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90 seconds at 9 am: China slowdown; US uptick; German court case; desperate French declaration; bond bull run over; NZ$1 = US$0.787, TWI = 73.7

90 seconds at 9 am: China slowdown; US uptick; German court case; desperate French declaration; bond bull run over; NZ$1 = US$0.787, TWI = 73.7

Here's my summary of the key news overnight in 90 seconds at 9 am, including news of a worrying slowdown in China.

A raft of figures over the weekend added to the evidence, with exports in May posting the lowest growth in almost a year, inflation, growth in bank lending and investment below expectations and factory output and retail sales growing only about the same pace as in previous months.

These numbers indicate continued expansion but growth remains unconvincing and the momentum seems to have lost pace in May, say local observers who are getting to understand 2013 will probably not meet forecasts.

This contrasted somewhat to reports out of the US where expectations for May are very much brighter with consumer activity and higher employment driving rising growth.

In Europe, eyes are turning to an important German court case. It could set in motion events that force Germany’s withdrawal from the euro, a leading judge has warned. In response, the ECB has reiterated there is no limit to its bond-buying program, denying a German newspaper report published in the run-up to the court hearing on the scheme.

And in a somewhat bizarre announcement, French President Francois Hollande has declared that the four year old eurozone debt crisis, is over.

Speaking of over, Bill Gross has announced that the long bull run for bonds is now at an end. That means, he thinks investors will face capital losses as interest rates rise.

Gross isn't always right, but he is often right, and he has the cred of having built the world's largest bond fund. Others point out his firm's unofficial motto is 'preach fear, sell security'. Still, a future with rising interest rates seems likely when the US Fed tapers off its stimulus.

Seeming to confirm this, Asian bond markets are seeing capital values declining as interest rates rise. These are very big markets, exceeding US$2.7 trillion and investors face big losses if the trend continues.

The NZ dollar starts today following another very sharp fall on Saturday at 78.7 USc, 83.1 AUc, and the TWI is at 73.7. These are the lowest levels in nearly a year and are due to the combination of a rising US dollar and question marks over China - and therefore Australia.

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10 Comments

While not behaving as the lead balloon that is the A$, the Kiwi is heading sharply down (as are most commodity currencies). Against the US$ its down about 7-8% but against the UK pound its pretty much 10%. Time to import a bit of inflation methinks.......petrol will be making a tilt at an all time high in very short order.

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Yes, and the prospect of cheap and hence cheerful Japanese car imports is now looking like a distant memory if the recent collapse in the value of the NZD/JPY currency pair keeps heading lower beyond it's recent move from 86.00 to ~76.50.

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This contrasted somewhat to reports out of the US where expectations for May are very much brighter with consumer activity and higher employment driving rising growth.

 

A small warning maybe in order - the sector displaying the best employment and wage growth in recent years is about to be hit with sequester cutbacks. US Government employee confidence may sag along with spending. Read more

 

Close to a million federal employees have been told that they will be furloughed for several days this year, but the number that has actually started to take furlough days is quite low.

 

We expect aggregate government worker income to decline in May given that furloughs started in late May.

 

The first day of government wide furloughs was on May 24, when roughly 115,000 federal workers, or 5% of the total federal work force, stayed home without pay.

 

However, with the majority of the furloughs not kicking in until the beginning of July, including the Pentagon’s 680,000 furloughs beginning July 8, the real income shock will not show up until the July personal income and outlay report on August 30.

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Roll on US 70c

All the amateur TV presenters will be raving on about petrol as usual, of course.

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C'mon let's make that a return to the 0.3940 lows, so we can make a few bob speculating on things other than houses in Parnell etc. Gotta pay the petrol bill for the new car somehow.

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I am not that harsh but it would be nice to see the overseas specys sell up and disappear with their tails between their legs.

That truly would realign the housing market to value.

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You must be kidding me. They (overseas specys) just reverse position and do the same as they did on the way up - why are proprietary trading desks set up and funded inside major banks? Cripes, someone told me a while back the BP's trading room had 350 traders.

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Yup that's true Stephen H.....but the locals...or genuine resident...ahhhh not sa good.

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While your watching it there Stephen H.... anything over 90 AUD will be ticket too....

 The glue's just starting to give on the pairings.....ya gotta  wonder just where good ol boys at Fonterra are gonna park the hedge now...? should get real interesting if the NZD stalls in the mid late seventies......forecasts will have some carry fwd bad news I'd expect.

 Good o you Basel B3 they had it their way long enough.....hopefully time to claw back some dead money.

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Christov, let's hope for the nation's sake Fonterra took notice of our previous musings or at least took remedial action to protect the forward payout to dairy farmers

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