Here's my summary of the key events overnight that affect New Zealand, with news of a China credit crunch
But first in the US, and for the first time in years, pay for lowest-income Americans is rising faster than for other groups. Weekly pay for earners at the lowest 10th percentile of the wage scale rose at a faster rate last quarter, from a year earlier, than any other group measured, including those at the top of the income scales who earn five times as much.
And their jobless claims fell last week, after a couple of weeks where it inched up. But it is still well below levels we had at this time last year.
More globally, Moody's said overnight that systemic risks in global financial markets have remained relatively contained over the past six months, despite increases in some areas. While the banking sector's fundamentals are improving and problem loans have bottomed out in most regions, the past improvement in capitalisation has lost some momentum. The areas where they see the most risk includes Russia and Brazil.
Private citizen John Key has reinforced his pulling power overseas. He is in Beijing and still managed to meet with Chinese Premier Li, an event Chinese media highlighted.
And separately in China, rising house prices and loan restrictions are having a bad impact on migrant workers arriving from rural China. There just aren't enough places to rent. Each year more than 250 mln such rural migrants and students arrive in Chinese cities. They are having to address the stress with vast new rental home building, and the program is kicking off first in the giant southern Guangzhou area. Public housing for 250 mln people per year will be a truly massive effort.
In China, there has been something of a liquidity crunch going on over the last three days. Their central bank has pumped in NZ$90 bln to their banking system since Tuesday.
This comes even though the flow of investment funds into China is rising particularly quickly. The BIS reported as part of its March 2017 International Banking Statistics that bank loan inflows to China accounted for 60% of all flows in the quarter to emerging markets. That takes the total amounts owed by China to international banks to US$850 bln, although that is still less than the US$1.1 tln that was owed in 2014, before a subsequent pullback.
The US and China failed late yesterday to agree on major new steps to reduce the American's goods trade deficit with China, worsening the US's economic and security relations with Beijing. The talks, which were supposed to be the first of a series, ended with canceled news conferences, no joint statement and no new announcements on US market access to China. Amateur American 'diplomats' are going to make it hard to get agreements.
In Europe, they still have house prices rising quickly. Data out today for the year to March shows house prices there rose +4.5% in the year, up over +10% in some Eastern European members, up almost +9% in Ireland, +11% in Norway, +6% in Sweden. Only Italy had declining year-on-year prices.
And today's ECB policy review has been a bit of a non-event.
Locally, an election pledge from Labour will fund an extra $150 per student to every school that agrees to stop asking parents for a donation. They reckon parents of more than 450,000 students will no longer be asked to pay a donation, bringing the total cost of the policy to about $70 mln each year.
In New York, the UST 10yr yield unchanged today at 2.26%.
The price of oil is lowern today and is now at just over US$46.50 a barrel, while the Brent benchmark is now just over US$49.
The price of gold is a little lower as well at US$1,237/oz.
But the Kiwi dollar is up from this time yesterday at 74.1 USc. On the cross rates we are at 93.1 AU¢, and at 63.7 euro cents. As a result the TWI-5 index will start today just on 77.
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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12 Comments
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=118…
"New Zealand's net foreign liabilities position is similar to Australia's, relative to the size the economies, but the only developed countries which are worse by this measure are those casualties of European monetary union: Ireland, Greece, Portugal and Spain".
Toronto House Prices Crash 192k since April.
https://www.youtube.com/watch?v=hGL0ysImPCo
Auckland Albany House Prices Dive 13.5%
https://www.stuff.co.nz/business/property/94154549/house-prices-dive-in…
The Crash Is Coming.
The article linked to says:
With a migrant population of 245 million, and some 7 million college graduates starting work each year, newcomers to Chinese cities often find it hard to find a lease due to insufficient supply, market irregularities and lack of government support.
So my take from that is that Chinese cities already have a population of 245 million migrants - i.e. that's not the number arriving each year.
I still wish we fully understood whats really going on in China with its economy .......... everything is so opaque, full of contradictions and vague .
And their Statistics seem improbable , how does and economy so large grow at between 5 and 8% per annum?
I just dont believe the numbers
While its seemingly abuzz with development and activity , its claim of this type of growth rate compunded seems improbable .........it just fails on every sense-test imaginable
Economic fundamentals that we Westerners understand as Gospel , seemingly don't apply in China.
And today's ECB policy review has been a bit of a non-event.
Hmmmm...
Draghi was no more “hawkish” in late June as he isn’t now “dovish” in mid-July. At both times he was consistently confused. Today, he came as close as might be ever expected to stating that as a fact outright:
There really isn’t any convincing sign of a pickup in inflation.
As some reports noted, he stated that same thing several times with slightly different wording. The problem continues to be an absence of all the things required to make money become inflation – starting with wage growth. Without that, can the economy really be improving?
The answer is no, and even an economist like Mario Draghi knows it. In that respect, the European economy is as stuck as the US economy. When friendly outlets like the New York Times notice this lacking vital component, it cannot be as something of a trivial difference:
Central banking increasingly looks like an act of faith.
Mario Draghi, the president of the European Central Bank, and his Bank of Japan counterpart, Haruhiko Kuroda, have spent trillions of euros and yen without generating as much inflation as they want. Yet they have little choice but to insist their policies will eventually work.
The eurozone is finally experiencing a robust recovery and the only things lacking are a pickup in wages and inflation, Mr. Draghi said on Thursday.
Is it really a “robust recovery” without a pickup in wages and household income? Mr. Kuroda can answer that question best with Japan’s experience stuck for a quarter century in, of all things, Japanification. The essence of that permanent stagnation is the lack of income and wage growth, the lagging behind of households that policymakers can’t for some reason see as the most important economic element.
Work equals recovery, and with more work comes more wages. Anything else is just the shifting of numbers, the economy flying erratically like a rocket without its tail fins. Read more
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