to avoid that. McPhee however is no pushover; late yesterday he handed down his first Report requiring banks to radically change their approach to paying staff and getting rid of sales-based remuneration. He has given them until the end of next year to have all their employee contracts converted away from the current questionable settings. Hopefully that will have a spin-off benefit in New Zealand as well.

Back in New York, UST 10yr yields have risen strongly today and are now at 1.54%.

The US benchmark oil price is up today, now just under US$46/barrel and the Brent benchmark is just over US$47/barrel.

The gold price down about US$15, now at US$1,323/oz. And that is the fifth fall in the last six trading days.

The NZ dollar starts today lower at 72 US¢, is at 94.3 AU¢, and at 64.8 euro cents. The TWI-5 index is now at 75.5. Essentially the drop we saw in the NZD yesterday afternoon when the RBNZ announced it would make a 'economic update' next week has held overnight.

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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6 Comments

by Chris-M | 15th Jul 16, 9:49am 1468532945

Re Australian Banks
I would have thought that the fact that the Australian banks were desperate to avoid a Royal Commission into their activities is the most compelling argument that one was desperately needed. Clearly it is an admission that they are up to no good.
However, once again here is yet another example of the gulf between NZ and Australia in how much more seriously the Australians take policing anticompetitive and other poor business practices.

by Henry_Tull | 15th Jul 16, 9:43am 1468532593

Hang on, one of the boys has gone over there to get a job as a rigger. Says at the bank its easier work than driving gear in WA.

by Stephen Hulme | 15th Jul 16, 9:32am 1468531973

Good corporate earnings reports, including by banks, is helping push Wall Street even higher today, breaking yesterday's records.

Elsewhere:
Corporate bond defaults have just crossed an ominous milestone.

Fully 100 companies have defaulted on debt, 50 percent more than for the same period in 2015 and the highest level since 2009, according to S&P Global Ratings.

Low oil and commodity prices, along with financial market volatility in the United States and abroad, have been the primary problems for the bond market this year. While the actual ratio of distressed issues is on the decline, the level of defaults has climbed.

While the defaults have been weighted heavily to the energy sector, analysts at S&P said there's no guarantee things will stay that way. Read more

Bill Gross aptly noted:

Worry for now about the return "of" your money, not the return "on" it. Our Monopoly-based economy requires credit creation and if it stays low, the future losers will grow in number. Read more

by rmnz | 15th Jul 16, 1:01pm 1468544499

Thanks Stephen, interesting links. This is yet another indicator that things approaching a significant economic event.

by workingman | 15th Jul 16, 9:48am 1468532934

The desperation of bankers in Australia to avoid a Royal Commission is merely a small, briefly visible, indication of the special pleading and influence peddling that has undermined democracy and responsible oversight around the globe. Globally the sector is incontrovertibly and continually steeped in fraud and criminality, from money-laundering to price-fixing, from false-accounting to so-called miss-selling and other offences, often as deliberate policy.

In Australia, hardly a month goes by without a parent bank of those operating in New Zealand being fingered for some new sharp practice or fraudulent activity. The Guardian published a handy timeline on 5th May: http://www.theguardian.com/australia-news/ng-interactive/2016/apr/29/ti…

As The Guardian reports, a 52-page report by financial think-tank, LF Economics, tabled to the Senate inquiry into white-collar crime, details 'systemic criminal activity in the finance, insurance and real estate sectors [placing] the livelihoods of consumers at risk, while authorities are aware but do nothing to stop it.’ https://www.theguardian.com/business/2016/may/05/white-collar-by-banks-…

Different here? The bank economists so often featured in the media are merely leading members of the sales force for the same compromised businesses. Their overriding interest and responsibility, come what may, is to seek to maintain and advance bank profitability and shareholder value, nothing else. Indeed locally, it may be thought that the influence of these businesses is now economically, politically and socially pernicious – their interests and activities being based overwhelmingly in pumping residential housing (think of it as an economy at your peril).

Does anybody really still suppose that the interests of commercial banks line up with the interests of a healthy society? The outcome of their Australian lobbying will be telling - for both sides of the ditch.

by meh | 15th Jul 16, 11:22am 1468538543

The Church of Money - ruler of all, accountable to no-one.

"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain." Napoleon Bonaparte, Emperor of France.

"The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." The Rothschild brothers of London writing to associates in New York, 1863.

http://www.moneyreformparty.org.uk/money/about_money/quotes.php