Here's our summary of key economic events over the weekend that affect New Zealand, with news the Chinese economy seems to be adding muscle.
China has reported its foreign exchange reserves have moved higher again in US dollars, to US$3.15 tln in July. It's its fourth consecutive monthly rise and a bigger rise than was expected.
And China has reported a strong trade surplus in July. Imports were down -1.2% year-on-year while exports were up +7.2% on the same basis. The resulting surplus of +US62.3 bln for the month was far better than the +US$42 bln expected. Their July result involves a stunning +$32.5 bln surplus with the USA. After all the time and energy the America First president invested in this issue, his citizens just keep on buying Chinese goods at an increasing rate, despite the tariffs. China ran a -US$0.5 bln trade deficit with New Zealand in the month, and that was slightly less than in June.
China has confirmed it will use old-playbook techniques of preferential export tax rebates and special credit lines to keep their exports flowing. None of these policies will advance their entry into the TPP they say they want.
The Chinese currency has appreciated +2% since the start of July with +0.6% of that coming in the past week. Iron ore prices are back above US$100/tonne on Chinese demand, near an 18 month high and apart from that brief spike 18 months ago, it is at a six year high.
Taiwan has reported a similar trade trend for July with exports rising (+0.4%) and imports falling (-6.8%) so it has a fatter trade surplus of +US$5.4 bln and on a per capita basis, five times more than China itself.
In Australia, the tension between public health and economic health is playing out in a brutal manner in Victoria (and inflamed by the Murdoch press). Those on the economic side seem to be fiercely uncomfortable that public health priorities should have precedence. It is unclear whether Melbourne has the discipline to 'stay at home' to beat the pandemic there. The odd thing is that the rest of Australia wants the health risk gone and wants Victoria to defeat COVID-19, but Victorian business interests are resisting their participation. And you know if the situation was reversed, they would have a completely different view.
Joblessness could rise to more than 10% if the virus pushes other states outside Victoria into Stage 3 and 4 lockdowns, the Reserve Bank of Australia has forecast in their latest Monetary Policy Statement. And they warn it will take a long time to recover, pushing them into an extended recession.
In the US joblessness is a growing issue too and renters there are in substantial trouble. With the end of the federal moratorium on evictions that expired on July 31 and the end of the US$600/week boost to unemployment benefits, a recent official survey showed just over a third of all renters had "little or no confidence" they can make their August rent payment. In July 27% missed a rent or mortgage payment, so the issue is getting much worse quite quickly.
The US non-farm payrolls gained +1.76 mln new jobs in July in a further improvemnet after the -22 mln jobs lost in March and April. +301,000 of the July gain was from Government jobs which was an unexpected boost. But their participation rate remained at a low 61.4%. These July improvements represent a slowing of the rebound, undermined somewhat by the rising pandemic second wave.
Canada also reported its July jobs data and those rose +0.42 mln. Their participation rate is an improving 64.3%.
We should also note that the US Fed has announced what has been touted as an alternative to Facebook's Libra crypto plan. The goal - instant payments. For Kiwis it may seem a quaint notion given we have had virtually instant bank settlement for much more than two decades here. But for Americans, used to dealing with thousands of banks and still largely transacting with cheques, their transfer system is a real anachronism. Now the Federal Reserve has announced the final rollout of FedNow, and instant interbank settlement system for the US, and one that will clear away all those money transfer delays, if not the fees. They are now in the 21st century on payments.
The latest global compilation of COVID-19 data is here. The global tally is 19,706,000 and that is up 529,000 since when we looked at it on Saturday. Global deaths reported now exceed 728,000 (+12,000).
A quarter of all reported cases globally are in the US, which is up 113,000 from this time Saturday to 5,169,000. US deaths are now just over 165,300 and a death rate of 499/mln (+6/mln). And the net number of people actively infected in the US rose overnight to 2,362,600, so still far more new infections than recoveries.
In Australia, there have now been 21,084 COVID-19 cases reported, another 404 overnight, and still very much concentrated in Victoria. There were another +10 in Sydney and NSW can't seem to shake its small community transfer outbreak. Their death count is up to 295 (+12). Their recovery rate is still just over 56%. There are now 8920 active cases in Australia (+229) and most are community transfer.
The UST 10yr yield is holding firm at 0.57%. Maybe this instrument is no longer the core signal it once was? Their 2-10 curve is marginally firmer at +44 bps. And their 1-5 curve is similar at +10 bps, while their 3m-10yr curve is also similar at +48 bps. The Aussie Govt 10yr yield is unchanged at 0.85%. The China Govt 10yr is up slightly again at 3.01%. And the NZ Govt 10 yr yield is also little-changed at just on 0.77%.
The gold price will start the week at US$2,035/oz which is up +US$4/oz from where we left it on Saturday but a long was down from its record high of US$2071 reached during last week. The silver price has fallen back too.
Oil prices are marginally softer today. They are now just over US$41/bbl in the US and the international price is now just over US$44/bbl. The US rig count atrophied again, slipping a few to a new record low.
And the Kiwi dollar fell rather sharply at the end of trading last week and is now down -¾c to just under 66 USc. Against the Australian dollar we are unchanged at 92.3 AUc. Against the euro we are down slightly at 56 euro cents. That means our TWI-5 is now a softer at 69.3 and also lower than where we were at a week ago.
The bitcoin price is up +1.0% over the weekend at US$11,428. But that is just a very marginal rise for the 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 ».