Here's our summary of key economic events over the weekend that affect New Zealand, with news of some sizable financial wobbles in both China and the US.
But first in China, Moody's has raised its estimate of growth in 2020 from +1.0% to +1.9%. But it has downgraded 2020 economic activity forecasts for all the other major economies, seeing a 2020 contraction in the global economy at -4.6% which is worse than their last estimate.
Concern about tighter liquidity in China is reverberating through that country’s financial markets. Their Government bond yields have risen from 2.50% in April to almost 3.10% now, their stock market rally has completely run out of puff since early July, and the yuan has strengthened to its highest level since January.
And now their central bank has revealed that in the past two weeks it has made emergency liquidity injections into their banking system of NZ$400 bln.
China's food security concerns have risen too in the southern part of the country where they are facing a locust plague.
In India, they have made an "interesting" move to support investment in housing for low income people. It has given an income tax exemption for foreign funds who invest in "affordable rental housing" via debt or equity. It's a benefit not available to local investors.
Late on Friday the US dollar had a sharp fall, but really just adding to a recent trend that started in early April as the pandemic set in. It is now at its lowest level in two years and lower than four years ago. The Trump Administration policies have undermined the greenback as traders move to discount its long term prospects. A cheaper USD makes US assets easier for outsiders to buy and partly explains why Wall Street 'values' have been rising. A Fed that is loosening its focus on inflation may be the driver for this latest decline.
It also helps explain why commodity prices have been rising - from iron ore, to precious metals. And why the Chinese currency "is now at its highest level of the year".
In the US, and in the Chicago industrial heartland, their PMI slipped a little in August from July but this should be seen as a net positive because for the second consecutive month it was above the level-pegging '50' benchmark after being below for all prior months of this year. But the important new order subcategory fell.
The next US consumer sentiment survey came in slightly better than the weak July result but still a heavy -17% lower than this time in 2019. The surveyors said it is in a "depressed range".
In Las Vegas, a major employer has announced 18,000 furloughed employees are to be laid off permanently. It is just the latest in a wave of layoffs sweeping over the US labour market in late August. Stanley Black & Decker is another in a long and growing list. (And it is not only in the US.)
In Europe, economic confidence continues to improve in August, with companies from manufacturing to services benefiting from higher demand following the end of pandemic lockdowns. It was a fourth consecutive rise and better than expected with the service sector giving a recent boost. One trend in the consumer part of these surveys however is that people are more worried about their job prospects.
The latest global compilation of COVID-19 data is here. The global tally is 25,069,000, up +515,000 since when we last checked this time Saturday. Global deaths reported now exceed 844,000 (+11,000 in two days).
Just under a quarter of all reported cases globally are in the US, which is up +86,000 since Saturday to 6,158,400 and a relentless rise. US deaths are now just over 187,000 and a death rate of 564/mln (+5/mln). The net number of people actively infected in the US rose overnight to 2,557,000, so back to many more new infections than recoveries. The return to school is probably behind the upsurge.
In Australia, there have now been 25,670 COVID-19 cases reported, another +222 over the weekend. Although most are in Victoria, it is definitely abating there and the new Sydney cluster isn't growing. Australia's death count is up to 611 however (+28). Their recovery rate is up over 82%. There are 3948 active cases in Australia (-289) indicating a turned tide and more recoveries than new infections.
The UST 10yr yield will start the week at 0.72%. Their 2-10 curve is at +59 bps. Their 1-5 curve is at +15 bps, while their 3m-10yr curve is at +64 bps. The Aussie Govt 10yr yield is up +2 bps at 0.98%. The China Govt 10yr is also up and by +1 bp at 3.09%. And the NZ Govt 10 yr yield has joined in with its own belated rise at the long end, up +7 bps to just under 0.64%.
The price of gold rose in final trade last week to be up +US$36 to US$1,964/oz and essentially repricing based on the currency shift.
Oil prices are little-changed today at just under US$43/bbl in the US while the international price is just over US$45.50/bbl.
However the US dollar sunk rather dramatically over the weekend and that has pushed the Kiwi dollar sharply higher, up almost a full +1c to over 67.4 USc and a sudden appreciation of +1.3%. That is its highest in more than a year, and probably annoys the RBNZ. Against the Australian dollar we are a little firmer too, at 91.5 AUc. Against the euro we are up to 56.7 euro cents. That means our TWI-5 is up to almost 70 and a one month high.
The bitcoin price is up +1.2% from this time Saturday at US$11,653. 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 ».