90 seconds at 9 am: Another NZD run-up?

Equities hit record highs; US prices fall, durable goods orders rise; EU exempts France; wholesale rates fall; oil and gold stable; NZ$1 = 75.4 USc, TWI = 78.5

27th Feb 15, 7:29am by David Chaston

Here's my summary of the key issues from overnight that affect New Zealand, with news we are ending the month with the NZD about to take a fresh run at parity with the AUD.

But first, global equities set new record highs and bond yields sank to fresh lows overnight as investors positioned for an extended era of cheap money ahead of the ECB's looming bond-buying scheme.

In the US, consumer prices fell over the past year for the first time since 2009 as petrol prices continued to fall, which could allow their central bank some space to delay raising their benchmark interest rate.

But then again, the steady rise in American employment levels may drive a rate rise. At least that is the opinion of the forecaster with the most accurate track record in Reuters polls in 2014.

Durable goods orders in America are rising again after two months of going nowhere. There were up +1.6% pa in January and shipments were up more than +3%. Capital goods orders were up a remarkable +9.5% in January.

The European Commission overnight has recommended what amounts to a two-year extension for France to cut its deficit, which exceeds a 3% ceiling.

New Zealand trade minister Tim Groser is warning that the TPP deal agreement window is now getting very narrow. He pointed out yesterday that unless the negotiations are wrapped up in about 15 weeks the opportunity will be lost.

The UST 10yr yields fell back a tick in New York and are now at 1.97%. We start today with our swap rates for terms 2 - 10 years very much lower today especially at the long end. Flattening pressures are returning.

The crude oil price is range bound at just under US$49/barrel with Brent crude just on US$61/barrel.

The gold price similarly stable and now at US$1,208oz.

The New Zealand dollar is now at 75.4 USc, and has jumped a lot - about 1c - against the Aussie to 96.5 AUc and near its all-time post float high again. The TWI is back up to 79.1. We are also near another post-float high against the euro.

If you want to catch up with all the changes yesterday, we have an update here.

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21 Comments

by skudiv | 27th Feb 15, 8:53am 1424980419

I don't have any confidence in an agreement that effects our laws, written by business people behind closed doors. In this case the US is super keen to push this through which makes me even more suspicious. NZ doesn't have much in the way of trade restrictions, so maybe we don't have much to lose except cheap healthcare. Bi-lateral trade agreements are a much better option, and you can get all the details right. I wont be upset if this whole thing falls apart, though I think do or die the US is going to get it through, and that tells you who benefits from it.

by King of the whiners | 27th Feb 15, 9:42am 1424983366

If the TPPA goes through you can expect plenty more situations such as this arising:

“The Philip Morris tobacco company is currently suing the Australian government over its tobacco plain packaging legislation, using an obscure 1993 Hong Kong- Australia investment treaty. Philip Morris is actually a US-based company, but could not sue under the US-Australia Free Trade Agreement, because public opposition kept this clause out of the agreement. Philip Morris rearranged its assets to become a Hong Kong investor in order to use an obscure treaty. This shows how giant global companies can abuse such clauses in trade agreements,’’ said Dr Ranald.

http://aftinet.org.au/cms/node/519

“Big tobacco and other global corporations are lobbying hard to include the right of foreign investors to sue governments in the current negotiations for a Trans-Pacific Partnership Agreement (TPPA) between the US, Australia, New Zealand and six Asia-Pacific countries,” said Dr Ranald.

And the public won't know a thing about it until it is on the books.....because it is a secret.

by steven | 27th Feb 15, 12:05pm 1424991919

I wonder who in NZ actually likes the TPPA? farmers apparantly? of course at the rate we are going it will be foreign owned farms selling to the USA.

So who cares really, who needs NZers? we just get in the way, unless bought out with baubles and trinkets.

by antonymouse | 27th Feb 15, 4:20pm 1425007212

From Australia:

The Trans-Pacific Trade Partnership, is essentially all the the dirtiest corporate schemes you can imagine rolled into one. It is being pushed and pushed on lawmakers around the world. https://www.youtube.com/watch?v=M9ZFDpuiFUs And from Wikileaks: This is a story you want to follow - if this thing passes, corporations can sue governments for threatening their profits. That’s not all, this deal could reduce labor rights, internet freedom, food safety standards and environmental protections. It's being pushed on the fast lane in legislation, and despite some dissenting voices in Congress, it's gaining speed. As if I needed to say it...this isn't good. Wikileaks has released another bombshell - this time publishing a portion of text from the secretly negotiated Trans Pacific Partnership. Now that the text is out in the open - will lawmakers in Washington finally realize how devastating the TPP is to the American economy? https://www.youtube.com/watch?v=bPIsjH25GHo

by King of the whiners | 27th Feb 15, 9:20am 1424982013

Ain't it strange? When US weekly jobless claims fall (as they did last week), your host is all over it like a rash:

http://www.interest.co.nz/news/74140/us-jobless-claims-fall-germany-say…

''But first, the number of Americans filing new claims for unemployment benefits fell more than expected last week, offering fresh evidence that the US labour market was gathering steam, and easing concerns over last week's unusual blip.''

But when they jump up - as they did in a big way today - estimate 288,000, came in at a big 25,000 over predictions at 313,000 (and +31,000 over the previous week) it is though the unemployment claims figures just don't exist...........(another 'unusual ' blip perhaps?). Moving 4 week average now up 11,500 too.......

Funny that.

by steven | 27th Feb 15, 9:32am 1424982720

Ditto Baltic Dry Index "ups"

Lots of ppl commenting on short term apparantly "good" upticks. Silence on the medium and long term trends.

Lots of ppl giving an opinion on what happened over night in say the currency. Isnt hindsight great. Utterly pointless as its history and no way to verify.

More and more I get the impression that there are a lot of "professional financial people" who really dont know any better than us amateurs but wear such big right wing (for want of a better term) blinkers they cant see so much.

by Chris-M | 27th Feb 15, 9:30am 1424982641

Has any other country ever gained more than they lost out of an "FTA" with the USA?

Canada
Mexico
South America
Australia

by steven | 27th Feb 15, 9:35am 1424982908

Add vietnam, they expected their cat fish to sell well until US interests scuppered that in congress.

Really we are fools to even consider dealing with a corrupt , almost bankrupt banana republic that is happy to shoot you for what they want if they fail to get it by any other means.

stupid, really stupid.

by Chris-M | 27th Feb 15, 9:45am 1424983507

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We may be better off with a less ambitious deal without the protectionist, aggressive and intrusive nations. Ie exclude Japan and the USA. I am sure that it would be a more equitable deal and more readily achieved. Let the other two cool their heels and remain on the outer. It might give them cause to reconsider their stance and admission would then be on the terms that suit the block that has been established. That is if you can really trust them and want them.

PS Sorry about the garbage above it appeared when I copied and pasted from a word Doc

by OMG_WTF | 27th Feb 15, 9:43am 1424983422

This government is a litany of stupid, stupider, stupidest since they came in.

by steven | 27th Feb 15, 9:59am 1424984393

but Labour would have been better? I have difficulty believeing that.

by OMG_WTF | 27th Feb 15, 11:16am 1424989017

Can only compare Labour's last 3 terms to the current 3 terms. And there'd be no Kiwi troops in Iraq for sure.

by Alter Ego | 27th Feb 15, 11:17am 1424989035

That figures. NEW HEAVIEST ELEMENT DISCOVERED: Oxford University researchers have discovered the heaviest element yet known to science. The new element, Governmentium (symbol=Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons and 198 assistant deputy neutrons, giving it an atomic mass of 312. These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called pillocks. Since Governmentium has no electrons, it is inert. However, it can be detected, because it impedes every reaction with which it comes into contact. A tiny amount of Governmentium can cause a reaction that would normally take less than a second, to take from 4 days to 4 years to complete Governmentium has a normal half-life of 2 to 6 years. It does not decay, but instead undergoes a reorganisation in which a portion of the assistant neutrons and deputy neutrons exchange places. In fact, Governmentium's mass will actually increase over time, since each reorganisation will cause more morons to become neutrons, forming isodopes. This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. This hypothetical quantity is referred to as a critical morass. When catalysed with money, Governmentium becomes Administratium (symbol=Ad), an element that radiates just as much energy as Governmentium, since it has half as many pillocks but twice as many morons. This was sent from UK. Equally applies here, just change the figures. Humour is seing the truth, in all elements of our society....or you would cry.

by OnwardsUpwards | 27th Feb 15, 10:06am 1424984805

Yes. Mexico gained heaps of manufacturing jobs at the expense of the U.S. worker under NAFTA.

by steven | 27th Feb 15, 10:16am 1424985402

but would have those jobs occured anyway? ie a big, cheap labour pool next door, no RMA? cheap energy whats not for a US corp to like?

by King of the whiners | 27th Feb 15, 10:29am 1424986161

Very little evidence that NAFTA benefitted Mexico, and plenty that it has harmed it:

http://www.cepr.net/documents/nafta-20-years-2014-02.pdf

Just read the exectutive summary to see a list of negatives as long as your arm - deterioration in the labour market, decimation of local agriculture, 14 million more below the poverty line, etc etc.

Most telling - Mexico's GDP growth rate has been half that of other non-NAFTA Latin American nations during the period covered by NAFTA.

You will have to try harder than that.

Oh, but it DID substantially benefit US corporations who made enhanced profits off the back of paying much lower wages to Mexican serfs. But then thats what such agreements are all about aren't they? Where would we be without benefitting deals that enriched major corporations?

by steven | 27th Feb 15, 10:14am 1424985288

Oil,

Apparantly storage is presently being filled and apparantly "investors" are storing yet more in tankers, When that storage is full the demand will drop, combined with 1~2mbpd excess got to wonder how much lower oil can go for 6+months out. Or may be it will climb, who knows these days.

by Stephen Hulme | 27th Feb 15, 10:16am 1424985365

TPP would link a dozen Asia-Pacific economies by eliminating trade barriers and harmonising regulations in a pact covering two-fifths of the world economy and a third of all global trade.

Not going to happen while key nations are deeply embroiled in currency wars - view more And despite whatever open mouth operations Fed officials undertake to dismiss the impact of a strong USD, the facts tell another story, which won't resonate well with the punters paying for the mentioned presidential election - read more

by steven | 27th Feb 15, 10:24am 1424985868

I can but hope.

On top of that with Congress and Obama at each others throats, what's the real win for Obama? v Congress? He has his legacy, the Affordable care act. Meanwhile lobbyists will be sending over $s hand over fist to their pet Congressmen so they have something to lose.

"read more" or are both these the effect of something else (not one causing the other)?

They are right they dont have PhD's in economics, sure have it in blinkered views though at times.

by Alter Ego | 27th Feb 15, 11:36am 1424990187

I hate to say it, but 14% on top of not very much, is still...not very much.

Statistically speaking, one can embellish all one likes, but it is numbers not being built, that truly counts, when housing ones own population..

by Mike B | 27th Feb 15, 4:22pm 1425007358

I think the DOW will be at just under 19500 by mid July