Here's my summary of the key events overnight that affect New Zealand, with news there are growing concerns about the Aussie apartment markets.
But first, jobs growth in the private sector in the US rose sharply in November to its second highest level in the past eleven months and +24% higher than the equivalent month a year ago. This data comes just before the next US non-farms payrolls report on Saturday. Markets are expecting +175,000 job gains in that survey which is much less than today's ADP actuals, so a better result is on the cards.
In a separate American data release, personal income rose at its fastest level in 18 months, while personal consumption expenditure rose somewhat less. The real interest in this data is the inflation component, and that was elevated at +1.7% pa, and compares with +1.3% in the same month a year ago. Deeper in the data is an unusual element that shows spending for goods up +4.7% while spending for services only rose +1.9%.
The Fed will release its important Beige Book survey in a few minutes and markets expect that to be positive.
But there is some worrying data released today too. The number of subprime auto loans slipping into delinquency climbed to their highest level since 2010 in the September quarter, and this is following a pattern very much like the months heading into the 2007-09 recession; that's according to fresh data from the Federal Reserve Bank of New York.
North of the border, Canada released its Q3 GDP growth data today, and that showed a +3.5% expansion, better than markets were expecting and better than the recent release for the US. It was Canada's best result since early 2014.
In Australia, their high-rise construction boom is turning the other way. Yesterday, data showed building approvals fell -13% in October, bucking market expectations for a +1.5% rise. The number of approvals for high-rise apartments dropped -40% to a two-year low. Bankers are worried, although no-one is saying there will be a market bust or bloodbath - at least, no-one is saying that out loud as they quickly wind back their exposures.
In New York, the UST 10yr yield is sharply higher today, at 2.39%.
The reason for that is that is that US benchmark oil prices raced higher today, up about +8% to just over US$49 a barrel, while the Brent benchmark is now just over US$50 a barrel. Discord at OPEC may have been overcome as OPEC has seemed to agree on output cutbacks. That agreement appears to reduce total OPEC output to 32.5 m/bpd at a time that demand (from OPEC and non-OPEC supplies) seems to be rising at +1.2 m/bpd. If the agreement holds, it seems likely higher crude prices will be the result.
The gold price however sank sharply, now at US$1,171/oz.
The New Zealand dollar is a little lower today at 70.9 US¢. On the cross rates it is higher at 95.8 AU¢, and against the euro up at 66.9 euro cents. The NZ TWI-5 index is now at 76.9 .
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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26 Comments
That higher oil price won't be appreciated by American households with median real household income still below the level at the start of the century. Sixteen years of globalisation, outsourcing, immigration and rampant corrupt financialisation to end up worse than where you started from. The dimmer lights among the elite are still trying to understand why Trump got elected.
http://wolfstreet.com/2016/11/29/companies-want-cheap-labor-fed-deliver…
Saudi Arabia as generally is the case is the country to watch , it wants to sell a stake in Aramco by 2018, its recent financial forays suggest a number of growing issues, whether funding its campaign in Yemen, funding its population, it will not take much before the locals , who have enjoyed generations of easy wealth to start to question the ruling elite.
Yes - if Saudi is selling shares in the one asset it actually has, it suggests it (and by default the world) energy's supply is in real trouble. Basically Saudi had the cheapest easiest best grade Oil, went on a massive population expansion and built up a welfare state reliant on easy oil funded jobs. Now that the world can no longer afford to pay $100 a barrel, they cant afford the upkeep on their bloated economy. Trouble ahead.
@HAM N EGGS , I think the Saudis are way more sophisticated than we give them credit for .
They may realize the oil age is in its plateau stage of the life cycle
At $100 ppb there are a lot more viable sources of crude oil and substitutes , so the price will not get there.
For new sources of oil , there is a sunk cost in new production , so they have to keep producing just to stay afloat , so they wont cut production but may cut costs and new projects and capex
Saudis may realise they need to diversify their income streams
They know that oil is not the limited resource OPEC have pretended it to be , America is now no longer a net importer, this has long -term implications for the price . There are hundreds of viable new finds in Africa and offshore
Add to this the fact that our dependence on oil is diminishing with hybrids , electric cars , better fuel efficiency , etc
The structure of Aramco is such that the Saudis will get 100% control back from using oil royalties to buy-back the shares as and when they want or choose to .
Saudi has also likely realised the price could stay low for a long time to come
Its a very complex story
Question - is there any qualitative and quantitative information on research into alternative energies, primarily for transport?
I suggest there is ample evidence to understand that the world's economies stand on the brink of needing alternatives to prevent themselves failing. So what is happening in this sphere?
Electric vehicles are getting traction, fuel cells - don't know, other sources of power/energy?
It would be nice to see some sort of publicly available development on the Transport energy front.
Something that can be "charged" in the same time as petrol, or has a similar range, or even a similar cargo capacity.
Even if it costs a lot, at least it would provide hope for some sort of future alternative.
If FE is to electric cars, what F1 is to petrol. Then it seems the best we can hope for is multiple cars that you swap along the way as with the pony express.
'Readying our Roads for the EV Onslaught' might interest to you ('In lament of the Farm', unrelated, but also worth a read).. How fast will all this happen is the question??
http://pureadvantage.org/news/2016/11/18/readying-roads-ev-onslaught/
Natural gas engines. The world is awash with it. Almost zero NOx so far cleaner than diesel. "converting all 2,200 transit buses in a city the size of Los Angeles to the new engine would result “in the total NOx emissions from the entire fleet being the equivalent of what was emitted by just two buses in 1985,” he said."
http://www.forbes.com/sites/trucksdotcom/2016/04/11/natural-gas-engine-…
Cant agree - I think you underestimate the importance of Oil in the economy. It is the basic building block so to diversify away from it doesnt make sense - everyones dependence on Oil is as big as ever. If Saudi is clever that doesn't explain why they are now ripping through their foreign currency reserves ... they will be well broke in a few years at current prices. http://www.tradingeconomics.com/saudi-arabia/foreign-exchange-reserves
Hybrids / electrics can not replace diesel/petrol - the reality is they are a non viable have, propped up by fossil fuel tax... thats all they can ever be.
https://www.bloomberg.com/news/articles/2016-11-30/gm-s-ready-to-lose-9…
as for new discoveries ...
https://www.bloomberg.com/news/articles/2016-08-29/oil-discoveries-at-a…
Yes, BM. I understand that average USA manning levels of their oil producers is less than a dozen and that, combined with their very nimble 'hire and fire' regs (or absence thereof), makes it very easy for them to radically increase production when the price hits the $60 mark.
The number of approvals for high-rise apartments dropped -40% to a two-year low. Bankers are worried, although no-one is saying there will be a market bust or bloodbath - at least, no-one is saying that out loud as they quickly wind back their exposures.
Hmmm...
In a world replete with bubbles, rarely has one been quite so complete! Read more
RBA's folly is surely matched by actions undertaken at the RBNZ.
To further highlight that point, as well as to bring it all back to the “dollar” again, Japan basis swaps dropped today to a new negative low. Rising dollar = dollar shortage = global money shortage. Hong Kong is just the latest to be caught up in it, and that is significant.
http://www.alhambrapartners.com/2016/11/30/rising-dollar-dollar-shortag…
A year ago, this was published:
http://www.afr.com/real-estate/i-would-not-be-investing-in-an-apartment…
Around the same time, completely coincidentally, this outfit were spotted attempting to sell Melbourne apartments at shopping malls around Auckland.
http://www.centralequity.com.au/
You know it's a great deal when it's being sold at a shopping mall.
You might still be able to get in if you hurry...
Have watched the passing apartment parade over the past year, in Sydney and Melbourne, where the main target market has been offshore buyers who can buy "new", but that market is evaporating
So I'm wondering why Meriton Construction and Harry Trigubuff (Sydneys largest apartment builder) havent come into Auckland market and set up their shingle
They are huge - have built 65,000 of Sydney's apartments
Think about that - there must be some serious impediment which is discouraging them
What is the obstacle
Very , very good question , but I suspect we make it too difficult for them and making a profit here is way too difficult compared to Sydney .
Our problems are :
1) Resource Management Act is a minefield
2) Our building materials cartel is so entrenched they can charge whatever they like for materials
3) Our wage rates are too high with chippes ( many of whom did not not finish school ) earning more than Doctors
4) The compliance costs are very steep and there is no commercial urgency in Local Government t expedite matters
5) The costs of acquiring development land and the lengthy holding periods erode profits significantly
trump has appointed his financial guys and first task cutting taxes
http://www.cnbc.com/2016/11/30/exclusive-trumps-treasury-pick-says-i-wa…
a lot of positive feeling in the US, interest rise a shoo in for this month
Re OPEC , there is Arabic folklore in a story about a colourful bunch called Ali Baba and the forty thieves , a group of rogues who have self interest first, and cheat, lie and are full of deceit .
Remember there is no honor between thieves , OPEC are simply a bunch of rogues , who cant be trusted as far as you can spit.
Quite simply , they will cheat on each other and the production cut will be ignored by one or two until they are caught out , and then everyone will jostle for position .
Ali Baba and the Forty Thieves is a complex interwoven story of deceit , trickery, vast wealth and all sorts of underhanded tactics to deceive and get an advantage
No different .
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