90 seconds at 9 am: Aussie mortgage stress rising

US factory growth slows; Trump considers bank breakup; Mexico wants TPP to be basis of NAFTA review; Japan factories healthy; Aussie mortgage stress worries; UST 10yr yield at 2.32%; oil and gold down; NZ$1 = 69.1 US¢, TWI-5 = 73.8

2nd May 17, 7:27am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news of rising concern over Australian mortgage stress.

But first in the US, factory activity is still growing but the rate of growth slowed in April with weaker expansion of output and new orders. Another survey showed input prices rising at their fastest pace since September 2014. Meanwhile, while consumer spending was unchanged in March and a key inflation measure recorded its first monthly drop since 2001. The US Fed is meeting this week to assess its policy rates and some analysts expect it to raise the rate by +25 bps on Thursday our time. But that is not the consensus, which is still for no-change this meeting.

Bloomberg is reporting that President Trump is actively considering breaking up the big Wall Street banks. And he is considering raising taxes on petrol.

The President failed to get any funds for his border wall. And renegotiating NAFTA may prove quite different than his rhetoric; in fact Mexico is suggesting they use the TPP as a basis for a renegotiated trade deal. The Trump concerns over China may just put that deal back on the table.

In Japan, factories are expanding faster especially from new export orders. But price pressure are showing up here as well.

In Australia, a new report says household financial stress is reaching 'worrying levels'. And regulators are taking notice of the survey. Affluent suburban areas feature among an estimated 1000 households a week expected to face mortgage default over the next 12 months, the analysis reveals. "Debt stress momentum is unprecedented," according to research firm Digital Finance Analytics, who have been doing this survey for more than 15 years. The number of borrowers in severe distress has increased by about one-third to about 32,000 in the past 12 months they say. One-in-four households are said to be facing financial distress follows the March warning by the RBA about increasing family "vulnerability" caused by soaring property prices, particularly in Melbourne and Sydney.

In New York, the UST 10yr yield is up today and now at 2.32%.

Oil prices are still slipping lower and now just under US$49 for the US benchmark, while the Brent benchmark is now just over US$51.50 a barrel.

The gold price is also down, slipping -US$10 today to US$1,256/oz.

The New Zealand dollar will open a little higher at 69.1 USc. On the cross rates the Kiwi dollar is at 91.7 AU¢ and against the euro at 63.4 euro cents. The NZ TWI-5 index is now at 73.8.

If you want to catch up with all the changes yesterday, 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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11 Comments

by bw | 2nd May 17, 7:55am 1493668511

NIMBY at its best?!
"(ANZ) Senior and middle management jobs are at risk in the transition, which will start with the Australian division, then spread to New Zealand...Hierarchies in a sense disappear....ANZ currently has seven to eight layers of hierarchy.."

Sound good! ANZ etc don't need 8 layers of management to dish out home loans. But...

Mr Elliott said that... agile teams would cut in two levels below him..."
Good one Shayne....
http://tinyurl.com/kd7wtvr

by sharetrader | 2nd May 17, 8:02am 1493668973

ANZ results are out today, I will take interest in CEO statement to see where the bank is headed
ANZ Half Year Results Announcement - Tuesday 2nd May 2017 at 10:00am

by middleman1 | 2nd May 17, 9:06am 1493672818

If recent share price growth is any guide, a 'good' result seems likely.

by dictator | 2nd May 17, 9:03am 1493672598

Those 1000 households defaulting in Australia per week certainly give hope to the low and decreasing interest rate crew. If it gets that bad there then the credit tightening from that will spread to here as well.

by Stephen Hulme | 2nd May 17, 9:12am 1493673140

As expected, the PCE Deflator for March 2017 dropped below target once again. At 1.83%, it is still being held up by oil price base effects which are quickly fading (variable to the WTI price), an average 33% increase in March compared to 77% in February. Expectations for conforming inflation in 2017 were written out based on oil’s anticipated straight-line ascent, for if the economy is getting better then demand for crude would surely continue to increase, leading the price right back up toward $100 or more. Read more

by Boatman | 2nd May 17, 10:03am 1493676238

Trump would do us all a favor if he nipped Moral Hazard in the bud ensured that American banks were never again to big to fail .

by Boatman | 2nd May 17, 10:22am 1493677369

With somewhere between 15 million and 25 million undocumented and illegal migrants wondering around America using fake Social Security cards , working for cash jobs and getting up to all sorts of mischief , Trump really does need to build that wall .

Imagine if Australia , for example , had an extra 5% to 10% of its population undocumented and illegally living there ?

Or if we had an extra 400,000 people we did not know where to find , or were not paying any taxes ?

What would we do ?

We get just one Illegal from Zimbabwe on a fake passport , and discover he is wanted for Murder back there , yet we are caught like rabbits in the headlights and he stays here because we don't know what to do with him , imagine just 1000 more illegal aliens , let alone 100,000 ?

It would be a crisis

by mfd | 2nd May 17, 3:05pm 1493694343

Alternatively, having between 15 and 25 million already in the country shows the futility of the wall. It'd also be interesting to know how many of them literally snuck across the border vs overstaying or having fake papers that would get you through wall or no wall.

I'd be surprised if they were getting up to much mischief, knowing that any brush with law enforcement could see you deported must make you think twice.

by Kate | 2nd May 17, 10:59am 1493679592

Australia. DTI at 188% and one-in-four households facing financial distress. it just seems unbelievable in such a low inflation (so we are told) and low interest rate environment.

by dictator | 2nd May 17, 11:42am 1493682170

After spending a few years helping people sort out their financial problems online nothing surprises me. Most of the population is financially illiterate in the west. People spend more than they earn and the debts just keep piling up along with compound interest. All the low interest rates are doing is allowing people to accumulate more debt and their financial problems are concealed by the low interest rates on mortgages.

Generally people don't start addressing financial problems until they have the time to focus on them or they are in a position where they can no longer ignore the situation. Often people are beyond their limits for some time or they buy a vehicle and the payments finally exceed their income. The financial sector doesn't go out of its way to make sure people are in a good position and collects the interest accordingly.

Peer to peer lending also gives a good insight as to people making bad decisions. Half or more of the loans are debt consolidation which means they are often starting the clean up process of their debts (not always). The remainder are loans to family members (they won't get that money back), purchases or new cars, boats or mythical computers costing $4000. Certainly anyone buying a computer for that price is an idiot. Not to mention large 3 to 5 year loans for a wedding or a holiday (that they deserve as a reward for not saving).

When interest rates go up the concealed problems will just surface more rapidly. There are 45 unique mortgagee sales on trademe across the country. No doubt this is only the tip of the iceberg due to the low interest rates (that they can't afford to pay).

by canon | 2nd May 17, 12:49pm 1493686186

Have a good friend who is a electrician and has been working in Perth the last 5 years. He's never had any issues finding work in the commercial space until now, says the place has died. Hasn't been able to get any work for 4 months, everyone is undercutting everyone else to the point where he's thinking about moving back to NZ.

How many others in this situation I wonder?