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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9 Comments
ANZ looking like Shyster Central
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
How is a luxury property bought for $7.5m in 2011 able to be sold to Hisco's wife for $6.9m in 2017 ( after 6 years during which NZ property went ballistic.) At the time of the sale "the property at 269 St Heliers Bay Rd had a Rating Valuation of $10.75 million, according to Terranet.""
One of the gang that would have been involved in the sale of the property to Mrs Hisco has now taken over Hiscos role. And so it continues....
Brian Gaynor says that excess is endorsed by directors after great company performance but surely the above is taking the proverbial.
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
Kiwis so dumb lah!
Brian Gaynor writes "no other New Zealand chief executive has delivered an annual profit of $1.953 billion and had to worry whether it might only be $1.925b.".
It's worth remembering that the majority of that almost $2b profit was extracted from the pockets of home-buyers, renters and residential property "investors".
The credit-fueled residential property bubble was great for ANZ and a handful of investors but of no real benefit to anyone else.
The UST 10yr yield is now at 2.06% and back to almost the same as at this time last week.
Indeed!! But the 2yr UST yield dropped from 1.84% to 1.76% over the same period.
Unsurprisingly, the most Chairman Powell would say recently about QE and the like was, “views differ on the effectiveness of these policies.” Interest rates and money curves are far more certain about them.
The President is saying that the Fed has made another policy error. But in making the claim he is also making an error. A policy error gives the central bank too much credit. It simply isn’t that powerful. If you really believe 2.40% federal funds crashed the economy, I doubt any amount of evidence would convince you otherwise.
It isn’t a policy error it is a forecast error. There’s a big difference. The policy is irrelevant. The Fed wasn’t tightening, it was raising rates believing the economy was so good it required some response. The problem isn’t the response it was the belief leading up to it.
Believing the central bank has that much influence, you’re likely to also believe rate cuts will help; or that a central banker will be in any way helpful...
No one ever thought to ask, by becoming less the place for bankers and almost exclusively the place for Economists, have central bankers also stopped being the lender-of-last-resort for banks? We don’t really have to ask the question any longer, 2008 answered for us. And if you didn’t like the answer, 2011 settled the matter anyway.
No, central banks are not.
Instead, the repo market has taken on this burden. It tried in 2007 and 2008, but collateral impairment was simply overwhelming (MBS bonds of all kinds not just subprime that were shunned, leaving too little collateral for repo to effectively backstop global liquidity). The Great “Recession” became great, in one big sense, because the repo market backstop itself required a backstop which didn’t exist.
Over the years since, the market has been somewhat rebuilt. It remains tepid, no longer so vibrant largely because of the same collateral pressures; a shortage of what counts as “pristine.” These are now mostly the top-level sovereigns, UST’s, bunds, and JGB’s, with agency MBS sprinkled in, too.
Graphic proof - large US banks extend their pursuit of "pristine" collateral ownership
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