Here's my summary of the key events overnight that affect New Zealand with news that India is to make a massive recapitalisation of its state-owned banks.
But first, sales of new single-family homes in the US in September climbed to a new all-time high and were a remarkable +17% higher than the same month a year ago. This was miles above market expectations. At the same time, new orders for key American-made durable goods also rose more than expected in September and shipments rose for an eighth straight month. Together this activity will be a strong mitigation of the storm effects that hit some regions of their economy in late August and early September.
The Bank of Canada reviewed its policy rate and has kept it at 1%. It raised its 2018 growth forecast to +3.1% and said their economy is running at "close to its potential". However they noted some remaining slack in their labour markets saying high growth can continue without inflation being "materially above target", for a little while yet.
India has announced that it will inject a staggering NZ$45 bln into its state-controlled banks over the next two years. This is much higher than has been previously signaled and shows a determination to drive economic growth - already high - on an even faster track. Credit rating agencies like the move which comes after some criticisim of the Modi government's approach to growth and reform. India is Asia’s third-largest economy after China and Japan, the world's seventh largest (although surprisingly the world's third largest on a PPP basis).
In what might seem an odd move by a country that holds more than US$3 tln in USD denominated reserves, China is returning to international bond markets for the first time in 13 years, with a US$2 bln offering of USD bonds. Bankers have begun marketing China’s five- and 10-year bonds to investors, primarily in Asia and Europe, and the securities are expected to price on Thursday.
And China has released the names of the the seven men (yes, all men) who will rule China for the next five years in their new Politburo Standing Committee. Well, actually, one man will, but these seven are the next level down and there is no successor to Xi among them. Xi looks like he is now in there at the top, for life.
In Germany, business confidence has reached a new all-time high.
In Australia, their CPI inflation rose by +1.8% in the year ending September 2017 and rose +0.6% for the September quarter alone. Inflation growth has slowed somewhat in 2017 in Australia, but it is up from +1.3% pa in the year to September 2016.
In New York, the UST 10yr yield is up yet again, now at 2.45%, a new six-month high. Markets are watching to see if it can hold above 2.40%.
The price of crude oil is marginally lower today and now just over US$52 / barrel, while the Brent benchmark is just over US$58.
The price of gold is also down -US$3 and now at US$1,271 oz.
The Kiwi dollar has slipped slightly from this time yesterday, now at 68.8 US¢. And on the cross rates we have recovered somewhat against the Aussie to 89.2 AU¢, but slipped further against the euro to 58.2 euro cents. That puts the TWI-5 index down at 71.7.
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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45 Comments
A useful; sidelight on China's corporate debt here: http://www.atimes.com/article/infrastructure-not-speculation-explains-c…
The core argument is that a lot of 'corporate debt' is in fact 'infrastructure capex' (because the Gubmint and corporations are inextricably interwined) and thus not as scary as the raw numbers sound.
The planet will love India's growth plan. They will need to burn truckloads more coal.
Ah well, its the economy or the environment so someone needs to prop up the ponzi.
On the plus side, NZ is making huge strides by forgoing some plastic bags.
https://qz.com/1110438/the-modi-governments-32-billion-recapitalisation…
India's growth will be short lived if they do burn truckloads more coal.
https://www.theguardian.com/environment/2017/aug/02/climate-change-to-c…
they will have to burn something
http://blog.friendsofscience.org/wp-content/uploads/2017/08/India-Energ…
Andy Xie
The bubble economy is set to burst, and US elections may well be the trigger
http://www.scmp.com/comment/insight-opinion/article/2114248/bubble-econ…
I (Andy Xie) wrote my doctoral thesis arguing that Japan was a bubble in late 1980s, a long report at the World Bank in the early 1990s arguing that Southeast Asia was a bubble, research notes at Morgan Stanley in 1999 calling dotcom boom a bubble, and numerous research notes from 2003 onwards arguing that the U.S. property market was a bubble. On the other hand I have never called something a bubble that turned out not to be a bubble.
Perhaps Uber / Tesla / Netflix will save us ...?
https://www.economist.com/news/business/21730446-five-outliers-chesapea…
Good piece, well it always is when it agrees with my view, LOL.
Meanwhile the pundits are implying how good things look, surely such masters of finance cannot be so wrong? um again?
On the other hand, since 2008/10 I/we have been expecting a major economic crash and a second Great Depression but it still eludes me/us. I wonder who will prove to be right when the fat lady sings.
India is Asia’s third-largest economy after China and Japan, the world's seventh largest (although surprisingly the world's third largest on a PPP basis).
IAF certainly throws money at the arms market.
Russia to Upgrade India's Frontline Fighter Jet Su-30MKI Into Super Sukhoi
From new sensors to radars, the fleet will see a major change in the cockpit as well. The two-stage modernization program will cost approximately US $6 billion. Read more
Here we go TAX - AND -SPEND .......... who would have thought they would announce a new tax BEFORE EVEN HAVING BEEN SWORN IN ?
Aucklanders to be smacked with a 10 cents a litre fuel levy to pay for a pet project this is both unnecessary and unwanted .
Who really wants a bloody Tram to Auckland Airport ?
Where will it leave from and who is going to use it ?
Why dont they do a cost-benefit analysis before raising a new petrol tax ?
This is the risk of having both a left -leaning bunch of spendthrifts at both a local and Central Government level .
The checks and balances ( and common sense ) are out the window
Well if it helps, the rest of us are facing huge roading cosst due to damage from logging trucks that can now weigh 57 tonnes. Our roads are falling apart, while %80 of the logs are owned by offshore companies, probably paying no tax in NZ.
It really is going to be a god awful mess.
Yes, light rail costs are in the order of $USD50-150m/km: http://www.abc.net.au/news/2017-09-21/newcastle-light-rail-costs-reveal…
The money shot:
Where the money is going:
Prior removal of heavy rail $210 million
Light rail capital cost $250 million
Light rail planning and development $10 million
Urban renewal funding requirement $50 million
Funds from sale of development land $45 million
Operation and maintenance $250 million
Nominal costs $600 million+
Well if you accept the science/math of peak oil airplanes in terms of mas transit are toast so really there is no point long term of installing a tram to an airport that wont be landing many planes 20 years from now
But the problem is no one wants to listen to the science unless it suits their agenda and this includes the Greens.
How about nationals 5 increases in petrol tax over their nine years, despite campaigning on a promise to reduce petrol taxes!
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=1090297
the airport rapid transit plan already has a cost/benefit, unlike most of nationals Roads of National Significance largesse. Please show me the cost/benefit of nationals campaign promise to build a motorway the full length of Whangarei - Auckland
So with this new Auckland Fuel tax , a 65 Litre tank a week would cost just $6,50 in tax , but annually thats around $300 for each car .
Add that to a rates hike of $1,500 per annum and that is not chump change for an ordinary family like ours to shell out an extra $2,000 per annum in additional taxes .
We can take this on the chin , but at this rate Auckland is soon to become the most "unliveable city " for ordianry Kiwis .
It is around 1 cent per kilometer travelled.
Completely benign increase when you consider that you are already heavily subsidised to travel on the roads.
The rates 'hike' is irrelevant, as well.
Your rates bill isn't increasing; it's the value of your house that's increasing.
Don't like it, sell up.
"Paper wealth a cash flow does not make."
Really?
Tell that to all those people who currently leverage paper wealth for borrowing and consumption purposes.
Unless you are now going to put your tinfoil hat on and argue that 'paper' wealth doesn't stimulate consumption.
Didn’t you vote NZF? If so, it’s an own goal. This is just the start. I expect it to have little effect on me. Inner city commute distances are small and I’ll fill up outside the tax zone for my long trips. The SUV tank capacity is 85 litres. It’s not so great for the likely new KiwiBuild house locations but that’s life.
Yes, it's all incremental. My only on-going frustration with my wife after 20-years is budgeting. When she blows the budget she looks for the big item to cut out, even though I point out it's the little things that add up. This government will be like the proverbial frog in the pot of hot water. Right now the water is tepid and the people who voted for this government think it's very comfortable. Exchange rate is off again this morning. If are not part of the exportable economy the water temp is increasing.
This is the cost of the 'grow for ever" economic model we have that are being passed onto you. Substantially multiplied by the last Government's growth through immigration policy I suspect.
In terms of ""unlivable city" this is rinse and repeat everywhere ie all councils have a need to add 4~5% to rates per annum even if CPI is
10c a litre is bugger all, prices can fluctuate that much within a day at the moment.
This kind of policy is simply part of a wider 'catch up' programme. Something has to give when you have such high levels of immigration.
Point the finger at the previous government if you have a problem with the tax.
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