US wages rise; China corporate debt stress grows; EU rolls back Greek deadlines; Brent crude price drops; UST 10yr yield 1.90%; NZ$1 = 76.7 US¢, TWI = 81.7

US wages rise; China corporate debt stress grows; EU rolls back Greek deadlines; Brent crude price drops; UST 10yr yield 1.90%; NZ$1 = 76.7 US¢, TWI = 81.7

Here's my summary of the key issues from overnight that affect New Zealand, with news of a record high reached last night for the Kiwi dollar.

But first, in the US March jobless data out overnight showed little change overall, but increasing variation between regions and States. This is because the low oil prices are having a marked impact positively in some areas and negatively in others. In related data, median weekly earnings data was up +1.5% year-on-year and as inflation was -0.1% in the same period, real earnings increases were slightly higher. This data may bolster Fed resolve to start their rate rises as they have signaled. The May 8 non-farm payrolls report will become a big test of whether the Q1 data indicates lingering softness.

In China there is growing concern about the ability of many corporates to handle their very high debt loads. Officials there pleaded over the weekend for lenders to roll over loans, and now more cases of companies unable to pay loan or interest payments are coming to light. It is a worrying trend. Overnight, the first State-owned company added to the toll.

In India, there is official frustration that their recent monetary policy interest rate cuts are not flowing through to the 'real economy' and that bankers are just capturing the cost reductions.

There was a strong hint of a back-down by the EU over Greece overnight. Euro zone finance ministers said they will not set any deadline for Greece to come up with reforms to get more funding because such time limits lead to brinkmanship in negotiations. That probably means July 20 is the real deadline now, when the ECB could not ignore a failure of Greece to pay it a loan repayment. Before then though there will be a whole series of new commercial stresses - like how to pay the power bills.

The UST 10yr benchmark yield is marginally higher today at 1.90%. 

The US oil price has remains at about US$56/barrel, while Brent crude dropped about US$2 to US$62/barrel in trading earlier today. 

The gold price rose about US$10/oz and now trades at US$1,203/oz.

The New Zealand dollar starts today at 76.7 US¢, at 99.4 AU¢, and 71.4 euro cents. The TWI is still very high at 81.7.

In fact, at about mid-night last night the TWI reached a record post-float high of 82.13 eclipsing the 81.93 record that was set in July 2014. At midnight, we were at 99.6 AUc and at 72 euro cents, themselves both records. The fallback this morning is relatively minor.  These new levels will be very tough for many exporters; certainly it will be undermining Fonterra's ability to hold its current payout forecast.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk is by following our Economic Calendar here »

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3 Comments

NZ = High Interest rates, High Dollar, Booming Auckland house market fueled by low interest money. .

It looks like Greece will have the last laugh. No surprises there because the EU wouldn't dare risk a Greek default. All that thought talk by the ECB was actually just fear. I'm going to go out on a limb here and make a prediction about gold. Although I have been bearish about gold I do think the U.S. dollar has topped and gold will have a rally before the end of the year.

ECB shouldn't worry too much. as long as Greece doesn't actually default the banks can just claim tax reductions for losses in Greece, milk it that way instead. Just as long as Greece doesn't increase it's problem... which means they actually have to start finding ways to deleverage...considering they aren't willing to Key-off their real assets to the lowest bidders.