Here’s my summary of the key events overnight that affect New Zealand, with news of signs of an unintended outcome in Vancouver.
But first, American retail sales came in lower than expected in August, according to the ‘flash’ retail sales data out today. They were up only +1.9% on the same month a year ago, mainly because petrol sales were down -10.6% and department store sales were down -4.5%. Car sales were up +3.3%, hardware sales were up +6.6% and internet retailing was up +11% compared with the same month a year ago. Still, this was not enough for Wall Street, who expected stronger gains. They concluded this ends the likelihood of a rate hike from the Fed next week.
Or maybe that view was more about the Fed own release of data on industrial production and capacity utilisation, also out today. That survey from all the Fed regions showed a -1.1% fall in production but a +0.4% rise in capacity utilisation.
Either way, there is a ‘relief rally’ going on on Wall Street with equities up more than +1%.
However, the chances the Fed will raise interest rates in December have shot up in the past month to about 70%, according to a Reuters poll that showed economists are more convinced a move is on its way despite what is seen as weak data..
In British Columbia, Canada, their state coffers are expected to be filled fast by new taxes on Vancouver real estate. The state government now expects a $2 bln surplus for the year thanks to their new property transfer tax and fast-rising income taxes. They are signaling that about a quarter of these gains are about to go back into “housing affordability” programs. No specific details yet. But is does suggest that their new transfer tax is not holding back speculators – who are paying the tax and it is being added to house prices. Unintended consequence?
In Australia, one of the risks of outsourcing is playing out for ANZ. The bank is having trouble actioning home loan approvals because its major Indian back-office processing center is caught up in civil unrest in Bangalore. The issues there are nothing to do with ANZ; they are over regional tensions concerning water allocation. Staff in the Indian city have been told to stay at home for their own safety. ANZ Australia is paying a market-share price for the problem.
In New York the UST 10yr yield is unchanged today at 1.70%. There is a noticeable steepening bias in wholesale money markets however.
The oil price is also little changed in today’s trading, with the US benchmark price now just under US$44 a barrel, while the Brent benchmark just over US$46.50 a barrel.
The gold price is noticeably lower, now just under US$1,315/oz.
The New Zealand dollar opens a bit higher than this time yesterday, now at 73.1 US¢, and on the cross rates it is at 97.4 AU¢, and 65 euro cents. The TWI index is now at 76.4.
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 ».