Mixed US data but consumer spending stays strong helping Wall Street make gains; China gives positive trade signals; France growth rises; eyes on NZ data; UST 10yr yield at 1.51%; oil up and gold down; NZ$1 = 63.1 USc; TWI-5 = 68.6

Mixed US data but consumer spending stays strong helping Wall Street make gains; China gives positive trade signals; France growth rises; eyes on NZ data; UST 10yr yield at 1.51%; oil up and gold down; NZ$1 = 63.1 USc; TWI-5 = 68.6

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Here's our summary of key events overnight that affect New Zealand, with news markets seem to be relieved to find some small positives.

Wall Street is up strongly today, up +1.4% so far, building of rises in Europe overnight of about a similar amount. That followed weak outcomes in Asian markets however - they weren't that negative; they just weren't very positive and didn't indicate what was coming in Europe and the US.

The US merchandise trade balance widened marginally in July from the same month a year ago with small rises in imports and small falls in exports. Leading the falls in exports were farm goods. Leading the rises in imports were consumer goods.

And American pending home sales for July fell quite sharply from June and are in fact lower than for July 2018. Historically low mortgage rates are not really boosting their housing market. For their classic 30 year fixed rate, Americans are paying 3.58%, plus 0.5% in 'points'.

There was an update to the US Q2-2019 GDP data out overnight and that softened the annualised growth rate to +2.0% and marginally lower than the +2.1% originally reported. But this release revealed the strongest consumer spending in more than four years as their labour market retains its firmness. This was data that helped Wall Street ease fears of an immediate downturn.

And China has now signaled that they may return to trade talks. They haven't really changed their position, but they did finally say something without mentioning tariff retaliation. This came after the Americans conceded privately that the US President just made up the idea that the Chinese called asking to restart talks.

All eyes will be on key August data out of China next week to gauge the impact of the recent trade and economic slowdowns.

And in Hong Kong, China has conducted a "routine rotation" of the PLA garrison there "ready to defend Hong Kong" - from its citizens.

There were few surprises in the EU's survey of business sentiment out overnight; it is still low and in a declining trend.

But there was one surprise, the French economy has grown faster than expected in the second quarter of 2019, up at an annual rate of +1.4% - and that is actually better than the export-dependent Germans.

Locally, look out later for some important data that we will be covering on building consents, and for consumer confidence.

The UST 10yr yield is up +4 bps at 1.51%. Their 2-10 curve is now negative by -1 bp. Their 1-5 curve is at -36 bps. Their 3m-10yr curve is at -55 bps. The Aussie Govt 10yr is at 0.91%, up overnight by +2 bp+. The China Govt 10yr is also down by -2 bps at 3.05%, while the NZ Govt 10 yr is down -2 bps at 1.09%.

Gold is down -US$20 to US$1,522/oz.

US oil prices are continuing their recover, up about +US$1 again and now just under US$56.50/bbl. The Brent benchmark is also up to US$61.

But the Kiwi dollar is softer again, now down to 63.1 USc. On the cross rates we have slipped to just under 93.8 AUc. Against the euro we are also softer at 57.1 euro cents. That pushes the TWI-5 down to 68.6 and a new four year low.

Bitcoin is now at US$9,536 and a chunky -5.9% drop from this time yesterday. 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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10 Comments

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With ASB forecasting no growth in the special Auckland housing market for 2020, while forecasting a further 9.3 percent rise for the Wellington region will the much maligned Mr Hickey have reason to celebrate his good fortune.

In the old days, you could have asked Wally

Markets rebound or the plunge protection team creating some positives before the return from the holidays?
There didn't seam like much good news to buy into.

The market certainly seems irrationally positive right now, it's a good thing the market doesn't get irrationally spooked by months starting with 'S' & 'O' - that could really unwind things...

Donald Amstad from Aberdeen Standard Investments delivers a sobering assessment on the state of developed market economies.

https://www.youtube.com/watch?v=3WclYu5l4G0

Economies Printing money v Economies Not printing money and their long term very, very dangerous outcomes.

A MUST WATCH! (about 20 minutes long)

Cheers for that Verinterested. A very good assessment.

Thanks

Hard to argue with any of that!

Sadly the one outcome that has been missed is WW3 and even though we think that these are things of the past... just think for a minute

Negative/low interest rates are screwing the economy.
https://wolfstreet.com/2019/08/29/how-even-low-interest-rates-screw-up-t...

Anyone with any sense would be hard pushed to find much to disagree with in that article. Then, of course, there's that special class of people who know better than we mortals - Central Bankers (sadly. Mr Orr among them).

"When interest rates get cut.....people, directly or indirectly, see their disposable income go (backwards). And guess what, they spend less, which crushes ( already weak) demand."