Here's our summary of key economic events over the weekend that affect New Zealand, with news we are in a time when 'unchanged' is about the best we can do.
Chinese markets will be back later today after their four day Dragon Boat Festival holiday. They will no doubt be back in a somber mood. In 2019 almost 96 mln people used this public holiday to visit events. But this year things got off to a very slow start with barely 17 mln people turning out on the first day, about half the level Beijing was hoping for.
Part of the restrained enthusiasm may be because of severe flooding in southern China.
Also somber is that Chinese company profits in the January to May period were down about -20%. That was less of a decline than in the January to April period because May profits rose +6% from April. But they were still down -7% year-on-year.
And Chinese unemployment levels fell marginally in May from April, declining from 6% to 5.9%. Even though the locals won't feel this is much of a relief, it is a much better outcome than is happening in the rest of the world.
Not all is well in the Middle Kingdom, obviously, and getting funds out is still a key objective of their wealthy. But one of the ways they move their money out of the country is being threatened with the annexation of Hong Kong into the Beijing security orbit. Via Thailand is becoming the favoured exit now.
In the US, in its annual stress tests, the US Fed said a long economic recession could saddle the country's largest and globally important banks with up to US$700 bln in losses from bad loans. It has told them to restrict dividends and temporarily end share buybacks so that they conserve funding for the coming increases in financial stresses. The price of bank shares fell.
Also falling is the Fed's balance sheet, which shrank for a second straight week as foreign central banks cut their use of currency swaps rather sharply, and American banks reduced their use of Fed repurchase agreements. The reductions seem odd when their economy clearly needs additional support, but maybe it is their way to get the fiscal authorities to act and do their part.
The latest consumer sentiment index rose in June from May but at a generally underwhelming rate and far below expectations. The best gains were in the northeast where the pandemic is under better control. But the rest of the country is clearly increasingly anxious.
And data for personal income in the US is concerning too. It jumped in April on the income support that Congress rushed through. But that support hasn't been followed up and new efforts are mired in partisan gridlock and resisted by Republicans. That has resulted in a very sharp -5% fall in real disposable income in May while at the same time personal spending rose more than +8%. Obviously it can't continue on like this very much longer and there is an economic reckoning coming, and soon. Past lifestyles can't maintained by such a huge mismatch for very long.
And that coming earthquake in consumer demand is getting the attention of equity markets. The S&P500 was down -2.4% on Friday capping a week that got lower as it wore on. The weekend futures trading suggests another -2.2% fall is on the cards when Wall Street re-opens tomorrow.
And the IMF is warning of the risks readers of these reports will have recognised months ago: "The disconnect between financial markets and the real economy can be illustrated by the recent decoupling between the soaring US equity markets and plunging consumer confidence" which they say can only end in tears. Every day, that quicksand quivers more violently.
The latest compilation of COVID-19 data is here. The global tally is more than 10 mln, and the last million added took just a bit more than 30 days. The official record now shows 10,044,731. Global deaths reported now exceed 500,000.
A quarter of all reported cases globally are in the US, which is up a very sharp +85,000 since this time Saturday to 2,531,700. This is now growing faster again than the global rate of infection. US deaths now exceed 125,700. The number of active infections in the US is now up to 1,726,700, up +68,300 since Saturday. And the Centers for Disease Control (CDC) is now saying that they have only been counting about 10% of the actual infections in the US community, maybe less. Tensions and risks are growing as testing centers are overwhelmed. It is an uncontrolled surge that has global implications, and the financial ones may be the least of our worries unless they get on top of it.
In Australia, there have been 7686 cases, another +45 since yesterday and up more than +128 since this time on Friday. Their death count is still at 104 but their recovery rate has slipped back to just on 91%. There are now 589 active cases in Australia (up +31 overnight).
The UST 10yr yield is lower at 0.64% and a -4 bps pullback from Friday as market fears build. Their 2-10 curve is flatter at just under +47 bps. Their 1-5 curve is also flatter at just under +14 bps, while their 3m-10yr curve is down to +52 bps. The Aussie Govt 10yr yield is also down by -2 bps at 0.87%. The China Govt 10yr is down -3 bps at 2.89%. And the NZ Govt 10 yr yield is down -2 bps at 0.94%.
The gold price is marginally firmer, up another +US$9 from Friday to US$1,771/oz.
Oil prices have softened marginally. It is now just over US$38.50/bbl in the US and the Brent price is just over US$41/bbl.
The Kiwi dollar is softer in a minor move down, now just on 64.2 USc. On the cross rates we are slightly firmer at 93.6 AUc and against the euro we are holding at 57.3 euro cents. That means our TWI-5 has held at 69.2.
The bitcoin price has stayed down, and is unchanged at US$9,154. During June this crypto has fallen -4.7%. 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 ».
Our currency charts are here.