Here’s my summary of the key events overnight that affect New Zealand, with news the leverage screws are being applied to globally important big banks.
But first, American stock indexes fell -1% in late morning trading today, their biggest fall in six weeks, as weak Chinese trade data and a cut in the OECD’s global growth forecast sparked fears about a global economic slowdown.
The OECD forecast suggests that emerging markets may be in for a rough rise but they also forecast a continuing positive outlook for trade for OECD members. The presumption is that rising interest rates along with low prices for hard commodities will hurt debt-laden emerging markets. They think China’s growth will slow from +6.8% this year to +6.2% in 2017. They peg New Zealand growth at +2.3% and headline inflation at +1.8% by 2017.
This comes as global financial regulators published new rules to stop banks from becoming “too big to fail,” which could force the world’s largest lenders to raise as much as US$1.2 tln by 2022 in debt or other securities that can be written off when winding down failing banks. The new rules mean that these institutions must have resources “readily available for bail in” equivalent to at least 16% of risk-weighted assets in 2019, rising to 18% in 2022. That implies an effective leverage rate of only 5.5 times, about half of the leverage banks in New Zealand have.
In Australia, the bank reporting season has kicked off with the local too-big-to-fail ANZ’s annual report revealing that CEO Mike Smith had total compensation last year of more than AU$10 mln. The same report shows that ANZ NZ boss David Hisco was paid NZ$4.8 mln. (Page 48.)
Back in the US, their labour market conditions index has come in more positive that analysts were expecting. They were expecting it to fall, but it in fact rose.
In New York, the UST 10yr yield benchmark continued its sharp rise and is now up to 2.37%. Local swap rates jumped in response to the weekend rise on Wall Street and will probably follow again today.
The US benchmark oil price is holding at the lower levels it reached on Friday, now still at US$44/barrel, and the Brent benchmark is at US$47/barrel.
The gold price also held after Friday’s drop and is still at US$1,088/oz.
The New Zealand dollar starts today essentially unchanged as well at 65.4 US¢, at 92.8 AU¢, and at 60.7 euro cents. The TWI-5 is at 71.2.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »