Here's my summary of the key news overnight in 90 seconds at 9 am, including news of a fall in economic growth in the US.
Their first quarter economic growth came in much lower than was expected in today's second estimate, and also much lower than the advance estimate. It is now reported to have declined at a 1% pa rate in the March quarter, mainly on the back of bigger decreases in inventories than earlier reported. That's the first shrinkage since 2011. However, markets regard this all as old news. Stocks are higher and at record levels.
Initial unemployment claims for last week were better than expected however. In fact their 'moving average' trend is now at its lowest level since August 2007. 2.6 million Americans are on these jobless benefits.
And their pending home sales index rose in April but not by as much as was expected. Gains in the Midwest and Northeast offset declines in the West and South. In fact, this real estate activity is 9.2% lower than for the same period a year ago. These markets are a drag on the US economy.
A worldwide bond-market surge - that is, falling yields, rising bond face values - pushed yields to the lowest levels in a year on growing evidence central banks can keep stimulating economic growth without igniting inflation. And not only are rates low, credit spreads are declining as well.
In Japan, the first data on retail spending after their GST rise shows sales dropped at the fastest pace in at least 14 years. It had better bounce back fairly quickly or Japan's reform process may falter.
In China, analysts are increasingly sceptical that a major program of stimulus is not going on as is claimed by the Chinese government. It is and it is at a significant level now, says Nomura.
Back in the US, it is being reported that the US Justice Dept is seeking a massive $10 bln penalty from BNP Paribas for sanctions violations. In addition, it has been revealed that a very large fraud probe is underway targeting some big banks.
In Australia, and in an echo of an issue here, their Reserve Bank says foreign investors may be helping to push up the prices of some Australian homes, but are probably not crowding out first home buyers. The Bank's views were in a submission to a parliamentary inquiry into foreign investment in residential real estate.
Bond yields are still falling. The UST 10 yr benchmark is now down to 2.42%. Oil is up, especially in the US as pressure goes on to allow exports, and gold is down, now below $1,255/oz.
Stocks are higher again, with the S&P500 at a new record today.
On the exchange rate, we start today lower. The NZ dollar is currently at 84.7 USc and an eleven week low, at 91.2 AUc and the TWI is now at 79.0.
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
Daily exchange rates
Select chart tabs
4 Comments
Meanwhile seems like every day there is news out of the US that the shale story is not as many would have you believe it (and that is a rather important point given that a not insubstantial part of the US 'growth' of the last 4 years has been dependent on the 'shale revolution'). Seems like all along many of the companies involved have merely been digging a debt hole to obtain this 'growth'. This piece from the bible of the oil industry, Rigzone, builds on yesterdays revelations form Bloomberg:
http://www.rigzone.com/news/oil_gas/a/133303/US_Shale_Debt_Increases_as…
''Recent analysis by Energy Aspects show 6 years of progressively worsening financial performance by 35 independent companies focused on shale gas and tight oil plays in the United States.
“This is despite showing production growth and shifting a large portion of their activity to oil since 2010, presumably to chase a higher-margin business,” he added. Oil and gas production by the companies represented 40 percent of output in unconventional plays in last year’s third quarter.''
And the huge problem they face is that they are having to run faster and faster just to remain still:
''Furthermore, independent producers will spend $1.50 on drilling this year for every dollar in return, Bloomberg noted in February. Producers will have to drill 2,500 new wells a year just to sustain output of 1 million barrels per day in the Bakken, according to International Energy Agency ''.
When the debt tap gets turned off you can kiss goodbye to shale............
How's this for contrary
Two same day announcements
Two different government instrumentalities
The RBA releases a statement that Foreign buyers are not to blame for property prices:
Reserve Bank 1 hour ago
RBA says there is no evidence overseas buyers are squeezing locals out of housing market.
Simultaneously the Victorian State Government (VIC population same size as NZ) thinks it is and announces it is ACTUALLY undertaking an INVESTIGATION into Foreign investment in Victorian property Will keep you posted
Auckland landlord wants to rent caravan for $200 per week - http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=112…
It will be Interesting to keep an eye on Reggie Middleton: he's bankrolling (the old way, presumably) a Bitcoin additional layer named Ultracoin, patents pending, that he claims will disintermediate banks, brokerages, and a whole lotta other ticket-clippers. Bitcoin holder will be able to trade directly with others - cloud banking. Naturally, Ultracoin -er- clips those tickets.
So, perhaps more of a New Intermediary rather than pure disintermediation (which I'd take to be the disappearance of intermediaries).
But as RM was the guy who predicted AAPL's margin compression a couple of years before the fact (and one would imagine, shorted the stock in time to reap a handsome reward), definitely one to watch.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.