Here's our summary of key events over the weekend that affect New Zealand, with news of equity records among sinking economic data.
The American September merchandise trade deficit has come in at -US$72 bln, almost exactly the same level it was in September 2018. Exports were down -3.5% and imports down -2.6%. For all the focus, that isn't much 'progress' on dealing with this perceived issue. This is the raw early data and details of the politically sensitive trade with China are now available yet.
American stocks of unsold goods are rising. Wholesale inventories are up +5.0% from the same month a year ago, and retail inventories are up +3.7% in September.
The National Activity Index collated by the Chicago Fed is pointing to subdued growth ahead. And the October Dallas Fed regional factory survey which has been an outlier of positivity earlier, has also now turned down, just like most other regional factory surveys done by the Fed.
None of this core economic data seems to be worrying equity markets today however. On Wall Street, the S&P500 has started the week positively, up +0.5% in mid-day trade. That modest rise however brought this index to a record high. This follows European markets overnight that posted modest gains, and Asian markets yesterday that were decidedly positive. While we were on holiday, Shanghai was up +0.9%, Hong Kong was up +0.8% and Tokyo up +0.3%. The ASX200 however was flat.
Sentiment that either or both the mini-trade deal will happen, or a -25 bps Fed rate cut at the end of this week, is keeping things positive in these markets.
In China, another large private company has defaulted on bond debt.
A new report about Chinese household debt however will allay many fears. It reveals that less than 14% of Chinese households had any consumer debt, and that total household debt, including home loans, was less than half China's GDP. In New Zealand it is 95%, and in the US it is 77%. This much lower debt load on Chinese households will give them more economic resilience.
China is likely to get more focus from HSBC, who announced more intensive restructuring plans as their European and US businesses drag their results.
The OECD is reporting that Foreign Direct Investment fell by -20% in the first half of 2019 compared to the last half of 2018, to US$572 bln. That is a drop of -US$143 bln and goes a long way to explaining how poor public policy affects investment decisions. The drop is equivalent to wiping out the New Zealand economy from the global stage.
The European Union has agreed to delay Brexit until the end of January 2020, a move that increases the chances of a British election before the end of the year. It also ends any hope of a departure by the end of October, a die-in-the-ditch promise by the English prime minister.
The UST 10yr yield is at 1.85%, and +5 bps higher than this time yesterday. Their 2-10 curve is positive at +20 bps. Their 1-5 curve is positive at +6 bps. Their 3m-10yr curve is a positive +10 bps. The Aussie Govt 10yr is up at 1.15%, and an overnight gain of +6 bps. The China Govt 10yr is now at 3.30% and a +5 bps rise overnight. The NZ Govt 10 yr is now at 1.21%, unchanged overnight.
Gold is down sharply, down -US$12 overnight to US$1,492/oz.
US oil prices are a little softer at just over US$56/bbl. The Brent benchmark is just on US$61.50/bbl.
The Kiwi dollar is soft at 63.4 USc. On the cross rates we are much softer against a rising Aussie dollar, now at 92.7 AUc. Against the euro we are marginally lower at 57.2 euro cents. That puts the TWI-5 at just on 68.5.
Bitcoin has pulled back slightly after its strong rise over the weekend, now at US$9,367, but that is more than a +25% leap since Thursday. 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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