Here's our summary of key economic events overnight that affect New Zealand with news the American economy continues its remarkable run, although corporate earnings guidance is showing some hesitation.
US jobless claims last week came in at +200,000, a decrease and more than expected. Interestingly, this is the same level it was a year ago for the same week. There are now 1.62 mln people on these benefits, also lower than expected.
Tomorrow's US non-farm payrolls are expected to grow just +113,000, but today's data on initial jobless claims, job cut data, and yesterday's ADP data all suggests the analyst estimates are well undercooked. Certainly markets think so and see the strong labour market and the pressure it puts on the economy as a reason the US Fed may defer its next rate cut.
Today's release of personal income, and personal spending levels both indicate faster rises than expected, also a flag for Fed caution. Core PCE inflation is still running at 2.7%. Real disposable personal income is up +3.1% from the same month a year ago. Real personal consumption expenditures are up the same. It is surprise 'strength' and markets are wary.
But not showing strength however was the October edition of the Chicago PMI.
The latest update in Canada for average earnings has them rising a rather remarkable +4.6% from a year ago. That is its highest rate since the pandemic, and before that since before the GFC in 2007. This was also quite a data surprise.
China's manufacturing activity snapped a five-month contraction in October, as the recent fresh stimulus measures boosted production. But only just. The country's official PMI came in at 50.1 for the month. Their services sector came in at 50.2, also only a minor expansion. It may only just be the start of their expansion, but they are probably disappointed at these early indicators.
And a new stimulus measure has been announced in China. Home loan borrowers have been given the right to renegotiate their loan interest rate lower as/if interest rates fall. It's China; a contract is only enforceable if Beijing says it is.
The Bank of Japan left its policy rate unchanged at 0.25% on Thursday as political uncertainties hang over the economy after an inconclusive national election result. They also kept their three-year inflation projections unchanged, confident their economy is expanding as they want. They say inflation should stay near 2%.
Japanese September retail sales were quite a disappointment, rising just +0.5% from a year ago when a +2.3% rise like they have had for a while, was expected. One to watch.
In the EU, the Euro Area CPI inflation rate ticked up slightly to 2.0% in October, again restrained by lower energy costs.
In a piece of humourous dystopian theatre, a Russian court has fined Google more than there is money in the world, because YouTube won't disseminate their state misinformation. The amount (in US dollars) is US$$20,000,000,000,000,000,000,000,000,000,000,000. I have no idea how to pronounce that. Compounding the oddness, they want South African courts to enforce the judgement.
Breaking a 17 week trend, container shipping freight rates actually rose last week, up +4% from the prior week, to be +126% above pre-pandemic levels. Bulk cargo rates fell -3.5% on the same prior-week basis, to be very similar to what they were a year ago.
The UST 10yr yield is now at just under 4.27% and down -2 bps from this time yesterday. The key 2-10 yield curve is still positive at +12 bps. Their 1-5 curve inversion is also now less inverted, now also by -12 bps. And their 3 mth-10yr curve inversion is less inverted by -42 bps. The Australian 10 year bond yield starts today at 4.57% and up +5 bps. The China 10 year bond rate is little-changed at 2.15%. The NZ Government 10 year bond rate is just on 4.50% and up +2 bps.
Wall Street has started its Thursday with the S&P500 down -1.7%. Earnings guidance from some majors is causing the re-think. Overnight, European markets were lower, all by about -1%. Tokyo ended yesterday down -½%. Hong Kong was down -0.3%. Shanghai rose +0.4% yesterday. Singapore was closed for Diwali. The ASX200 ended its Thursday session down -0.2%. And the NZX50 ended its session down -0.4%.
The price of gold will start today at US$2739/oz and down -US$37 from yesterday and well off its high.
Oil prices are up +50 USc US$69/bbl in the US while the international Brent price is unchanged, still at US$72.50/bbl.
The Kiwi dollar starts today at 59.6 USc and down -20 bps from this time yesterday. Against the Aussie we are also down -20 bps at 90.8 AUc. Against the euro we are down -20 bps too at 54.9 euro cents. That all means our TWI-5 starts today at just on 68.6, and - no surprise - down -20 bps from yesterday at this time.
The bitcoin price starts today at US$70,389 and down -2.4% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.
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52 Comments
Haven't we got our own version of that already?
Borrower :"Look. I can't pay the loan off"
Lender: "No problems! How about we lengthen the term of the loan? No? Ok. What about Interest Only then? Still tricky. How about a Distressed Loan Interest Rate that's a bit below what others are paying. But don't tell anyone. And when you get on your feet in, say, 2 years time we'll have another look at your loan when the value of your collateral has gone up. Then you can sell and repay us the amount outstanding"
Sounds good. Unless.......
Yes, this is why our default rate isn't up. You can push your loan term to 30 years with a five-minute phone call (whatever your age). A bit longer on the phone can get you interest-only or a temporary discount rate. Banks are bending over backwards to keep things afloat.
Because several people I work with have done exactly that. One is sat next to me now(!) They were moving off a fixed rate to a higher rate. They asked to move to interest only. The bank's agent said that this would take a week or so but they could move to a fixed rate and a longer-term straight away. They moved to 25 years (they are in their late 50s). I presume that this is not available to people with negative equity, but it absolutely common place. How do you think people have afforded mortgage costs doubling?
I did this last week , but not for 30 years. From 2 years out to 7. The rather "chatty" lady on the phone explained she could do this without going "higher up" , because it was well within the original approved amount and term.
She was the first one i spoke to that understood I had been paying ahead of the original schedule and payments , before that it felt like i was been penalised for paying off the loan quicker.
As this downtrend continues, more unfortunate people will discover their equity has run dry along with refinancing options. Has the huge run up in prices over such a short space of time just forestalled the inevitable? Watch this ( )
If you think this all looks rather precarious, you're not alone.
I imagine if you are ahead on repayments (which a lot of people are) then it should be easy for them to push the loan term out (which is really just setting it back to the original setting). In other cases wouldn't it be considered new lending and trigger the CCCFA?
Neither do I, but it seems like a bit of a hole of you can pass the CCCFA on one set of terms and then change the terms later. Maybe it doesn't trigger the CCCFA unless the payments increase.
I wanted a 20k mortgage topup a while ago for some renovation work. Spent about an hour on the phone answering all sorts of stupid questions even though we had a mortgage with that bank for more than 10 years and had always paid more than the minimum repayment. In the end I gave up when they started asking me about how I was planning for retirement, despite that being decades away and the bank also having my quite decent Kiwisaver account.
When its this bad...... they just have to extend, pretend and lie.....why the hell not 100 year terms/???- Enslaving your grandchildren is a great idea!
Its Ponzi Protection....until the Dam wall is so pockmarked and soggy, she just let's go. The Bottom is to be found somewhere between 2026 to 2028 and at 2012 to 2015esk levels!! This slide is precipitous
This and the Google fine does make things look just a tad farcical - garbage time. COVID changed things - I think people believed life would carry on as it had over the previous two decades - COVID came along and shattered that illusion ( I think the process was already under way - just accelerated by COVID).
ANZ attempting to lock in higher for longer?
"It is getting closer to the time when locking in a longer-term home loan rate might be worth it, ANZ economists say, with retail rates having dropped further than the official cash rate (OCR) might fall, and global rates pushing up."
https://www.rnz.co.nz/news/business/532531/interest-rate-warning-from-c…
Here's a link to that case - McDonalds were 80% at fault:
Liebeck v. McDonald's Restaurants - Wikipedia
I would strongly recommend Murray that you listen to two very respected Americans discussing which two countries pose the greatest "threat to the stability of the planet" .
Hint - neither of them is Russia.
"In a piece of humourous dystopian theatre, a Russian court has fined Google more than there is money in the world, because YouTube won't disseminate their state misinformation."
In terms of getting coverage, its good marketing ...
Misinformation - as judged by Google execs? Its a slippery slope
It's an important discussion. And as you suggest difficult to solve. The dawn of the information age held great promise about being able to make more informed choices and decisions. Naively, as usual, the darker side of the human psyche was ignored. Some people cannot accept being disagreed with, and being proven wrong.
With AI becoming more powerful it is possible that it will become harder to discern facts from fiction. It seems it is even fraught to use the word 'truth' as there is a segment of discussion that argues that 'truth' is simply what someone believes, irrespective of any supporting data or facts. In some respects that is being played out in the US right now. But it stands that even historical records may not be accurate if (Edit) the original records portray something some group disagrees with or dislikes. Some of the more radical forms of Islam demonstrate that.
How do we solve this problem?
Definitions from Oxford Languages · Learn more
truther
/ˈtruːθə/
noun
informal•US
plural noun: truthers
-
a person who doubts the generally accepted account of an event, believing that an official conspiracy exists to conceal the true explanation; a conspiracy theorist.
"she denied evolution, AIDS/HIV, and was a 9/11 truther"
S&P closing on its lows. NASDAQ down 2.25%. Gold continuing to fall. I wonder why? Perhaps the UK gives us a clue....
" Leading economist Julian Jessop wrote: “It’s premature to talk about a ‘meltdown’, but today’s jump in the cost of UK government borrowing is worrying"
That's more or less the view that I expressed to those I knew who were running around in a panic 2012 because the 5000 year Inca calendar came to an end and they accepted the argument that it foretold the end of the world. I just suggested to them that the book had not yet been written on what followed it. That provided an opportunity for our contribution. So far it is going........
Great program on Aljazeera on performance enhancing drugs in the USA at present. I didn't realise how far past just steroids we have moved. All over Tik Tok with people taking and promoting the stuff nowadays as well as dropping dead along the way.The one interesting fact was 107,000 people a year are dying of Fentanyl OD. Don't watch it if you don't like needles.
During the potential vice presidents debate it was acknowledged that there was a mental health crisis in the States. It was a acknowledged but there no discussion. It was disappointing. Reading Reddit I've come across posts along the lines of "I'm 19 and behind in life" . In many ways I am stunned - 19 and you're behind - your life hasn't even started yet I guess this comes from people comparing themselves to others - a fatal flaw in the human psyche.
Social Media is literally killing people. Now the "Haves" are openly flaunting their riches and in some instances its probably not even real so all those in the "Have Not" group are suffering from depression. So much better off growing up in the 1970's, no internet, no mobile phones, no social media and a whole lot lower level of mental problems and suicides. By the time all this largely unnecessary shit came along I was old enough to handle it, now parents give their 5 year old a phone and wonder why they have problems by 19.
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