Here's our summary of key economic events overnight that affect New Zealand, with news China remains an enigma, with some steps forward but undermined by questions about how that is happening.
The Chinese banking regulator is seeing sharp rises in bad loans coming. It urged lenders to prepare even though they aren’t exposed yet. Bad loans have risen to 2.1%. Banks have been told to boost profit retention to accumulate capital, "while appropriately reducing or limiting bonuses".
China's economy is expanding. Q2-2020 GDP will be announced on Thursday and it is expected to show a +2.1% growth rate. That is a sharp rebound from the -6.8% fall in Q1-2020 (and miles lower than the +6% rates in 2019). It is a rebound that many of its neighbours hope to ride.
Underpinning their recovery, car sales rose in June for the fourth consecutive month and posted the first quarterly rise in two years. It's now the world's largest car market and 2.3 mln vehicles were sold in June, rising almost +12% year-on-year. (However the industry is warning they face up to a -20% fall from here if conditions worsen.)
But new debt is doing its part still. Chinese banks extended ¥1.81 trillion yuan (NZ$400 bln) in new yuan loans in June, up a startling +22% from May and up +13% year-on-year. There is nothing new debt can't solve in China.
And China is pulling back on its limited transparency, suddenly stopping the release of some key data without explanation.
In Australia, ANZ says the six-week lockdown of metropolitan Melbourne will lead to a second wave of businesses going belly-up. And the Canberra government is readying more wage support as their current program comes to an end. It's a treadmill they can't get off. In fact, so far no country has shown how to get off.
Meanwhile, Aussie bankers are pressing customers who can pay, to take themselves off the loan deferral scheme.
Internationally, airline job losses are accelerating. United Airlines says it will lay off 36,000 employees, Emirates says it is to shed 9,000.
In the US, the Federal Reserve balance sheet is still shrinking, now for the fifth consecutive week. After growing sharply to almost US$7.2 tln, it is now down below US$7 tln, a decline of -$248 bln.
The USDA's WASDE report has raised its forecast for imports of beef into the US and lowered its forecast of US milk production. US red meat production is falling and is projected to fall well into 2021 even if the trend is minor. Both trends will aid New Zealand's trade in these key commodities. But they do see dairy output rising in 2021 even if they missed forecasting it falling in 2020.
The US action against countries who try to get tax their tech giants continues. They have announced retaliation against France for trying to get Facebook, Apple and Google to pay some tax. France has deferred action while the BEPS negotiations move forward. So the US has deferred imposing its sanctions on France.
Canada's economy added almost one million jobs last month, as businesses reopened after their COVID-19 shutdowns. And that is on top of the +290,000 it gained in May. But despite that two-month stretch, there are still -1.8 mln fewer jobs in Canada as at the end of June than there were in February. Almost half their job gains were part-time jobs. Their jobless rate fell to 12.3% in June, down from the record high of 13.7% it hit in May. (Across the southern border, the US unemployment rate is 11.1%.)
Wall Street ended last week up +1.1% for the S&P500 on Friday and a weekly gain of +1.7% and taking the year-to-date loss in market capitalisation down to -US$420 bln. European markets closed the week higher on the day too, generally up more than +1%. Frankfurt was up +0.8% for the week, Paris was down -0.7% and London was down a bit more than -1%. Shanghai closed yesterday -2% lower on the day to cap a week of strong gains, up +7.3% as profits we taken at the end and State pension funds started selling. Hong Kong was up +1.4% for the week while Tokyo was unchanged for the week. Locally, the ASX200 ended the week with a -2.3% loss and the NZX50 ended with a -1.5% loss.
The latest compilation of COVID-19 data is here. The global tally is 12,785,500 and that is up +444,000 since this time on Saturday. Global deaths reported now exceed 566,000 (+10,000).
A quarter of all reported cases globally are in the US, which is up +67,000 overnight to 3,388,800. US deaths now exceed 138,000 and that incidence is now rising as ICUs fill to capacity. The number of active infections in the US is now up +58,500 to 1,745,500. Florida is the new epicenter in the US. In fact, it is getting more new cases daily than 112 countries have had in total since the start.
In Australia, there have now been 9797 cases reported, another +244 since this time yesterday, and still concentrated in Victoria. But NSW is now having a surge of its own. Their death count is up +1 at 108 and 17 people are now in ICU (+1). Their recovery rate has slipped back further to under 79%. There are now 1961 active cases in Australia (up +239 in one day).
The UST 10yr yield is holding at 0.64%. Their 2-10 curve is stable at +49 bps. Their 1-5 curve is also unchanged at +15 bps, and their 3m-10yr curve marginally steeper at just under +54 bps. The Aussie Govt 10yr yield is up marginally to 0.90%. The China Govt 10yr is unchanged at 3.13%. And the NZ Govt 10 yr yield is also unchanged at 0.98%.
The gold price has held at its lower level, now at US$1,799/oz.
Oil prices are firmer. They are now just over US$40.50/bbl in the US and the international price is just over US$43/bbl. But the US rig count has slipped further, to a new record low.
But the Kiwi dollar is marginally firmer at just over 65.8 USc. On the cross rates we are also firmer at 94.7 AUc. Against the euro we are up to 58.3 euro cents. That means our TWI-5 has risen slightly to 70.5.
The bitcoin price is unchanged at US$9,224. 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 ».