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Here's our summary of key events over the weekend that affect New Zealand, with news that we are heading into the fourth quarter of 2019 with plenty of big economic headwinds.
First up, remember China is on holiday this week, it's their Golden Week break that includes the 70th anniversary celebration of the CCP. The only news that will be flowing out of China this week will be heavy doses of propaganda.
But late last week they reported a sharp fall in industrial profits in August, down -2.0% year-on-year after a +2.6% rise on the same basis in July. Not a great way to celebrate the 'success' of the CCP rule.
One tight control they have is over their exchange rate, and it has been virtually fixed now for all of September. To help keep it that way, their central bank issued 10 billion yuan (NZ$2.2 bln) of six-month bills in Hong Kong on Thursday at 2.89% and that is a substantial premium to get them sold.
Over the weekend, there were reports that the US was moving to expand the trade war into capital markets, fearful it can't compete there either. That didn't help Wall Street market sentiment on Friday. The White House was reported as considering forcing Chinese companies to delist from Wall Street and prevent American companies investing in China. But the market reactions have brought a backtrack, and the US Treasury Department has denied such plans exist.
The Chinese have confirmed the senior chief Chinese trade negotiator is off to Washington as soon as the Chinese holiday is over.
More fundamentally in the US, durable goods orders in August were down a rather startling -4.2% from the same month a year ago. Typically this data is reported as a change from the prior month, but the depth of the annual fall is a somewhat hidden surprise. The important capital goods component has dropped more than -9% on the same basis. With trends like this, no wonder most of the regional Fed factory surveys are glum.
And American consumer spending slowed more than expected in August, signaling a key pillar of their economy is losing momentum as the global economy wobbles and trade tensions remain high. Personal incomes rose in August 2019 from August 2018 by the slowest rate rate of the year, while consumption growth tailed off slightly more. The real weakness in these year-on-year trends is in services.
Also, their consumer sentiment is sharply lower on a similar year-on-year basis (-6.9%) even if it actually rose in August from July in one of the two widely-watched polls. Perhaps that is because PCE inflation dipped slightly in August.
Still, an increase in the American private domestic investment has tipped the latest estimate of US growth up to +2.1% in Q3; still lowish by their standards but up from Q2.
The UST 10yr yield is unchanged from Friday at 1.69%. Their 2-10 curve positive at +5 bps. Their negative 1-5 curve is unchanged -21 bps. Their 3m-10yr curve is slightly narrower at -26 bps. The Aussie Govt 10yr is now at 0.95%, an overnight fall of -1 bp. The China Govt 10yr is unchanged at 3.16%. The NZ Govt 10 yr is at 1.13%, a -2 bps dip from Friday.
Gold was down -US$2 to US$1496/oz.
US oil prices are lower today at now just under US$56/bbl. The Brent benchmark is just under US$62. That is a -4% fall for the week.
The Kiwi dollar is little-changed today, now at 63 USc. On the cross rates we are firm at 93.2 AUc. Against the euro we are at 57.6 euro cents. All of these are firmer than this time last week. That puts the TWI-5 back up to just on 68.6 and a +70 bps gain for the week.
Bitcoin is now at US$8,016 and while that is marginally softer from where we left it on Saturday, it is more than -20% down from this time last week. 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 ».