Here's our summary of key events over night that affect New Zealand, with news jurisdictional arguments are building up everywhere when 'compromise' is now a dirty word in public policy, in a winner-takes-all world.
The release of their September minutes shows the US Federal Reserve signaling they see a strong economy justifying continued interest-rate increases. That will put them in the cross-hairs of the US President.
American data for housing starts, building permits, and housing completion for September all came in lower than the month before. Building permit levels actually came in lower than the same month in 2017.
And new data shows end of year holiday hiring of more than 700,000 workers by American retailers will be the largest since 2014.
The American economy sits top of the World Economic Forum's annual global competitiveness survey for the first time since the GFC. Last year it ranked second behind Singapore, but these two switched this year. The US benefited from a revised ranking methodology this year. New Zealand ranks 18th (down from 13th last year). While we score at the top on the sub-category of 'Institutions', with the world's best "enabling environment', we are hindered by lower rankings in 'human capital', 'innovation', and 'financial markets'. Ovbiously we rank low in overall market size. Australia ranks 14th this year, and up from 21st last year. Last year, the NZ Government heralded the result with a gushy press release. This year, nothing.
An nasty but important tiff is developing as a consequence of Brexit. The EU is 'defending' itself from the position of London as a financial center by changing the rules for derivatives trading to ensure after Brexit that their regulations will apply for all traders of euro derivatives. But that catches the US trading firms too, and the American CFTC has threatened to withdraw US banks from the system it they become subject to EU regulations. Because the US institutions provide the bulk of the liquidity to the London systems, the impact will be enormous. It's just a threat at this stage, aimed at not having US banks subject to EU regulation on derivatives (as happens now), but the implications are serious.
Meanwhile on Brexit, there are indications that the EU is prepared to offer the UK another full year to achieve a negotiated resolution.
China is slowly selling its holdings of US Treasuries as it tries to restrain the fall of its currency. The value of the yuan is falling at a modest pace but is still under 7 to the US dollar. Selling US Treasuries helps keep that change from undermining market confidence. The volumes involved are still large enough to be one factor in the rising UST interest rates. The Chinese have reduced their holding by -US$37 bln in a year as Federal US public debt has risen by almost US$1.1 tln. But many analysts think a more rapid depreciation of the yuan is not far away and Beijing won't be able to prevent it.
Growth in China’s net new yuan loans in September slowed sharply despite government calls for expanding financial support for businesses, adding to evidence that the world’s second-largest economy is facing growing downside risks. Major SOE banks may not be enthusiastic members of the 'home team' after all.
The UST 10yr yield is up slightly to 3.17%. Their 2-10 curve has held at +29 bps. The Aussie Govt 10yr is at 2.71% (down -1 bp from this time yesterday), the China Govt 10yr is at 3.60% and also down -1 bp, while the NZ Govt 10 yr is at 2.71% which is down -1 bp as well.
Gold is down -US$2/oz and now at US$1,225/oz.
US oil prices are down sharply today on swelling US crude inventories and have fallen more than -US$2/bbl to just over US$69.50/bbl. The Brent benchmark is now just under US$80/bbl.
The Kiwi dollar is little changed today at 65.7 USc. On the cross rates we are at 92.2 AUc, and at 57 euro cents. That puts the TWI-5 at 69.8.
Bitcoin is also little changed at US$6.517. This rate is charted in the exchange rate set below.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».