US new home sales drop; Canada retail zooms higher; China fiscal revenues up +7.4%; Draghi swats Mnuchin; global FDI slumps; Vict. launches new FHB assistance; UST 10yr 2.63%; oil and gold up; NZ$1 = 73.7 USc; TWI-5 = 74.2

US new home sales drop; Canada retail zooms higher; China fiscal revenues up +7.4%; Draghi swats Mnuchin; global FDI slumps; Vict. launches new FHB assistance; UST 10yr 2.63%; oil and gold up; NZ$1 = 73.7 USc; TWI-5 = 74.2

Here's our summary of key events overnight that affect New Zealand, with news of a new first-home buyer program in Victoria. (We are passing on coverage of the Davos circus this morning. It's everywhere else.)

First in the US however, sales of new single-family homes fell more than expected in December, recording their biggest drop in nearly 1½ years. But prior months included replacement sales for flood damaged homes. However the December 2017 level is +14.1% higher than the same month a year ago.

In Canada, their retail sales were up +6.5% in November from the same month last year. Part of that is from rising petrol prices however. But on a 'real' basis, the rises is still a healthy +4.5%. Sales of electronics and appliances were a standout, up a remarkable +23.4%. Canadian consumers are feeling their oats.

China has reported that its tax revenues rose +7.4% in 2017 (the combination of central and local government fiscal "revenues") to US$2.7 tln. (For perspective, Federal, State and Local tax revenues in the US amount to more than US$6.5 tln.)

In Europe, as their economic indicators hit new highs, the ECB is under pressure to end stimulus sooner than it planned. Today it reviewed its policy positions and left everything unchanged. But the pressure is definitely on and Mario Draghi bit back at the US Treasury Secretary over his cavalier attitude to trade.

The UN agency UNCTAD is reporting a sharp drop in 2017 outbound foreign investment. It fell -27% in 2017 after spikes in 2016. Flows to developed countries took the biggest hit. North America saw a drop by a third, Europe suffered a drop by more than a quarter. These falls contrasted with growing world trade. China however attracted a record level of foreign direct investment, putting it just behind the US.

In Australia, the Victorian government is launching a shared-equity assistance program for first-home buyers. They need to have at least 5% for a deposit and the State government will apparently stump up the rest to a 25% deposit. The government then shares the equity proceeds in the original proportion when the house is sold. The home buyer makes all the payments. There are income caps for households that apply. All good for the taxpayer if capital gains are strong. It is in the State government's interest to keep house sales bubbling along as they clip the stamp duty ticket at an average of AU$40,000 in Victoria for a median-priced house.

Standard & Poor's have held the Aussie credit rating at AAA with a negative outlook. But they have warned that it could be lowered in 2019 if the progress towards a budget surplus falters.

The UST 10yr yield is marginally lower at 2.63% (-2 bp). The equivalent 10yr China sovereign bond is unchanged at 3.96%. The equivalent NZ 10yr sovereign bond is down another -2 bps to 2.93%. The surprise low inflation rate yesterday has also seen local swap rates drop. In fact at 1.97%, our one year swap rate is a record all-time low.

Oil prices are up further to be just under US$66 a barrel, while the Brent benchmark is now under US$71.

Gold is up another +US$4 to US$1,361/oz.

The Kiwi dollar lost a bit of ground against all major trading partners on the CPI data and is now back to 73.7 USc. On the cross rates there is shrinkage on the day as well. We are now at 91.1 AUc, and against the euro at 59 euro cents. That puts the TWI-5 at 74.2, a drop of about -50 bps.

Bitcoin is now at US$11,168, +2% higher than where it was at this time yesterday.

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

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

26 Comments

Comment Filter

Highlight new comments in the last hr(s).

Pro-free-trade economist Michael Reddell argues the new version of the TPP is full of fishhooks and there's little evidence it will benefit New Zealanders.

I write from the pro-trade, pro-market side of the argument. Which, of course, is not the same as a “pro-business” perspective.

Sadly, the TPP and its replacement the CPTPP, like the welter of preferential trade agreements various governments have been signing over recent decades, isn’t necessarily a step towards free-trade at all. That is a point the Australian Productivity Commission has long been making about such trade agreements – probably since around the time of the Australia-US agreement which many independent experts concluded made Australia worse off economically (having been signed for political signalling purposes more than anything else).

These agreements keep MFAT officials busy, and ministers of trade looking as if they are “doing something”, but there isn’t much evidence (net) that they are making New Zealanders as a whole better off. Read more

So - just more ideological nonsense to divert, at best, our attention away from more pressing matters demanding real solutions?

You know there's a property bubble when the local Government is investing in housing hoping to make a profit. House price in Victoria are going to increase at quite a rate with the Government will to put down 20% on a house. What could possibly go wrong?

Any subsidy will boost prices, When will governments learn this and let market forces rule and pricing fall to the level of support-same thing happened here with the increase in student living allowances, how did that work out, oh that’s right as soon as students had more money rents went up to soak it up

I think David makes a very valid point here;

"It is in the State government's interest to keep house sales bubbling along as they clip the stamp duty ticket at an average of AU$40,000 in Victoria for a median-priced house."

They're winning on both counts earning duties and making investments. Give with one and take with the other comes to mind

Also happened with the last government with the first home buyers grant. It was already known from overseas experience that it only redistributes taxpayer money into pushing house prices up further, yet it was still done. And we've got Working for Families and the accommodation supplement subsidising company wages while pushing up rents.

Too true - classic neo-liberal wealth transfer tactics - moving money away from the poor to a diminishing number of elites. Dutifully underpinned by central bank interest rate cuts.

I can't see the comparison with the Victoria state govt solution at all.

perhaps the FHB grant pushes up the lower quartile prices - It would likely increase home ownership rates. Nobody seems to care about home ownership rates but I think it's quite an important social stability metric.

Sad thing is, the people who come out of this worse off, are likely to support these supplements.

It's not just this new scheme in place; FHBs can also get between $10,000 and $20,000 as a grant depending on what state they are in. Here's the page for the Victoria one: https://www.sro.vic.gov.au/fhogapply

FHBs can also get a duty concession or exemption (https://www.sro.vic.gov.au/first-home-owner/apply-first-home-buyer-duty-...), and can use up to $30,000 in volunteer contributions from their Super as a deposit from July 1st (https://www.ato.gov.au/General/New-legislation/In-detail/Super/First-hom...).

It's hard to learn something when your mates' livelihoods depend on you not learning it.

The Australian governments keep doing this. Pouring money into the demand side so that keeps prices rising and the bubble going. One change would have made all the difference. Apply it to only new houses.

The written supplement can be viewed here

Snider is only following China superficially. (I doubt he has been there.) Principally he is following metrics (fixed asset investment growth) that the Chinese themselves say they are trying to deemphasis. Beijing knows it is not sustainable in the long run. They need to develop an economy driven by consumers. And retail consumption is booming. In fact, Chinese retail demand is about to pass the quantum of US retail in 2018 (which itself is growing healthily) making it the largest of any economy.

Snider needs to look forward, not backwards to old metrics. China is quickly becoming a consumer-based economy, which is a big change. And industrial activity is rapidly converting to innovation industries. A downside for this is that this innovation activity is concentrated in just a handful of mega-cities (10-15).

This is an interesting observation David in which i see links to other topics, specifically the wealth/income gaps. For consumerism to be the driver in any economy, countries need to ensure their population has disposable income left over after providing the basics. Preferably more than just a little. But so many businesses for so long have seemingly worked hard at minimising what they pay to their workers, maximising profits on their products and so on. Virtually opposite ends of the paradigm. Or is it just the middle and upper classes (the middle at least is shrinking as most fall out the bottom) who are the targeted consumers? surely the more consumers the better? Thus everyone is better off if they are paid more (within reason).

Snider's general views dovetail with mine both as a professional money markets trader for twenty years and in retirement for another twenty living off the previous, but nonetheless continuously reinvested proceeds. Until my finances falter I will remain steadfast.

Steadfast almost sounds like a ..head in the sand... attitude to me, Stephen... :)
Don't let your achievements get in the way of an open and enquiring mind.

I think we all agree on the general view ....We all seem to think China is a "Credit boom" train wreck waiting to happen.

Snider, basing his whole argument , simply on fixed asset investment...is a waste of words in my view..
To me the article felt like snider was just wordsmithing.... I suppose he has to write something !
I can see why David used the word superficial..

Steadfast almost sounds like a ..head in the sand... attitude to me, Stephen... :)

Markets are not forgiving to the unwary and I have no means of being out of them - one is always invested 24/7.

There is way too little market competition and price rigging in New Zealand . Some may think this is not a business issue but it is something that affects many families ..... the perennial topic of the cost of School Uniforms .

The system is basically rigged , with confidential kick-backs to schools and all manner of nonsense that is both unfair and non-transparent by one or two commercial interests

The cost of living in New Zealand is way to high for most working families and the school uniform system has what is obviously cartel or monopolistic features, with there being just one supplier of say a pair of grey shorts which should cost $9.99 at Kmart , costing $75 at the "sole supplier" because it has a tiny school logo on the shorts .

Who on earth needs a school logo on a pair of shorts , for goodness sake ?

Why not have a standard grey, blue or black pair of school shorts and plain white short sleeve shirt for boys and skirt for girls

I recall going to my first school , a rural Catholic Mission run school in a generic uniform of grey shorts and a plain white button down shirt with a school badge on the pocket that had press studs, black shoes and plain grey long socks . We had a dark blue pullover jersey with no badge or logo or fancy stuff on it .

Uniforms should be just that , mass produced , simple , cheap and be imported from China for about $20 all up fully kitted out , and sold in Kmart for about $45 to $65

Too right! But careful Boatie, blasphemy to capitalists - they like our corruption.

One thing I wonder - are schools doing it as a covert form of supplementing their funding? You split part into "donations" and part you hide in margin on uniforms (depending on the business model and role of the supplier, obviously).

Oz kicking off live export of slaughter cattle to China. Bit of competition for NZ beef.

"The company is licenced to import and slaughter 100,000 cattle from Australia each year at its facility near Ningbo.

Wealthy markets in Yangtze Delta cities are within close proximity where much of Australia's $400 million in chilled and frozen beef exports to China currently arrive."

http://www.abc.net.au/news/rural/2018-01-17/history-made-as-northern-cat...
http://www.abc.net.au/news/2017-06-09/gina-rinehart-signs-cooperation-ag...

Would not be surprised if one day the live cattle is slaughtered and processed in China then exported back to Australia.

Like our fish, Rinehart is talking %10 of Aussie cattle kill going live.