Here's our summary of key economic events overnight that affect New Zealand with news of China's big push to sharply raise domestic consumption.
But first in the US, the inflation data the Fed watches was released today. The personal consumption expenditures (PCE) price index for May increased +3.9% from one year ago, reflecting increases in both goods and services. Energy prices increased +27% while food prices increased +0.4%. Excluding food and energy, the PCE price index for May increased 3.4% from one year ago. That is only marginally higher than the year-on-year rise for April of +3.1%. These rates are high but probably not high enough for the Fed to change its "this is transitory" stance.
Personal income slipped in May, but only because of a pullback in government benefits. The last industry survey for May had weekly earnings rising +2.6% in the past year. Personal spending was little-changed in May, but it is up +20% for goods from just before the pandemic hit, and down -1% for services on the same basis. It does seem now primed for strong growth in services over their summer period.
Another Fed member has come down on the side of an earlier rate hike saying the criteria for a hike "could be met as soon as the end of next year". (In the video, not the summary.)
The Federal Reserve released its updated annual bank stress tests as at March 2021, which showed that the 23 largest American banks continue to have strong capital levels "and could continue lending to households and businesses during a severe recession". With this official signal of a clean bill of health, these institutions are now poised to start issuing as much as US$130 bln in dividends and stock buybacks from July after almost an 18 month block on distributions to shareholders
China is focusing its efforts to get its relatively low consumption (60% of GDP) up to developed country levels (80% of GDP). And their 'dual circulation' policy is aimed at doing that. They have a very long way to go, but the progress will be quite extraordinary and distortionary to the world economy with many winners and some losers along the way.
S&P has affirmed its A+ credit rating for China. It is not a rating that China has solicited. It sees the country able to maintain above-average growth in the next few years and wants to see it repair its deteriorated fiscal debt position over the next three to four years.
Singapore industrial production is bouncing back very strongly after some recent lackluster months. In May it was up +7.2% from April and up +30% from the same month a year ago. From May 2019 it is up almost +20%.
The Sydney pandemic outbreak is spreading. Overnight the number of Delta-variant-infected people rose to 65 with 22 yesterday alone. There are now 181 locations where a visit requires self isolation. Large sections of the inner eastern suburbs, including Woolhara, Waverley, Randwick and the central City of Sydney have been issued with a 'stay at home' lockdown restriction "for at least one week"- but because it is NSW there are plenty of exceptions. A failure to act decisively earlier looks like it hasn't worked to keep the Delta variant from spreading. New Zealand extended its travel bubble pause with NSW for another 12 days last night. (The Level 2 restrictions in Wellington will run until Sunday night.)
Wall Street is firmer today with the S&P500 up +0.3% in afternoon trade. For the week it is a strong gain of +2.6% so today's level is a record high. Overnight, European markets were quite mixed with London up +0.4% but Paris slipping back -0.1%. The others were in between. Yesterday the very large Tokyo market ended up +0.7% on the day for a weekly gain of +2.0%. Hong Kong was up +1.4% in its final session for the week to cap a weekly gain of +2.8%. And Shanghai was up +1.2% on the day for a weekly rise of +2.6%. The ASX200 ended with a +0.5% daily gain but that closed the week with a -0.8% retreat. The NZX50 Capital Index ended with a modest +0.3% Friday rise to finish the week with a modest +0.5% rise.
The UST 10yr yield starts today up +6 bps at 1.54% and up +9 bps from a week ago. The US 2-10 rate curve is steeper at +1.27 bps. Their 1-5 curve is a little steeper at +85 bps, while their 3m-10 year curve is also steeper at +149 bps. The Australian Govt ten year benchmark rate starts today at 1.57% and a +6 bps rise. The China Govt ten year bond is unchanged at 3.11%. And the New Zealand Govt ten year is now at 1.82% and that is up +2 bps. A week ago it was at 1.80%.
The price of gold starts at US$1780/oz which is up +US$5/oz from this time yesterday. It is up a modest +US$10 from this time last week.
Oil prices are firmer again from this time yesterday, up almost +US$1. In the US they are now at just under US$74/bbl, while the international Brent price is just under US$75.50/bbl. Crude oil prices are now at their highest since October 2018.
The Kiwi dollar opens today unchanged at 70.6 USc but it has recovered +130 bps from this time last week. Against the Australian dollar we are little-changed at 93.1 AUc. Against the euro we are unchanged at 59.2 euro cents. That means our TWI-5 starts today at 73. A week ago it was at 72.
The bitcoin price is now at US$32,092 and down -7.8% from this time yesterday. Over the past week, this price has fallen -10%. Volatility in the past 24 hours has been extreme again at +/- 6.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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