90 seconds at 9 am: Oil price jumps

US jobless claims fall; Wall Street hit new records; China struggles with housing boom; iron ore prices rise; Australia vetoes Chinese investment; UST 10yr yield at 1.54%; oil prices jump, gold up; NZ$1 = 72.1 US¢, TWI-5 = 75.2

12th Aug 16, 7:25am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news the oil price is up +5% today as demand rises worldwide.

But first, the number of Americans filing for unemployment benefits edged lower last week, extending their labour market strength in early August.

On Wall Street, equity markets hit new records today, based on some strong corporate earnings reports and a rise in the oil price.

In China, a large second tier city has moved to curb property speculation in their city, raising deposit requirements for 'second homes' and imposing higher land transfer fees. Land speculation is a whole industry in China.

The credit-fueled property boom in China is raising demand for iron ore and prices are following. Some industry analysts expect it to rise to US$72/tonne by 2018, after languishing below US$40 at one point earlier this year. Today it is over US$60/tonne. All this is 'good' for Australia's mining industry.

And staying in Australia, the Government there has vetoed the sale of the NSW power grid to a Chinese firm, citing national security concerns. The Chinese are not overly happy with this decision, and they are being supported by a senior ex-Labor Party politician. England is mulling whether to allow Chinese investment in some critical infrastructure as well. Ex Labour politicians are making the case 'for' there too.

In New York, the UST 10yr yield is a little higher today at 1.54%.

The US benchmark oil price has jumped nearly US$2/bbl today and is now just under US$44/barrel and the Brent benchmark is just under US$46/barrel. The IEA said that both production and consumption of energy products is rising in 2016 but production increases are falling behind demand.

The gold price is also higher - by US$5/oz - and now at US$1,350/oz.

Although the Kiwi dollar has jumped around in the meantime, it will start today almost exactly where it was at this time yesterday, at 72.1 US¢, at 93.6 AU¢, and at 64.7 euro cents. The TWI-5 index is at 75.2.

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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3 Comments

by MikeM | 12th Aug 16, 7:37am 1470944248

US U6 has been flat since October last year.

http://portalseven.com/employment/unemployment_rate_u6.jsp

by Henry_Tull | 12th Aug 16, 12:39pm 1470962368

Now this Hong Kong one seems be CK and the other one mainland state owned.
Can we imagine the OIO in Wellington as they manage open files and ongoing approvals thinking about this (knowing about this). Given its power and electricity network stuff.
Or is one eye of the five a bit rheumy.

On Thursday, after federal Treasurer Scott Morrison announced his preliminary decision to block bids from StateGrid and Hong Kong-based CKI for a controlling stake in distributor Ausgrid on precisely the grounds in the union ad, Foley pounced.
http://www.smh.com.au/nsw/overblown-campaign-rhetoric-bites-mike-baird-…

And the English say:
In Australia, the government expressed concern about the security risk posed by a plan for two bidders – one from Hong Kong, the other from mainland China - to take a 50.4 per cent stake in Ausgrid, the main electricity network in New South Wales, the nation’s largest state. The network serves 1.6 million homes and businesses in Sydney and beyond.

Scott Morrison, the treasurer or finance minister, noted that the grid covers the “critical” supply of power and communications to businesses and government. "The national security concerns are not country specific and relate to the transaction structure and the nature of the assets," he said.

http://www.telegraph.co.uk/news/2016/08/11/australia-blocks-electricity…

Silver Fern Farms

by Stephen Hulme | 12th Aug 16, 9:35am 1470951351

On Wall Street, equity markets hit new records today, based on some strong corporate earnings reports and a rise in the oil price.

The joys of state interference in the price discovery mechanism.

The deleterious outcomes have once again spread to property mortgage underwriters Fannie and Freddie.

The failures of government intervention in the economy have made headlines yet again. Recent stress tests by the Federal Housing Finance Agency found something sinister brewing under the surface at notorious mortgage giants Fannie Mae and Freddie Mac. The results show that these puppet companies could need up to a $126 billion bailout if the economy continues to deteriorate.

That’s right — the two companies that were taken over by the government and that sucked $187 billion from the treasury could be entitled to more taxpayer money. The toxic home loans bought during the last crisis coupled with a lack of liquidity have suddenly become serious risk factors. The so-called “recovery” that has been trumpeted for years by countless politicians and economists is falling apart in plain view. The media will do just about anything to assure the public that this is all isolated and overblown, but the canary in the coal mine has just dropped dead. Read more