US house sales slow; Wall Street slips; China uncovers huge FX swindle; Scots accuse Macquarie of asset stripping; Toshiba hammered; UST 10yr 2.50%; oil up, gold unchanged; NZ$1 = 69.1 USc, TWI = 76.1

US house sales slow; Wall Street slips; China uncovers huge FX swindle; Scots accuse Macquarie of asset stripping; Toshiba hammered; UST 10yr 2.50%; oil up, gold unchanged; NZ$1 = 69.1 USc, TWI = 76.1

Here's a special holiday update of some key events and data you may want to know about today.

Firstly, rising US interest rates may be starting to bite. Their realtors are reporting that contracts to buy previously owned homes fell in November to their lowest level in nearly a year. Meanwhile, arbitrage investors in housing ("house flippers") are making a comeback in the US, with average returns (of US$60,000 per transaction) now at pre-GFC levels again.

On Wall Street, equities are in retreat having failed to reach 20,000 on the Dow index. The S&P500 is down -0.8% while the NASDAQ is down a full -1%.

In China, authorities are struggling to get control of illegal currency transfers. Authorities in Shanghai have uncovered illegal transactions totaling almost NZ$4 bln this year and it suspended three banks from selling foreign exchange for being involved in cross-border capital transfers via counterfeit trades. This is just one city, and is undoubtedly only the tip of an iceberg.

In Vancouver, we tend to hear about their residential housing stresses. But their commercial real estate market is noteworthy as well. Some research released recently showed their stellar 2015 commercial real estate data was eclipsed in just the first six months of 2016. Now that is a booming market.

In Scotland, MP's there have raised concerns that Australia's Macquarie Bank is about to "asset strip" Britain's prized Green Investment Bank. Macquarie could gain control of the institution as early as next month.

In Japan, shares of Toshiba fell more than -20% yesterday after it warned that it is likely to be hit with a multibillion-dollar write-down that could leave it with a negative net worth. This is after a -12% fall the day before. The existential threat is all to do with its Westinghouse nuclear subsidiary in the US and residual claims from an earlier deal done by Westinghouse before it was bought by Toshiba.

In New York, the UST 10yr yield is down sharply today, now at 2.50%. Meanwhile in thin trade locally, our wholesale swap rates turned higher, yet again. The two year is now up to 2.55%, the five year is up to 3.18% and the ten year is up to 3.63%. These are the highest levels in 10, 16, and 12 months respectively.

The US benchmark oil price is a little higher as well and now just over US$54 a barrel, while the Brent benchmark is just over US$56. The latest data shows that American frackers are finding debt financing easier to get.

The gold price is virtually unchanged at US$1,138/oz.

The New Zealand dollar made something of a recovery today and is now at 69.1 USc. On the cross rates it is stable at 96.3 AU¢, and 66.5 euro cents. The TWI-5 is now at 76.1.

The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »

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16 Comments

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China uncovers huge FX swindle

Wow - What a surprise - I'm hornswoggled

and its only the tip of the iceberg, plenty more will take there place once this lot are taken away.
when you have a society built on corruption at all levels and the mindset is how to get around laws and rules as the ultimate goal is to make money why would you be surprised

Yes not surprising either that Auckland's property market started to drop in November when China announced that it was forcibly cracking down on capital flight.

CNBC article: China unveils crackdown on companies investing overseas
http://www.cnbc.com/2016/11/29/china-unveils-crackdown-on-companies-inve...

In Vancouver, we tend to hear about their residential housing stresses. But their commercial real estate market is noteworthy as well. Some research released recently showed their stellar 2015 commercial real estate data was eclipsed in just the first six months of 2016. Now that is a booming market.

Yes, and totally unsupported by commensurate GDP growth - just another property bubble underwritten by another central bank chasing falling CPI inflation with ideologically inspired official interest rate cuts. Such cult like behaviour is incongruent with observed economic reality.

Statistics Canada reported last week that monthly GDP had contracted yet again. In October, GDP was down nearly 0.3% from September. There were no wildfires or even energy to blame this time:

The Canadian economy contracted in October, falling short of expectations as manufacturers recorded their largest monthly decline in output in nearly three years. Read more

Well said and so true:
" .........another central bank chasing falling CPI inflation with ideologically inspired official interest rate cuts. Such cult like behaviour is incongruent with observed economic reality."

And so damaging and self-defeating:
- people earn less on their savings— so cut back on spending to reach their target retirement income
- pension and insurance funds are at risk of failing to meet their commitments.
- companies need to put more money into pension schemes—leaving less to spend on investment.
- property speculators raise the price of homes for FHBs.

and even worse, speculators think that if times change the RB will be there to bail them out with low interest rate policies, leading to even more asset appreciation and risk taking.
Leaving the poor depositor exposed to loss of savings in an OBR event, with no ability to judge risk via interest rates set by market forces.

Global copycat examples of absurd, unsustainable property market valuations abound.

The total value of the UK property market has been valued at US$10.1 trillion, according to the property listings website Zoopla. If this number were converted into a GDP figure, it would be equal to the third largest economy in the world, behind China, the US and ahead of Japan and Germany.

Although the figure provided by Zoopla is an estimate, they still believe that the UK property market has increased since 2015 by 7.35 percent, reflecting a growth in house prices over 2016. Read more

No wonder UK personal saving rates have risen. Risk averse owners are selling their properties on to newly indebted greater fools.

Personal deposits grew an annual 4.8 percent in November, data compiled by the BBA show. They increased by 32.4 billion pounds ($39.7 billion) in the first 11 months of the year, outstripping the 19.8 billion-pound growth in the same period of 2015. Read more

the real cost of interest is killing people in my trade. It's just taking time for people to realise what is really happening.

The total value of UK property should be worth an absolute fortune. It is a pretty special place.

It is a safe place.
Hence, is a place to flee to.
Now, the mechanics of providing for all the economic refugees, is another matter.

NZ is much safer though....apart from the roads where the death rates are half that of over here.

Special for being a nation far too familiar with this type of faux property co-ownership scheme - namely over borrowing today that which will never be earned in the future - debt.

While the UK market may be overvalued, a stock (property "value") is not a flow (GDP). It is a meaningless comparison.

https://en.wikipedia.org/wiki/Stock_and_flow

People love comparing random amounts to GDP values, just because they're both in dollars.

Sigh...

Ahh beat me to it. Suddenly I thought, what?, wait, what the hell does GDP of China have to do with the value of UK property? To be honest if what China earns/spends in just one year is worth more than all the private property in the UK then that property is under-valued!

I qualified the quote with the descriptive term "absurd" to preempt your contingent observation.

El-Erian warning: 'Big negative shock' can spur liquidity crisis

http://www.cnbc.com/2016/12/28/el-erian-warning-big-negative-shock-can-s...