Here's our summary of key events overnight that affect New Zealand, with news stock markets are ending the week holding strong gains and that will bolster KiwiSaver balances.
But first, the early June PMI surveys for the US are coming in quite weak. The factory one is now at almost a ten year low and expansion is dead in the water (50.1). The services one is at a three-year low and its reliable expansion is buckling now. New order growth is weak and weakening.
US existing home sales turned up in May and by more than was expected. But year-on-year they are still lower and by -1.1%. But the higher short-term demand is pushing up prices and year-on-year they are up +4.8%. Still, mortgage rates are falling. Meanwhile, the average interest rate for a 30-year, conventional, fixed-rate mortgage decreased to 4.07% in May, down from 4.14% in April. The average rate in all of 2018 was 4.54%.
Canada has reported very weak retail sales growth in April, and far below what was expected. In fact, if it wasn't for higher petrol price, food and booze, they would have reported a decline.
In the trade war, the US has blacklisted more Chinese tech companies.
In Japan, their factory PMI edged lower and further into contraction. They are having their fastest drop in new orders since June 2016.
In Europe, the pace of eurozone economic growth as measured by their PMIs remained subdued in June but edged up for a second successive month to reach a seven-month high. Growth was driven by an expanding service sector, which helped offset an ongoing manufacturing downturn. The eurozone's services sector is now expanding faster than the American one. Optimism about the future meanwhile dipped lower, running at its lowest since late-2014, suggesting growth will remain weak in coming months.
Earlier today the S&P500 made a run at a record, all-time high, but since has fell and will end the day lower. But for the whole week, it will book a +2.3% gain. Since the start of June, the gain is +7.4%. The expectation of renewed stimulus from the US Fed is behind these gains. And markets expect President Trump to make some headway to get the Fed to juice the US economy to aid his re-election prospects.
The Shanghai's equity market closed up +0.5% yesterday, capping a flat weekly performance. Since the start of June, this market is up +3.6%. Chinese stimulus expectations are behind this rise as well. The ASX200 is up +4.0% so far in June, the NZX50 is up +2.0%. When the June KiwiSaver results are revealed, it seems likely that there will be both strong equity gains, plus strong bond price gains (ie, yields fell). The KiwiSaver wealth effect is becoming a 'thing' with almost $60 bln now in these funds.
At the Paris Air Show, the first practical electric-only aircraft are on show and taking orders.
In Australia, their central bank has been modeling the potential impact on the country if the Chinese economy suffers a sharp setback. It is not great for the 'lucky country', but it not all doom-and-gloom either.
And one of the richest people in Australia has labeled the inability of the Government to pass its tax cut package as 'irresponsible'.
The UST 10yr yield is now at 2.06% and back to almost the same as at this time last week. In between, it fell below 2% but the recovery has been strong overnight. Their 2-10 curve is now at +29 bps an their negative 1-5 curve is narrower at -14 bps. The Aussie Govt 10yr is at 1.31% and an -8 bps fall over the week. The China Govt 10yr is down -3 bps over the week to 3.25%, while the NZ Govt 10 yr is down -13 bps this week, now at 1.54%.
Gold is up yet again, up +US$10 overnight and is now at US$1,398. That is a gain of +4.2% in a week, and takes it to a six year high.
US oil prices are a little firmer overnight, mainly because a major US refinery is closed due to a fire. It is so bad, that facility may never reopen. They are now just on US$57.50/bbl. The Brent benchmark is now at US$65. The US rig count is down marginally again.
The Kiwi dollar is up almost +1c this week and now at 65.8 USc, although that is a small pullback overnight. On the cross rates we are also firmer at 95 AUc. Against the euro we are similar to last week at 57.9 euro cents. That all pushes the TWI-5 up to just under 70.4. The Chinese have let their currency firm overnight, taking it away from the "7" challenge to the USD..
Bitcoin has had a strong week rising to its high today of US$9,908. That is more than a +17% rise in just one week. In fact in New Zealand dollars, the bitcoin price is now over NZ$15,000. It was last at this level in March 2018 - on the way down. The international anti-money laundering organisation sees cryptos increasingly used to launder the proceeds of crime and is moving to rein in the risks. Now exchanges and custodians will have to carry out detailed checks on customers and report suspicious transactions. "Know-Your-Customer" rules that apply to banks will now apply to cryptos and their transactions. The bitcoin rate 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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