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Aircargo growth impressive; ADP payrolls disappoint; US debt limit warning; Volker Rule 'under review'; India cuts rate; Tasmanian dairy trouble; ANZ to sell another NZ bit; UST 10yr yield at 2.27%; oil up, gold down; NZ$1 = 74.4 US¢, TWI-5 = 76.7

Aircargo growth impressive; ADP payrolls disappoint; US debt limit warning; Volker Rule 'under review'; India cuts rate; Tasmanian dairy trouble; ANZ to sell another NZ bit; UST 10yr yield at 2.27%; oil up, gold down; NZ$1 = 74.4 US¢, TWI-5 = 76.7

Here's my summary of the key events overnight that affect New Zealand, with news the Volker Rule is under attack in the US.

Firstly however, June aircargo data was released today and that shows world trade in a very healthy state. The June data was +11% higher that the same month a year ago, with aircargo shipments in North America up +12.7% and in Europe up a remarkable +14.3%. Overall international airfreight volumes are up +12.0%. By any measure, these are very substantial gains.

In the US however, the pre-cursor ADP employment report has disappointed somewhat. Markets were expecting a +190,000 employment gain in July but it actually came in at +178,000. This is an advance indication of what to expect in the US non-farm payrolls report due out on Saturday.

Also somewhat disappointing was a fall in the number of new mortgages approved in the US. They decreased -2.8% in the latest week reported. American are now paying about 4.15% for a 30 year mortgage, about 3.45% for a 15 year mortgage.

Perhaps one reason is that Americans, once renowned for their willingness to move in search of opportunity, are decreasing that willingness to be mobile. They are now their least economically mobile in about 70 years.

And lets not forget that the pressure from the reaching of the US debt limit is growing. There may only be eight weeks left until a shutdown, and more experts are warning of the dire consequences if no solution is found. And if they leave it too late, that could prompt a borrowing surge by the US, causing new problems in debt markets.

Their may be more trouble as well. The Trump Administration is moving to wind back the Volker Rule - which would open back up the option by banks to restart 'proprietary trading', again de-emphasising the core role of banking.

In India, their central bank cut its main lending rate by -25 bps to 6% which is a more than six-year low, as both inflation and economic growth slowed. Inflation has fallen dramatically to under their target rate of +4%, and growth has slipped to a +6.1% annual basis.

And keep an eye on the border dispute between India and China. Both sides are digging their heels in with no sign of compromise.

Remember Van Diemens Land Company, the large Tasmanian dairy operation that was owned by the New Plymouth District Council? They sold it in April last year for NZ$300 mln to a billionaire Chinese buyer, a deal that was approved by Canberra on the basis that he invest another $100 mln into the operation. But he is in trouble - he can't get that sort of money out of China any more and is looking to sell already.

And there are rumours in Australia, that ANZ Melbourne is moving to sell its New Zealand life insurance business. It must be frustrating for ANZ New Zealand to get bits of its operation flogged off by their Aussie parent. First UDC, now this.

In New York, the UST 10yr yield is up today at 2.27%.

The price of oil is up slightly today at just over US$49.50 a barrel, while the Brent benchmark is now just under US$52.50. But OPEC and other big oil producers are now facing a new problem: how to keep the oil market calm if they decide to lift their output curbs and ramp production back up.

The price of gold is down by -US$4 to US$1,268/oz.

And the Kiwi dollar will start just slightly softer again today at 74.4 USc. On the cross rates we marginally lower as well at 93.3 AU¢, and at 63.7 euro cents. As a result the TWI-5 index will start today at 76.7.

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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17 Comments

Mortgage issuance falling? This...is what happens when cheap debt has flooded the market and even the most marginal borrower can't borrow any more.

Ultra-cheap debt means the sharemarket's central function as a platform for providing capital is being seriously undermined....."The social and economic function of the stock market is to provide equity capital to the Australian economy. This has helped create jobs, supported our economy's solid momentum, and facilitated the development of new products." Now, the stock market is "not working". Why come to the equity market to raise capital when you can raise money in the debt market for zero to 1 per cent?"

http://www.afr.com/markets/credit-suisses-hasan-tevfik-says-equity-issu…
This cheap-debt phenomenon has polluted all asset markets, and 'the escape' that was imagined has not happened. Now...it won't, and the alternative to an orderly unwind of bloated unproductive asset markets is that they will have to find their own levels violently. And much higher, won't be it.

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July 2017 auto sales were downright awful across-the-board: GM sales -15.5%; Ford -7.4%; FCA -11%; Hyundai -27.9%; Kia -5.9%; Mercedes-Benz -9.8%; Nissan -3.2%; Honda -1.2%. The only major manufacturer producing sales gains was Toyota (+3.6%). Read more

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Yes. Reported that yesterday. But a part of that for the core US manufacturers is that they stopped selling to rental car fleets at bargain prices. They may hold their earnings even though top line sales are down. But you are right, the overall trend is lower. Just not as sharp as the top line data suggests.

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Big plunge in new vehicle sales July New Zealand.

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OPEC don't know if they're coming or going.

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Going, I'd say, given the pressures on most governments to move away from oil. Though it will take a substantial while for OPEC to be actually gone.

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Move away from Oil ... LOL. That is Oil in & on your bread.

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Oil at under $50/pbl is not sustainable for most producers , and its also problematic for the US Shale energy companies .

The oil price now reflects demand and supply more or less in sync

This is evidence that the free market system actually works and that super-profits are never sustainable in the long run

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As part of the Treasury's Q3 refunding announcement, which as discussed earlier sent 30Y yields to session lows after it failed to either boost upcoming debt issuance or mention ultra-long dated bonds, the Treasury Borrowing Advisory Committee or TBAC, a select group of bankers from Wall Street's biggest firms tasked with providing periodic guidance to the Treasury, released its latest presentation, whose topic this quarter was "Normalization of SOMA Portfolio", or a breakdown of i) how Wall Street expects the Fed's balance sheet reduction will play out from a chronological and structural basis, ii) how treasury issuance will be impacted as a result, and most importantly, iii) the expected impacts on markets. Read more

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Link to story about sale of dairy farms seems to be broken.

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fixed now (AFR)

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Headlines on AFR (paywalled)
The Chinese Bilionaire who tried to sell Van Diemens Land Farm before buying it
http://www.afr.com/business/agriculture/the-chinese-billionaire-who-tri…

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At least the New Plymouth District Council will be able to keep the deposit

I hope they got their deposit

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FYI, ANZ CEO Shayne Elliott spoke about the NZ life insurance business when I interviewed him in April - http://www.interest.co.nz/business/86886/anz-keen-keep-kiwisaver-business-itself-group-ceo-shayne-elliott-says-nz-wealth-unit

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You know the Americans are a bunch of suckers who have clearly don't practice " Second Order Thinking " in their decision - making processes

Their Banks caused a Global Financial Crisis through what is euphemistically call Proprietary Trading which is off Balance sheet, highly geared and often reckless, speculative activity . And now they want to start all over again .

They invade Iraq without any second step thinking as to what would be done when they had invaded the place , such as the consequences or the outcomes , which anyone with the vaguest understanding of Arab Nationalism, would know it would be a disaster and not end well.

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Airfreight volumes may be up but from a low base. Air cargo accounts for less than 1% of world trade.
http://www.atag.org/facts-and-figures.html

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David likes to cherry pick the air transport figures while I like to stay with the BDI. The BDI is still down from 11000 odd a decade ago. "strangely" these days they dont show back so far so easily so we look at 5 years odd so the

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