Here's my summary of the key issues from over the weekend that affect New Zealand, with news of new aggressive anti-foreigner rules in Australia.
But first, US data out over the weekend, while not terrible, did little to alleviate growing worry about the immediate direction of the US economy. Two factory sentiment surveys, the ISM and PMI both reported anemic changes, although it must be recalled output is still strongly expansionary. But things are moderating noticeably.
But two top Federal Reserve officials both talked up the prospect of rate hikes, saying that even at the June review, a decision to increase their policy rate will be "on the table".
In China, factory surveys there were much tamer. The official one of large enterprises is still barely positive, the HSBC one still shows minor contraction.
To try and get their juices flowing again, China made some technical changes over the weekend to improve their sagging jobs market. It is not going to be easy.
Other recent easing policies, especially in their real estate market, seem to be having an impact. Home sales in key markets are trending higher again.
But worries about the sustainability of their growth is having a direct impact on individual household budgets: their savings rate has soared and shows no sign of declining. Faith in the future is low in China.
In Australia, their factory sector continued its steady, painful shrinkage in April. They haven't had any meaningful expansion in this sector since 2013. Their factorys' prospects are in stark contrast to ours - although our expansion is also slowing.
Australia is changing in other ways too. Firstly, they are getting tougher on foreign purchasers of real estate who don't play by their rules. They are also changing the rules (although those changes don't apply to Kiwis thanks to existing treaty provisions).
And secondly, their farmland is being eyed for major investment by Chinese beef suppliers. The Chinese are really interested because purchases there can quickly give it scale, something New Zealand can never offer.
Back in New York, the UST 10yr benchmark yield rose again on Friday to 2.11%.
The US oil price held at US$59/barrel, while Brent crude also held at US$67/barrel in final trading last week. And over the weekend, Iraq said it exported a record 3 mln barrels per day in April. At the same time, last week's US rig count fell again, as did the international count.
The gold price slipped a little further to US$1,178/oz.
The New Zealand dollar starts the week lower at 75.4 US¢, at 95.9 AU¢, and 67.3 euro cents. The TWI-5 is now at 79.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »
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17 Comments
Back in New York, the UST 10yr benchmark yield rose again on Friday to 2.11%.
Hmmmm..- A buyer of 10-year German bunds last Friday was willing to accept an annual yield of 15 bps. That same buyer lost 210 bps of principal on those bonds this week, as yields surged 22 bps. At this point, I’ll assume most global “bond” investors have forgotten how quickly losses can be incurred. This week saw French yields surge 23 bps to 0.65%. UK bond yields jumped 19 bps this week to 1.84%. Japanese JGB yields rose seven bps to a five-week high 0.36%. Ten-year Treasury yields jumped 21 bps to a seven-week high 2.12%. Long-bond yields surged 22 bps to near four-month highs. Read more
Losing 2.1% of one's principal, over a week, in a sovereign market that issued the same security (bund) with a 0.5% ann.coupon back in February, is unsustainable volatility.
So it's not true when professional bond investors claim " you can't lose with bonds , mate ! " ....
... serves them right for not investing in something rock-solid which never goes down , in Auckland residential housing for instance ... professional house investors know its true ...
Too true Mr Chaston. And yet the over bidding at sovereign debt auctions remains intense due to the perception that state printed money will ensure the opposite. Foreign professionals in possession of such remain committed to NZDMO tenders. Whose money do they intend losing?
Around the traps the top news stories today appear to be the miraculous recovery of a 101 year old Nepalese man from the rubble of his home , unscathed a week after the devastating earthquake which shook the Himalayan kingdom to pieces .... and the new royal baby , born to Wills Windsor and Kate , in London ...
... Gummy suggests that as the Queen Mother was 101 years old herself when she died , we ought to link the amazing Nepalese people to the royal family , and name the new princess after the 101 y.o. survivor ...
I give you the Princess Funchu Tamang Windsor .... bow , curtsie and tug your forelocks you colonial plebian oinks !!!!
FED reserve rate hikes are still on the cards - AGAIN - who believes the propaganda?
David i hate this new setup. Its messy to format. You cant find past articles and comments. We need a search engine to search the search results. Whats happenning - going to the pack in my opinion.
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