90 seconds at 9 am: US economy signals sag

Weak US durable goods orders; weak US business surveys; Canada targets sales commissions; German confidence high; Apple blocks Westpac innovation; UST 10yr yield 2.13%; oil up but gold slumps; NZ$1 = 73 US¢, TWI-5 = 77.4

27th Jun 17, 7:32am by David Chaston

Here's my summary of the key events from overnight that affect New Zealand, with news of diverging economic fortunes between the US and Europe.

American durable goods orders unexpectedly fell in May, driven lower by weakness in the aircraft manufacturing sector. It is the second month in a row of decreases following rises in five of the previous six months. Without the aircraft sector, the result was essentially flat.

Overnight, two Federal Reserve districts released surveys of economic activity and the results were not positive. The Dallas one was for their region and it came in well under expectations. The Chicago one was a national survey and that one turned negative.

North of the border, the Canadian Securities Administrators, has proposed a ban on asset managers paying commissions to advisers for selling mutual funds. The regulator argues that this near-universal practice sets up a blatant conflict of interest, increases costs for investors and damages returns. The proposals are similar to those recently introduced in Britain and the Netherlands, and due to be introduced across Europe in January 2018. There is determined push-back by the industry in Canada, claiming that it will 'hurt savers'.

In China, a court in Shanghai sentenced sixteen employees of James Packer's Crown Resorts to prison for illegally promoting gambling in China. It is a clear signal that targeting Chinese gamblers is not a winning strategy.

In Germany, business confidence has hit a new high in June, having already reached a quarter-century peak the previous month. The closely-watched Ifo business confidence index set a new record of 115.1 points, defying expectations of analysts of a slight decline after it reached 114.6 in May, the highest since 1991.

In Australia, Apple has moved to restrict how Westpac uses its platform, killing off an innovative element of the bank's appeal to users on social media.

In New York, the UST 10yr yield is lower yet again today today on the weak durable goods data at 2.13%.

The price of oil is up a little today and is now just under US$43.50 a barrel, while the Brent benchmark is now just under US$46.

But the price of gold is sharply lower, down -US$12 and now at US$1,244/oz. But that may get reversed because it was driven by an unusually large (56 tonnes !!) sell order. Markets are scratching their head over this.

However the Kiwi dollar is a little higher and just touching 73 USc. On the cross rates we are holding at 96.2 AU¢, and 65.2 euro cents. The TWI-5 index is now back up at 77.4 which is a four month high.

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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Source: RBNZ

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11 Comments

by bw | 27th Jun 17, 7:58am 1498507121

Re Gold:
"Gold's failure at the $US1255 resistance level may have triggered a technical sell"
or
"This bears the hallmarks of a fat-finger 'Muppet' - a trade of 18,149 ounces would be a very typical trade, but a trade of 18,149 lots of a futures contract (which is 100 times bigger) would not be"
Take your pick! (NB: "There were also signs of falling demand for gold as China, the largest consumer, bought less from Hong Kong in May. Purchases fell to a net 44.8 tonnes, from 74.9 tonnes in April")

by dictator | 27th Jun 17, 8:46am 1498510003

Unless there's a larger sustained sell off nothing much is going to happen. It could have been a simple rebalancing.

by Boatman | 27th Jun 17, 1:57pm 1498528663

Gold always moves up with US$ weakness

by Stephen Hulme | 27th Jun 17, 9:17am 1498511859

What is actually taking place in bill markets are these other “dollar” dimensions, the distinct liquidity preferences that remain no matter which way the Fed goes proving the greater independence of money from policy. In the specific case of T-bills, we can easily surmise collateral ( why was gold slammed this morning?). Read more

Nonetheless, The 3 Reasons Why Goldman Just Turned Bullish On Gold

by dictator | 27th Jun 17, 10:36am 1498516590

I've been looking at gold performance in a crisis recently. The price either goes up or goes down heavily with some changes short term and others long. I find it to be rather counter intuitive. No matter what if there's a price change of 10%+ then something major has happened.

by scarfie | 27th Jun 17, 10:34am 1498516453

Has Ping, the new payment method from Trademe been discussed here?I haven't looked at it closely but it looks to be charging a fee, which on the face of it is an extra commission in disguise.

by President of P… | 27th Jun 17, 10:48am 1498517286

maybe some treasury sold off all their gold and are buying cypto currencies like bitcoin and ethereum.
that would make sense and would boslter a countries financial position long term when dollars are custard.
President of Property

by Stephen Hulme | 27th Jun 17, 11:13am 1498518822

Is the Fed risking another policy tool failure?

This morning, at a speech at the BIS Annual General Meeting, Bill Dudley came right out and stated unequivocally that the Federal Reserve was targeting financial conditions.

As I see it, financial conditions are a key transmission channel of monetary policy because they affect households’ and firms’ saving and investment plans and thus influence economic activity and the economic outlook. If the response of financial conditions to changes in short-term interest rates were rigid and predictable, then there would be no need to pay such close attention to financial conditions. But, as we all know, the linkage is in fact quite loose and variable.

For example, during the mid-2000s, financial conditions failed to tighten even as the Federal Reserve pushed its federal funds rate target up from 1 percent to 5¼ percent. Conversely, at the height of the crisis, financial conditions tightened sharply even as the Federal Reserve aggressively pushed its federal funds rate target down toward zero. As a result, monetary policymakers need to take the evolution of financial conditions into consideration. For example, when financial conditions tighten sharply, this may mean that monetary policy may need to be tightened by less or even loosened. On the other hand, when financial conditions ease — as has been the case recently — this can provide additional impetus for the decision to continue to remove monetary policy accommodation.

There is no ambiguity there. That’s as clear as Central Bankers get. Dudley, who is generally considered the third most influential FOMC board member (behind Yellen and Fischer), is telling you plainly - as long as financial conditions keep easing (and employment doesn’t collapse), the Fed will keep raising. Read more

by Gummy Bear Hero | 27th Jun 17, 12:06pm 1498521986

America's Cup to return to Orc Land after a 14 year absence ...

... we predict that Peter Burling will get a knighthood , and mega-million $ offers from overseas syndicates ...

And that this cup return & regatta will reignite the Orc Land housing market ... expecting a further 100 % rise over the next 4 years ( chuckle .... yeah , right ! ) ...

... and we expect Wild Bill to now get the government firmly behind Team Emirates NZ ... well ... most boats do have some unwanted barnacles clinging desperately to their hulls , don't they ...

by Boatman | 27th Jun 17, 1:56pm 1498528598

Funny how the Germans are confident , but the rest of the EU is in the doldrums , with huge unemployment problems in Southern Europe , Greeks ongoing fiscal pain , deficits and trade imbalances , the refugee saga , terrorism and who knows what else

by MikeM | 27th Jun 17, 9:04pm 1498554254

"American durable goods orders unexpectedly fell in May, driven lower by weakness in the aircraft manufacturing sector. It is the second month in a row of decreases following rises in five of the previous six months. Without the aircraft sector, the result was essentially flat.

Overnight, two Federal Reserve districts released surveys of economic activity and the results were not positive. The Dallas one was for their region and it came in well under expectations. The Chicago one was a national survey and that one turned negative."

Bond market 1 v Fed 0 re inflation outlook?