Here's our summary of key events overnight that affect New Zealand, with news of possible agreement on the NAFTA front.
The United States says it and Mexico agreed earlier today to a revision of the free trade agreement. Mexico however says it is still just an 'understanding' with still one issue yet to be resolved for them, without identifying it. Mexico seems to have done well in this revision however, one that will see a resurgence of manufacturing on its side of the border. The Mexican currency rose on the news; the US dollar slipped. The US has managed to weaken the other party's rights when there is a dispute. But that now puts pressure on Canada to come to terms an many unresolved issues, but especially on car manufacturing, to remain part of the three-nation pact.
In Germany, there has been a surprise improvement in their business sentiment. It jumped in August with more firms seeing their immediate future prospects brighten.
In Turkey, after a week of relative calm, the Turkish lira has started falling heavily again.
Brazil has posted a big trade deficit in July, after four consecutive monthly surpluses, due mainly to fast-rising interest payments.
In Malaysia, they have made an about-turn on a huge US$100 bln new city development that targets Chinese residents. They will no longer allow foreign ownership nor give visas to foreigners to live there. The change imperils the whole project. This change comes after Malaysia pulled back of some other Chinese-backed Belt & Road projects, saying they trapped Malaysia into unsustainable debt.
In China, new data shows large firm industrial profits up +17.1% in the first seven months of 2018 compared to the same period a year ago. Strong performances like this bolster the idea that China may find a way to avoid much of the tariff pain coming their way from the US.
In Tokyo, the world's first driverless taxi service has started operating on public roads, a trial that is expected to be completed and rolled out ready for the 2020 Olympics.
The UST 10yr is up +3 bps at 2.85% and the 2-10 curve is at +20 bps. The San Francisco Fed is pointing out the recession risk of the narrowing of this curve. They doubt the 'this-time-is-different' theories surfacing in some quarters. The Aussie Govt 10yr is at 2.54% (unchanged), the China Govt 10yr is at 3.65%, up +1 bp, while the NZ Govt 10 yr is at 2.61%, also up +1 bp.
Gold is slightly firmer again, this time by +US$4 from yesterday and is now just on US$1,209/oz in New York.
US oil prices are firmer today too, now almost at US$69/bbl. And the Brent benchmark is well over US$76/bbl.
The Kiwi dollar is also a little firmer at 67 USc. On the cross rates we are now at 91.1 AUc, and at 57.3 euro cents. That keeps the TWI-5 at 70.5 and comfortably above its recent three year lows.
Bitcoin is at US$6,729 and +1.0% higher than this time yesterday. And for the third day in a row it is above NZ$10,000.
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15 Comments
You are right Roger but that is how the world operates in terms of international relations. There is always power struggle involved in strategic partnership and trade deals. The weaker nation ends up selling their sovereignty to the stronger in return for economic growth and prosperity.
The power dynamics between NAFTA countries is no different from the China interfering in our internal affairs thanks to our degree of reliance on exports to China; or Germany running the show in the EU, incurring large surpluses at the expense of other member nations and lashing out on those threatening to leave the Union.
NZ is in a much stronger position than it realises. I can see a Canadian or mexican manufacturer with a fleet of trucks ready to transport product to USA would be easy to threaten. NZ exports to China and also many other countries. If China bans an NZ product invariably there is a world market and the transport costs barely change. To take the extreme example milk power is a major export to China with NZ having brand leadership since we do not have a reputation for adulterating our product (the reverse in fact). If China takes offense to some NZ govt action (say baby Ardern is photogrtaphed in Taiwanese nappies) so they decide as a dictatorship can to ban NZ milk powder. Then Danish milk goes to China and NZ picks up the Danish international market. We have allowed our MPs of Chinese origin in Labour and National to have too much power in influencing NZ policy - probably because they are such good fund raisers for their parties. Not that I recommend thoughtlessly tweaking the Chinese panda's nose but we ought to be able to treat China as we do say Japan (whales) and Australia (detention of Kiwis without trial).
While the shackles may be figurative rather than literal, and regardless of the terminology you wish to put on it, the end result is still a form of slavery.
The Americans should be ashamed that they allow their own corporations to act in such a way, and that they are a party to.
That the Mexican authorities accept such components of agreements (I do accept that they may have little choice) then it is not such a surprise that the drug cartels run amok!
I think of it as musical chairs. Everyone in the dance is un-willing to not take part because there are big short term profits to be made buying and selling off each other. I question however how many know full well they are gambling but are un-willing not to play and I'm sure more than a few think they can exit first and not get burned.
Share values are for me so massively over priced I wouldnt play that game, but in a monolithic system Im in it even if I do not want to be (and so are you).
China apparently keen to buy into Saudi Aramco https://uk.reuters.com/article/uk-saudi-aramco-ipo-china/exclusive-china-offers-to-buy-5-percent-of-saudi-aramco-directly-sources-idUKKBN1CL1WX
I love your 'autonomous' taxi. A " a set 5.3km route" 4 times a day.
At 1minute in on the video "there was a car behaving strangely so the driver took over"
Also note at the start when it is being parked etc , it is being driven manually. Would be good to know if it is able to park on it's own when it is on the fixed route.
Most Auckland drivers behave strangely, so I guess over here it would require a human driver to take over full time.
baby steps.
How Aussie got sucked dry
https://www.michaelwest.com.au/the-great-gas-con-how-we-got-sucked-dry/
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