US trade deficit widens; Texan storm cost estimates start; US 'more tolerant'; PBoC raises yuan value; China and India settle; UST 10yr yield at 2.16%; oil down and gold up; NZ$1 = 72.6 US¢, TWI-5 = 74.7

Here's my summary of the key events overnight that affect New Zealand, with news the Houston storm is having international repercussions.

But first, the American trade deficit in goods rose in July as exports fell more than imports, suggesting that trade would make only a modest contribution to economic growth in the third quarter. Inventories were pretty much unchanged.

The cost of that Texan storm is expected to hit the insurance industry to the tune of about US$30 bln, but the total cost will be far higher, probably well over US$100 bln because most people don't have insurance. (That compares with the 2011 Christchurch quakes of about US$16 bln.) In time, the recovery will create a mini-boom in the area.

Here's an interesting American survey, something you may not have expected. New, respected Pew Center research shows Americans are getting more tolerant, not less. But all we hear is from the strident anti- brigade. While most multi-racial people say they've been targets of racial slurs or jokes, almost none think their status is a liability in the US. One in five, the Pew survey finds, say it's an advantage, while three-quarters say it has made no difference in their daily lives or career. The Pew Center's conclusion: Multi-racial Americans "are at the cutting edge of social and demographic changes in the U.S. - young, proud, tolerant and growing at a rate three times as fast as the population as a whole."

China's central bank is nudging up the value of its currency in a relentless move, taking it to a 13 month high against the US dollar. Still, that is only a three month high against the Kiwi dollar.

In the Himalayas, India and China have appeared to end a months-long military cold confrontation. Both sides are seeking to portray the withdrawal as a victory. Eased tensions there is a very good thing.

In New York, the UST 10yr yield slipped slightly again and is now at 2.16%.

The price of crude oil has fallen sharply on the shutdown of Texan refinery demand and now just over US$46.50 a barrel, while the Brent benchmark is just under US$52. These are major crude consumers, and while petrol prices may have jumped, taking out this processing demand - about 15% of US refining capacity - has had the opposite effect for crude prices. The impact will be particularly tough on places like Venezuela.

The price of gold is sharply higher, up +US$18 to US$1,311/oz which is a three month high.

The Kiwi dollar is also a little higher today at 72.6 US. But we are lower on the cross rates at 91.1 AU¢, and 60.6 euro cents. The TWI-5 index is however still at 74.7.

If you want to catch up with all the changes on 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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36 Comments

"The cost of that Texan storm.... will create a mini-boom in the area.
Could be. But let's recall that when Hurricane Katrina hit ( 29th August 2005 - spooky!) before the Boom...we got a rather large Bust ( The GFC).

I understand that only 16% of Houston homes have flood insurance. Not too sure how much of a boom it will be with that many homeless and/or broke homeowners trying to get their lives back together. These mega disasters tend to drag on a place for years, even decades - Katrina, Christchurch etc.

Funny note I heard, apparently a religious pastor who claimed Katrina was god's wrath on the queers just had his house destroyed by Harvey.

All I can say to that is sadly, good.

Fitting JuJu

Sounds like he's been enjoying some closeted fun on the side.

It's ironic that some commentators talked up Houston's deregulated approach to housing development as the answer to Auckland's problems. Concreting everything with no integrated storm-water management seems to have accentuated this disaster.

Perhaps because the US is becoming more tolerant is the reason that the anti brigade are becoming more vocal - they see it as a threat.

Are the "anti tolerance" becoming more vocal or are you being lied to - there seems to be a hell of a lot less identifiable/organised/institutionalised intolerance than there used to be. A few guys protesting about a statue that is culturally important to them is another thing entirely and has been blown out of all proportion by an hysterical MSM with god knows what agenda.
There are some very fundamental issues at stake here; we are entering a time of great danger to our civil liberties. Incredibly it's the the liberal left attacking the right to free speech, a fundamental cornerstone of democracy and a free and liberal society.
Just to show how "Orwellian" things have become a hooded, black clothed, stick wielding element (ANTIFA) attacking free speech advocates in the name of antifascism. You couldn't make it up!

Couldn't happen here? Here's Jack Tame in the Herald: " I'm delighting in an Internet witch-hunt.
Overwhelmed by the power of Twitter and however many thousand photographs of the protests, the racists who marched in Charlottesville are one-by-one being picked off by the Internet. It's online bullying for good."
So here we have a "journalist" supporting mob rule, folk getting sacked for their opinions and immensely powerful media and internet companies dispensing summary "justice" to legal protesters. It's bizarre. Would it have been OK for a boss to sack one of their staff he'd seen protesting against the Springbok tour? That's what Jack Tame wants. Here's a link to the piece. What do you think?
http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=119...

Exactly. Journalists need to refrain from public virtue signalling and just record the news for the readers, who are fully competent to draw their own conclusions.

“Sorry. This is commentary dressed up as news reporting,” Mr. Baker wrote at 12:01 a.m. on Wednesday morning to a group of Journal reporters and editors, in response to a draft of the rally article that was intended for the newspaper’s final edition.

He added in a follow-up, “Could we please just stick to reporting what he said rather than packaging it in exegesis and selective criticism?” Read more

I'm GenX so I'm cynical of what everyone says :-)

What to do with a certain journalist who had a leaker do a leak into his ear and ran with it beating it up into "the mother of all scandals"

Now the journalists are the angry mob and hate groups are just exercising free speech. Upside down world. I don't think placards and reasoning work with the KKK, National Front, EDL or Nazi Party. The only thing they know is violence and intimidation.

Sorry DB, free speech is absolute, we have a right to free expression and protest - whether you (or even the vast majority) agree with what is being said or not has nothing to do with it.
I was referring to the pro free speech rallies in the US with the participants being attacked by Antifa and the liberal left in a frightening display of the very thing they are pretending to be against.
You can't have the mob deciding who is right or wrong, or have folk thrown out of work for their belief; think about it.
I don't know how much grounding our young folk have in history but some of the stuff they support, the victimisation of people for their beliefs is very worrying. For example the Auckland University have banned a pro-life group by popular vote. You can't have people voting out a minority view point like that - and these are supposedly liberal minded people.
https://www.whaleoil.co.nz/2017/08/auckland-university-student-union-suc...

Ironic that Antifa takes its name and flag from the militant arm of the communist party of Germany, which seized power in a 1918 revolution, promptly surrendered (even though Russia had been conquered and Germany's Eastern Army was marching on Paris - which was surrounded and about to fall) signed the treaty of Versailles and in general set the stage for Hitler and WWII. Did I mention it was made up many Jews?
Curious that even though history has been memory holed, it still seems to rhyme.

We have well and truly decided that Nazi-ism and the swastika flag of Nazi Germany and everything they represent, especially now as people who have no memory or no more living relatives with memory of it all, should be consigned to the bin, and rightly so. We can never, ever allow that to rear its ugly, ugly head ever again.
And yes, while you cannot repress those who wish to think a certain way, (such as pro-lifers) you most certainly can put down any sentiment that the law should reflect their view. As with gay marriage, get back to me when someone tries to make it compulsory.

You'll love this one DB - right on cue just what we have been discussing.
https://www.whaleoil.co.nz/2017/08/antifas-infuential-website-banned-inc...

Your comments about free speech are specious.
Quoting Karl Popper
"Unlimited tolerance must lead to the disappearance of tolerance. If we extend unlimited tolerance even to those who are intolerant, if we are not prepared to defend a tolerant society against the onslaught of the intolerant, then the tolerant will be destroyed, and tolerance with them"
"We should therefore claim, in the name of tolerance, the right not to tolerate the intolerant."

So damn the alt-right, the neo-fascists, the racists, the Trump apologists and even the god-botherers who want to deny women sovereignty over their bodies. There is no place here for you.

More progressive narrative fiction, none of it is true or relevant because the only ones being intolerant are the hypocrites accusing everyone else of being intolerant.

Ohs, noes, we can't be having none of that progressive stuff.

You totally missed the point

Yes, Macadder, skudiv didn't realise that your comment was satire.

So who gets to decide who we tolerate? Do we tolerate religious fundamentalism?
Susan Devoy wants to strengthen our blasphemy laws (I'm not joking) so that we can't have an honest discussion because it might offend someone. We have a mainstream religion that advocates extreme male domination and the death penalty for non believers, homosexuals and adulterers - extreme intolerance in other words. Do we destroy their holy books, ban them from meetings or do we bring it into the light of day and discuss things like rational adults. You tell me.
Hanging labels on folk then indulging in a witch hunt is the beginning of the end for our open and free society.

You are assuming that someone who believes what you have outlined is up for rational debate, I think not. I think we generally know what is right and what is not. You can only really have an open and free society as long as everyone is tolerant of the views of others, and I mean everyone. That free speech could, I guess, start with "I believe" and end with "but I understand that not everyone agrees with me, but that is ok". If you have people thinking that their views should become the norm, then I think the rest of society has the right to say no, you cannot say that.

That's fair enough. Try ending it with "the rest of society has the right to say no, I don't agree with that"
We do suffer from a lack of honest public debate without rancour and are much the poorer for it. I particularly enjoy the British "The big questions" series. Here's one that's relevant to our discussion - freedom of religion: https://www.youtube.com/watch?v=bOM2TFjHy8I

"We should therefore claim, in the name of tolerance, the right not to tolerate the intolerant."

I wish the European left understood this but instead they allow millions of barbaric Muslims into their countries. Acid attacks, rapes, female genital mutilations and sharia law are all caused by short sighted pathological altruism.

I am by my own admission, fairly intolerant of religion in general, think it should come with an R18 tag (seriously) but the "European Left" do not tolerate acting out of such things, they just have broad enough minds to know that not all Muslims do that.

I agree, a helping hand and compassion for those in need. But the full force of the state on the necks of those who seek to undermine covertly and openly a tolerant civil state. There is no contradiction. This means neutralising by all legal means, neo-fascist groups and fifth columnist Islamists.

A superlative parody of modern day Bolshevism. Well done Macadder!

..the recovery will create a mini-boom in the area.

Not if City of Houston hire CERA to manage the city rebuild.....

Didn't you hear Bill the other day - Christchurch is mission accomplished.

So who picks up the tab in Houston if so many are uninsured?

Talking about:insurance:

Several years ago, the International Swaps and Derivatives Association, or ISDA, lost much of its credibility when during the peak of the Eurozone debt crisis, it first refused to determine that CDS on Greece had been triggered (i.e., that an event of default had taken place) only to eventually concede - following substantial outside pressure - that Greece had, in fact, defaulted (if only on bonds not held by a certain central bank), but not before penning a "petulant" blog post in which it claimed amusingly that the "credit event/DC process is fair, transparent and well-tested". The fiasco prompted many, this site included, to dub sovereign Credit Default Swaps as "Schrodinger's CDS", contracts which may or may not pay out in case of a default, depending on which way the political winds were blowing at any given time.

Fast forward to today when not only is ISDA in hot water again, but the entire corporate CDS market has been roiled by another indecision by ISDA, which said "it was unable to determine" if Singapore-listed Noble Group, formerly Asia's largest independent commodity trader was in default or not, creating a vacuum similar to what happened with Greece 5 years ago, and which, according to the FT, has resulted in mass confusion in the corporate bond and CDS market. What is more striking, however, is that this is "the first time ISDA has dismissed a question of default without making a ruling either way." Read more

oh boy - gee - Jon Corzine must feel really hard done by

In New York, the UST 10yr yield slipped slightly again and is now at 2.16%.

Interesting times.

The poor 2Y Auction that concluded just 90 minuets ago is a distant memory, because while the market, and especially Indirect bidders, appeared to balk sale of $26 billion in 2 Year paper, there appeared to be no concerns involving the just concluded sale of $34 billion in 5Y new paper, buyside demand for which could be described as "blistering."

The high yield of 1.742% stopped through the 1.75% When Issued by 0.8bps, with an 18.98% allocation at the high yield. It was the lowest 5Y yield going back to October of last year. Read more

I wonder what would actually happen if they made the Yuan a free floating currency ?

I'm not surprised about the Pew results as I don't get my news just from CNN and Washington Post. Most Americans are getting on with their lives like everyone else in the world. If we were to look at Carlottesville a few weeks ago we see about maybe 300 - 500 white supremacists (of various shades) and a larger group of counter-protesters from a range of groups including the extreme and violent "Antifa". The US is 75 times our size so if 4 - 6 people turned up for a rally here it would be absolutely ignored. Racism isn't a large issue in the US but making money of it is.