US trade deficit jumps again; US home sales rise and mortgage rates fall; Canada inflation drops, EU sentiment negative; ASIC to second-guess mortgage applications; UST 10yr 2.68%; oil up and gold down; NZ$1 = 68.4 USc; TWI-5 = 72.7

US trade deficit jumps again; US home sales rise and mortgage rates fall; Canada inflation drops, EU sentiment negative; ASIC to second-guess mortgage applications; UST 10yr 2.68%; oil up and gold down; NZ$1 = 68.4 USc; TWI-5 = 72.7

Here's our summary of key events overnight that affect New Zealand, with news markets seem to be tiring of all the political shenanigans.

Today, politics may be grabbing all the headlines, but the economic drivers are still working away in the background.

The American mechandise trade deficit widened sharply in December to -US$72.6 bln, and on a seasonal basis one of the widest monthly deficits on record. Exports fell -1.3% year-on-year to December while imports rose +3.3% on the same basis. This is another sign that US economic growth slowed in the fourth quarter.

In their housing market, a sign activity is picking up. Pending home sales rose in January from December with a good +4.6% gain. But year-on-year they are down -3.2%.

US mortgage applications also rose and the average interest rate most borrowers are paying for their standard 30yr mortgage is 4.35% which is back to levels that applied a year ago.

Canada inflation came in at +1.4% in January, down sharply from the 2.0% rate reported for December. This wasn't unexpected and is essentially driven by much lower petrol prices (-14.2%).

Across the Atlantic, the latest batch of confidence surveys shows falling economic sentiment. Consumers are staying downbeat while manufacturers turned sharply negative even as the service sector recorded a more positive outlook.

Equity markets are almost all in negative territory. After good gains in Shanghai (+0.4%) and Tokyo (+0.5%) yesterday, European bourses turned lower (-0.5%), and Wall Street is following them down (-0.2%) in mid-day trade today, although the losses are being limited as the session wears on.

In Australia, they had another quarter (to December) where construction work completed came in way below expectations. In fact, this data is now lower in 2018 than in 2017 by -0.5%. The sharp contraction in residential building is expected to be a significant drag on the broader Australian economy.

And staying in Australia, ASIC has revealed it will be using 'big data' to check that mortgage brokers aren't submitting applications that distort income levels, with a new program designed to catch out cheaters. The prescriptive reach of both the regulators and lenders into individual borrower's personal affairs is a direct result of Hayne's Report which forces mortgage industry participants to assume all mortgage applications are flawed. Banks are now directly responsible for verifying the honesty of the application and it is the banker who will be sanctioned if they get it wrong.

The UST 10yr yield is at 2.68% after a rise of +3 bps. Their 2-10 curve is higher at just on +18 bps while their 1-5 curve is still a negative -6 bps, but a little less so today. It has been negative all year. The Aussie Govt 10yr is up +1 bp to 2.11%, the China Govt 10yr is down -2 bps to 3.19%, while the NZ Govt 10 yr is down -1 bp at 2.17%.

Gold is down -US$5 today at US$1,320/oz.

US oil prices are sharply higher at just over US$57/bbl while the Brent benchmark is up to just on US$66.50/bbl. OPEC has confirmed production cuts, in direct defiance of the US President's 'warning'.

The Kiwi dollar is starting today lower by -½c at 68.4 USc. On the cross rates we are unchanged at 95.9 AUc. Against the euro we are at 60.2 euro cents. That puts the TWI-5 down to 72.7.

The bitcoin price is virtually unchanged at US$3,797. This rate is charted in the exchange rate set below.

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

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Cant happen here right?

Just an opinion of course.

https://www.youtube.com/watch?v=53DG5KBBnSA

If you look at his body language and the way he delivers it, you can probably notice that he's trying hard to deliver 'the message' that he was asked to deliver... repeating 'key words' at the places where they not connected to the sentence he has just said... was it written for him?

So we are now adopting Guilty until proven innocent? Societal decay anyone?
And staying in Australia, ASIC has revealed it will be using 'big data' to check that mortgage brokers aren't submitting applications that distort income levels, with a new program designed to catch out cheaters. The prescriptive reach of both the regulators and lenders into individual borrower's personal affairs is a direct result of Hayne's Report which forces mortgage industry participants to assume all mortgage applications are flawed.

Is this a logical result of centralisation? Centralisation seems to lead to being out of touch, favouring theory over experience and politicisation of decision making into fewer and fewer hands. It used to be that the bank manager knew you, so not only did he have access to the data, he also had some idea of your character. We have made bureaucracy, corporate and institutional, into the new priesthood. Result, bigger mistakes and societal decay as the web of trust is destroyed. How did that happen, exactly?

Well done David for pointing the finger there. [Also, my apologies for the use of bold, it is a bit too strong for my taste, but I'm still trying to adapt my rambling thought process to the need for fewer words, and in this case them words got used up by the quote.]

And how would the bank manager know me from a bar of soap? (And which bank manager?. I have accounts with multiple banks.) The world has moved on from cheques and a passbook which required physical presence at a branch.

Proposing to leave power in the hands of an individual that going to make decisions based on what? A good firm handshake and whether you look them in the eye? How much effort goes into kissing butt? I'll pass thanks.

Saving and overall spending habits. This is about measuring risk, and Roger is right. the wrong type of, and over reliance on a specific focus will distract one from being able to properly assess the risk. It will not be able to be done centrally.