US confidence falls, home sales drop; Yellen warns of imprudence from low rates; China censorship grows; RBA sees irresponsible borrowers; BHP bullish; UST 10yr yield at 2.24%; oil and gold slip; NZ$1 = 72 US¢, TWI-5 = 74.5

Here's my summary of the key events overnight that affect New Zealand, with news Australia's mining industry future is looking a lot brighter.

But firstly in the US, consumer confidence fell in September (although their 'expectations index' rose) and home sales dropped to an eight-month low in August due to the impact of their severe hurricanes.

Despite this, Janet Yellen said overnight that it would "it would be imprudent to keep monetary policy on hold until inflation is back to 2%", and the Fed needs to continue rate hikes despite broad uncertainty about the path of inflation. And she warned about against making changes "too gradually".

China is getting ready for its 19th National Congress in October - and part of the preparations to ensure no unexpected distractions include postponing of two Ironman events, new restrictions on foreigners traveling to Tibet, and curtailing and disrupting the WhatsApp messaging service in a broadening of their online censorship.

In Australia, a central bank official said overnight that house price levels are not the key issue that she worries about, it is the how the growth in prices causes many consumers to change behaviour and become imprudent with their spending and taking on financial risk. And that sets up dangers when interest rates start to rise. These irresponsibilities may limit how the central bank can act if too many borrowers go rogue.

And BHP, the world's biggest miner said overnight has forecast growing demand for its raw materials as 2017 looks set to be the "tipping point" for electric cars, and China's Belt and Road initiative will boost global iron ore demand. The new key commodity? Copper, they say.

In New York, the UST 10yr yield is a little higher today, now at 2.24%.

The price of crude oil has slipped today to be just under US$52 a barrel, while the Brent benchmark is down even more at just over US$58.

The price of gold has fallen under US$1,300, down -US$8 to US$1,299/oz.

And the Kiwi dollar is also lower. It is now just under 72 US, its lowest in three weeks. On the cross rates we are pretty much unchanged at 91.3 AU¢, and 61 euro cents. And the TWI-5 index is now at 74.5.

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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15 Comments

In Australia, a central bank official said overnight that house price levels are not the key issue that she worries about, it is the how the growth in prices causes many consumers to change behaviour and become imprudent with their spending and taking on financial risk. And that sets up dangers when interest rates start to rise.

LOL

Does she mean the possible process of buying a portfolio of residential properties in and around the area of a high profile politician and when that property comes up for sale, bid it's price through all previous high offers to settle a higher valuation on all of them?

A not dissimilar ploy is undertaken by modern impressionist art dealers at Christie's and Sotherby's auction houses in New York and London.

It seems the resourceful nature of Australian malpractice practitioners is expansive.

THE Australian mortgage market has “ballooned” due to banks issuing new loans against unrealised capital gains of existing investment properties, creating a $1.7 trillion “house of cards”, a new report warns. Read more

To see why culture matters, consider a recent survey conducted by UBS AG. It quizzed Australians who'd applied for mortgages over the past 12 months and found that only two-thirds said their applications were "completely factual and accurate". Fully A$500 billion ($400 billion) of the country's A$1.69 trillion in mortgages outstanding are "liar loans" based on little or no documentation, the bank estimated. Despite a push by APRA and other regulators to improve underwriting in recent years, 46 percent said it had become easier to get loans, against 17 percent who said it was harder. Read more

Borrowers gone rogue!
Haha. That's a new one.
I would have thought that you would totally ignore borrowers who have gone rogue. Let them face the consequences of their own decisions.

My favourite line from the article;

"... nothing more than a $1.7 trillion ‘piss in a fancy bottle scam’"

Did no one get invited to Graham Wheeler's farewell morning tea, or was his tenure simply a bumbling , mistake ridden, egotistical ,inept performance that should be quickly forgotten.

It's impossible to forget the ongoing hardships that visit the elderly and infirm as a result of his incomprehensible actions.

As I'm sure you read, when the Inflation Conundrum becomes too much, get another Indicator! (The Underlying Inflation Gauge) "Broad Inflation came in at a red-hot 2.74%, the highest since November 2007"

http://www.zerohedge.com/news/2017-09-22/new-york-fed-calculates-inflati...

There, all fixed! Janet was right, all along.....

Incredible news from Saudi Arabia, with the royal decree allowing women to obtain driving licenses. Crown Prince Salman making his mark.

It looks like China has decided electric cars & silk roads can be the next version of ghost cities to keep industry busy. Its in no way a green story. The economics dont add up but someone has to create demand to keep industry busy. So the net result is we need to keep burning fossil fuels faster (to produce millions of EV's and related infrastructure) ... which creates "growth".
From the BP link above
"The reality is a mid-sized electric vehicle still needs subsidies to compete... so a lot will depend on batteries, on policy, on infrastructure.. Balhuizen said he expected the electric vehicle boom would be felt - for producers - first in copper, where supply will struggle to match increased demand. "
"Belt and Road, as the giant initiative is known, is a "tremendous opportunity", he said, acknowledging that there was a risk that big slogans may struggle to translate to profit."

“Imagination is the only weapon in the war against reality.”
― Lewis Carroll, Alice in Wonderland

Imagination or denial?

https://un-denial.com/2017/01/06/you-know-you-are-in-trouble-when/
"
All types of non-fossil energy do not provide a substitute for the only energy we can’t live without: diesel for trucks, trains, ships, tractors, and combines, and mining machines; plus natural gas for fertilizer"

Productivity growth in New Zealand has been pretty lousy for many decades, really since around the end of World War Two. We’ve had the odd decent run, but over the decades we’ve had one of the lowest rates of productivity growth of any advanced country. We’ve slipped down the OECD league tables, and now part of the way we maintain reasonable living standards is by putting many more hours, over a lifetime, than the typical person in an advanced country. Read more

This is the real dead cat Mr Joyce should have thrown on the table?