US regional factory data better; Canada jobs up; Indonesia cuts rate; China stresses mount; Aussie jobs data good; UST 10yr yield at 2.03%; oil down & gold up; NZ$1 = 67.5 USc; TWI-5 = 72.4

US regional factory data better; Canada jobs up; Indonesia cuts rate; China stresses mount; Aussie jobs data good; UST 10yr yield at 2.03%; oil down & gold up; NZ$1 = 67.5 USc; TWI-5 = 72.4

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Here's our summary of key events overnight that affect New Zealand, with news there is better data out overnight even if it is second-tier, but equity markets are lower worldwide anyway.

In the US, the next regional Fed factory survey has come from Philadelphia, and this one is much improved. Many will be hoping this is not an outlier because they need some better economic news. The latest update of US GDP shows it languishing at a +1.6% growth rate going into the third quarter.

In Canada, their July unofficial employment report has also come in with a strong rebound.

In Indonesia, their central bank cut its policy rate by -25 bps to 5.75%, its first cut in two years.

In China, new data shows that the population of Beijing are enjoying fast rising disposable incomes. They are now up to NZ$7,360 per capita, an almost +9% rise in a year.

And China is rapidly increasing its soybean plantings. The trade in the crop with the US may never return. And it turns out Russia is also raising production based on export demand from China. It doesn't help the Americans that one major use of the crop is as pig food and the African Swine Fever virus is shrinking China's herd too. It's also a problem for China, one that just keeps getting worse.

And China is slowly but surely decreasing its holdings of US Treasury bonds. They fell for the third straight month to US$1.1 tln which is their lowest holdings in two years. The problem for the Americans is that the faster their budget deficit rises, they need more buyers and if some of the largest buyers pull back and demand wanes, interest rates will surely rise.

China has its own issues; yesterday four private firms defaulted in the one day, reneging on almost NZ$6.5 bln worth of bonds. It is a problem that is growing.

The iron ore price is holding, but it is likely to face a stern test soon. Chinese customers are not happy with the high level, and major Brazilian miner Vale is about to resume shipments. In advance of that, shipping prices have risen sharply and are now at a one year high.

Yesterday, Australian jobs data for June brought little change, a jobless rate still at 5.2% and a participation rate that is finding it hard to move higher. But still, markets moved by downgrading the chance of another RBA rate cut. That was because the growth in full time jobs in this report came in above expectations.

The UST 10yr yield is lower at 2.03% and -3 bps lower than this time yesterday. Their 2-10 curve is marginally steeper at +25 bps, and their negative 1-5 curve is at -11 bps. The Aussie Govt 10yr is down -1 bp at 1.37%. The China Govt 10yr is unchanged again at 3.19%, while the NZ Govt 10 yr is down -4 bps to 1.60%.

Gold is up another +US$5 overnight and now at US$1,426/oz.

US oil prices are falling again today as production resumes in the Gulf of Mexico. They are now down more than -US$1.50 to US$55/bbl. And the Brent benchmark is down a similar amount to just over US$62. These falls come even as Iran seizes a small tanker in the Persian Gulf.

The Kiwi dollar just keeps rising; it is now up to 67.5 USc. On the cross rates we are also firm, still just on 96 AUc. Against the euro we are up at 60.2 euro cents. Now, the TWI-5 is up at 72.4.

Over the past 24 hours, the bitcoin price has risen back over US$10,000. It is at US$10,565 after getting as low as $9,157. The 24 hr volatility has been +/- 7.5%. 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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And then Fed Chair Williams spoke!

US Navy Shoots Down Iranian Drone Over Strait Of Hormuz: Trump - Tehran claims no information of such an event.

So cracks are turning to gaping holes in China

12
up

Gold rose $20 yesterday and did the same today - it currently stands at $1445.94/oz. Furthermore, UST 2 yr yields collapsed overnight, thus the 2s- 10s spread moved from 22 to 27bps.This bear steepener in reality (bull steepener in bond trading) is perfectly clear. The short end drops quickly with the long end following if at a slower rate. Nominally, the whole curve shifts lower but because the short end is moving fast the curve steepens while it shrinks. Traditionally, this is the recession signal.

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The secret lives of the brain
There's someone in my head and it's not me
https://www.amazon.com/Incognito-Secret-Lives-Eagleman-2011-05-31/dp/B01...

Sooner or later Mr Debt will catch us all out. China beware, therefore the rest of us beware.