Moody's pays for GFC failings; US retail and confidence rise; heavy hitters at Davos; China clamps down on payment platforms; China tax take falls; UST 10yr yield at 2.40%; oil and gold lower; NZ$1 = 71.3 US¢, TWI-5 = 77.2

Moody's pays for GFC failings; US retail and confidence rise; heavy hitters at Davos; China clamps down on payment platforms; China tax take falls; UST 10yr yield at 2.40%; oil and gold lower; NZ$1 = 71.3 US¢, TWI-5 = 77.2

Here's my summary of the key events over the weekend that affect New Zealand, with news the "global elites" are gathering for their annual meeting in Davos.

But first, Moody's has agreed to pay nearly NZ$1.2 bln to settle with American authorities over its ratings of risky mortgage securities prior to the 2008 financial crisis. Nearly two years ago, S&P paid almost NZ$2 bln on the same charges.

American households ended 2016 spending at a solid pace, especially on cars and online shopping during the holidays. Sales rose +0.6% in December from a month earlier, the eighth monthly increase in nine months and extending their long economic expansion. In fact, retail sales rose +3.3% in all of 2016, faster than the prior year’s gain of +2.3% and supported by the +2.9% pickup in American wages.

As a consequence American consumer confidence hit 12 year highs at the end of last year, too, helping to keep spending strong.

If there is any meeting that says "global elite" is the Davos meetings in Switzerland, and they are on this week. At them are American billionaires (including senior Trump adviser Scaramucci), Russian oligarchs, and most Chinese heavy hitters. President Xi will be there. It won't be the fine-sounding conference agenda that attracts them, its the opportunity for back-room deals.

In China, their leading home appliance maker Haier said its profits in 2016 jumped +12.8% to almost US$3 bln. Haier owns Fisher & Paykel Applincaes. It also owns the GE Appliances brand business.

And China's central bank has identified a US$67 bln financial stability risk from 267 "payment platforms" and has ordered them to hold advance payments from customers in non-interest earning State deposit accounts, to prevent "misappropriation".

Their tax authorities also said that tax revenue growth in the country slowed to +4.8% in 2016 from +6.6% the previous year. Income tax cuts turned out to be implemented quickly, but the switch to a GST did not actually generate the tax take expected.

In New York, the UST 10yr yield reversed its recent weakness and climbed at the close, finishing at 2.40%.

Oil prices slipped slightly on Friday, now just on US$52.50 for the US benchmark, while the Brent benchmark is now just on US$55.50 a barrel. Growth in the rig count stalled last week. Expect energy prices to rise from the severe cold weather in the Northern Hemisphere. NZ$2/l pump prices are on the cards, boosting local headline inflation. This will be just one feature of "much more volatility" in oil prices in 2017, says the IEA.

The gold price slipped in New York at the close and is now at US$1,195/oz.

The New Zealand dollar ended last week at 71.3 US¢. On the cross rates it was at 95.1 AU¢, and against the euro at 67 euro cents. The NZ TWI-5 index is at 77.2, a four week high.

If you want to catch up with all the changes on Friday, 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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21 Comments

Comment Filter

Highlight new comments in the last hr(s).

http://www.radionz.co.nz/news/national/322422/top-1-percent-of-nzers-own...

Latest from Oxfam, in stark contrast to the meeting in Davis...

petrol prices and transport surcharges to cover it have been creeping up for the last three months, so should be starting to feed into local inflation.
I expect the next OCR movement will be upwards

In fact, retail sales rose +3.3% in all of 2016, faster than the prior year’s gain of +2.3% and supported by the +2.9% pickup in American wages.

Hmmmm....

In 2016, retail sales have improved overall, but in some good part due to gasoline sales rebounding with the price of oil. Rather than be purely accretive now just as it was deleterious then, gasoline sales appear to be coming back at the expense of other sectors. It isn’t an overwhelming trend, but it does appear significant. Retail sales ex gasoline were up just 4.2% in December, for a 6-month average of just 3.8%. Non-gasoline sales averaged 4.5% to end 2015, and 5.7% finishing up 2014.

That’s right back in the same rut as in 2012 and 2013. Overall retail sales (ex autos) were up just 3.77% in December. The 6-month average is still stuck at just above 3%. This is not an indication of a rebound except so far as at least consumers haven’t retrenched further as they spend more at the pump. This is consistent with data we find elsewhere, including the huge increase in consumer credit that mirrors almost (too) perfectly the broad slump in labor utilization (hours worked). - Read more

More cherry picking pessimism.

If increasd gas sales were at the expense of other sectors then other sectors would be down. Yet you say retail ex-gas is UP.

You alhumbra guys will find a negative in any piece of positive news.

They see it as I did when I was a trading professional employed by a London US based proprietary trading bank. Positive trading revenues were all that mattered - politically driven utopian views of the world tend to impact negatively upon such outcomes. Moreover, bank liquidity issues remain persistent and in a rising trend.

Also of global economic importance today is the UN Peace Conference in Paris, with 70 Foreign Ministers, trying to create a Palestinian State before Obama & Kerry leave office.
http://www.scoop.co.nz/stories/WO1701/S00021/paris-peace-conference-rene...
No mention of whether NZ leaders, currently in Europe, will be attending.

I fully expected 90@9 David draped in winter woolies throwing snowballs with the other invited. Next year.

Can National Government denies what is happening ;

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1178...

Change of leadership and will it still be a party of Denial, Lie and Manipulation to justify their vested policies.

Flipping houses in Auckland. Within hours.
What is the benefit of these sets of multiple sales within a very short time period?

That's business

The buyers of the main George Courts homestead created their own luck
Their intentions enabled a situation that if they could also buy the frontage property off the Church's, the enlarged land area enhanced the potential value of the rear property, which in turn made the offer to the Church's for their property an imperative. An offer they couldn't refuse. The sum total of both properties together enhanced the value of both

Frankly, I don't see anything sinister in the deal, just smart business operators, a lesson for the locals

A lot of this is happening in Aussie, neighbors are banding together to sell toa developer for a premium on the normal sale price

Yes you're right Expert1: Also according to the news article; one of the Mangere Bridge properties is a historic homestead once owned by Auckland department store owner George Courts, sparking fears a slice of history could be lost.

How will they be allowed to build on that land? Or did they not do their home work?

Suddenly ....
In typical fashion the bureaucrats arrive 4 months after the event
There is a difference between historic and heritage listed
In a new development, council heritage experts visited the property last week. A report is being prepared into the homestead's heritage value and whether it warrants protection.

Good analysis here on potential US tax policy changes;

https://letstalkabouttaxnz.com/2017/01/15/destination-anywhere/

I like the analogy about the US becoming the MacDaddy of all tax havens - sounds like a Trumpesque type grand plan. This certainly does promise to be interesting.

NZ had better pull its finger out otherwise it will be left eating everyone else's dust

The Multi-nationals will want to do their profit-shifting faster than ever

The profits wont even touch the sides

Gone in 60 seconds

Back around 2007, a Texas equiteer, TPG purchased the Australian based public company Myer department stores, stripped it, and re-floated it 3 years later, and in the process made a $1.5 billion profit

One week later the ATO tried to put a hold on on the funds

But they found the money had gone the day after the completion of the IPO

https://www.crikey.com.au/2009/12/18/ato-decision-to-tax-tpg-on-myer-is-...

The chancellor, Philip Hammond, has suggested Britain could transform its economic model into that of a corporate tax haven if the EU fails to provide it with an agreement on market access after Brexit. Read more

I like this guy's thinking.

So Moody's commit offences ( and lets face it , it was an offence) and all they get is a slap with a wet jandal