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Here's our summary of key events over the weekend that affect New Zealand, with news benchmark bond yields are rising suddenly in the US. But complicating matters, we are now on tenterhooks for how markets will react to the latest Middle-East oil crisis.
Drone missile attacks on the core Saudi oil system are likely to impact markets. Crude oil prices are expected to jump when markets open today on the uncertainty. More than half of Saudi output has been knocked out and it may take days to restore. Saudi officials say it will be back to normal export levels tomorrow but insiders aren't so sure, and much of the price reaction may be down to who the US points its finger at.
In the US, the Cass Freight Index, a monthly measure of rail, trucking and airfreight volume, dropped -3% in August from a year earlier, the ninth consecutive month of declines. Their report blamed tariffs for stalling trade volumes.
But solid American retail sales data for August did calm some concerns about the US economy. Those retail sales rose +4.2% from a year ago but that was slower than the +4.9% gain in July. A surprisingly good rise in vehicle sales kept the data robust, otherwise it would have been lackluster.
US consumer sentiment as measured in one widely-watched survey stopped falling and posted a small rise, even though it remains -8% lower than this time last year.
The oil tensions will probably set this week's market direction. But at the end of last week the US bond markets were turbocharged with prices falling sharply and yields jumping. Growing doubt about the usefulness of lower interest rates has traders thinking the US Fed may use other means to prop up American economic growth. Those bond yield shifts will have echos in our markets too.
Asian equity market gains on Friday seemed to be on the back of the US President saying he would be open to an "interim deal" on trade issues, something the Chinese have been pushing for. The iron ore price stopped falling and turned up on the remarks. China suggested that it would exempt some American ag products from its retaliatory tariffs, like soybeans. The sign that the Americans are coming to understand that a compromise will be needed, buoyed Asian sentiment.
In Hong Kong, the protests continue. Beijing is marshaling its own 'crowds' to confront huge demonstrations.
In Europe, Google has been ordered to pay nearly €1 bln to the French government over allegations of tax fraud. The court ruling comes as European authorities are exploring new ways to clamp down on digital tax evasion.
In Australia, the impact of detailed prescriptive regulation is being felt by newly credit-shy bankers not wanting to end up in court. The resulting credit squeeze has ASIC squirming at an Australian parliamentary oversight committee hearing and claiming it is not to blame "but bankers are". ASIC is fighting court ruling losses that block its ability to prescribe how banks assess borrowers credit situations.
And staying in Australia, the governing Liberal Party's coalition partner, the Nationals, have called for a law change to protect the provenance of milk, meat and seafood, saying fake replicas shouldn't be allowed to claim they are equivalents.
The UST 10yr yield leapt on Saturday, up +12 bps from the day before, now at 1.90% and that is +34 bps higher than this time last week. Their 2-10 curve more positive now at +10 bps. Their negative 1-5 curve is fading fast, and now at just -12 bps whereas a week ago at was -33 bps. Their 3m-10yr curve is even narrower at -8 bps down from -50 bps a week ago. The Aussie Govt 10yr is up sharply at 1.23%, a weekly gain of +16 bps. The China Govt 10yr is now at 3.09% and in a week it has risen +7 bps. The NZ Govt 10 yr is now at 1.35%,a +17 bps gain for the week and that was on top of the +8 bps gain last week.
Gold was sharply lower at US$1,486 and a drop of -US$13 in a day and -US$22 in a week. But it is likely to recover much of that on the oil tension news.
US oil prices ended last week softer at just under US$54.50/bbl. The Brent benchmark was just on US$60.50. Watch today when markets open, they won't be at that level then.
The Kiwi dollar opens much weaker today, now down to 63.8 USc which is more than a -½c fall since this time last week. On the cross rates we are softer too at 92.7 AUc as the Aussie jumps and that is the lowest level since November 2018. Against the euro we are at 57.6 euro cents. That puts the TWI-5 back down to just on 68.9 and taking the overall devaluation of the Kiwi dollar since the beginning of July to -3.8%.
Bitcoin is now at US$10,300. 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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