Advance US Q4 growth data slows; US consumers optimistic, US factory orders fall, China bond default ripples, China outbound property investment risk; UST 10yr yield at 2.49%; oil lower, gold stable; NZ$1 = 72.6 US¢, TWI-5 = 78.3

Advance US Q4 growth data slows; US consumers optimistic, US factory orders fall, China bond default ripples, China outbound property investment risk; UST 10yr yield at 2.49%; oil lower, gold stable; NZ$1 = 72.6 US¢, TWI-5 = 78.3

Here's my summary of the key events over the weekend that affect New Zealand, with news of economic wobbles in the US.

Firstly, American economic growth slowed markedly to +1.9% in the fourth quarter advance estimate as a sharp drop in shipments of soybeans to China weighed on exports, but steady consumer spending and rising business investment showed good strength in domestic demand. While below most expectations, the result was the second highest growth level in five quarters and brought the rate for the calendar year to +1.6%. No doubt Wall Street will fall when it opens later tonight.

However, American consumers expressed a higher level of confidence January than any other time in the last dozen years. The post-election surge in confidence was driven by a more optimistic outlook for the economy and job growth during the year ahead as well as more favorable economic prospects over the next five years. Consumers also reported much more positive assessments of their current financial situation due to gains in both incomes and household wealth, and anticipated the most positive outlook for their personal finances in more than a decade.

Another advance report - for durable goods orders in January - was out over the weekend and that showed weakness. It was down for the second consecutive month.

In China, a Chinese phone maker’s default of NZ$230 mln in bonds has rippled through a secondary internet investment marketplace, hitting investors who hadn’t even bought the securities. The default, by phone maker Cosun Group, is one of the most high-profile failures to hit China’s sprawling network of Internet-based financial firms. It is an embarrassment to Alibaba Group because its affiliate Ant Financial Services owns the investment marketplace where the bonds were sold.

Overseas investment from China in residential, commercial and industrial property totaled NZ$46 bln in 2016, up more than +50% from a year earlier, as Chinese buyers snapped up office buildings, hotels and residential land. This points to the potentially disruptive impact of tighter capital controls imposed late in the year to discourage outbound money flows.

In New York, the UST 10yr yield ended last week at 2.49%.

Oil prices are lower today now just under US$53 for the US benchmark, while the Brent benchmark is still just under US$55.50 a barrel.

The gold price is marginally higher at US$1,188/oz

The New Zealand dollar is also higher at 72.6 US¢. On the cross rates we are at 96.2 AU¢, and against the euro at 67.9 euro cents. The NZ TWI-5 index is still high at 78.3.

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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3 Comments

Firstly, American economic growth slowed markedly to +1.9% in the fourth quarter advance estimate as a sharp drop in shipments of soybeans to China weighed on exports, but steady consumer spending and rising business investment showed good strength in domestic demand.

Hmmmm...

There is now more than enough empirical evidence to show conclusively QE3/4 failed. The entire previous paradigm had depended entirely upon one word, transitory, for it to be revealed otherwise. It has been GDP more than anything else which has likely convinced Federal Reserve officials to abandon both QE and recovery, moving dangerously closer to an embrace (in their own way) of secular stagnation. Read more

As with inventory, the economy after 2015 has that much bigger of a mountain to climb to truly get going. Without the contribution of that $51 billion in new inventory in Q4, real GDP would have been just 0.86%. That’s an exceedingly small platform for actual positive momentum and capacity with which to get started. Read more

Talk about inventory
http://www.reuters.com/article/us-china-corn-stockpile-idUSKBN15A36I?fee...

That how to really screw markets

First China-Britain freight train reaches London

http://www.globaltimes.cn/content/1029824.shtml