Factory prospects improve in the US, Europe and China; China's cash clampdown catches foreign firms too; ANZ cans stock bonus; UST 10yr yield spurts to 2.46%; oil surges, gold sinks; NZ$1 = 70.7 US¢, TWI-5 = 76.6

Factory prospects improve in the US, Europe and China; China's cash clampdown catches foreign firms too; ANZ cans stock bonus; UST 10yr yield spurts to 2.46%; oil surges, gold sinks; NZ$1 = 70.7 US¢, TWI-5 = 76.6

Here's my summary of the key events overnight that affect New Zealand, with news ex-Goldman Sachs executives seems to be winning a disproportionate share of Donald Trump's cabinet appointments.

But first, and probably more importantly, the bond market rout is deepening. The yield on the UST 10 year rose to a 17-month high, following the biggest monthly increase in November since 2009. And today, it has zoomed even higher.

Meanwhile in the US, markets are awaiting the non-farm payrolls report tomorrow as a confirming signal for the December 15 Fed rate hike. Today's initial jobless claims blipped up but from a very low level.

Two surveys out overnight indicate American factory activity accelerated to a five-month high in November amid further improvement in new orders and production.

In Europe, the factory picture seems to be brightening further too. The Eurozone manufacturing PMI is now at highest level since January 2014, led by growth in the Netherlands, Austria, Spain and Germany. Output price rises recorded are at their fastest pace in over five years, as cost inflation there surged to 56-month record.

In China, their factory PMI data maintains its recent recovery, but at a slightly reduced pace in the private survey, but at a faster pace in the official survey. Growth in new orders and output slowed, and cost inflation keeps rising faster. Their services sector also continues to expand strongly, in fact at its fastest pace since mid 2014.

China's recent clampdown on moving funds out of the country also applies to foreign firms operating there and that is causing angst for many of them. This reinforces just how far away the yuan is from being the global reserve currency and it reinforces the US dollar.

ANZ has decided the bank's 20,000 Australian and New Zealand employees are not getting a $1,000 share bonus this year. The bonus ANZ stock "was intended to share the benefit of good years", the bank said. "It was not a good year." But it is not as though 'normal' bonuses are being withheld. Apparently it was a good enough year for those.

In Australia, we should also note that they are expecting a "monster" wheat harvest this year, one that will help keep food prices low.

In New York, the UST 10yr yield is even higher today, now at 2.46%. That is an eighteen month high.

Oil prices are substantially higher again today, and the US benchmark is now just over US$51 a barrel, while the Brent benchmark is now just over US$54 a barrel. OPEC's output restraint deal is still the catalyst.

The gold price is down sharply again, now at US$1,165/oz.

The New Zealand dollar is a little lower today at 70.7 US¢. On the cross rates it is at 95.5 AU¢, and against the euro up at 66.5 euro cents. The NZ TWI-5 index is now at 76.6.

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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48 Comments

10
up

ANZ Bank, management looking after themselves, but not their staff because it was "not a good year". That must be being blamed on the staff. Typical sense of entitlement at the expense of their customers and employees who actually do the work.

surely if management can take the credit for the "good years" and get good bonus's, then they must aslo take the blame for the bad years. Perhaps the shareholders need to ask some hard questions?

Anz stated that they are STILL paying bonuses. Not sure what you're on about. Sounds like a whinge.

"ANZ has decided the bank's 20,000 Australian and New Zealand employees are not getting a $1,000 share bonus this year. The bonus ANZ stock "was intended to share the benefit of good years", the bank said. "It was not a good year." But it is not as though 'normal' bonuses are being withheld. Apparently it was a good enough year for those." -
What part of the above do you fail to understand?

Are ANZ's 'normal' bonuses for management only? Just because the 20,000 staff aren't getting a share bonus doesn't mean they aren't getting other cash ('normal') bonuses.

Of course its for management only - as I read it no bonus for the hard working staff, business as usual for management. We are taking about ANZ here..

Wrong. Normal bonuses are still being paid to staff as the article clearly states. Obviously the share bonus is an added perk/benefit. Go see if other companies give shares away for free every year.

Management bonuses yes I can read that - and did really did they have a bad year?
Do you see it as giving away shares for free - or a share incentive for bloody hard work on the front line?
"ANZ's full-year profit has dropped 24 per cent to $5.7 billion, hit by nearly $1.1 billion of write-downs as the bank restructures away from Asian retail banking."
Got to love hose write downs! - Bring on the Xmas Grinch

So the execs decide to expand into Asia, then when that fails the ordinary worker has their bonus cut while those responsible for the failing strategy still take their bonus 'reward'

I previously worked for another bank (which I won't name) and there were annual 'normal bonuses' for all staff - from the tellers (sorry, "CSOs") upwards. They were given out pretty much every year, even during the GFC (though they were much smaller then...).

Hence I think assuming the 'normal bonuses' are management only isn't necessarily valid.

Lots of bitter people like to bash the big banks here. Little do they understand their folly. If the banks weren't headquartered in Wellington, this place would be Palmerston North.

they are parasitic on the rest of the country.
http://www.converge.org.nz/evcnz/resources/money.pdf

The Banks are parasitic! Any money I have deposited is considered belonging to the bank, not me. When times get a little hard they talk about depositors taking a "haircut", in other words reducing bank liability to their customers. The have tied up most processes so that no one can operate without some form of bank account, meaning they can charge you for it. In the last couple of years at least the four major banks have declared combined profits that amount to over $1000 for every man, woman and child in the country! How is that not cause for concern?

Well judging by the confusion here from this... clearly their communications team aren't getting any bonuses this year.

We have got very good at agriculture, record crops are the norm. A lot of that wheat will get converted to Protein.

http://www.world-grain.com/articles/news_home/World_Grain_News/2016/11/C...

Why take the protein from here to the UK when you can just import the feed and do it all at home.

http://www.world-grain.com/articles/news_home/World_Grain_News/2016/11/G...
https://www.bloomberg.com/news/articles/2016-08-11/glencore-said-to-ship...

SNAFU

13
up

in addition to the 90second news... Foreign Land sales in NZ up 440% this year. Newsworthy I am sure.
Imagine if we had stamp duty on the 357,318 hectares of land just sold this year. Would have helped with the infrastructure funding that NZ needs.

357,318 hectares is equivalent to around 9million 400msq sections.9,000,000 average sections.

"Foreigners' appetite for New Zealand land rose 442 per cent in the first 10 months of this year compared to the same time last year, official data shows.

Overseas Investment Office (OIO) revealed that from January to October last year, foreign entities got consent for deals involving 65,838 hectares gross of New Zealand land area. But in the same time this year, that rose to 357,318ha."

http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11758774

@@A Politician would say ...."Nothing to see here, let us move on......."

I moved a great deal of money and business away from ANZ permanently yesterday.

Better to be safe...than sorry. Spread the risk over a number of different options.

It is all electronic, so papering over the cracks, is getting easier.

We all have them...unless a slave to the one Bank.

Never upset your good customers, is my motto whilst in business.

Perhaps ANZ should adopt it.

Aussies should learn, "Never pft off your good, close relationships with clients, whilst playing the field"....it ain't bleedin cricket...surely something a good sportsman would realise.

So I gave em a run for MY money....and so will anyone with any money or sense left....these days.

The boundaries, should never have been.....breached.

It ain't a National product anymore, just another thieving Aussie...past time....and long past its...prime.

I am spreading my risk too, as are all my friends who have any cash. So people like us are staying short and looking at options continuously, because we recognise the system is flawed.

Have you looked at the Perth mint? gold could be good buying sooner than one may think and the Perth Mint is backed by Western Australian government and our $ is strong V Aussie $ .
http://www.perthmint.com.au/invest.aspx

Thanks for the suggestion AJ...will have a decko......I have some....some more may be attractive.

My wife has a ring around my neck.....everytime she crooks her finger....with a gold band on it.....I come...begging....She owns half of our net worth......but I like to play along.

Gotta keep the missus happy. ...A bit more gold, might do the trick.

Gold is taking a hammering of late...it is probably being beaten into submission....spread a bit thin...and ...glossed over.....may be just the time to have a look.?

It is worth a mint....at times......maybe...no time...like a Present. Christmas is coming.??

A couple of glasses of wine and some lube and in the middle of the night those rings just slip off. Then in the morning blame her for getting pissed and losing the ring, an emotional attachment between you that she went and lost!

My Uncle was a famous UK Goldsmith and Artist who made the wedding ring for her.

It is worth so much more than just face value of Gold, it is an artistic master piece..so better hang on to it a while longer.

Plus I cannot afford to lose half my assets, nor risk a kick into touch. Plus she is an asset, I cannot comprehend...your thinking.

Plus I cannot afford the whine, woman and song and dance, I know where my mind is at.

So I will just Plonk myself down, not rub her up the wrong way....and get with the program....just where do you invest paper money.

I cannot even give my Son a 5$ Bill, as he is a Vegan...and it is so tainted....sob.....

Damn those greasy bwankers...fingers in every pie.

I'm also looking at spreading my deposits (currently all with ANZ)

The thing is - to where? Most banks here are AUS owned or do I look at Kiwibank or TSB?

Thoughts?

You should get lots of warning, houses would have to fall significantly, there would have to be defaults, I know rural managers are concerned about rural debt but finding it hard to pull back as profits are illusory. but so far they simply cannot stop the juggernaut.
Those houses are assets and there will be a lot of loans with good equity. It's those new loans at %90 borrowing, loans to landlords using other properties as equity and the Aussie parents banks wanting to repatriate another 8 billion from NZ interests that worries me.

Plus the co-op. If your worried about profiteering by the aussies, deposit or borrow some funds with the co-op and you become an owner.

Your share of the profits might even pay for a nice meal.

Bond market is certainly active at the moment. Two year treasuries have already priced in another Fed hike in addition to the December one. Action aplenty!

watching Donald trump live this morning at carrier, I can see now why the markets like him. he is a very positive person and he wants to lower business tax from 35% to 15%, and cut regulations in half

If he actually reverses the insidious trend of more ...and more...and more... regulation .. then hes' gotta be good..!! good luck to him on that..

Taxes

The most bullish thing of all about Trump is his tax plan. It establishes three brackets of 12%, 25%, and 33%, and the top rate kicks in at an income of $225,000.

So right off the top, about a 7% reduction in the top marginal rate.

Also: the standard deduction will be $30,000 for married filing jointly, instead of $12,600, which has massive implications. Who pays more than $30,000 of mortgage interest every year? Why itemize deductions? All this running around we do at tax time, collecting receipts and such, could go away for all except the wealthiest.

But here is the biggest proposal of all—make sure you’re sitting down.

Trump wants to lower the corporate tax rate to 15%. A laudable goal: lower the rate, broaden the base, collect more revenue, and maybe repatriate some of that overseas income. But he wants to apply it to not just C corporations but to pass-through entities such as LLCs and S corps and partnerships. I’m sure some people get most or all of their income from pass-through entities. Think about how big this is.

Likelihood of passing? No idea. It’s hard not to imagine distortions arising from a 15% federal LLC tax (everyone opening up LLCs, for example), but even a partial reduction in taxes on small business… yuge, as they say.

Jared Dillan the tenth man

Corporate tax reform has been a key policy initiative of Trump's as he has called for slashing the corporate tax rate from 35% down to 15%. While this is welcome news for most companies, it would result in some fairly staggering writedowns for Wall Street's largest banks that amassed substantial net operating losses in 2008 and 2009. Read more

Any body noticed that banks have suddenly become very cagey with things that they normally don't worry about?

Have I what. Mine is becoming almost hostile because I don't borrow except for a small overdraft facility. Basically told me to F off.

about 10 years ago they would fall all over me because of the amount of cash I held (in reserves ) now because I don't hold any debt or want any debt same response as you.
makes me chuckle as those same people are working to pay me twice yearly

not time to get in the bunker yet,NZ is the bunker for the rich,the chinese have got fed up waiting for us to build houses for them and are coming in to build their own.

Lets hope that a few others come here as well and they start competing. It would also do some good if they started importing reasonably priced building materials. (who knows they might be able to export our own timber back to us, milled and cheaper than we pay for it)

google have a new feature so those that were not around can see what expansion has done to Auckland
https://earthengine.google.com/timelapse/

12
up

I dont understand why New Zealanders just accept this sale of farm land nonsense , when our hard-nosed brethren over the ditch wont have a bar of it

I am going to go against NZ public opinion here and say that is it is true , then its scandalous that we have sold 360 , 000 hectares of farmland to foreigners this year .

I am going to go further and say if its true I am outraged , and I am surprised Kiwis are allowing themselves to be led like lambs to the meat factory.

Soon we will be in hock up to our eyeballs to foreigners , we will be come tenants to foreign landlords and working for employers based who -knows-where ?

Why do we just accept it? I believe largely because we no longer have an in independant mainstream media who will champion a cause, particularly at the 6 or 7.00pm slot. Instead they continue to push trivia at us, distracting the masses from getting any traction on important issues, such as foreign ownership and immigration.

How anyone can support a govt who will organise a referendum on something of little interest (the flag) yet on real issues such as land and immigration is deaf and dumb, beggars belief.

For those who think Key is going to nail the elections, think again. The flag referendum was his baby and the voters told him to take a hike - and they now even more fed up with him. The media are blind to Key, just as they were with Clinton and Brexit. Key will go the same way.

Agreed 360,000 hecters of land sold to foreigners up 440% from last year and it barely makes the news.... main stream media at work

We'll (voters) accept an awful lot in return for rising house prices.

When consumers want to spend more than they earn , like we love to do in NZ, there is no choice but to liquidate assets to fund the consumption. Hence land sales.

Some outrage curber for you. " The friendly land prices and rich agricultural resources make Australian ranches a good investment. However, due to policy differences, high labor costs and language barriers among other things, many of these Chinese nationals have become snarled in management difficulties and been forced to sell their properties within two or three years.
Candy, a professional realtor specializing in ranches, said many of her Chinese clients have given up their ranches thanks to unsatisfactory dividends and the isolated lifestyle."

http://en.people.cn/n3/2016/1104/c90000-9137428.html

And what is even more stupid, our Prime Suspect endorses the procedure, in fact encourages it.

New Zealand is unable to do this in reverse, how daft is that....wonder who is 'benefiting' from this, in what way and why do we all pay for the consequences.?.

Getting time for some Ruatoria-style direct action.

the last asian invasion in 1997 was stopped cold by economic crisis in their home economies,maybe there will be another divine wind disguised as a huge bond crash

China's recent clampdown on moving funds out of the country also applies to foreign firms operating there and that is causing angst for many of them. This reinforces just how far away the yuan is from being the global reserve currency and it reinforces the US dollar.

Some PBOC balance sheet analysis might be appropriate. Read more

Wow guys this Bond market crisis is really starting to look like a big rock rolling down a hillside , it started slowly a few days ago , and has gained momentum that makes it dangerous and unstoppable .

The long -time -coming consequences of QE are finally showing up