Here's my summary of the key events overnight that affect New Zealand, with news NZ and the UK are about to start talks on a new trade agreement.
But first, surprisingly weak demand for electricity in the US as seen overall American industrial production barely rise in September. This has happened even though the data shows a rebound in manufacturing and mining output. Together, this Fed survey suggests only moderate economic growth in the third quarter for the world's largest economy.
The American economy may face longer and deeper recessions in the future if interest rates remain stuck at current low levels, Fed Vice Chair Stanley Fischer said overnight. In this latest speech he mapped out a world in which low rates hamstring central banks from effective recession-fighting. The RBNZ should be wary of firing all its bullets during a time we are not even close to being in a recession.
New Zealand and the UK are to start regular trade policy talks for a new bilateral trade agreement following Britain's vote to leave the European Union. New Zealand is in line after Canada and Australia with these talks, although we do have a history of getting things done quicker.
The Aussie issuance of its first long sovereign bond - one that matures in 30 years - has been seen as a great success. They issued A$7.6 bln, snapped up with twice that in demand. The yield was 3.27%. But it is becoming clear that this demand has been a big bet by international bond funds that they can pressure the Aussies to cut their benchmark policy rates and thereby induce lower Aussie bond interest rates. If they are successful, gains approaching +25% could be won by these bond funds - in a time frame as short as six months. More than two thirds of this issue was bought by foreigners, a level far above the usual level (of about 35%). These international bond funds have the Aussies in their sights.
In New York, the UST 10yr yield has pulled back from yesterday's recent high, now at 1.76% and still retreating.
The US benchmark oil price has seen a pullback as well, now just under US$50 a barrel, while the Brent benchmark is now just under US$51.50 a barrel.
The gold price is a couple of dollars higher today, now at US$1,255/oz.
The New Zealand dollar is a little higher too, at 71.4 US¢, and on the cross rates it is up to 93.5 AU¢, and 64.8 euro cents. The NZ TWI-5 index is now at 75.4. We are also at another new high against the sinking pound at 58.5 British pence.
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
7 Comments
There's an acronym for that. "A movement towards such an entity is already beginning, with 160,000 people signing a petition for free CANZUK movement of peoples on www.cfmo.orgwithin a few months. CANZUK free movement brings an immediate benefit to ordinary Britons, with effective reciprocity in the form of employment, business, and retirement opportunities that ordinary Britons can enjoy, as opposed to the mostly theoretical benefits that the EU brought."
No chance uk will want anyone who chooses to walk in to have an automatic welcome after getting out of that at great cost in Europe. Nor do we! Anyone we take in should contribute npv to current NZ citizens - after due allowance for dependants they may drag along with them. Pretty obvious really
The American economy may face longer and deeper recessions in the future if interest rates remain stuck at current low levels, Fed Vice Chair Stanley Fischer said overnight. In this latest speech he mapped out a world in which low rates hamstring central banks from effective recession-fighting. The RBNZ should be wary of firing all its bullets during a time we are not even close to being in a recession.
Hmmmmm...
It has been the biggest lie of the latter half of the 20th century and so far of the 21st: economists are believed to be experts on the economy. They are not; they are statisticians and Yellen’s speech leaves absolutely no doubt as to this fact. She starts out by making an astounding claim:
For example, hysteresis would seem to make it even more important for policymakers to act quickly and aggressively in response to a recession, because doing so would help to reduce the depth and persistence of the downturn, thereby limiting the supply-side damage that might otherwise ensue. In addition, if strong economic conditions can partially reverse supply-side damage after it has occurred, then policymakers may want to aim at being more accommodative during recoveries than would be called for under the traditional view that supply is largely independent of demand.
Technical jargon aside, the message is clear enough. Most people would respond to her by exclaiming, “what the hell have you been doing?” All we have heard since the “unexpected” panic was how “accommodative” monetary policy would be, exemplified by quantitative easing in increasing doses. Now she says that “policymakers may want to aim at being more accommodative during recoveries?” But what she really said is that economists are starting to realize what was wrong was not necessarily QE but “under the traditional view” with which it was designed.
And it is where these mistakes have been made that is most exasperating. Economists, people caught up in their math, are now suggesting that they really needed more common sense and maybe less religious devotion to correlations of past conditions that they believed were ironclad rules.
There is actually much more to her speech that deserves highlighting if for nothing else how it flies in the face of the image central bankers have carefully crafted for themselves all during these decades. These are supposed to be the “best and brightest” who have all the answers on markets and economy, and in the media and in politics they are still treated with full reverence in this manner. Reading Yellen’s speech, however, you are left with the distinct impression that she actually knows less than the average household.
I have been writing for years that they really don’t know what they are doing. For once, the Fed Chair opened that door. When it (eventually) swings out wide enough, the recovery can begin. Read more
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.