US household wealth recovers; China tightens capital controls; US trade slips; OECD sees rising inflation; ECB opens door to cuts; UST 10yr yield at 2.12%; oil and gold up; NZ$1 = 66.3 USc; TWI-5 = 71

US household wealth recovers; China tightens capital controls; US trade slips; OECD sees rising inflation; ECB opens door to cuts; UST 10yr yield at 2.12%; oil and gold up; NZ$1 = 66.3 USc; TWI-5 = 71

Here's our summary of key events overnight that affect New Zealand, with news China is showing some first signs of real economic stress.

But first, data for US household net worth in the March quarter of 2019 showed this wealth recovered sharply after the Q4 2018 plunge. It increased by a massive +US$4.7 tln or +4.5% after the -3.7$ drop in the previous quarter. And the growth in household debt slowed to +2.3% annual pace, the lowest rise since 2015. US household debt levels are now at 74.8% of GDP, a load that is slowly falling.

In China, they are tightening their capital controls, and that is having some interesting day-to-day consequences. Despite claims they have everything under control, foreign banks are increasingly reluctant to lend US dollars to Chinese banks, and the nervous behaviour of some Chinese citizens as they scramble to get foreign currency is raising concerns.

And a recent mid-sized bank failure, which authorities claim is an isolated case, may be more widespread than that. The central bank is pumping in much more market liquidity than that bank's situation needs.

It's not just banking that is showing signs of stress. The recent sharp falls in car sales aren't responding to stimulus measures. Overall, confidence is taking some hits. (And to be fair, it is not just the Chinese car industry under pressure.)

The trade war policies are causing US exports and US imports to shrink and quite quickly too.

Brazil has suspended beef exports to China after confirming a case of mad cow disease. But it may be a short-lived suspension and the international animal health body hasn't changed its status for Brazil.

The OECD says inflation is rising. It said among their member countries it picked up to 2.5% in April 2019, compared with 2.3% in March, as energy prices increased by 3.8%.

In Europe, the ECB opened the door to interest-rate cuts, a significant policy shift that amplifies a global trend toward easier monetary policy to combat weaker growth. And it is clear that the US Fed is considering them as well. Others are too.

In Australia, AfterPay has disclosed that it is "in dialogue with regulator Austrac" regarding AML compliance issues.

And former Westpac NZ boss George Frazis is jumping the Westpac ship to become CEO of Bank of Queensland, a listed second tier bank that also runs a franchised branch network. It's a job that has a AU$1.3 mln base salary, plus incentives. He is guaranteed a 90%-of-salary bonus in his first year.

And staying in Australia, their Federal Police have been conducting chilling raids at news organisations, the ABC and Murdoch papers, to try and find the journalist who ferreted out some official documents they classified as 'secret'. Publishing leaked documents that embarrasses their Government is a jailable crime now.

The UST 10yr yield is little-changed overnight and is still at 2.12%. And their rate curves are little-changed with the 2-10 curve now at +25 bps and their negative 1-5 curve down to -16 bps. The Aussie Govt 10yr is at 1.49% and unchanged overnight. The China Govt 10yr is up +1 bp to 3.26%, while the NZ Govt 10 yr is down -2 bps at 1.70%.

Gold keeps rising, today up +US$7, now at US$1,336/oz.

US oil prices rose a little overnight, up +US$1 to just on US$53/bbl. The Brent benchmark is now US$62/bbl.

The Kiwi dollar is still holding. It is now at 66.3 USc. On the cross rates we are unchanged at 95 AUc. Against the euro we are stable at 58.8 euro cents. The TWI-5 remains at 71.

Bitcoin has fallen back today, now down to US$7,640 and a -2% drop overnight. Bitcoin is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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19 Comments

12
up

Everyone should be concerned at the rise of fascism in Australia. Back onto the much more democratic nation of China their banks problems are probably going to be contagious. Chinese know not to trust their Government so expect to see a series of bank runs, along with the Government making social media posts disappear about bank problems.

Car sales and the building inventory has been a problem for months. People are tapped out of credit, they can only take on so much debt before they start getting declined. I'm expecting credit card problems to kick off, I'm not seeing the issues yet but people use them as a last resort when they lose their job or can't afford to pay the bills.

Martin North on his WalkThe World YouTube channel has his finger on the pulse regarding this in Australia. Well worth viewing his channel as he gives regular feedback on his 52000 household survey reports. His data is obtained from Australian households not just the bank data or government data that is so often talked about.
It’s a bit like flying at 30,000 feet over Syria and looking out of the plane window and saying “well it all looks ok to me- I can’t see anything going on” rather than being on the ground and seeing what’s really going on.... His channel is ‘on the ground and is reporting on what real people are thinking and experiencing.

Yup, governments abusing their power is not good for anyone anywhere anytime.

Back onto the much more democratic nation of China

Perfectly appropriate username you have there :-)

All in all a very interesting update today. Thanks, team!

Beyond meat is starting to worry me, if they can cut a deal with McDonalds and raise this sort of money then they will compete head on in the mince market with our bull beef.

https://www.marketwatch.com/investing/stock/bynd

Nestle
https://www.businessinsider.com.au/beyond-meat-stock-price-nestle-announ...

Excellent..plant based goodness

Animals are plant based too....

On the other hand, if people are happy to reduce their beef intake then that could help slow the record deforestation of the Amazon rainforest: https://www.reuters.com/article/us-brazil-environment-deforestation/sate...

lots more nutrient leaching from crops than beef. The Pioneer web site gives a fert allowance of $500 a hectare for maize crops, thats one hell of a lot of nutrients more than the crop should ever need.
The Amazon is being cleared for short term profits from Forestry sales to China. My daughter plays the violin and lots of Chineses bows available made from timber that is meant to be banned. Brazil has more under utilised farmland available than Russia and Nth America combined, they are not clearing the Amazon to grow crops.

AJ, you should know better than to inject Facts into the vague generalisations emitted by some commenters. Just confuses everybody. /sarc

What are you smoking? Deforestation is not made up. If land is cleared for a mix of purposes that's not saying that it is NOT being cleared.

Hope that helps.

Definitely not made up. Forests are a ready source of quick riches, just sitting there waiting for a saw look what happened in NZ, got skinned. This timber ends up all over the world, the land after the trees have been cleared is of little concern to companies that own the cutting rights.
I wanted to go and have a look with a friend but we canned the trip as even though he was local, he didn't feel it would be safe for us snooping around forestry companies with the corruption in Brazil at the moment..

The more the social narrative diverged from the truth, the more likely it was that the media would be nobbled. Assange is the lead-story in this split, the ABC some way behind, Hager (Hit and run) is our version. But they all fail the bigger-truth test - Why are we there? Who are we disenfranchising? Can we redress that and also continue our rate of consumption? Can we actually live without disenfranchising others? For how long?

Further down the scale, we have the lack of dissemination between 'opinion' and 'fact'. Send them a piece and at best they say 'We'll look at it", at worst they ignore you. Then they put up stuff which sells papers or adds clicks - which adds up to pandering to desires rather than investigating (and boldly presenting, damn the consequences) what the truth is. For example, 'Child lack of access to resources and energy' is repetitively called 'Child Poverty' - thus avoiding the need to discuss population.

Pushing a false narrative on a double-or-quits basis, requires ever-bigger lies (silence, if it represents quashing of the truth, can have the same effect on readers/listeners as telling them porkies - bit of a joke that a Murdoch paper was involved, in my humble opinion).The media are needed now more than ever, but are becoming increasingly curtailed. Much of that curtailment, though, is an 'own goal'.

Interesting times - read all about it.

Are you starting to see how naked this emperor is? These are unserious people.

It is absolutely impossible to overstate this point. All monetary policy is based on the assumption, yes assumption, that what amounts to stimulus is only the central bank saying it is stimulating. It ultimately doesn’t matter what is done, only that the central bank says it is stimulus and the public understands it the same way in a straightforward manner.

Monetary policy, therefore, is essentially: trust us.

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