American payrolls impress everyone except the markets; trade supporters challenge Trump; Musk makes Aussies an energy offer; UST 10yr yield at 2.58%; oil and gold lower; NZ$1 = 69.2 US¢, TWI-5 = 74.9

American payrolls impress everyone except the markets; trade supporters challenge Trump; Musk makes Aussies an energy offer; UST 10yr yield at 2.58%; oil and gold lower; NZ$1 = 69.2 US¢, TWI-5 = 74.9

Here's my summary of the key events over the weekend that affect New Zealand, with news all is not lost for holding the US in to big multilateral trade agreements.

But first, over the weekend markets yawned despite the US non-farm payroll report for February showing a higher than expected gain in employment, a lower than expected unemployment rate, a higher than expected participation rate, and a higher than expected rise in wages. Probably the ADP survey had raised expectations in the final days before the release for markets to be impressed. The US dollar hardly moved with the good data, and the UST 10yr benchmark actually slipped slightly. Markets have now factored in a full 25 bps rise in the Fed's benchmark rates due on Thursday.

The new US administration is wrestling with it's actual position on trade. TPP supporters are gaining ground in a battle for influence inside the White House. Some have called the turf tussle a 'civil war' and Breitbart News does not like the way things are developing. All this has to be a positive development for New Zealand.

Outside pressure is building too. The German Chancellor is off to Washington. She is reported to be preparing to push back against the US President's plan for a 'border adjustment tax'. Not only will it break WTO rules, if the Americans do it, Germany says it will tax US companies the same amount in Germany, and make any tax the American impose on their companies tax-deductible in Germany, compensating for any unilateral US actions. Germany is readying lower corporate tax and 'social contributions' to retain its relative position.

China is claiming its offshore investment has resulted in Chinese firms hiring 1.5 mln people offshore. It is a schoolboy claim; apparently they want us to believe Haier employed all those people at Fisher & Paykel, and all the workers at Silver Fern Farms when it took over or bought into these local firms. China is pretty ham-fisted in its propaganda.

Australia has an urgent energy crisis with no obvious short-term solutions. It is particularly acute in South Australia which set on a 'renewables' strategy it can't deliver. Over the weekend, Tesla billionaire Elon Musk has stepped up with an enticing offer to supply mega battery storage solutions. Australian public policy officials are in thrall, although other suppliers have come through with storage offers too.

Australia may have its issues, but it is wealthy and attracting wealthy migrants. A new report out highlights its position, but it also shows New Zealand features as a prime destination for HNW immigrants, suggesting we attracted 4,000 of these people with US$10 mln in net assets in 2016. That is behind Australia (17,000), the USA (10,000) the UK (8,000) and Dubai (5,500) but still impressive. The main places HNW people are escaping are France, China, Brazil, Turkey and India.

In New York, the UST 10yr yield is unchanged after the US payrolls report and now at 2.58%.

Oil prices were down again over the weekend to just over US$48 for the US benchmark, while the Brent benchmark is just over US$51 a barrel. Something of a rush to sell oil futures is weighing on oil market pricing.

The gold price is also down and is now under US$1,200/oz.

And the New Zealand dollar held at its new lower level on Saturday at 69.2 USc. On the cross rates the Kiwi dollar is at 91.7 AU¢, and against the euro is at 64.9 euro cents. The NZ TWI-5 index at 74.9. And finally, the American securities regulator has turned down an application to list what would have been the first bitcoin ETF in the US.

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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20 Comments

FED very bullish now, next hike locked in and talking min two more this year.
I expect our interest rates to follow as bank borrowing becomes more expensive.

All eyes on the dot plot.

If the US 10 year closes above 2.60% we will have entered Bill Gross's bond bear market.

I'm sceptical about our banks in NZ raising on-call savings rates though.

The New Zealand banks aren't too bad for on call savings actually (1.75% TSB, 1.8% SBS, 3% Heartland bank), it's the Aussie banks that are taking the piss. Vote with your feet.

Good on NZ for attracting 4000 HNW individuals bringing a massive US 10 mln. That is a huge US$2500 per person, hardly HNW is it?

To be a HNW in this survey, you need to have US$10 mln minimum. So that minimum is 'each'.

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The biggest problem with this sort of immigrant is they do not take part in society and community, they are elitist and seek a place to hide away, often at the expense of locals. I think they add very little to the country, unless they are starting significant businesses here and I mean STARTING not just coming in and buying up something existing.

It's an interesting question, hopefully there is some NZ research on it that can throw light on the issue. Some do just build a fancy house with grounds and gates, which does employ builders and gardeners in the short and long term. Also, they probably have overseas income that they spend here. Counter to that they can just push up property prices and their capital flowing in pushes up the exchange rate thereby pushing exporters out of business and reducing the wages they can afford to pay.

Having said that, the benefits of having wealthy entrepreneurs who do develop productive businesses can be dramatic, a few dynamic types could have a very large effect and create thousands of jobs.

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Locals priced out. Vote NZ First in September.

I agree... Unless that money is used to actually "Create" something "New".... it simply bids up prices.....
In terms of growing wealth of NZ.... it is akin to a "Heroin shot "..
A small ripple like wealth effect as they pay for assets and the happy seller spends a little more..
Longer term.... nothing changes

For a country, long term.... success = work ethic + productivity ( innovation/creativity/enterprise )

I would guess most come here for the
- lack of people
- to buy a haven to avoid people
- to buy a piece of unspoilt wilderness
in other words nothing which would suggest they add squat but a bit of a reno & the odd grocery order

"Australia may have its issues, but it is wealthy and attracting wealthy migrants. A new report out highlights its position, but it also shows New Zealand features as a prime destination for HNW immigrants, suggesting we attracted 4,000 of these people with US$10 mln in net assets in 2016. That is behind Australia (17,000), the USA (10,000) the UK (8,000) and Dubai (5,500) but still impressive."

Compare it with the population - the percentage is extremely high in NZ and they do bring in money but the imbalance multiple.

The new US administration is wrestling with it's actual position on trade. TPP supporters are gaining ground in a battle for influence inside the White House. Some have called the turf tussle a 'civil war' and Breitbart News does not like the way things are developing. All this has to be a positive development for New Zealand.

Is that so?

The latest figures (November 2016) from the OECD suggest global trade will accelerate only slightly in the next few years, rising 3.2% in 2018 to $24.3 trillion. If the Great “Recession” has been an actual recession global trade “would” be in 2018 instead $36.6 trillion. The world economy is thus poised to be only two-thirds of what it was expected to be a full decade after the assumed end of the affair. This was not, of course, a determination that orthodox outlets like the OECD made contemporarily, rather like US economic potential it has been forced upon them by a very different reality. Read more

Thanks for that, well worth the read. That "Claims on foreigners payable in dollars" chart really gets to the heart of the matter.

"I didn't know to this day that it was the dollar all along."

There is nothing useful in the TPPA, especially if an extreme right wing Whitehouse thinks its a good idea now.

Markets have now factored in a full 25 bps rise in the Fed's benchmark rates due on Thursday.

Hmmmmmm...

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

and you see articles like this ... and wonder how an interest rate rise is going to help ...
http://wolfstreet.com/2017/03/11/restaurant-recession-meets-february-deb...

"Same-store restaurant sales in February dropped 3.7% and foot traffic dropped 5.0% from a year ago, according to TDn2K’s Restaurant Industry Snapshot..."

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Hat tip to another commentator, who mentioned last weeks Economist's housing article. The Economist may not appeal to everyone, nor how it may interpret its housing metrics, yet it barely receives a mention locally, and not in print media The fact that New Zealand, was removed from the Economists charts for a couple of years only reappearing last week at the very top of the pile. Whether we want to be number 1 in the Economists housing metrics , or whether it is an issue is debatable . Personally, I would give it more credibility than another global wealth survey ,suggesting that every rich dude and his dog are coming to New Zealand to prop up real estate.

The Australian energy situation is very interesting and highlights an issue that will become mainstream as nations turn away from conventional generation (excluding Hydro) and to renewable s such as solar and wind. The renewables are not predictable or consistent and this threatens the ability of the power system supply to match demand both long term and instantaneously. The resultant system instability can crash the whole power system. A well set up battery system is one method instantly smoothing the positive and negative mismatches between supply and demand and maintain system stability.
Eion Musks price of $250 per KWhr of storage is very attractive and if prices fall further as predicted, battery storage will become a very real proposition.
https://arstechnica.com/business/2017/03/elon-musk-on-batteries-for-aust...

Sadly however I suspect that there is a very real chance that Eion Musk could could loose out on the guarantee to do it in less than 100 days because getting anything done in Australia is nothing like the USA. In Australia the labour force and bureaucracy will tie him up in knots and delay completion endlessly. 200 days may be nearer the mark unless somebody high up in government rides roughshod of the the typical crap on his behalf.

If HNW's want to come and live here and are Tax Domiciled here , then they are welcome