China ignores tariff pressures, private factories expanding; Japan factories contract; G20 economies in growth decline; Aussie house prices up, job ads down; UST 10yr yield at 1.50%; oil down and gold up; NZ$1 = 63.1 USc; TWI-5 = 68.7

China ignores tariff pressures, private factories expanding; Japan factories contract; G20 economies in growth decline; Aussie house prices up, job ads down; UST 10yr yield at 1.50%; oil down and gold up; NZ$1 = 63.1 USc; TWI-5 = 68.7

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Here's our summary of key events overnight that affect New Zealand, with news China is taking the US to the WTO over its tariff actions - a move that is unlikely to see an early resumption of direct trade talks.

Firstly however, it is a holiday in the US so Wall Street is closed. European markets were generally quiet although London rose +1% (before some more parliamentary shenanigans). They followed Asian markets which closed yesterday generally lower by about -0.4%. But Shanghai had a banner day, up +1.3%.

In China, the unofficial Caixin factory PMI shows a small expansion in this sector. This wasn't expected, especially after the official measure of large-scale businesses (many state-owned) showed a contraction. The Caixin survey is of medium sized companies and suggests that these firms are adapting better to the tariff stresses.

And there is more evidence China is ignoring the pressure from US tariffs. Although it didn't retaliate directly to the latest American hike, if has taken the US to the WTO with a complaint that has a very good chance of success - and a move that is likely to rattle the Americans.

In Hong Kong, tens of thousands of Hong Kong university and school students swapped classes for democracy demonstrations yesterday, the latest act of defiance in the anti-government movement. Meanwhile in China itself, they are tightening the screws on their students with big-brother facial recognition systems to ensure class attendance and overall student behaviour.

In Japan, their factory PMI is in contraction, but only just. One issue getting the blame is that the Japanese are just too organised - most of the stimulus projects for the 2020 Olympic Games are complete or nearly so.

In the UK, political uncertainty is rising with the chances of a snap election high if Parliament blocks a hard Brexit.

Ratings agency Fitch is pointing out that annual GDP growth rates have been falling since mid-2018 in virtually all of the 20 large developed and emerging economies.

In Australia, their factory PMI is still expanding, even if it is at a slower rate.

Expanding at a faster pace however is house prices. The August CoreLogic report shows then up +1% in a month and the first rise in almost two years with Sydney and Melbourne leading the way. But despite this recent upturn, overall prices are almost -6% lower in a year.

The recent up-tick in Aussie job ads hasn't been sustained however, reverting to its decline in August and they are now down -11% in a year.

The UST 10yr yield is unchanged at 1.50% because Wall Street is closed. Their 2-10 curve still negative, but only by -1 bp. Their negative 1-5 curve is wide at -38 bps. Their 3m-10yr curve is out to a negative -59 bps. The Aussie Govt 10yr is at 0.92%, up +4 bps. The China Govt 10yr is up +1 bp at 3.08%, while the NZ Govt 10 yr is now at 1.07%, and down -3 bps from this time yesterday.

Gold is up at US$1,529, a rise of +US$9 since this time yesterday.

US oil prices are weaker again today at now just on US$54.50/bbl. The Brent benchmark is also lower at just on US$58.50.

The Kiwi dollar holding at its lower level of 63.1 USc. On the cross rates we are up to 94 AUc. Against the euro we are at 57.5 euro cents and marginally firmer. That puts the TWI-5 at just on 68.7.

Bitcoin is now at US$10,087 in a rising trend and up +5% 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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17 Comments

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Highlight new comments in the last hr(s).

Victoria Uni Vice-Chancellor, RNZ news this am; "the kids are the adults in this instance".

Ain't that the truth

"On Monday (Australian PM) Scott Morrison said of the upcoming GDP figures that the government knew the economic situation was deteriorating..... but it’ll get better when his plan starts working. Why isn’t it working now?"
https://www.theguardian.com/business/grogonomics/2019/sep/03/scott-morri...

They've got some major issues on their hands. Construction has been a key driver in the economy but now the incidence of sub-standard workmanship has now cast fear on the actual value of the properties. Double-edge sword when your country has double-downed on house prices as the be-all-and-end-all of the economy.

Construction recession deepens and spreads across all sectors

https://www.abc.net.au/news/2019-08-28/construction-work-done-q2-2019/11...

It follows a decline of 1.2 per cent in June alone, which prompted an economist to warn that up to 100,000 construction jobs might be at risk if the gloom continued.

https://thenewdaily.com.au/money/finance-news/2019/08/28/building-slump-...

Tomorrow's headline.
Fear grips the market after US holiday. Stocks down 1.7% but rebound to -1.2% by the end of the day. Gold and silver up, BTC down, Hong Kong more tension, weaker growth / production charts here there, something else is a it better than expected. Jacinda still quite on the subject. Orr wants help. Banks change rates. Economists say it's all good, jump in and spend and house prices to increase and Jacinda parks another ambulance at the bottom of another cliff.

You must be an optimistic bank economist yourself if you're seeing things being that good!

That's just for tomorrow.... My mid to long term, hang on to your steak and cheese. This rental has been driven up a gravel road and the corigations are getting larger and more frequent, either something is going to give on the car or there is a washout arround the corner. Either a wheel falls off and we come to slow stop or we hit the washout and there will be pain and smoke. I'm 80% on the latter.

As long as you're not towing the tiny house behind as well ^.^

I would love to be towing 20 tiny houses but they have been flip flopping on those for years.

.

""One issue getting the blame is that the Japanese are just too organised - most of the stimulus projects for the 2020 Olympic Games are complete or nearly so."" Some days I wish I was Japanese.

Carrie Lam on Hong Kong - very revealing;

https://play.stuff.co.nz/details/_6082597549001

China is taking the US to the WTO ?

I just quickly checked the bottom of my screen to see if its 1 April , because its got to be a joke .

China is clearly desperate , given they have broken almost EVERY rule of international fair trade, its more than
a little surprising to see them doing this when they are as guilty as all hell .

The reason they have NOT gone to the WTO until now , is because they know they are out of line.

There is a legal term used when someone comes to court "with dirty hands " , and that is what China is doing

I say .....Bring it on !

Its time to deal with China's cheating and malfeasance , and shocking trade practices

"And there is more evidence China is ignoring the pressure from US tariffs"

Only a severe case of TDS could lead the author to write such nonsense. China has responded by aggressively devaluing its currency while adding tariffs to US goods.

As you say, it's time someone took China to task for its destructive trade practices.

True.

And if China believes that the USA should abide by a WTO ruling, does that mean China will abide by the International Court's ruling on the South China Sea and China's incursion into Philippine territory?

Well said.

In addition to WTO matter, International Court rejects territorial claims in South China Sea.

https://www.theguardian.com/world/2016/jul/13/china-damns-international-...

So CPC follows which rules?