Here's my summary of the key events overnight that affect New Zealand, with news of a deeper perspective of Chinese house-buying demand. They haven't pulled back, they have just shifted focus.
But first in the US, bank profits are continuing to grow. They rose +10.7% to US$48 bln in the second quarter from a year earlier. There is little sign yet that the long heralded challenge from the tech world, and other disintermediators, is posing any challenge to modern banks. And the big banks are said to be much less reliant on the type of wholesale funding linkages that helped accentuate the GFC.
A new survey by investment bank UBS is casting a different light on Chinese buyer demand in offshore property markets. Their six-monthly UBS Evidence Lab: China housing survey doesn't really see demand by customers out of China falling, just shifting. 'Animal spirits' are increasingly behind the re-acceleration in Chinese housing demand," the survey says. "Expectations of higher prices were behind 30% of all purchases in the last 12 months and the reason for two-thirds of buyers purchasing earlier than they planned. The proportion of consumers expecting price declines is at record lows. Higher domestic leverage has also helped fuel housing sales, making credit tightening there more effective than before. Currency risk is an important driver, but not local taxes intended to deter them. In fact, more than two-thirds of respondents said tighter controls would not put them off buying overseas. In most markets the Chinese buyers of residential property abroad tended not to use local banks for financing, and 56% of buyers from China buy with offshore property with cash. Australia and New Zealand are no longer favoured because gains are higher back home and in other markets such as Thailand. But a quarter of Chinese buyers purchase residential property and hold it empty as an investment, and a further 45% buy as an investment that they rent out, so are unlikely to be affected by higher local surcharges on foreign buyers. Buying for family reasons tends to push financial considerations to the background, the survy says.
In Germany, economic sentiment slipped in August. While it is still positive, this slippage come in the middle of their national election campaign.
Mexico, which is in a tough renegotiation of its NAFTA Agreement with the US and Canada, posted its 16th consecutive quarter of economic growth in the June quarter as strong services output compensated for sluggish industrial production. GDP was up +3.0% year-on-year.
In Malaysia, a planned large bank merger between AMMB and RHB has been called off. This sets back ANZ's opportunity to sell down its 24% stake in AMMB. It's back to the drawing board for ANZ which has been working to unwind the Mike Smith Asia-pivot strategy.
In Australia, their major dairy company released full financial year data yesterday and that came with a surprise. Murray Goulburn will struggle to maintain the title of 'Australia's biggest', with its milk intake forecast to sit equal with New Zealand-owned rival Fonterra. Announcing its full year financial results, they revealed its milk intake had dropped nearly -22% from the previous financial year to 2.7 bln litres, and was expected to drop even further over the coming season to 2 bln litres, a level Fonterra is expected to jump up to, partly on the back of the Murray Gouldburn losses of farmer support.
And staying in Australia, the head of their tax office told a Parliamentary inquiry that the world's biggest tech companies are now declaring an AU$7 bln more in sales in Australia every year, that prior to their now profit shifting policies which means they are paying twice, triple and even five times the amount of tax they were previously. They announced that Apple had had a five-year audit and no flaws were uncovered. Microsoft however has just reached an out-of-court settlement with the ATO. But Google, Facebook and IBM confirmed they were still being audited.
In New York, the UST 10yr yield is a little higher today, now at 2.22%.
The price of oil is marginally higher today US$47.50 a barrel, while the Brent benchmark is still at US$51.50.
The price of gold is lower, down -US$5 to US$1,286/oz.
And the Kiwi dollar will start lower today at 72.8 US. On the cross rates we are also lower at 92.1 AU¢, and at 62.1 euro cents. As a result that puts the TWI-5 index at 75.4.
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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