US third quarter GDP revised lower but still tops 3%, JPMorgan in the gun over Malaysia's 1MDB, Chinese property tax based on appraisal value, Carney on bitcoin, NZ$ at US70.14c

Here's our summary of key events from overnight that affect New Zealand, with news that unlike New Zealand yesterday where Gross Domestic Product figures were revised up, in the United States GDP has been revised down overnight.

Albeit this was only for the third quarter, and only a minor revision down - to 3.2% from 3.3%. It's still the fastest growth since the first quarter of 2015, and is the first time since 2014 that the US economy delivered growth of 3% or more for two consecutive quarters.

The main Wall Street stock indexes were higher with investors expecting lower corporate tax rates to encourage companies to spend more on dividends, new projects and wage hikes. The US Congress approved a US$1.5 trillion tax cut bill this week, which includes a corporate tax cut to 21% from 35%.

Swiss financial markets supervisory authority FINMA says the Swiss subsidiary of US bank JPMorgan committed serious anti-money laundering breaches in relation to Malaysian sovereign wealth fund 1MDB. 1Malaysia Development Berhad (1MDB) is the focus of money-laundering investigations in at least six countries including Singapore, Switzerland and the United States, according to Reuters. There's also an IMDB connection to NZ trusts. Malaysian Prime Minister Najib Razak, who chaired 1MDB’s advisory board, has denied any wrongdoing. 

"The bank [JPMorgan] failed in particular to identify the money laundering risks relating to cash flows between business accounts and personal accounts. In one case, it credited hundreds of millions of US dollars from the 1MDB sovereign wealth fund, allegedly earmarked for the purchase of a company, to the personal account of an individual with close ties to a 1MDB business partner," FINMA says.

In China President Xi Jinping is said to taking a longer-term approach to China’s problems, with more tolerance for short-term economic growth fluctuations, having cemented his power at the Communist Party congress in October, where he was lifted to the same status as previous leaders Mao Zedong and Deng Xiaoping. China’s leaders usually focus on the next year at their annual economic policymaking meeting, which was held this week. This year the timeframe for controlling financial risk, reducing poverty and curbing pollution was set at three years.

Meanwhile based on a People's Daily article quoting Finance Minister Xiao Jie, it appears a new residential properties tax in China will be based on appraisal value.

Yet another regulator has waded into the debate about bitcoin. Bank of England Governor Mark Carney says big moves in the value of bitcoin don't present a threat to global financial stability. Separately Carney sees “fundamental problems” with the idea of a digital currency issued by a central bank being used by the general public. More on that here.

Having pushed towards US$20,000 earlier in the week, the bitcoin price was recently at US$15,354.81.

With US crude inventories at their lowest level since October 2015, oil prices rose with WTI (Nymex) at US$58.25 a barrel, and Brent crude at US$64.63. Gold was also higher, at US$1266.08oz. The yield on 10-year treasury bonds fell 1.5 basis points to 2.48%.

This morning the Kiwi dollar is just over US70 cents at US70.14c, it's at AU91.08c, and against the euro it's at 59.11 euro cents.  

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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16 Comments

Regarding the proposed new residential property tax in China and the upcoming legislation banning foreign buyers of existing NZ property: I wonder whether this has created a spike in the Chinese buying Auckland property?
I note that the number of houses for sale in Ak has dropped in recent weeks. Maybe houses are selling quite well at the moment. A little window of opportunity.

...Trump going for broke - obvious this won't end well. USA about to flood the world with bonds and higher longer term interest rates coming - surely! Does this mean that those who have holdings of US treasuries must brace for significant losses? Yup

At the risk of diverging a little here about Trump, I watched the news article on the Jerusalem vote at the UN. I can't help but think that every time they exercise their Veto, the Americans work against one of the very things they claim that makes America great - democracy!

The use of a veto denies majority opinion. It also damages the reputation of the UN. The US ambassador to the UN described the motion (I think it might have been in the Security Council) as an insult [to America], but thought nothing of employing the veto, as an insult to the majority of the world. And then Trump publically threatens and bullies countries who might be dependent on America's largess. Trump is just another Putin, a bully!This is not about a great country leading the world, it is a big country and economy imposing it's will on the world irrespective of whether they agree, or want it or not!

I cannot comment on the market in general but my parents' house in Glenfield sold 2 weeks ago after being on the markets for 6 weeks. What is interesting is that of the 30 or so parties that came through the open houses to see it, EVERYONE was Chinese. No-one was NZ-born. Not one. The property sold to Chinese. This is just one property and I have no idea if this is representative of other properties, but as at a couple of weeks ago the Chinese were still looking (and buying).

I cannot see the logic of Chinese who buy for investment here in NZ.
When they want to divest ( and history says they surely will in herds) they will not have another qualifying Chinese to sell to. The new restrictive law will ultimately hit all non-resident owners, Chinese or not, and the only buyers will be locals.

The Chinese are the biggest savers in the world. They buy and hoard. The new restrictions won’t make much difference.

Wow, that is incredible 100% Chinese prospective buyers ! BTW how do you know they are not Korean or from any other Asian nation or Kiwi born ?

Koreans have thicker eyebrows squarer faces apparently.

I can easily spot the difference between Korean, Japanese, Vietnamese, Chinese etc... I suppose you think all Maori and Pacific Islanders look the same too.

They also have very different accents and mannerisms along with looking completely different to each other.

The main Wall Street stock indexes were higher with investors expecting lower corporate tax rates to encourage companies to spend more on dividends, new projects and wage hikes. The US Congress approved a US$1.5 trillion tax cut bill this week, which includes a corporate tax cut to 21% from 35%.

Indeed.

Dr. Rosenbloom: Well what the bill does is it borrows a ton of money. The real argument against the bill is the increase in the deficit. The way I would view the bill from the macro level is that it borrows a ton of money and restores it largely to the business community, and to some extent to wealthy individuals…

You could argue that the bill is harmful to individuals not so much because it doesn't reduce their taxes, as because it reduces the freedom of the United States to expend money on things we need to spend money on, like infrastructure or helping the disadvantaged. We've stripped ourselves of extra funds with this bill and given it back to companies. That to me is the real indictment of the bill, if there is an indictment.

Sputnik: How much money are we talking about?

Dr. Rosenbloom: Well they've aimed at $1.5 trillion, but they've played games with the numbers; I've seen numbers all over the place, but it's probably over $2 trillion. When US debt starts approaching our GDP, that changes a lot of things in the United States. Remember, we live in a very low interest rate environment. If interest rates start rising, that debt burden is going to be much more of a burden on our nation's life. Read more

Hmmmmm...

For the U.S., the specter of cooler Chinese demand comes at an inopportune time, with the Federal Reserve tapering its portfolio of Treasuries and Congress debating a tax-overhaul plan that could increase the federal deficit by $1 trillion over the next decade. The U.S. debt burden was already forecast to swell by $10 trillion in that period even before any tax changes.

China owns almost $1.2 trillion of U.S. government debt, more than double the level from a decade ago. The bulk of the buildup came as the Chinese boosted foreign-exchange reserves to help offset a strengthening yuan.

The U.S. could rely on that appetite as the Treasury market soared above $14 trillion this year, from less than $5 trillion in 2007. Read more

If you can't make a dollar get the government to give you one - citizens inevitably relegated to tax slave status.

Indeed - the robber barons have taken over the asylum.

https://www.youtube.com/watch?v=WRNYqsMIbg0

Here's a press release from Workplace Relations and Safety Minister Iain Lees-Galloway;

Minimum wage to increase to $16.50 per hour 

The Government will increase the minimum wage by 75 cents to $16.50 per hour on 1 April 2018, Workplace Relations and Safety Minister Iain Lees-Galloway announced today.

“The Government is committed to a high-performing economy that delivers good jobs, decent work conditions and fair wages,” says Mr Lees-Galloway. 

“The increase to $16.50 per hour will benefit approximately 164,000 workers and their families, and will increase wages throughout the economy by $129 million per year. 

“Raising the minimum wage to $16.50 next year was one of the Government’s top priorities for the first 100 days, and we are committed to increasing the minimum wage to $20 by 2021. 

“I’m delighted that in time for Christmas 164,000 Kiwi workers at the lowest pay grade can look forward to a lift in their conditions from 1 April next year.

“It is important that we achieve this goal in a fiscally responsible way, which is why we are signalling to employers in advance of our plans to incrementally raise the minimum wage and spread the increases as evenly as possible each year. 

“We will continue to review the minimum wage each year, and economic conditions will be taken into account when setting the new rate of the minimum wage. This consistency gives employers and employees certainty, and minimises potential negative effects of increasing the minimum wage too sharply. 

“These changes are a part of this Government’s wider workplace relations policy platform, which is about backing fair pay and conditions, and ensuring those on lower incomes get to share in our economic prosperity. 

“To that end, within the first 12 months of this Government’s term we will abolish starting-out rates and consider changes to the training wage. In the meantime, these rates will continue to be at 80 per cent of the minimum wage, increasing to $13.20 per hour,” says Mr Lees-Galloway.

Announced yesterday, Alibaba and Yunfeng Xincheng Fund announced a 320 million yuan investment with Hunan Dakangs trading subsidiary for dairy products, giving it a 40 percent stake in the venture. Hunan is currently suspended on the Shenzhen stock exchange . Alibaba which has recently announced its wish to strengthen its New Zealand presence is undoubtedly a powerful player in e commerce, and although the investment is small it is an interesting combination.