US jobs growth steady; EU names [some] tax havens; German factory orders jump; AU GDP disappoints; AU interest-only lending plunges; UST 10yr yield at 2.32%; oil down and gold unchanged; NZ$1 = 68.8 US¢, TWI-5 = 71.8

Here's my summary of the key events overnight that affect New Zealand with news of a very sharp fall in investor interest-only lending in Australia.

But first in the US, their precursor ADP employment report has come in right where markets were expecting. It is a good rise and broadly based powered by mid-sized firms and services. Only construction and IT services showed any declines in employment levels. This probably means Saturday's non-farm payrolls report will shows payrolls expanded by +200,000. That is not spectacular, but the average over the past year is a +167,000 gain.

The Bank of Canada has held its official interest rate unchanged at 1%, but it did say it is seeing signs of higher prices in the country.

In Europe, the EU has named and shamed 17 countries on a new tax haven blacklist. But the bloc's effort to crack down on tax avoidance has come under fire, with no EU member states included on the list. That list includes Samoa, the UAE, and South Korea. But it doesn't include Luxembourg, Malta, the Netherlands or Ireland, all countries with far larger tax haven issues.

German factory orders rose yet again in October, in data out overnight. It was the third straight month of strong growth and prior month data was revised higher as well.

Yesterday's Q3 GDP data release in Australia shows their economy grew slower than forecast as household spending rose at the weakest pace since the 2008 financial crisis. So despite the RBA's view earlier in the week that interest rate rises may be near it looks more like they will keep interest rates on hold for longer.

And staying in Australia, their crackdown on risky investor lending has resulted in the share of interest-only loans plunging by nearly half in just three months. APRA data shows that interest-only lending dived -45% during the September quarter. Interest only loans made up 30% of the new loans in the June quarter, but that share has plunged to an historic low of just 17% in the latest data.

In New York, the UST 10yr yield is now at 2.32%.

The price of crude oil is sharply lower today, down -US$1.50, now just over US$56 / barrel, while the Brent benchmark is just over US$61.50. Significant rises in petrol stocks worldwide are behind the drop. But further out analysts are raising their forecast of 2018 crude oil prices after an OPEC-Russia output restraint deal was extended. But the irony is those crude price estimates are actually lower than today's prices.

And reinforcing the theme of lower commodity prices, copper dropped more than -3% yesterday on the Shanghai market. China growth concerns are behind the shift lower.

The price of gold is unchanged at its new lower level of US$1,263 oz.

The Kiwi dollar is also unchanged. We are still at 68.8 US¢. And on the cross rates we are higher at 90.9 AU¢ following yesterday's AU GDP undershoot, and against the euro at 58.3 euro cents. That puts the TWI-5 little changed at 71.8. But bitcoin is sharply higher yet again today, up US$1,000 in the past 24 hours to US$12,720. (NZ$18,500)

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

This...is what Low Interest Rates + tax havens produces:

The South African-headquartered, Frankfurt-listed company plunged more than 60 per cent on Wednesday.....The billionaire’s family investment vehicle borrowed €1.6bn from banks in order to buy 314m shares in a capital raising by Steinhoff to refinance loans that funded its acquisitions....

https://www.ft.com/content/ea50383c-da64-11e7-a039-c64b1c09b482

Moreover:

ECB Caught In Sprawling Scandal After Bonds It Owns Implode

Taxpayer bail-out ahead? Always!!!!!

Always interesting to look at the stock price graph after something like this breaks. Similar to the Canadian lenders that got into trouble earlier this year and another just recently. They both took big hits on their share price.

I suspect that a lot of the large scale ponzi schemes with "accounting irregularities" are starting to have cash flow problems. If there's no money to make the minimum payments on debt obligations questions get asked.

Why are America's farmers killing themselves in record numbers?

The US farmer suicide crisis echoes a much larger farmer suicide crisis happening globally: an Australian farmer dies by suicide every four days; in the UK, one farmer a week takes his or her own life; in France, one farmer dies by suicide every two days; in India, more than 270,000 farmers have died by suicide since 1995. Read more

For twenty years I have been to various farmer field days, we started off with the growth theme , borrow, don't be a glass half empty moron,get bigger get better, intensify,the glass is half full. In the last two years it's a framer from the South Island called Doug Avery, he is very popular and he talks about depression and suicide. We have rural support groups all over the place. I suspect a Causal link.

Of course there is. They are sold a pup on how much debt they can handle, always through rose tinted glasses, and are too trusting of their bank managers and business advisers who never mention the down side. So when the down side becomes reality they stand to lose everything, while the banks gain it all.

David a small correction, the blacklist included American Samoa rather than Samoa. Two different countries if course.

In the report I read (from The Guardian) both Samoas were on the list.

Click the link in the story. Both are named.

And here are the views of the Tax Justice Network, including that EU member states Cyprus, Ireland, Luxembourg, Malta, Netherlands and the United Kingdom should have been included - http://datafortaxjustice.net/paradiselost/ and 'The EU flunks the tax haven test' - https://www.taxjustice.net/2017/12/05/eu-flunks-tax-haven-test/

My apologies. Should have gone to Specsavers.

But first in the US, their precursor ADP employment report has come in right where markets were expecting. It is a good rise and broadly based powered by mid-sized firms and services.

Hmmmmm...

America’s homeless population has risen this year for the first time since the Great Recession, propelled by the housing crisis afflicting the west coast, according to a new federal study.

The study has found that 553,742 people were homeless on a single night this year, a 0.7% increase over last year. It suggests that despite a fizzy stock market and a burgeoning gross domestic product, the poorest Americans are still struggling to meet their most basic needs. Read more

It was during the dot-com recession of 2001 that Ross Perot’s “giant sucking sound” finally materialized. Between then and the bottom of the Great “Recession”, one third of US manufacturing jobs disappeared. With imports stuck, especially those from China, could production be moving back onshore? The unemployment rate at 4.1% would seem to suggest a burgeoning economy where that might be the case for US consumers.

Unfortunately, that doesn’t appear to be happening according to any data. Despite it being a Trump campaign promise, there just isn’t any indication that the loss of manufacturing capacity is anything other than permanent. Then again, we don’t really know for sure because there just isn’t any growth in the demand of US consumers regardless of where the goods are produced.

To that end, US factory orders were up a mere 5.2% year-over-year (unadjusted) in October 2017. After contracting for just about two years, the domestic factory sector is as moribund as its Chinese counterpart for the same reason – the absence of upturn, real upside, from US consumer demand. Read more

A lot more homeless on the US west coast now thanks to the wild fires. That's a problem that will have huge implications.

Earlier this year there were clear indications of people selling their houses as they were getting into trouble with their mortgage across the US. I suspect that those that haven't been forced out by the bank have ended up selling and having nowhere else to go and no income.

Those living in California have an additional problem as the Trump tax cuts actually reduce their mortgage tax break if they have a mortgage over $1m. There are going to be people that would normally get a tax refund that will get nothing, or a tax bill in the coming year. I expect retail will take a hit or people will go broke at a higher rate.

Though the BEA revised GDP slightly higher for Q3 2017, the government agency took hourly compensation out to the woodshed. On a quarterly basis, this metric of labor market wage pressures is often quite volatile. In Q4 last year, for instance, nominal hourly compensation was -4.5% Q/Q (annual rate), followed immediately by a 4.9% gain in Q1 2017.

For Q3 2017, the BEA had originally figured a 5.1% rise Q/Q for the same series. It has now been revised to just 2.7%, a much more serious downward revision than it might otherwise appear. Given the noisiness of the series, and what that likely represents in the real world, these positive quarters are more than necessary to balance out the bad ones in order to equal, over time, sustained growth. Instead, what the revised data shows is that the good periods have become both less frequent and less good.

With the latest revisions, nominal hourly compensation, the factor most directly tied to the unemployment rate (the real one, which is not necessarily the version published by the BEA) is growing on average at the lowest pace since 1994. The 4-quarter year-over-year change is less than 1% now, which is worse than at any point in 2008-09. Read more

How will those burgeoning debts, both personal and government get extinguished?