US mulls alternatives; EU tells UK divorce first; more China stimulus; ANZ-AU cuts some credit card interest rates; UST 10yr yield at 2.42%; oil unchanged, gold up; NZ$1 = 71.8 US¢, TWI-5 = 77.3

US mulls alternatives; EU tells UK divorce first; more China stimulus; ANZ-AU cuts some credit card interest rates; UST 10yr yield at 2.42%; oil unchanged, gold up; NZ$1 = 71.8 US¢, TWI-5 = 77.3

Here's my summary of the key events over the weekend that affect New Zealand, with news banks might be thinking of reducing credit card interest rates, finally.

Firstly, in the US, the Trump administration is about to use sharply higher [alternative] growth rates in its first budget, according to leaks reported by the WSJ. And a separate report says they are considering 'revising' the way imports and exports are counted. Alternative data to meet campaign rhetoric is expanding from China and Russia to the USA, it seems.

And remember it is a holiday weekend in the US - President's Day, so data will be light until Wednesday, New Zealand time.

In Europe, the EU’s Brexit negotiators are adopting a 'divorce first' stance, denying Britain any trade talks until progress is made on their €60 bln exit bill and the rights of expatriate citizens.

In China, they say they are getting good at controlling currency outflows. In January, the net outflow was US$19.2 bln according to their currency officials, down from US$46.3 bln in December and US$33.4 bln in November. However observant readers will note that the official January data is much higher than was reported unofficially earlier in the month.

And staying in China, they are reporting work is about to start on 35 new railway projects in 2017. Infrastructure stimulus continues unabated.

Singapore grew +1.8% in 2016 and their Govertnment says that will be about what they grow in 2017. Actually they said "+1 to +3%" for this year. That means New Zealand could out-grow Singapore this year.

In Australia, they are looking to raise their 6% renewables energy production up to achieve 40% of their energy needs from renewables by 2025 by a massive increase in solar capacity. (New Zealand is already at 38%.)

And staying in Australia, ANZ has broken ranks with the other majors and lowered 'some' credit card rates by "up to 2%". But the reductions are highly selective. Only two cards benefit; their Platinum card which gets the full -2% to 11.49%, and their "low rate Classic" card which gets only -1% to 12.49%. Credit card interest rates are also undefendable in New Zealand and we will be watching for reductions here.

In New York, the UST 10yr yield will start the week lower at 2.42%.

Oil prices are essentially unchanged today and still just over US$53 for the US benchmark, while the Brent benchmark is just over US$55.50 a barrel. Iran announced that it has found 2 bln bbl of shale oil reserves in its western Lorestan province. And the Americans added even more rigs into production last week. And further, Iraq's oil reserves are larger than previously estimated.

The gold price is -US$5 lower at US$1,235/oz.

And the New Zealand dollar will start the week a little lower at 71.8 USc. On the cross rates we are at 93.7 AU¢, and against the euro at 67.7 euro cents. The NZ TWI-5 index is at 77.3.

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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12 Comments

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ANZ's reduction in credit card rates may be somewhat self-serving. Low rate cards will tend to carry balances. Those balances have a high capital requirement so a decrease in the rate at which they go up will give them more breathing room. Also with mortgage credit tightening people are turning more to non-secured lending. An interesting move by ANZ.

Firstly, in the US, the Trump administration is about to use sharply higher [alternative] growth rates in its first budget, according to leaks reported by the WSJ.

Hmmmm...

Janet Yellen was apparently “hawkish” again in her latest speech, though the reasons why she may have been continue to elude the media and many markets. In many ways, she doesn’t even know, a fact that she expressed several months ago to likewise very little appreciation. The FOMC may or may not raise rates in the next meeting or the next several meetings, but if they do it doesn’t mean anything like how it continues to be described. There truly is no reason for this misleading interpretation, as all the data is readily available to completely dispel it.

The Congressional Budget Office (CBO), for example, produces estimates for economic potential on a semi-annual basis. This doesn’t mean they know what our economy’s potential is or might be, but the figures have other uses. The manner in which they are derived is entirely similar with the models and assumptions used by the Federal Reserve (that does not publish estimates for potential). Economic potential is a key concept in monetary policy, perhaps even the most important part of it. Read more

The problem with the Fed raising the federal funds target band is not that they are doing that instead of another QE or the next genius idea that would follow that failure, but what it says about their view of the shrinking economy – it is for them just the way it is and will be. With no other answers as to why or how, might as well be graying hair and drug addiction as anything more reasonable and inconvenient. Their output gap is closed, and I could not concur in more positive terms. As I wrote earlier for today:

This used to be the Land of Opportunity, but they would have you believe, in polite terms, it was squandered by you and me. Forgive me if I don’t believe that America stopped being America at exactly the moment central bank monetary failure was most exposed for what it always was – a lie. The consequences of it have finally been revealed even to the ideologically blinded. Both the Fed and I agree for once, the output gap is gone and there is nothing left for them to do. In fact, if they would all just resign, then the road to recovery might actually begin, no rehab or retirement facilities required. Read more

Stephen is this an example of the so called 'exspurts' being too enamoured of their own opinions, and too wedded to flawed economic theory (probably because it is espoused by one of their own) to realise that they and the Governments they advise and influence have screwed the pooch to the point where it is almost non-recoverable?

http://www.nakedcapitalism.com/2017/01/philip-pilkington-extent-economic...

Could be a book worth reading. Would economists be willing to change their own views?

"Australia, they are looking to raise their 6% renewables energy production .. by a massive increase in solar capacity"

Solar panels are not renewable.

Yes true the sun will collapse one day. Prey tell what is renewable in your books then?

dtcarter - you will see i said solar PANELS... you know, the chunks of metal forged with coal and Oil and difficult to mine minerals. A marketing misnomer or complete have in other words.

You cant renew any energy .. only transform it.

You will note the article is about renewable ENERGY. I guess i missed the part where you clearly redefined the popular meaning of the words in the article you are responding to thus making your comment irrelevant to the point under discussion.

Watched Trump give his speech to his supporters in Florida yesterday. I don't think I've ever seen such a divided US. It seems to me he's working for only half the country as opposed to assuming responsibility for all citizens once in office. His campaign-style rant at the media is truly bizarre.

Photos of Trump signing documents with aides to the side looks like something from the Freemasons.

Weird, weird, weird.

"It seems to me he's working for only half the country as opposed to assuming responsibility for all citizens once in office"

And how is this any different to what John Key and National have done for the last 8 years?

Exactly. M&M could do worse than getting amongst BH's comic man:

http://blog.dilbert.com/post/157317171676/how-to-evaluate-a-president

Imagine if we all thought the same!

Brexit is about to get very messy indeed , the UK cannot afford the Bill , and nor can they take back every Pom living in Spain , Greece , Tuscany or the Algarve