Subscribe to our daily podcast here.
Here's our summary of key events over the weekend that affect New Zealand, with news of how slowing growth is affecting key economies.
First up today, China has announced that its foreign currency reserves slipped slightly to just over US$3 tln. And India also said its foreign currency reserves hit a record high for them, US$435 bln.
In China, their tech sector is feeling the pinch, more so than the rest of their economy. But their tech sector is a very large portion of Chinese economic activity - surprisingly large. In September, it accounted for just under 28.7% of overall economic inputs. But that was down from the 29.4% in August, and in an economy as large as China's, a difference like that is large.
In Hong Kong, there has been another night of high violence on the streets after the Government extended its ban on umbrellas, to face masks or face paint. China's surveillance won't work on either. Protester fury has been raised a notch in reaction to that and strategic shutdowns of their public transport system. As we have reported previously retail sales have fallen sharply. Now Hong Kong's richest landlord as offered HKD$1 bln in assistance to 'SMEs' (about NZ$200 mln), but he is doing it in conjunction with the Hong Kong Government's own HKD$2 bln assistance package.
In India, they have cut their benchmark policy interest rate by -25 bps to 5.15% which is the fifth rate cut they have made in 2019. This is in response to a slowing Indian economy. Interestingly, their central bank is saying all the responsibility for reviving growth is up the Central government and their fiscal policies.
The American non-farm payrolls report came in weaker than almost all analysts expected over the weekend at a gain of just +136,000, and the lowest since 2017 that did not involve the aftermath of a hurricane, or a government shutdown. Factory payrolls actually decreased, as did trucking payrolls. In the year to September, there have been almost -20% fewer jobs created (+2,147,000) in the American economy than in the same 2018 year (+2,633,000), a shortfall of -486,000 jobs. In the same period, the US population grew by almost exactly +2 mln people to 329.4 mln.
Despite the low growth, their jobless rate fell to 3.5% and their participation rate held steady, even if it is quite low. Weekly earnings growth slipped to +2.9% in the past year.
The downshift was enough for markets to assume that Fed help is on the way, and Wall Street was up on the prospect. The S&P500 ended Friday up +1.4%. That follows rises in Europe in earlier end-of-week trading. Asian trade was mixed; and the ASX200 was up a modest +0.4%, the NZX50 up a bit more at +0.7%.
Meanwhile, the US trade deficit widened in August, with imports rising faster than exports. The goods deficit is rising while their services surplus is falling. But the politically sensitive goods deficit with China has fallen slightly in 2019. All that does however is signal a re-routing of imports.
In Canada, they posted a different result, with exports up, imports down, and a narrowing of their trade deficit.
In Australia, the RBA has released its October financial stability review and warned of the growing risk to their growth from the deeper slowdown in the global economy. They also warn of 'rapid housing price growth' that seems to be taking hold in Sydney and Melbourne.
Also out late Friday was data for August retail sales in Australia, and while they were up, the rise was much more modest than anyone expected. After a AU$15 bln tax cut flowed into consumer pockets, this was a very lame outcome and not what their Government was hoping for. The RBA will likely be concerned as well, bringing closer more official rate cuts, negative rates, even QE.
Today is a public holiday in most eastern Australian states, but not Victoria.
The UST 10yr yield is down at 1.53% and -15 bps lower than this time last week. Their 2-10 curve is positive at +12 bps. Their negative 1-5 curve is narrower at -25 bps. Their 3m-10yr curve is unchanged at -24 bps. The Aussie Govt 10yr is down at 0.90%, and a weekly fall of -5 bps. The China Govt 10yr is unchanged at 3.16% but will resume trading later this morning after their week-long holiday. The NZ Govt 10 yr is now at 1.03%, and a -10 bps drop for the week.
Gold will start the week at US$1,504/oz.
US oil prices are firmer today at now just under US$53/bbl. The Brent benchmark is just over US$58.50. But that is a -5% fall for the week.
The Kiwi dollar is little-changed this morning, now at 63.2 USc. On the cross rates we are still at 93.3 AUc. Against the euro we are still at 57.5 euro cents. All of these are firmer than this time last week. That puts the TWI-5 at just on 68.6. It is worth noting that in the past two years, our currency has devalued by -15%. But that hasn't improved our trade performance; exports have grown +$8.3 bln while our imports have grown +$10.6 bln. Our merchandise trade deficit is 75% higher despite the currency assistance. Meanwhile, our bank debt is also +$48 bln higher in that same period, just saying.
Bitcoin is now at US$7,991 and that is down -2.4% from where we left it on Saturday. 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 ».