Here's my summary of the key events overnight that affect New Zealand, with news expanding service activity is buoying many key economies.
It is a holiday on Wall Street today, so key data flows will be light. It might also be worth noting that there are now only 57 days until the US presidential election.
The G20 meeting of world leaders has ended in China, an inconclusive affair marred by Chinese attempts to dominate everything. Nothing of substance was resolved or decided. But at least leaders are talking together, personally.
Down the road in Hong Kong however, six 'independent' MPs have been elected to their Legislative Council, securing about 20% of the vote despite official pressures against them, and they are expected to annoy Beijing by calling for 'localist' policies. 'Localists' gained in this election, Beijing supporters gave ground. Beijing is in no mood to tolerate anything but the party line, so this may spell trouble for Hong Kong.
In Japan, their central bank governor signaled a readiness to ease monetary policy further using existing or new tools, and rejecting growing market concerns that the bank is reaching its limits after an already massive stimulus program. We will get to hear their plans on September 21, the day before the US Fed and the RBNZ reviews.
India's departing central bank governor warned overnight that central bankers are in a low interest rate trap. Once you let yourself in, you can't get out, he says. A lesson perhaps for New Zealand here.
There were some key services PMI data released overnight and they were generally expansionary. In the US, they slipped a little to a six month low. In Japan there was no growth. In China, they improved further. The most impressive data was out of Europe where the expansion is holding at a healthy level.
Reinforcing that, Euro-zone retail sales for July came in much better than analysts were expecting, growing +2.9% year-on-year.
In New York markets are closed. But elsewhere, trading shows the UST 10yr yield up slightly to 1.61% today.
The oil price is up by another US$1 with the US benchmark price now just over US$45 a barrel, while the Brent benchmark just over US$47.50 a barrel.
The gold price also gained, but only slightly, now at just over US$1,326/oz.
The New Zealand dollar is marginally higher today as well, holding on to the rises we saw yesterday especially against the greenback. It’s now at 73.1 US¢, 96.3 AU¢ and 65.5 euro cents. The TWI index is still at 76.5.
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 ».
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Japanese long-term bonds fell, with 30-year debt adding to its biggest weekly loss in almost 2 1/2 years, as investors prepared to bid at an auction of the securities Tuesday.
The 30-year yield climbed 3 1/2 basis points to 0.54 percent as of 12:29 p.m. in Tokyo, according to Japan Bond Trading Co. It was the highest since March. The yield jumped 16 basis points last week, the most since the period ended April 12, 2013. Read more
It's worse than that - there have been six rate cuts since early June 2015 - and the NZ dollar is now higher than it was six OCR cuts ago - http://www.rbnz.govt.nz/monetary-policy/official-cash-rate-decisions
The six OCR rate cuts have succeeded in fueling the housing bubble.
It pretty much backs up the point above
"India's departing central bank governor warned overnight that central bankers are in a low interest rate trap."
Or alternatively
Insanity: doing the same thing over and over again and expecting different results. Albert Einstein
Or alternatively
Is the combined intellect of the worlds governments and reserve banks so poor that they cannot see that this is not working. or Are they lining the pockets of the wealthy deliberately by showering them with money to inflate their assets at the expense of the general population?
You have to ask why they are doing it - because clearly they can't all be stupid. And it is because they have to do anything and everything to fend off deflation and keep the Ponzi ticking - real growth is dead and has been for some time. Without new debt growth, commodities will fall through the floor.
Once deflation settles in, there is no way back to business as usual.
Possibly we need tax breaks to encourage savers. Also need to encourage exporters as a two pronged approach to close the current account deficit. If we have a large external deficit at these interest rates (low interest on overseas debt) can you imagine what the deficit will go to when interest rates rise.
I think you are right DC. Trouble in Hong Kong for sure. Spent time in both recently and Mainland has no mood to toy about. They never have been. It's a lesson for NZ to learn - it's a hard cold world and China will take from us. Trade deals and friendship agreements are an illusion.
It is interesting. The South China Morning Post has been full of this issue for ages, but until this election we have hardly heard anything through our media. I wonder if it has anything to do with that recent attempt by the Chinese to influence various foreign media.
"It's a lesson for NZ to learn - it's a hard cold world and China will take from us"
Our relationship with China will be a bit of a worry for decades to come if for no other reason than the monumental difference in scale. The whole of Oceania represents just 2% of Chinese exports yet they are a huge part of ours and Australia's. They don't give a toss about us. Our Dear Leaders sickening, obsequious grovelling to them says it all. He's too scared to bring in laws for the good of the country without running it past Beijing first. Disgusting!
Precisely. So many believe that mass Chinese investment is a good thing for their personal net worth, but they forget the tipping point and the plutocratic, ambitious, resentful and non-allied foreign government in the background. It's not the individuals that are the concern. It's the Chinese government. What happens when Beijing decides that it is time to "protect" its brethren, a la Germany?
Why NZ? Southern Ocean fisheries, Pacific base positioning, encircle Australia, secure Southern Pacific vs US, water source, food source, wood source, labour source, Southern Ocean/Antarctic oil/mineral/gas exploration etc.
Do the nouveau-maison-riche think that they will be allowed to retain their big GZone house and late model Euro motor? Nope. Get in the soup queue. You work now.
China has been very active in the Pacific - the Cook Islands where they have a keen interest in their fisheries. The M.O. is to buy out the gullible local politicians - chuck a few baubles around; a new building (built and supplied by themselves) for example and end up with a huge chunk of the world's tuna fishery.
A bit like here really.
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