Eyes on Fed; US PPI jumps; SME optimism rises; Moody's sees world growth rising; OECD sees jobless rate below pre-GFC levels; Trump's Washington panned; UST 10yr yield at 2.42%; oil slips, gold drops; NZ$1 = 69.3 US¢, TWI-5 = 72.6

Here's my summary of the key events overnight that affect New Zealand with news that Wall Street is higher ahead of the next US Fed rates decision due tomorrow.

That decision is widely expected to bring a +25 bps rate hike. If it doesn't, there will be sharp market reaction. Today the UST 10 year yield has pushed up to a two month high.

In the US, business prices rose across a broad range of goods and services in November, a signaling higher price pressures at a time when consumer inflation has remained stubbornly low. Their PPI was up +3.1% in November from a year earlier, the biggest jump in nearly six years.

And firms now see their ability to raise prices as easier. In fact a survey of US small business optimism has scored near a record high on this, and the view that their taxes are about to be reduced. Hiring intentions also rose.

Ratings agency Moody's has issued a very positive review of the state of covered bonds worldwide. They say the credit quality of Australian and New Zealand covered bonds will also remain strong in 2018, underpinned by the high credit quality of issuers and the strong sovereign credit quality of the two countries. Moody's is positive about global growth prospects too.

And the OECD is reporting that the rate of unemployment in its members has finally dipped below pre-GFC levels - although to be fair, this is only held up by its European members. In absolute terms, they are still +2.5 mln people higher than in April 2008 however.

A new survey of American voters indicates they think the Washington 'swamp' is now much worse than it has ever been and it has gotten worse very quickly.

In New York, the UST 10yr yield is now at 2.42% and its highest since October 2017.

The price of crude oil is lower today, now just under US$57.50 / barrel, while the Brent benchmark is down to just over US$63.50.

The price of gold is down -US$7 at a new five month low of US$1,238 oz.

The Kiwi dollar however is holding its higher level at 69.3 US¢. And on the cross rates we are holding up too at 91.8 AU¢, and against the euro at 59.1 euro cents. That puts the TWI-5 just up further at 72.6 and its highest in over a month.

Bitcoin is now at US$17,215 and just under a new all-time record high set four hours ago. The driving force behind this bubble are millions of Asian 'investors'.

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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End of day NY time
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8 Comments

"Australia's two most successful self-made international entrepreneurs are retreating from the global business market..Billionaire Frank Lowy is selling Westfield's shopping mall empire spanning the United States, Europe and the United Kingdom...... Rupert Murdoch is reportedly poised to offload about $US50 billion of 21st Century Fox's entertainment assets in a deal with Walt Disney "
Anyone who believes in 'follow the money' should be taking note! These two men/companies aren't selling up because they see a future the same as the one that made them their money....What worked today and yesterday, may not work tomorrow.
http://www.afr.com/business/lowys-westfield-murdochs-fox-sales-driven-by...

For each seller there is a buyer. So your logic implyes that Murdoch knows more than Disney and Lowry knows better than whoever buys his empire

Yes.
"Lowy said "$1000 invested in 1960 would be worth $440 million at the end of Unibail-Rodamco takeover. "
Looks like a good track record to me!
The Secret to any financial dealing is to know when to get out....... Too many people hold on too long. That's how human nature works.

The Lowy family .... have attracted enormous investment backing and the biggest takeover bid in Australia's history. But their playing strategy is not one of bluff but one that involves reading the cards closely and reading them early. Their strategy was probably devised a decade ago...

http://www.afr.com/real-estate/westfields-lowy-family-play-a-magnificent...

The Amazon effect

We have been hearing for several years now at least of Shopping Malls in USA closing down or becoming depressing places that are not being maintained with corner-stone lessees moving out, Malls being half occupied

I'm surprised at the French take-over - I would be a seller - the days of the mega-malls are over

Time to get out

how Kellogg’s and Sanitarium infiltrated the medical profession
https://www.michaelwest.com.au/investigation-kelloggs-sanitarium-infiltr...

" whole foods like half an avocado contain more fibre (6.5g) than two slices of bread (3.8g) or a cup of oatmeal (3g)."
So that's why avocado rustling is on the up!

While Covered Bonds are relatively secure as an asset sub-class , I am not so sure anyone should be too bullish about the perceived lack of downside risk . These assets are no different to any other asset class.

Given that its paper issued against a pool of assets ( in Aus and NZ's case, mortgages) there is still risk of a severe market correction if interest rates increase and loan defaults increase .

So there is market risk at current property price levels , and the Banks are effectively taking these assets off their balance sheets in a form of securitisation ,ostensibly to "free up" capital for more lending .

And the markets are looking risky , quite apart from inflated property prices , price -earnings ratios are at record levels , first world economies are not thriving ( since 2008) and there is all manner on nonsense going on with debt in China, that we dare not lift the lid on .

While everything in our economy looks as benign as the Hauraki Gulf at low tide at sunrise on a windless dry summers morning , we all know it does not stay this way .