Manufacturing slump in China and Japan, soft growth in US house sales, record fine for Deutsche Bank, consumer confidence strong in NZ; NZ$1 = 75.9 US¢, TWI = 80.4

Manufacturing slump in China and Japan, soft growth in US house sales, record fine for Deutsche Bank, consumer confidence strong in NZ; NZ$1 = 75.9 US¢, TWI = 80.4

Here's my summary of the key issues from overnight that affect New Zealand, with news of a weakening dollar.

But first, manufacturing activity has weakened in China and Japan in April, while growth in the sector has slowed in Europe and the US, suggesting the global economy may be less robust than policymakers are predicting.

Overall, manufacturing in the US is still going strong, despite new export orders falling and domestic orders in China and Japan dropping right off.  

As for the sale of new houses in the US - growth is soft. While March saw a double-digit increase in sales compared to March last year, the number of houses being sold is still below market expectations.  

US and British authorities have fined Deutsche Bank a record US$2.5 billion to settle accusations it helped manipulate the benchmarks used to set interest rates on trillions of dollars in mortgages, student loans, credit cards and other debt.

Back home, there's considerable horsepower across the economy’s engines. The ANZ-Roy Morgan Consumer Confidence Index nudged up marginally in April, as consumer sentiment was perky, businesses were optimistic and inflation expectations continued to ease.  

The UST 10yr benchmark yield is unchanged today at 1.97%. 

Swap rates have fallen with a steepening bias, following the Reserve Bank Assistant Governor, John McDermott, yesterday annoucning an OCR cut is possible if wage and price setting pressures settle at lower levels. 

The US oil price has risen to US$58/barrel, while Brent crude has crept up to US$65/barrel. 

The gold price remains at a US$1,188/oz, following a big price drop yesterday. 

The New Zealand dollar's dropped to the lowest point its been in a week - once again a reaction to McDermott's game-changing speech. Overnight the dollar fell against the US, to 75.9 US¢; against the Australian to 97.5 AU¢; against the Euro to 70 €¢. The TWI fell 100bp to 80.4.  

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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18 Comments

A bit of talk to temporarily lower the nz dollar.
But we still have the ongoing underlying tightening bias in reality and paranoia about runaway inflation.
And a lack of acknowledgement that most of the developed world is in deflation.

A useful read from Stratfor.com, says things I have been saying here for some time. America controls the world not only because of the dollar, but because it controls the sea lanes. As such it is far from a done dog.

https://www.stratfor.com/weekly/chinas-new-investment-bank-premature-pro...

So the Kiwi $ dropped , but rest assured this will not be for long ............ its march is upwards and in time, I will wager , it will be stronger than the Aussie .

We may live to regret this , but at least we can adjust somewhat

So the Kiwi $ dropped , but rest assured this will not be for long ............ its march is upwards and in time, I will wager , it will be stronger than the Aussie .

We may live to regret this , but at least we can adjust somewhat

The Japanese have cracked 600 kph with their trialling of a Maglev train near Tokyo ... 374 mph she topped for 10 seconds , and in that short time travelled a mile !

... Auckland to Hamilton , 125 km .... at 600 kph .... 12 and a half minutes .... Boooo-yahhhhhhh !!!!

Thats one way to put affordable property in commuting distance of Auckland.

One year ago Auckland's trains were diesel engines..
I would be cautious expecting such an infrastructure improvement in our lifetime :)

Sharemarket darling XERO has dropped 9 % this morning on the NZX , on news that although annual revenues rose 77 % to $ 123 million , the trading loss doubled from $ 35 million in the previous financial year to $ 70 million this year ...

... the company still boasts a market capitalization of $ 3 billion .

If that's investment, and hence capex, then its good (making the product better) like adding payroll!
His 700 staff have to be doing something...

... I wonder if the people who are willing to buy XERO shares are the same one's who'd stump up good cash to purchase shares of the likes of Martin Jetpacks too ?

Sort of , " to the moon or bust " , types ...

Well Martin Jetpacks has a much better chance of getting to the moon.

This reminds me of the King who paid a small fortune to a tailor to make him the finest clothes. After a few weeks the tailor informed the king that his clothes were ready, and that the clothes were so special that only intelligent and wise people could see them. The king couldn't see the clothes, but didn't want anyone to think he was stupid so he pretended to put on the clothes. He then organised a parade through town and informed all the townsfolk that he was wearing clothes that could only been seen by wise and intelligent people. Everyone turned out to the parade and marvelled at the kings new clothes.

That is what xero is like.

This year we sold 5,000 widgets for $5 each, next year we plan on selling 10,000 widgets.

(widgets cost $7.50 to make)

They've been putting a lot of work into getting into US and European markets, and setting up "platinum partnerships" with the large incumbents. Hopefully they don't get pulled away from their biggest selling product difference, an accounting system that normal people can use and access. Many of the professional accounting systems used to have a bunch of rules that seem solely for the purpose of protecting the professional trade,

I use Banklink, it's cheap and very easy (I just get the wife to do it)

$70 per year v $660, you could pull a lot of pony-tails with those kind of savings.

I had two accountants promise it but it never showed up. Plus I needed something that could do accounts not just GST/cash management. I was using a "double entry bookkeeping" program & excel in parallel for 3 years - doing everything double entry (my excel spreadsheet had around 120 pages at the end). It worked well but was very time consuming.
Unlike the first accountant who was tens of thousands of dollars out and couldn't even get the two shareholders names correct.

Previous to that when I was doing private computer consulting, my wife at the time, who worked part time for the bank, and was studying a few accounting papers was supposed to be doing the books for the computer consulting business.... I left it to her rather than be a micromanaging husband. She never even picked up the receipts as I found out come tax time, didn't stop her spending everything.

My next female partner just said "I don't want to do that stuff" so I had to do all the business and household budgets/finance.

Sometimes I should just find a man whose willing and expected to work and support me regards of my demands or habits....all I need to do is figure out a way to shoot out a kid and I'm set.

LOL have fun with that :)