90 seconds at 9 am: US housing sales surge

China's richest man steps up push into Hollywood; US housing booms, manufacturing shaky; Europe shows further recovery signs; UST 10yr yield at 1.55%; oil and gold up; NZ$1 = 72.9 US¢, TWI-5 = 75.8

24th Aug 16, 8:09am by Jenée Tibshraeny

Here's my summary of the key events overnight that affect New Zealand.

The number of new homes sold in the US unexpectedly surged to a nearly nine-year high in July. Sales jumped 12% from the previous month and 31% from July last year. The gain came mostly from homes not yet started or still under construction, suggesting a rebound in residential construction investment.

Housing market strength should offset some of the manufacturing drag the US is experiencing. The Richmond Fed manufacturing index and Markit US manufacturing Purchasing Managers Index (PMI) have both eased. While production is rising, growth in new orders and employment are slowing.

It’s a similar story in Europe with services PMIs firm, but manufacturing PMIs easing a touch. At this stage, the eurozone’s economic recovery is looking good further to the Brexit.

In other news, China’s richest man is stepping up his push into Hollywood. Wang Jianlin has told Reuters of his plans to target the ‘Big Six’ movie studios, bringing their technology and capability to China.

His call comes further to his company Dalian Wanda Group already committing several billion dollars towards acquiring Hollywood studios. The changing nature of Hollywood - an institution so stereotypically American - is undoubtedly a space our film industry will be watching.

In New York, the UST 10yr yield has risen since this time yesterday to 1.55%.

The oil price has climbed on rumours Iran might participate in OPEC production cap talks next month. The US benchmark price is up to US$48 a barrel, while the Brent benchmark is at US$50 a barrel.

The gold price is up to US$1,340/oz.

The US dollar has slid as investors anxiously await comments from the Federal Reserve’s chair at the central bank’s annual meeting at the end of the week. The New Zealand dollar is at 72.9 US¢. It’s jumped to 95.8 AU¢, and is up to 64.5 euro cents. The TWI-5 index is at 75.8.

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 ».

Daily exchange rates

Select chart tabs

Source: RBNZ

Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

15 Comments

by Stephen Hulme | 24th Aug 16, 8:21am 1471983703

FX hedging costs are at their highest since the financial crisis. The three-month JPY/USD forward is now at -39 pips, the lowest since December 2008. The more negative the reading, the more expensive it is for Japanese issuers to swap yen to U.S. dollars. It also means that the shortage of dollars, from a Japanese perspective, has never been greater.

Rising Libor rates could push FX swap rates out further by the end of this year, Sugisaki estimated. "An increase of the cost of funding in CP and CDs would be definitely negative for the banks," he said. "For the Japanese banks, it's going to be very tough."

The strain on short-term funding is not expected to end soon, with Citigroup estimating that three-month Libor could rise another 5bp-10bp before October 14.

In the absence of cost-effective alternatives, Japanese banks will have to continue issuing CPs at a higher cost, pressuring their profit margins, leading to an even greater shortage of US dollars, higher Libor rates, and so on, until the Libor spike spills over across the Pacific and claims its first US and European banking victims. Read more

I guess foreign wholesale funding that the likes of ANZ source is rising in cost as well.

by Stephen Hulme | 24th Aug 16, 8:29am 1471984194

In New York, the UST 10yr yield has risen since this time yesterday to 1.55%.

"It's Gone" - Why Foreign Demand For US Treasuries Has Disappeared

by ngakonui gold | 24th Aug 16, 8:54am 1471985688

Lets hope,given the good news on housing in the states that the share price of Tenon and Rubicon on the NZX rise .

by Chris-M | 24th Aug 16, 9:02am 1471986146

Funny how houses sales are treated as one of the primary economic indicators and yet they are largely excluded from the CPI.

by dmitri | 24th Aug 16, 9:29am 1471987750

It's just when they need to make up the numbers..

by Donald Ellis | 24th Aug 16, 11:16am 1471994183

Look carefully. It's house building that's being reported on same as our building consent stats every month. From memory construction costs are in the CPI but secondary sales of completed houses aren't.

Effectively we take land prices out of these calculations.

by Chris-M | 24th Aug 16, 2:51pm 1472007088

Yes but it is land that has increased the most in Auckland and is in the order of half the cost of a house. It is a pretty arbitrary exclusion for what reason?

by Donald Ellis | 24th Aug 16, 4:31pm 1472013061

Because its not a consumption good. It doesn't get consumed. Houses wear out over time but your spot on the map doesn't.

So I think its fine to say "look we are doing more building of new houses". Clearly that is an economic activity no different to hairdressing. What doesn't tell us much about whether the economy is going well or not is how many houses we sell to each other and for what price. Minimal real economy going on there.

by Stephen Hulme | 24th Aug 16, 9:27am 1471987666

British workers have suffered the longest fall in wages since Queen Victoria sat on the throne. Between 2007 and 2015, real wages fell by an astonishing 10.4% - the worst fall in any advanced nation other than Greece. Read more

Another successful central bank stimulus escapade?

by OnwardsUpwards | 24th Aug 16, 9:57am 1471989431

Not surprising really. Back in the 'good ole days' the wages of poms were subsidized by all their slave colonies. Now the poms need to compete just like everybody else. It would seem that they're not very good compared to other nations. Oh dear.

by taxPayer | 24th Aug 16, 9:34am 1471988085

US housing "surge" all very well but they've only just got back to 1963 levels. And prices are falling.
https://mishtalk.com/2016/08/23/new-home-sales-surge-most-since-2007-me…

by notaneconomist | 24th Aug 16, 10:46am 1471992388

It is these types of headlines that makes people suspicious of the media. Imagine a headline " more people choose to take advantage of 1963 house prices" !!

by Adam B NZ | 24th Aug 16, 2:20pm 1472005213

All depends on the area. Some places in the US are past their 2007 levels. The US is a big place.

by kiwimm | 24th Aug 16, 2:53pm 1472007181

The "1963 level" is just selective reporting. Look at that graph in the article, you could just as easily say back to 1974 level, 1990 level or 2008 level.

by Ahuhyeah | 24th Aug 16, 3:48pm 1472010499

ok just because I can - does this sound right:
1963 USA population 189 million with average family size of 3.7 people = 51 million households.
2016 USA population 318 million with average family size of 2.5 people = 127 million households

True headline is "2016 sales levels are less than half of 1963 levels per population". People more mobile these days too?