90 seconds at 9 am: 'Massive military response'

US hits back at North Korea saying it has 'many options' to annihilate the country; China cosies up to Russia; Non-farm payrolls underwhelm; AUD climbs; UST 10yr yield at 2.17%; oil and gold up; NZ$1 = 71.4 US¢, TWI-5 = 73.7

4th Sep 17, 8:03am by Jenée Tibshraeny

Here's my wrap of what’s happened around the world over the weekend, with breaking news of the US upping the ante against North Korea.

US Defence Secretary James Mattis is vowing to launch a “massive military response” to any threat from North Korea against the US or its allies. Making a statement outside the White House, he says the US isn’t looking to “total annihilation” of the rogue state, but has “many options to do so”. The call comes further to North Korea yesterday conducting its sixth and most powerful nuclear test.

In a dig at China, US President Donald Trump has threatened to cut off trade with any country that does business with North Korea. He has also had a go at South Korea for taking a more conciliatory approach towards its neighbour.

Meanwhile Chinese President Xi Jinping is cosying up to his Russian counterpart, Vladimir Putin. Having met over the weekend, the pair have committed to enhancing military cooperation in view of denuclearising the Peninsula.

The latest nonfarm payrolls report shows the US jobs market cooled off a touch in August. At 156,000, slightly less jobs were created last month than expected. Meanwhile the unemployment rate ticked up a little to 4.4%. Average hourly earnings were up 0.1% month-on-month. Despite underwhelming markets, there isn’t much concern about the report. ANZ economists suggest slower employment growth could be a sign of workers becoming harder to find.

The Commonwealth Bank of Australia has confirmed it knew it had major deficiencies in its anti-money laundering and terror financing protocols before Australian regulators first informed it in July of suspected criminal activity.

It looks like the scandal may also land CBA in hot water with US regulators. CBA is reportedly already responding to information requests from a number of US agencies with different mandates and enforcement agendas. An announcement of a formal US-led investigation, is now only said to be a matter of time.

In New York, the UST 10yr yield has risen four basis points since Friday to 2.17%.

The price of crude oil is up at notch at just over US$47 a barrel, while the Brent benchmark at US$53.

Gold has jumped to US$1,324/oz.

An ongoing rally in metal prices has helped propel the Australian dollar. In fact, the NZD/AUD blasted down through the 0.90 mark at the end of the week, falling to its lowest level since April last year.

The New Zealand dollar is also weaker at 71.4 US cents and 60.1 euro cents. The TWI-5 index is down to 73.7.

If you want to catch up with all the changes from Friday, 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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29 Comments

by Foxglove. | 4th Sep 17, 8:39am 1504471151

There have been too many manic despots, dictators throughout history to count. But this is the first time one is nuked up. How do you lance that sort of boil without it bursting out full on? If China, and now Russia are serious about denuclearising the peninsular they must have regime change in mind. In other words a replacement dictator they can control. Poison in the soup? Whatever necessary, because any border incursion of any type by any country will start a conflagration beyond imagination.

by MikeM | 4th Sep 17, 9:21am 1504473695

I believe China is the only country capable of wrestling NKs dangerous toys from the regime's grasp.

by two otherguys | 4th Sep 17, 10:26am 1504477602

chuckle - where on earth do you think NK is getting the materials from to construct these toys

by PocketAces | 4th Sep 17, 10:34am 1504478076

Something to do with one party loading the guns and the other firing the bullets, eh?

by MikeM | 4th Sep 17, 11:10am 1504480236

Yes well that's sort of my point. If China are as neutral as they imply, they have the power to cut off resources and tell NK to pull its head in.

by Foxglove. | 4th Sep 17, 11:42am 1504482147

Oil would do it for a start.

by MortgageBelt | 4th Sep 17, 12:35pm 1504485344

NK is the proxy for China, & is serving China's purposes for flexing muscles in the region.

by Ralph | 4th Sep 17, 3:56pm 1504497379

Fun and games with megalomaniacs, you just know it's going to end well.

by the Joneses | 4th Sep 17, 1:03pm 1504487032

North Korea is getting Nukes as they feel it is the only way they can protect themselves against USA overthrowing their government. As USA has done for countless other governments which was not to their liking. USA will leave them alone if they think they pose a serious risk to their own people. North Korea would not attack USA with nukes or they know they will be blown to smithereens. They are not stupid.

The big elephant in the room is how many nukes the USA and friends has.. They point the finger at Iran and North Korea when they might have one Nuke, when they own enough Nukes to kill the planet many times over. The other problem is that Donald Trump is currently in charge of them all.

by Bozeman | 4th Sep 17, 3:52pm 1504497176

Excellent analysis here:
https://www.theatlantic.com/magazine/archive/2017/07/the-worst-problem-…

by Hardly | 4th Sep 17, 8:42am 1504471328

I can't believe the headline from this article from the herald.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119…

"Aucklands red hit market spreading to the regions."

Seriously? The only reason you'd describe it as red hot is that it's about to heat up from reentry as it crashes back to earth

I don't actually think it will "crash" but the red hot description is highly misleading.

by CJ099 | 4th Sep 17, 9:01am 1504472515

The Herald is just a National mouthpiece, and they're certainly not going to let the general population know that property prices are in a decline. They'll try to make things appear roseier them they are especially when we're on the verge of general election.

by MikeM | 4th Sep 17, 9:16am 1504473387

At the bottom of any Herald article there should be a disclaimer reading 'Sponsored Content'

by Hardly | 4th Sep 17, 10:44am 1504478675

It's more like spoonfed content and attention grabbing headlines. The headline - housing market neither going up or down - probably isn't going to get many clicks. The industry groups play the game by giving them easy quotes that can be whipped up into an article with no thinking required. When they actually stop to look at an issue it is usually higher quality.

by two otherguys | 4th Sep 17, 10:31am 1504477862

Heading doesn't say that
The sub-title says "heat from Aucklands 'previously' red hot market" etc

by Hardly | 4th Sep 17, 10:38am 1504478299

I wrote what the online heading was down at the time I read it because content is a bit out of step. My point is the heading people see on the main page is misleading. It doesn't help if article corrects.

by CJ099 | 4th Sep 17, 8:49am 1504471788

Depends on which despot we're focusing on. Remember most of this got heated up by Mr Trump when he went looking for a new enemy to make the rest world feel insecure, so he could sell arms to the and boost the U.S. economy.

by Didge | 4th Sep 17, 8:52am 1504471933

Meanwhile the NZ$ continues its steady decline.

by Hardly | 4th Sep 17, 9:45am 1504475106

Is that a good thing? I bet Wheeler wishes he was able to move the currency so effectively.

by Stephen Hulme | 4th Sep 17, 9:28am 1504474090

Despite underwhelming markets, there isn’t much concern about the report. ANZ economists suggest slower employment growth could be a sign of workers becoming harder to find.

Doubt it.

Unfortunately for Federal Reserve officials, the small change in hours accounts for the small acceleration in weekly earnings. Wage rates continue to refute the unemployment rate, and incomes overall are nowhere near what would be consistent with “full employment.” At only 2.7% (6-month average, year-over-year), growth in earned income has merely matched the 2014 upturn, remaining far less than is required for an end to this stagnation.

The reason for that is very simple. The media has become filled with anecdotes and stories about a labor shortage, but as is common sense it can only be one related to regular turnover rather than of expansion (rapid or otherwise). Companies are always seeking new employees if for no other reason than existing workers leave all the time. There is no shortage that cannot be cured by rising wages and pay.

Businesses in general and in the aggregate aren’t willing to pay, however. That much is clear from the earnings data if not also the slowdown in the headline Establishment Survey. That is because there is no economic growth and there has been none since 2007. For companies, that has meant little expansion in revenue and therefore cash flow. Because the economy doesn’t actually improve, they cannot afford to pay more for labor; both as wages as well as more employees. Read more

by Stephen Hulme | 4th Sep 17, 9:35am 1504474518

US Defence Secretary James Mattis is vowing to launch a “massive military response” to any threat from North Korea against the US or its allies

A policy flip-flop?

Defence Secretary James Mattis has said the US is “never out of diplomatic solutions” for dealing with North Korean aggression – contradicting Donald Trump’s declaration that “Talking is not the answer!” Read more

by Stephen Hulme | 4th Sep 17, 9:54am 1504475676

Investors seek liquidity irrespective of costs.

Two weeks ago, we were surprised to find that despite the recent "growth promise" of what has been called a coordinated global recovery, the market value of bonds yielding less than 0% had quietly jumped by a quarter in just one month to the highest since October 2016.

Since then, the paradoxical divergence between the reported "strong" state of the "reflating" global economy and the amount of negative yielding debt, has only grown, and as JPM reports as of Friday, Sept. 1, the global market value of government bonds trading with negative yield within the JPM GBI Broad index rose to $7.4 trillion, up 60% from its low of $4.6 trillion at the beginning of the year. Read more

by Alex Tarrant | 4th Sep 17, 10:01am 1504476093

Here comes that non-tradables inflation to save the day...

Parking fees in central Wellington increase from $4 to $4.50 per hour from today (Monday 4 September). The fee rise of 50 cents an hour will affect the area bounded by Bunny Street, Lambton Quay, Bowen Street, The Terrace, Boulcott Street, Willis Street, Dixon Street, Cuba Street, Jervois Quay and Waterloo Quay.

Map of fee increase area: http://wellington.govt.nz/~/media/have-your-say/public-input/files/consultations/2017/06/parking-fee-areas.pdf?la=en

Councillor Chris Calvi-Freeman, Wellington City Council’s Transport Strategy and Operations Portfolio Leader, says the Council has responded to feedback that parking is oversubscribed in the central city.

“We’ve been told by residents, retailers and businesses that there’s a lack of parking availability in the high-occupancy areas of the CBD. To maintain a healthy retail and commercial sector in the central city we have to be smarter and more effective in how we make the maximum use of limited parking spaces. Increasing fees in the central city will help us do that.”

The fee increase proposal was part of the Council’s Annual Plan consultation. Residents also had an opportunity to provide feedback through the traffic resolution process earlier in May. Only one submission was received, which was in favour of the fee increase.

Councillor Iona Pannett, Chair of the Council’s City Strategy Committee, which recommended the increase, says parking fees haven’t risen in 13 years.

“Inflation, fees in other major centres, increased demand and traffic management flows were all considered in the officers’ report we considered. They’ve calculated that the 50-cents-an-hour rise will create just over half a million dollars in revenue a year, which will be used to contribute to the cost of road maintenance, which will benefit motorists in the future. Alternatively, rates would have needed to increase by 0.2% to come up with this amount.”

Meters have had stickers on them informing motorists of the increases, and posters have been displayed in the area for the past month.

by Stephen Hulme | 4th Sep 17, 10:10am 1504476658

The council will turn the city into a retail ghost town. Internet vendors and road construction companies will be the only winners.

by Ralph | 4th Sep 17, 3:14pm 1504494869

So long as it was all part of the council grand plan .. that's the main thing.

by J.C. | 4th Sep 17, 12:31pm 1504485106

Last time I was in the Auckland CBD with a car, the parking rates were comparable with central Tokyo and Osaka. The cost of taking a bus from Takapuna to the CBD was equivalent to a the cost of a train from a mid-range suburb to central Tokyo. An express train from Osaka to Kyoto was about $7.

by fat pat | 4th Sep 17, 2:42pm 1504492921

I see the aerospace and defense ETFs (ITA & PPA) have done pretty well since the start of the year.

by J.C. | 4th Sep 17, 3:10pm 1504494623

Yes, they've been rocketing (ignore the pun)

by Ralph | 4th Sep 17, 3:17pm 1504495078

Sorry, couldn't possibly ignore - top work!