Here's my summary of the key issues that affect New Zealand overnight with news of many central banks talking or taking action.
But first, American consumer spending rose at a brisk pace in November as lower petrol prices gave their holiday shopping season a boost. A tightening labour market and lower jobless claims are starting to spur faster wage growth, which together with those lower petrol prices is helping to stimulate consumer spending.
In Russia their central bank raised interest rates overnight to 10.5% from 9.5%, the second hike in six weeks, as it seeks to control surging inflation as their economy really struggles under sanctions and the low oil price. The rate-rise action failed to halt the ruble's slide.
In China, their central bank is to pump nearly 400 bln yuan (NZ$85 billion) into their banking system in an effort to spur growth. That comes as their leadership revealed a willingness to accept a 'new normal' of slower economic growth. Lower reserve ratios are coming too, in response to yesterday's low inflation data. It seems odd to me that lower oil prices don't seem to be helping the Chinese economy.
Norway cut rates overnight, slicing 25 bps off ther benchmark rates to 1.25%.
In Australia overnight, their Reserve Bank chief said explicitly that he wants the Aussie dollar to fall to levels last seen a decade ago - about 75 USc from the current 83 USc - and says official interest rate cuts need to be delivered in a way that boosts confidence rather than remind people of their economy’s woes. But he also downplayed more rate cuts soon.
We don't often have share market news, but for those who follow the growth of peer-to-peer lending, shares in Lending Club, the world's largest peer-to-peer lender, surge more than 65% to US$24 per share in their New York Stock Exchange debut, valuing the firm at nearly US$10 bln.
Benchmark UST 10 year bond yields slipped again in New York today and are now at 2.19%.
The oil price has fallen again and is now flirting with US$60/barrel and the Brent price is just on US$64/barrel.
The gold price is unchanged at US$1,228/oz level.
Meanwhile our currency rose sharply yesterday and bedded in overnight after the RBNZ MPS. We start today at 78 USc, 94.4 AUc, and the TWI is at 78.7
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 »
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5 Comments
Hugely significant article from a prominent Washington insider:
http://seekingalpha.com/article/2746305-this-time-is-the-same-like-the-…
Guffaw. All of a sudden the shale oil debt bubble meme is going mainstream:
http://finance.yahoo.com/news/fed-helped-cause-550-billion-143354747.ht…
'The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.
Borrowing costs for energy companies have skyrocketed in the past six months as West Texas Intermediate crude, the U.S. benchmark, has dropped 44 percent to $60.46 a barrel since reaching this year's peak of $107.26 in June.
Yields on junk-rated energy bonds climbed to a more-than-five-year high of 9.5 percent this week from 5.7 percent in June, according to Bank of America Merrill Lynch index data. At least three energy-related borrowers, including C&J Energy Services Inc. (CJES), postponed financings this month as sentiment soured.'
And so on......
And the real kicker:
'Midstates Petroleum Co. (MPO) is spending about $1.15 drilling for every dollar earned selling oil and gas. OUTSPENDING CASH FLOW IS THE NORM for many companies in the U.S. shale boom.'
We are all, in a very short order, going to see what the US shale oil bubble was really all about.
Coming in thick and fast now - companies in the US shale oil patch already going into liquidation, alas poor Red Fork Energy, we knew you not at all:
http://www.abc.net.au/news/2014-12-11/oil-price-drop-claims-first-wa-vi…
"So, now the price of oil is down where it is, the shale gas producers might find they are unable to service their debt, so there would be a lot of non-performing loans," Mr Strachan said.
"By some reports, $15 trillion of funds has been lent to this business, so it may well be in fact that it's not the oil companies that are in trouble, it's the banks."'
How interesting, and they are blaming the FED, Obama, Saudi anyone but their own broken business model of a) costs too high, b) over-supply.
I look forward to the class actions, there wont be any criminal fraud charges I'll bet.
"banks" yes plus whos doing the hedging? ie a double whammy?
So it looks like the business model is the shale player goes to the futures market and gets a guaranteed price for 2 years on the oil he'll drill for as that is his break even. With that "guarantee" he goes to a bank and gets a loan to drill.
What's the bet that the bank is not only lending the money to drill but also has that hedge which is now bleeding $20 to $30 a barrel on them? Or maybe some hedge funds in the action?
So when the oil industry says its OK for 2 years no worries what they are really saying is the poor buggers holding the futures contract are that are losers, for now.
oh boy could this get interesting...
We don't often have share market news, but for those who follow the growth of peer-to-peer lending, shares in Lending Club, the world's largest peer-to-peer lender, surge more than 65% to US$24 per share in their New York Stock Exchange debut, valuing the firm at nearly US$10 bln.
The reasons for such a mispriced IPO to garner such pump support can sometimes be attributed to excess funding looking for a home.
Others noted the same phenomenom.
This Is The Biggest Buying-Panic In Stocks Of The Year
And all because of;
TDF Operation ID:
F54
Total Amount Awarded:
$402,152,500,000
Number of Participants:
97
The awarded deposits will settle on December 4, 2014, and will mature on December 11, 2014. The interest rate of 0.30000 percent will apply to all awarded deposits. Read more
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