US housing starts fall, consents rise sharply; China house price rises wane, shadow banking assets fall; iron ore price tanks; UST 10yr yield 2.29%; gold and oil fall; NZ$1 = 64.4 US¢, TWI-5 = 70.3

Here’s my summary of the key events overnight that affect New Zealand, with news of a few bumps in the road in the US, China and Australia.

American housing starts in October fell to a seven-month low, weighed down by a steep decline in the construction of multi-family homes, but a surge in building permits suggested their housing market remained on solid ground.

By the time you read this, the US Fed will have released the minutes of its October meeting and observers will be looking for commitment signals for a December rate rise. Various Fed speakers have been on the hustings recently – and as recently as today – making sure we all understand it is coming. There should be no market surprises; its been the most well signaled policy event of all time.

In China, their real estate sector reported “a slowing recovery” in October, with new home prices in a reduced number of cities registering month-on-month rises. Of 70 large and medium-sized cities surveyed in October, new home prices climbed month on month in only 27, down from 39 in the previous month.

And in another sign of cooling, assets under management at China’s trust companies posted their first quarterly decline in five years, falling -1.6% from the June quarter, according to data released overnight. Trust companies, which take money from investors and lend out to other firms, are an important part of China’s informal – or shadow – banking system, which is a key source of funding for companies underserved by the main state-run banks.

And now we are getting reports that the Chinese president is acknowledging the headwinds his country is facing. At the G20 summit in Turkey just a few days ago he said China’s growth target of 7% will likely be reached this year. But at today’s APEC Summit in the Philippines he is backtracking somewhat, now talking about “considerable downward pressure and the temporary pain of deep reforms.”

The iron ore price is plunging, and that will be creating big headaches for Australian Federal and State tax revenues. And there are no expectations it will rebound.

In New York, the UST 10yr yield benchmark has slipped but only marginally today, now at 2.29%. Equity markets are higher again however on better earnings reports.

But the US benchmark oil price is lower yet again, now just on US$40/barrel, while the Brent benchmark is under US$44/barrel.

And gold continues to go south, now at US$1,064/oz. Even insiders don’t see any imminent improvement.

The New Zealand dollar starts today lower again at 64.4 US¢ and that is a whole 1c lower than where we started the week. Against the Aussie it is up however at 91 AU¢, and is a tad lower against the Euro at 60.6 euro cents. The TWI-5 is at 70.3.

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 »

Daily exchange rates

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