Here's my summary of the key events from overnight that affect New Zealand, with news of a surprising detail in the recent Aussie budget.
But first in the US, import prices may be about to fuel a rise in inflation there. They were up +4.1% in the year to April, boosted by a rise in energy costs.
And the American government had a US$182 bln budget surplus in April. The fiscal 2017 year-to-date deficit is US$344 bln compared with US$353 bln in the same period of fiscal 2016. As a percent of GDP, this deficit is now just on -3%.
In China, consumer inflation remained tame in April, edging up on higher costs for rent, education and other nonfood items, while producer prices rose at a slower but still-high pace. The consumer-price index was up +1.2% from a year earlier, rising from +0.9% in March and slightly above the +1.1% forecast of analysts.
And new data shows China’s biggest-ever foreign acquisition frenzy is ending almost as dramatically as it began. After stunning the world with a record NZ$350 bln of announced outbound takeover deals in 2016, Chinese companies are now struggling to cope with tighter capital controls and increasingly wary counterparties. Cross-border purchases plunged by more than two-thirds during the first four months of this year, the biggest drop for a comparable period since the depths of the global financial crisis in 2009. After a brief starburst, Chinese buyers are now on the sidelines.
In Australia, some further measures in the new Federal budget are just now getting more attention - especially the depth of the plans to tackle their 'black economy'. One in particular deserves mention here; the new requirement for buyers of newly built homes and apartments to pay GST on their 'investment' directly to the tax department. (See page 5-13.) Currently that is done by the developer and a new home purchase is GST free just like a purchase of an existing home. But some developers have gamed the system so intensely, by going 'bankrupt' right at the end of the project, the Aussie tax authorities find they never actually collect the GST. So the onus is to be put on the ultimate buyer. It is a case where innocent developers - the majority - are going to 'pay' for the sharks' actions. And this will likely make existing houses seem more attractive to buyers - especially as a resale of the new-build won't recover the GST paid. Only the first buyer will pay it.
In New York, the UST 10yr yield is up again this morning and is now at 2.42%. And that is even after a heavy sag in-between based on US political risk.
The price of oil is is up US$1.70 today. The US crude benchmark is now over US$47.50 a barrel, while the Brent benchmark is just under US$50.50. The mover is a surprising lower level of US crude oil inventories.
Gold is alos up and now at US$1,220/oz.
The New Zealand dollar is slightly stronger as well and now at 69.4 USc. On the cross rates the Kiwi dollar is at 94.2 AU¢, its first break above 94 AUc since early February, and 63.9 euro cents. The TWI-5 index is at 74.6.
If you want to catch up with all the changes yesterday, we have an update here. And we will have all the news and analysis around the RBNZ MPS today at 9:00 am.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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