Here's our summary of key events overnight that affect New Zealand, with news the Chinese are concluding that the G20 Trump promises are all hollow.
It is a public holiday in the United States and their markets are closed. That means a key driver of economic data is sidelined today. But of course there is plenty going on elsewhere.
China said that existing American tariffs will have to be removed if there is to be any trade deal between Beijing and Washington. This is a hardening of their position. Further, the Chinese are having doubts that the Trump promise to release exports to Huawei will actually happen. That means some major agriculture purchases that the American expected may not proceed either. It already looks like the G20 Xi-Trump talks were pointless.
Meanwhile exports from major Southeast Asian countries to the US are surging as manufacturers scramble to find alternative production bases not subject to tariffs. Malaysia's exports to the US increased +12% year-on-year in May. This more than offset a -2.2% drop in exports to China, contributing to a good net gain for Malaysia.
One place not benefiting is Singapore, where things aren't booming anymore. Their factory PMI slipped into contraction for a second consecutive month, ending 32 months of continuous expansion. In June, new orders, factory output, inventory, and employment all retreated.
And Singapore's housing market is not booming either. Their Housing Board property resales are falling, and prices are soft too. The chill winds from the trade wars are affecting Singapore a lot.
In the meantime, China is reviving its standard playbook, ramping up infrastructure spending to counter the domestic effects of the trade war. In the first half of the year they have spent an extra NZ$185 bln, although this is only about +0.1% of their GDP.
Markets are also absorbing the implications of the two new US Administration nominees to the Federal Reserve. This will add political risk to a core global institution that will need to be accounted for elsewhere, and in a way that the US can't control.
In Canada, the housing market is back firing on all cylinders in their largest city, Toronto. Sales volumes are up +10% and prices are rising again too.
Eurozone retail sales unexpectedly fell in May from April in data released overnight, and year-on-year they were up only +1.3% and well below the +1.8% gain recorded in the year to April. That is the slowest growth all year, and more evidence the European economy is going to need some official help when Christine Lagarde takes over the ECB reins. But she doesn't actually start in the role until November.
In Australia, retail sales were also weak, coming in with a +2.9% rise in May on a year-on-year basis, down from the April rise of +4.2%. Analysts see this flat lining as a worrying sign.
And Aussie job vacancy growth is falling away as well. The growth in vacancies over the past year of +4.2% is well below the year before, when it was +21%. "This is consistent with the recent slowing in other economic indicators," their statistics agency said.
With the prospect of new juice coming from the US Fed via the appointment of two Trump-friendly governors, the S&P500 ended yesterday's half-day session up +0.8%. The appointment of Lagarde to the ECB didn't quite have the same impact in Europe with their equity markets up just +0.2%. Asian markets yesterday were even less enthusiastic, down in Hong Kong (-0.2%), and Shanghai (-0.3%) while Tokyo was up modestly (+0.3%). Closer to home, the ASX200 was up +½% while the NZX50 struggled for its gain (+0.1%).
The UST 10yr yield is unchanged at 1.95%. Their 2-10 curve is now at +19 bps and their negative 1-5 curve is at -19 bps. The Aussie Govt 10yr is at 1.29% and up +1 bp overnight. The China Govt 10yr is down -1 bp to 3.18%, while the NZ Govt 10 yr is also down -1 bp, now at 1.55%.
Gold is down -US$3 overnight to US$1,415/oz.
US oil prices are a little lower today and now under US$57/bbl as demand fears rise. The Brent benchmark remains at US$63/bbl.
The Kiwi dollar is just a little softer today at 66.9 USc. On the cross rates we are unchanged at 95.3 AUc. Against the euro we are a little softer at 59.3 euro cents. None of that was enough to shift the TWI-5 much and it is still at 71.6.
Bitcoin is firmer again today, up +7% from this time yesterday, and up to US$11,860. 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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