The Reserve Bank of New Zealand (RBNZ) left the official cash rate (OCR) unchanged at 3.5%. The rate statement suggested some softening in global economies apart from the US.
A strong construction sector, high net immigration and historical low interest rates continue to support the expansion of the economy. In addition, it is important to note that a further depreciation of the New Zealand dollar is expected.
Thursday, October 30, 2014
FOMC does not make sense: Ending QE and expecting inflation to rise
The Federal Reserve (Fed) is set to end its quantitative easing programme end of this month. The asset-purchase so far has added $ 1.66 trillion to the Fed`s balance sheet.
In the Federal Open Market Committee (FOMC) press release, it was stated that labour market conditions improved "with solid gains and lower unemployment rates." Everything else seems in place except the housing market which recovery is still sluggish.
Slowness in the global economy and low inflation levels are key risks the Fed needs to combat. Ending quantitative easing (QE) means pumping less cheap money into the US economy, slowing down recovery and driving inflation rates down.
Narayana Kocherlakota, the Minneapolis Fed President dissented "in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level."
Clarence Lim, a trading associate remarked that the decision to end QE does not make sense although he acknowledges "QE is no longer the fad".
In the Federal Open Market Committee (FOMC) press release, it was stated that labour market conditions improved "with solid gains and lower unemployment rates." Everything else seems in place except the housing market which recovery is still sluggish.
Slowness in the global economy and low inflation levels are key risks the Fed needs to combat. Ending quantitative easing (QE) means pumping less cheap money into the US economy, slowing down recovery and driving inflation rates down.
Narayana Kocherlakota, the Minneapolis Fed President dissented "in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level."
Clarence Lim, a trading associate remarked that the decision to end QE does not make sense although he acknowledges "QE is no longer the fad".
Wednesday, October 29, 2014
Business confidence doubles in New Zealand
The ANZ business confidence doubled to 26.5 in October. The report`s subheading "Feeling wheelie good" indicated that business conditions are improving.
Monday, October 27, 2014
Business confidence in Germany drops
Bloomberg mentioned that the German business confidence dropped for the sixth month now, highlighting more trouble in the Eurozone. The confidence level dropped to 103.2, worse than last month`s 104.7.
Sunday, October 26, 2014
Economic news/data for the week
On Tuesday, the RBA released its monetary policy minutes. The cash rate is left unchanged at 2.5%. This was then followed by China`s GDP. The economy grew a tad more than expected at 7.3% but still 0.2% off the GDP from the previous period. In addition, the industrial output at 8.0% beat estimates and prior data.
With the acceptable Chinese GDP, the Australian consumer price index (CPI) beat forecasts by growing at a pace of 0.5% on Wednesday. This is the same level as the previous quarter.
In the evening, the Monetary Policy Committee (MPC) released its asset purchase facility votes and bank rate votes. Both were unchanged, in line with expectations. US CPI grew by 0.1% after last month`s disappointing contraction of -0.2%. The core CPI displayed the same number but did not meet the target rate of 0.2%.
It was New Zealand`s turn on Thursday. The CPI remained at 0.3%, failing to meet estimates of 0.5%. China`s HSBC flash PMI manufacturing indicated a growth in the manufacturing sector. The flash PMI bettered estimates and September`s results. More bad news for the Eurozone as the French manufacturing sector contracted yet again as seen from the flash PMI`s uninspiring numbers.
However, Germany did show a growth at a flash PMI of 51.8, ahead of estimates and the previous month. UK retail sales dropped to -0.3%, worse than what economists predicted and last month`s rate. The unemployment claims in the US rose by 17 thousand this week, not what economists predicted.
Finally on Friday, New Zealand`s trade balance stood at -1 350 million. This deficit is more than double of what was expected. UK`s preliminary GDP met the forecast of 0.7%, although this figure is still less than the previous quarter. New home sales in the US increased by only a thousand, falling short of the target sales of 473 000.
With the acceptable Chinese GDP, the Australian consumer price index (CPI) beat forecasts by growing at a pace of 0.5% on Wednesday. This is the same level as the previous quarter.
In the evening, the Monetary Policy Committee (MPC) released its asset purchase facility votes and bank rate votes. Both were unchanged, in line with expectations. US CPI grew by 0.1% after last month`s disappointing contraction of -0.2%. The core CPI displayed the same number but did not meet the target rate of 0.2%.
It was New Zealand`s turn on Thursday. The CPI remained at 0.3%, failing to meet estimates of 0.5%. China`s HSBC flash PMI manufacturing indicated a growth in the manufacturing sector. The flash PMI bettered estimates and September`s results. More bad news for the Eurozone as the French manufacturing sector contracted yet again as seen from the flash PMI`s uninspiring numbers.
However, Germany did show a growth at a flash PMI of 51.8, ahead of estimates and the previous month. UK retail sales dropped to -0.3%, worse than what economists predicted and last month`s rate. The unemployment claims in the US rose by 17 thousand this week, not what economists predicted.
Finally on Friday, New Zealand`s trade balance stood at -1 350 million. This deficit is more than double of what was expected. UK`s preliminary GDP met the forecast of 0.7%, although this figure is still less than the previous quarter. New home sales in the US increased by only a thousand, falling short of the target sales of 473 000.
Friday, October 24, 2014
First meal in 40 hours
I`ve missed out a number of high importance data from Tuesday. I had a bad case of food poisoning and only recently had a meal since Wednesday night.
I`ll summarize the necessary data I`ve missed in a single post.
I`ll summarize the necessary data I`ve missed in a single post.
Monday, October 20, 2014
ECB is purchasing covert bonds
The European Central Bank (ECB) acquired short-term French and Spanish notes. The IMF has projected a growth of 1.3% next year, down from the 1.5% predicted in July by Mario Draghi. The bond purchasing is expected to improve the deflation risk Eurozone has been facing so far.
With the additional money supply pumped into the economy, the Euro should depreciate against major currencies. EUR/USD is looking good to short for those who have not entered.
With the additional money supply pumped into the economy, the Euro should depreciate against major currencies. EUR/USD is looking good to short for those who have not entered.
Vix index
The guardian has a write up on the Vix volatility index. It`s a good article as it is written with a layman approach.
Friday, October 17, 2014
How to make a million dollars
I was reading "The Millionaire Messenger" by Brendon Burchard yesterday. To be blunt, it`s one of the less interesting/ impactful books I`ve read this year. Do not be fooled by its philosophical title, the focus is on informational marketing. However, there is one chapter that stands out regarding cash flows.
As per title, how to make a million dollars? The idea is this, conduct a seminar that charges $ 1 000 per person and get 1 000 people to attend (at once or through multiple seminars). There`s your million, as simple as that.
This of course is an extremely basic and theoretical approach on cash flows and one of the reasons why this is not the kind of book I would recommend others to pick up and read. The ideas are too simple and the content lacks any real depth to be impactful. I feel that the book is just another tool for the author to sell his advanced programmes. In addition, the author constantly brags on how much he can charge his clients.
As per title, how to make a million dollars? The idea is this, conduct a seminar that charges $ 1 000 per person and get 1 000 people to attend (at once or through multiple seminars). There`s your million, as simple as that.
This of course is an extremely basic and theoretical approach on cash flows and one of the reasons why this is not the kind of book I would recommend others to pick up and read. The ideas are too simple and the content lacks any real depth to be impactful. I feel that the book is just another tool for the author to sell his advanced programmes. In addition, the author constantly brags on how much he can charge his clients.
1.02 million new building permits approved
Slightly over a million new home construction took place in September. This is a growth of 6.3% from August`s 957 000.
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