Here's our summary of key economic events overnight that affect New Zealand, with news investors have had enough of high valuations unsupported by the real economy - for today at least. Risk is off.
Firstly, the US trade balance has come in a terrible -US$63.4 bln for July, the worst result since 2008. Exports were down more than -20% from the same month in 2019, imports were down -11%. The tariff war is having no impact on imports from China because the US deficit with China went up to -$31.6 bln in the month and worse than for June. The only impact it is having is that American are paying more for these imports - and ironically they purchased +8% more from China in July than June. The Chinese purchased -2% less from the US in the same period. The US is running a busted trade policy - although that comes as no surprise to everyone but about three people.
Initial US jobless claims were up +881,000 last week which was slightly lower than expected. The total number now on jobless benefits dropped to 13.25 mln, a decrease of -1.25 mln as increasing numbers of people lose their social support entitlements. Congress can't get its act together to renew support programs.
US job cuts so far this year surged +230% compared to the same period of 2019.
The widely-watched ISM services PMI is still expanding but at a much reduced pace than was expected. Employment is still contracting in the sector however.
The combination of the dire trade balance and the toxic direction of unemployment support has been too much for investors and markets are down very sharply with the NASDAQ down -5.3%. All other indexes are also sharply lower. Today no-one is buying the dips, not yet at least.
China's private sector PMI for services was out today and it came in marginally lower in August than for July, expanding at a PMI of 54.1, as normal business conditions return to China. A feature of this report is the shift of the employment component into expansionary territory. Also this services PMI version is now slightly weaker than the official version (55.2) and that hasn't been the case for all of 2020.
The Chinese central bank made a surprise net liquidity injection into their banking system of NZ$4.5 bln via open market operations yesterday.
But traders are watching the copper price as Chinese demand is rising while supply is not. And iron ore prices just keep on rising and rising.
In the EU, PMIs came in on average slightly better than expected in August. They were marginally lower than July, but still expanding. They were bolstered by the German result.
But EU retail sales disappointed in July, falling far short of expectations. But at least they did eke out a small year-on-year gain which in the circumstances is positive.
France has launched a €100 bln economic stimulus package to kick-start their coronavirus-damaged economy. It's 'investment' will be focused on green energy and transport.
In Australia, their July trade surplus narrowed a bit more than expected. Exports fell (-4.4%) and imports rose (+6.9%). Their service exports took a sizable step lower, down -12%. Their July surplus was +AU$5.4 bln and well below the June surplus of +AU$8.1 bln.
In New York, the S&P500 is being trashed today, down -3.9% in afternoon trade today. Overnight European markets fell about -1.4% on average. Yesterday, Shanghai closed down -0.6%, Hong Kong was down -0.5% and Tokyo managed a +0.9% gain. The ASX200 ended up +0.8%, and the NZX50 Capital Index was up +1.3%.
The latest global compilation of COVID-19 data is here. The global tally is 26,112,000, up +277,000 since yesterday. Global deaths reported now exceed 864,000 (+5,000 in one day).
Just under a quarter of all reported cases globally are in the US, which is up +36,000 in a day to 6,310,000 and a relentless rise. US deaths are now just over 190,500 and a death rate of 575/mln (+4/mln). The net number of people actively infected in the US slipped overnight to 2,564,000 (-9,000).
In Australia, there have now been 26,049 COVID-19 cases reported, and that is +126 more than yesterday with a new small but stubborn NSW outbreak. Australia's death count is up to 678 (+15). Their recovery rate is now 84%. There are 3464 active cases in Australia (-112) indicating a turned tide and more recoveries than new infections.
The UST 10yr yield is down another -3 bps today at 0.62%. Their 2-10 curve is flatter again now under +50 bps. Their 1-5 curve is down -2 bps at +11 bps, and their 3m-10yr curve flatter too at +53 bps. The Aussie Govt 10yr yield is down -2 bps at 0.89%. The China Govt 10yr is still rising, up +3 bps at 3.14%. But the NZ Govt 10 yr yield is little-changed at 0.64%.
The price of gold is down again, down -US$9 today to US$1,932/oz.
Oil prices are slightly lower again today, down to under US$41.50/bbl in the US while the international price is down slightly less to just on US$44/bbl.
The Kiwi dollar is lower today and has given up some of its recent gain to be at 67 USc even. Against the Australian dollar we have dipped to 92.1 AUc. Against the euro we are down -½c to 56.6 euro cents. That means our TWI-5 has softened to 69.9 but still above where it was this time last week.
The bitcoin price is sharply lower today again from this time yesterday, now at US$10,744 which is another -5.5% drop. In fact since Wednesday it has dropped more than -US$1200 or -NZ$1600. 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 ».