Factories in the US and EU see good growth; EU-Canada FTA dead; talent magnets; IRD targets MNCs; APRA clamps down on loan standards; UST 10yr yield at 1.77%; oil and gold down; NZ$1 = 71.3 US¢, TWI-5 = 75.6

Here's my summary of the key events over the weekend that affect New Zealand, with news the economic outlook in the West seems to be brightening.

On Wall Street, equities touched their highest levels in two weeks as a flurry of deal activity and strong quarterly earnings boosted investor confidence.

October data signaled that American factories have started October in a strong fashion, with output and new order volumes rising at markedly faster rates than in September. A rebound in business conditions contributed to greater input buying among manufacturing firms and renewed pressures on capacity. Input cost inflation has risen to its strongest for almost two years.

In Europe there are also some definite green shoots. The pace of economic growth there rose to the highest seen so far this year in October, led by a growth upturn in Germany, according to PMI survey data. Faster growth of order books and an acceleration in the pace of hiring also augur well for the region's economy to continue to strengthen in coming months. Inflationary pressures meanwhile showed signs of picking up, with the survey recording the largest increase in prices charged, for over five years.

The European Union's hopes of signing a landmark free trade deal with Canada appeared to evaporate overnight as the Belgian federal government failed to win the consent of local politicians in their French-speaking region. Any country in the EU can block such deals, and either region in Belgium can block Belgian approval. It is a wonder the EU can get anything approved.

New research shows that the world’s highly skilled immigrants are increasingly living in just four nations: the US, Britain, Canada and Australia. It is research that highlights the challenges of the brain drain for non-English-speaking and developing countries. And although the UK is in this exclusive list, it is also one of the largest source of talent for the other three.

In New Zealand, our tax authorities have launched a series of audits into the tax arrangements of international technology firms after they found "anomalies" in their filed New Zealand accounts.

In Australia, their banking regulator is bringing in rules that borrowers must be strong enough to repay their mortgage if interest rates rise to 7%. (see page 14.) I wonder how many recent investor borrowers in New Zealand, let alone first-home buyers, could meet that standard here. On a $500,000 loan, that will involve additional weekly payments of $179. APRA are also insisting on banks being much more inquisitive on supporting statements of income and expenses, wanting more independent verification.

In New York, the UST 10yr yield is higher at 1.77%.

The US benchmark oil price has slipped today by nearly -US$2, now just under US$50 a barrel, while the Brent benchmark is now just under US$51 a barrel. A refusal by Iraq to join output restraint is the catalyst for the drop. This is despite the World Bank raising its 2017 oil price forecast, which seems to have been ignored.

The gold price is down -US$6, now at US$1,262/oz.

The New Zealand dollar is a lower too, at 71.3 US¢, and on the cross rates it has had a small pullback against the Aussie to 93.8 AU¢, and the euro to 65.5 euro cents. The NZ TWI-5 index is now at 75.6.

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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I like APRA - don't muck around do they - wonder if there will be any spillover

Read clause 39

When assessing a borrower’s income, a prudent ADI would discount or disregard temporarily high or uncertain income. It would apply appropriate adjustments when assessing seasonal or variable income sources.

Significant discounts are applied to bonuses, overtime, rental income on investment properties

Also in Australia - NAB blacklists loans for properties in ‘risky’ suburbs - will this policy be implemented in New Zealand for the BNZ ?


APRA--All fur coat and no knickers. Another conflicted regulatory body.

Yeah those APRA boys are no nonsense all right. God help you if you don't have the right licence for your toddlers' dance class..: http://apraamcos.co.nz/music-customers/licence-types/dance-schools/

Different animals


Australian Prudential Regulation Authority

Australian Prudential Regulation Authority

Too late and too little.

Audits. Good to see our civil servants on the case with the international corporations tax trickery. I hope our politicians back them, give them good law, and don't let the lobbyists have their way. It's policy and law that's weak in this area.

All this good EU, US economic news fails to spur Japanese export and import exchanges with these nations - what's up?

Overseas shipments dropped 6.9 percent in September from a year earlier, the Ministry of Finance said on Monday.

The median estimate of economists surveyed by Bloomberg pointed to a 10.8 percent decline.

Imports fell 16.3 percent during the same period, resulting in a trade surplus of 498.3 billion yen ($4.8 billion). Read more

Ironically, the response of investors and pension funds to this long-toothed, overvalued, uncorrected bubble has increasingly been to abandon risk-managed approaches in favor of rear-view-mirror investment approaches that remain fully-invested in passive indices all the time. Look. Passive, value-insensitive strategies look glorious in hindsight precisely because the markets are in the extended top-formation of a speculative bubble. The subsequent future returns of such strategies, at least on a full-cycle and long-term horizon, always map directly to the level of valuation that investors accept, and are likely to be distressing in the coming 10-12 years. This expectation can be demonstrated in data across a century of history.

Having read the weekend comments in regards to RBNZ possible new measures , we truly appear to be in a state of denial, as New Zealand is different. Looking at the role of interest only loans, (including David Hargreaves article in June), RBNZ reconciliation figures and the use of these types of loans both in the United States and Ireland in the run up to their housing collapses, once our market plateaus it will be game over. For those fanciful investors/speculators that believe otherwise, and delude themselves that they will not be the first on the chopping block if the government allows the passage of new RBNZ measures , or indeed even the talk of such measures may be enough to put New Zealand on a downward spiral not seen in a century.

No one envisioned that the credit-based global currency system would ever run so afoul of regular order. Even in March 2009 when Governor Zhou was pleading for Western authorities to actually understand the world’s monetary arrangements he wasn’t at that time doing so with the expectation that the eurodollar, wholesale format was no longer workable; Zhou just wanted a more stable eurodollar…it wasn’t until September 2011 that it became clear any such hope was a futile one (though it wasn’t until 2013, it appears, that Chinese authorities finally realized it; which still puts the Communists so many years ahead of the “free market” West in terms of figuring out what is actually going on).

The economy seems rigged to me. It's all a big bluff to lead us into open borders and one world government. The next phase is to get Hillary elected. Free market is dying the consumer will no longer choose what they want to buy. New world order regulations are dictating the new industries.

Any country in the EU can block such deals, and either region in Belgium can block Belgian approval. It is a wonder the EU can get anything approved.

What's not to like?

On Sunday the leader of the Wallonia region told the Belga news agency the ultimatum from the EU “is not compatible with the exercise of democratic rights.”

"We are not against a treaty with Canada," Magnette said. "But we won't have one that jeopardizes social and environmental standards and the protection of public services and we want absolutely no private arbitration mechanisms."

Magnette was referring to an introduction of a secret corporate court system, empowering big business to sue states for policies that threaten their profits. Read more

That sounds a lot like out TPTA. What's with people worrying about loss of sovereignty. Who would want to put their own countries interests first against the might of the multi nationals. I'm sure they will treat us fairly and it will be for our benefit.

i think when you centralise power you lose democracy and create opportunities for corruption. ( absolute power corrupts absolutely). Even if you think about this on a local level, say with local councillors who are paid $15,000 per year, the type of people these jobs attract are community minded people who like serving the community. But if you create super cities and everyone on the council is paid hundreds of thousands these jobs attract business people with personal motivations. I don't think we should just have rich business people in political positions because they need to represent everybody in a democracy. This is the problem we are being run by rich businessmen like JK being told what to do by richer businessmen.