Here's my summary of the key events over the weekend that affect New Zealand, with news Beijing has raised minimum deposit requirements for first-home buyers.
But first, American consumers became a bit more optimistic about prospects for the economy as well as their own personal finances in September, according to the respected University of Michigan Surveys of Consumers. Consumer sentiment has remained at high levels throughout the past year, with only small month-to-month variations. Rising incomes and declines in food and fuel prices were responsible for the recent confidence gains.
But, American consumer spending fell in August for the first time in seven months while inflation showed signs of accelerating, mixed signals that could keep the Federal Reserve cautious about raising interest rates.
In China, activity in their services industry expanded in September at a slightly faster pace than the previous month, and at a very respectable index level of 53.7. The factory sector is only marginally back in expansion territory, but from an annual perspective, that is a good result. (Also see this data.)
But not such a good result is that corporate China is now seriously delaying trade payments, a sign of increasing stress. Bloomberg is reporting that average payment times ballooned out to 92 days in 2016, up from a cyclical low in 2008 of 52 days. This sort of management is a sure sign of corporate immaturity. The equivalent delay for New Zealand is just 35 days, a decline from 52 days, also in 2008.
Beijing is in the middle of a housing bubble. Their response is to try an quell demand by raising the loan deposit requirement to 35% from 30% for first-home buyers, and to 50% for investment purchases.
Worldwide, there is plenty of focus on the financial state of Deutsche Bank, but some analysts are suggesting this is a bit misplaced. It has €43.5 bln of tier one equity in place now, a 10.8% capital ratio. (For reference, ANZ NZ has a 10.4% tier 1 capital ratio.) But it will only be in serious trouble if it can't maintain a 7% capital ratio and that would need a new €15 bln loss. All its current litigation liabilities have been provided for (to about €5.5 bln). And of course its Co-Cos would then be triggered if it did. However, while we are looking at downside risks, we should also remember, it has a 2019 obligation to get its regulatory capital up to 12.25%. Whatever happens, it is just another big bank that will need more capital.
In New York, the UST 10yr yield bounced back up at the end of trading last week and is now at 1.60%.
The US benchmark oil price was little changed at the end of last week now at US$48 a barrel, while the Brent benchmark is now just on US$49 a barrel. Rig counts in North American continue their rise. In fact, the better than expected Canadian GDP result was largely attributed to higher oil and mining output.
The gold price was down again however, now at US$1,316/oz.
The New Zealand dollar is a little higher today than at this time on Friday, now at 72.9 US¢, and on the cross rates it is at 95.2 AU¢, and 64.8 euro cents. The TWI-5 index is now at 75.9. And on a currency matter, we should note that the Chinese yuan officially entered the IMF’s official basket of reserve currencies over the weekend. It comes in at 11%. The latest data shows it is now used in about 4% of international trade, far behind the US dollar that is used in over 85% of transactions, and that share is rising. (The UK pound and the euro are the losers.)
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 ».