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US house sales fall; Richmond Fed data weak; debt ceiling deal done; China bond woes deepen; China rushes to import beef; IMF downgrades global growth again; UST 10yr yield at 2.07%; oil up & gold down; NZ$1 = 67.1 USc; TWI-5 = 72.1

US house sales fall; Richmond Fed data weak; debt ceiling deal done; China bond woes deepen; China rushes to import beef; IMF downgrades global growth again; UST 10yr yield at 2.07%; oil up & gold down; NZ$1 = 67.1 USc; TWI-5 = 72.1

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Here's our summary of key events overnight that affect New Zealand, with news the IMF has again downgraded world growth prospects.

But first, the latest regional Fed survey in the US, this time from the mid Atlantic states, shows manufacturing activity weakened in July. Their index fell from 2 in June to -12 in July, its lowest reading since January 2013, as all three components - shipments, new orders, and employment - posted declines. Backlogs of orders also fell, reaching a value of -26, its lowest reading since April 2009.

US home sales fell in June, down -1.7% when a flat result was expected. A persistent shortage of properties pushed prices to a record high however with the median home price up to NZ$425,800 or +4.3% year-on-year. Their housing market is struggling to regain speed since hitting a soft patch last year. Meanwhile, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 3.80% in June, down from 4.07% in May. The average commitment rate across all of 2018 was 4.54%.

Meanwhile, the White House and Congress have completed their two year debt-ceiling deal. It's a rare consensus compromise and a deal that helped firm the US currency.

In China, yesterday we reported that their NASDAQ-style tech share index had launched on Monday, with Beijing's SOE-buying support. But yesterday that support wasn't extended, and first-day buyers lost more than -US$1 bln as prices retraced sharply. It seems it was a one-day wonder.

And yesterday two more private Chinese firms joined the growing ranks of bond defaulters.

Meanwhile, China is importing beef and pork at a fast-rising pace, replacing lost local production from the ASF epidemic in the pig herd. Imports of beef surged more than +60% so far this year to 133,700 tonnes. Overseas pork purchases in June rose even more from a year earlier to 160,500 tonnes.

In Britain, Boris Johnson won the race to lead the ruling Conservative Party and become the country's next prime minister, repeating a pledge to pull Britain out of the EU by October 31 - but the challenge he faces became quickly apparent as he quickly lost the support of some key Cabinet members.

The IMF has reduced its 2019 and 2020 growth forecasts yet again, saying that the downgraded outlook is self-inflicted by trade-war policies. While this latest downgrade is a modest -0.1% in each of the two years reviewed, it comes on top of prior substantial downgrades. The longer the trade standoffs continue, the sharper these will become. No doubt a hard Brexit will be accounted for in the next review.

And by the way, the record high stock market price for A2 Milk is probably because of what was reported in this article that ran on interest.co.nz.

Wall Street is up +0.6% so far today, following European markets which were up +1.2% overnight. Shanghai was up +0.5% yesterday, Hong Kong up +0.3% and Tokyo up +1.0% yesterday.

The UST 10yr yield has moved up to 2.07%. Their 2-10 curve is little-changed at +24 bps and their negative 1-5 curve is still at -15 bps. The Aussie Govt 10yr is unchanged at 1.32%. The China Govt 10yr is also unchanged at 3.16%, while the NZ Govt 10 yr is down -2 bps at 1.58%.

Gold is down -US$8 overnight to US$1,419/oz.

US oil prices are a little firmer again today. They are now just over US$56.50/bbl. The Brent benchmark is also firmer at just over US$63.50.

The Kiwi dollar is marginally softer today and just touching 67.1 USc which is down more than -½c since this time yesterday. On the cross rates we are also softer at 95.7 AUc. Against the euro we dipped to 60.1 euro cents. That lowers the TWI-5 to just on 72.1.

Bitcoin has been soft overnight as well, at one point dipping below US$9,900, but now is at US$10,020 and a -3.1% fall. Volatility has been +/- 2.5%. 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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12 Comments

No doubt we will be reassured that beef exports to China will save no economy from a world recession
Despite consumer demand being v reliant on housing sales and confidence which are v weak.

In other news, Britain finally relieved of its failed administration as the last grey Ministers of Failure resign. Hopes are high that the new administration will be able to move the country out of the foul, stinking mud in which it is mired. Will the country rally round in support?

The next few months promise to be exciting. How long will the honeymoon last? Usually a new administration has a short period of opportunity for reform before the different factions of the staus quo beneficiares join forces to overwhelm the reformers with the grey sticky mud of stagnation. Chief status quo beneficiary is, of course, the Guild of Superior Civil Serpents, so a cunning combination of bribery and division, appointments and "resignations" is in order. Delicate and precise axe handling is essential.

Is it going to be a re-run of "Yes Minister"?

https://www.youtube.com/playlist?list=PL00253ECF36106F03

Surely, not. I mean this is 2019. Some things don't change though. Special interests know when they are threatened. The key appointment is the Finance Minister, otherwise known as the Chancellor of the Exchequer. Parliament exists to adjust the flow of funds into and out of the goverment's hands and he is the man at the wheel.

This is the second dying Empire to relinquish democracy in favour of a charismatic buffoon. Happened in the '30's too.

So its a dictatorship then.....

Funny how it is only democratic when it works out the way you want.

Look at all the sad Dems in the US, living in denial like little school kids that didnt get their way.

Live by the sword, die by the sword...

You miss the point. The Dems are part of the establishment, as are the Republicans, as are Nat and Labour hereabouts. Folk are giving the finger to the establishment, as it increasingly fails to deliver. The result is a certain type, popping up all over the planet. You can expect that lower down the consumption-range, but when it gets up to the US and the UK, there isn't much left. Even if it's right...

Honeymoon? Can't see Johnston being able to get anything through parliament

So can one assume that the record A2 price is driven by A1 consumers?

Ditched dairy years ago..plenty of alternatives and my health much improved. Saying that I do own A2

Until recently I was getting organic milk, which I turned into yoghurt or kaffir yoghurt. The bacterial change I think neuters the bad parts of milk.

I make beer also, which leads into the fact I was taking the piss about lack of cognition in A1 consumers from the study :-P They probably vote Act or National also.

Days to the General Election: 26
See Party Policies here. Party Lists here.