Here's our summary of key events overnight that affect New Zealand, with news the US is completely random in its views on trade.
Firstly, two reports from two different regional Feds show differing business tracks. The one by the Philadelphia Fed revealed some gloss coming off their upbeat outlook in the heart of industrial America. The one by the NY Fed was more upbeat and remained near recent highs.
Meanwhile, the US is importing at a furious pace.
Mexico and Canada are preparing for a NAFTA relationship without the US. It is a track very similar to the TPP, something the US now seems to want back in on. And US tariffs on Canadian newsprint appear to be an own-goal. Also badly affected may be aircraft manufacturer Boeing. All this from a President that just makes up his own 'facts' even when the data says otherwise.
And staying in Canada, their national average home price was down -5% and sales volume was down -17% in February compared with a year ago, evidence that many buyers there raced to purchase before new mortgage rules came into effect.
In China, some major conglomerates are in liquidity trouble. HNA has skipped paying for fuel for its airlines, and LeEco has failed to offload units in its planned reorgainsed due to excessive debt, putting it viability in doubt.
In Europe, industrial giant Unilever has decided to move its headquarters to Rotterdam from London.
In Australia, their Royal Commission inquiry is delving into the gritty detail of some transactions, identifying about 5,000 at CBA that may or may not have issues over a three year period. However, given that CBA has more than 1 mln residential loans and record high customer satisfaction levels, they seem to be arguing over the ½% at the margins. The real issue seems to be in the Australian predisposition to use mortgage brokers and their ability to control dodgy behaviour in that sector.
In New York, the UST 10 yr yield is back up to 2.82%. Locally, wholesale swap rates will open noticeably higher today for the one year duration, up +4 bps yesterday and now up +12 bps over the previous four weeks. Rises of this magnitude will be having bank mortgage managers thinking about the pricing for one year fixed mortgage rates.
The gold price has slipped back today, down -US$5 and now at US$1,318/oz.
Oil prices are up marginally today with the US benchmark down to just over US$61/bbl and the Brent benchmark now just over US$65/bbl.
The Kiwi dollar will start today ½c lower at 72.8 USc as the greenback is back in favour. On the cross rates we are unchanged at 93.2 AUc and 59.1 euro cents. That puts the TWI-5 at 73.8.
Bitcoin is now at US$8,175, down -1.4% from this time on yesterday. This recent weakness is due to a decision by Google to stop accepting cryptocurrency ads, following the same decision by Facebook.
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5 Comments
More on airline fuel. Cathay Pacific which announced results this week another loss, but improving. Management had locked in the price of jet fuel for 4 years , expecting higher prices. In the end the management team ran a commodities hedge fund. Always beware of experts, do not always believe the bosses, if there is something to blame other than yourself something will almost always be found.
Lots of bad stuff coming out of the Aus banking review. Shades of the US mortgage market pre GFC. I don’t know if underwriting standards here are as bad as Aus, but given where we are with household debt to income I doubt our banks have much to be proud of. Even if the banks here are angels, it’s irrelevant as we will wear whatever happens to the Aussie parent cos. Get your popcorn for the Aussie banking crisis of 2020.
If you had to pick a black swan event for our market, credit impairment of the Aussie banks due to a property market meltdown and debt crisis in Aussie would be my bet. I mean, I look at the Aussie mortgage market and I really struggle to see how it can end well.
Although it's difficult to describe it as a black swan event, as it is an entirely foreseeable possibility and you don't need the benefit of hindsight to see it. Less of a black swan, more of a slow motion car crash
Lots of bad stuff coming out of the Aus banking review. Shades of the US mortgage market pre GFC. I don’t know if underwriting standards here are as bad as Aus, but given where we are with household debt to income I doubt our banks have much to be proud of. Even if the banks here are angels, it’s irrelevant as we will wear whatever happens to the Aussie parent cos. Get your popcorn for the Aussie banking crisis of 2020
Yes. It's barely news in NZ and is being underplayed in Australia, So far, in terms of public awareness and reaction, the banks are winning the battle, I agree with you that the behavior is appalling and no doubt it's far worse than what is coming out in the RC.
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