Here's our summary of key events overnight that affect New Zealand, with news that has the feeling of being the calm before a storm.
Firstly, American retail sales rose +6.4% in June from the same month a year ago. Car-buying was back in favour compared to the previous month, and that is bolstering expectations for decent economic growth in the June quarter. Still, the month-on-month June growth was only +0.3% compared to the May rise of +1.1% so there was a moderating at the end of last quarter.
The EU trade suplus in goods has fallen in May to +€16.5 bln. Markets were expecting a surplus of +€17.6 bln, so the trade results are starting to move faster than expected.
Canada existing home sales were down almost -11% in June 2018 from the same month a year ago, although there are signs they may be near their cyclical lows. New home sales were up (based on apartments in Toronto and Quebec), but the existing home market in Canada remains weak. House price gains have almost evaporated. Average house prices in Canada are now NZ$560,000.
The OECD area employment rate – the share of the working-age population with jobs – increased by +0.2 percentage point in the first quarter of 2018, to 68.2%, with gains in 28 out of 36 OECD countries. New Zealand is high on this comparative, at 77.7%.
China has reported 2018 Q2 growth pretty much in line with what markets were expecting. They say year-on-year, their economy grew +6.7%, and -0.1% lower than the March quarter. There was better growth in their retail sector, with this up an impressive +9.0% in June (compared with +8.5% in March). But industrial production was up only +6.0% in June, down from a +6.8% rate in March. Fixed asset growth also slowed a little. China is also now publishing labour market statistics using the internationally recognised survey methods. That shows their jobless rate at 4.8%, unchanged from three months ago. However equity investors in Shanghai viewed the data sceptically seeing the 6.7% rate as a seven quarter low, and the SSE Index dropped -0.6% yesterday, falling faster at the end of the session.
Expectations are that China will now start more aggressive stimulation policies in the face of the trade war with the US, and slowing growth at home.
And there is something of a bank run going on in China. Savers are rushing to pull money from peer-to-peer lending platforms, accelerating a contraction of the NZ$300 bln industry. It is also testing Beijing's ability to maintain calm as it cracks down on risky shadow-banking activities. Almost 50 P2P platforms have failed in the past two weeks, adding to 80 cases in June. It's a growing problem.
For all the good current data, views on the future are not so sanguine. The IMF says that rising tensions over international trade has already plateaued the broad global expansion that began roughly two years ago and it has become less balanced. Even though they see growth at +3.9% worldwide, they warn that the risk of worse outcomes has increased, even for the near term. The IMF also says markets are complacent, and that they should preparing for the coming consequences.
Bond prices are lower today which means yields are up. The UST 10yr yield is at under 2.86% and up +3 bps. The Chinese 10yr is at 3.51% (down -1 bp overnight) while the New Zealand equivalent is now at 2.86%, down -2 bps.
Gold is weaker by -US$2 and now at just on US$1,239/oz.
US oil prices have fallen sharply and now just over US$68/bbl. That's a -US$3 drop in one day. The Brent benchmark is now just under US$72/bbl, a similar drop.
The Kiwi dollar is starting today a little firmer at 67.8. USc. On the cross rates however we are also marginally firmer at 91.3 AUc, and at 57.8 euro cents. That puts the TWI-5 at 71.1.
Bitcoin is now at US$6,667 which is a gain of +4.7% since this time yesterday.
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5 Comments
Technically, a P2P lender is an information provider that matches borrowers with lenders. But most players raise money from depositors before lending it to corporate borrowers, such as property developers, to chase high returns
sounds so much like our finance companies, all good when the market climbed, once it turned uh oh
just shows no matter the country greed is a big driver over common sense
ie if someone can offer a return of 15% in a low interest environment HOW?
and if a sector is non regulated it always ends in tears for some.
our NZ P2P's look similar at the moment
NZ P2P platforms are a lot closer to true peer to peer than what you're describing. Most of them, you actively choose who to lend your money to and the contract is between you and the borrower, the P2P company is just an intermediary.
There is a bit of a difference at Squirrel where losses from one loan are applied over the whole book (with a buffer fund to soak up expected losses), so any loss of invested capital is socialised. This makes it pretty irrelevant who you end up lending to and you don't directly choose.
There is also a slight issue at Harmoney where the majority of funds to the company come from wholesale rather than individuals, and even the company itself is now allowed to lend money to its users. I'm not sure how much control the wholesalers take over choosing who to lend to, I suspect not much.
I don't believe that corporate lending is a big part of any NZ P2P companies that I'm aware of, save for a little small business lending.
Technically, a P2P lender is an information provider that matches borrowers with lenders. But most players raise money from depositors before lending it to corporate borrowers, such as property developers, to chase high returns >
This kind of rubbish was being talked about when people first became aware of P2P, however the majority of platforms are not lending institutions. Not really sure why that's so difficult to understand. Tangxiaoseng is an example of a ponzi scheme that calls itself a P2P lender when effectively it's operating as a lending institution.
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