90 seconds at 9 am: Macron chases consensus

French president appoints PM from right, meets Angela Merkel; Chinese growth softens; cyber attacks slow; UST 10yr yield up to 2.34%; oil up, gold unchanged; NZ$1 = 68.8 US¢, TWI-5 = 73.6

16th May 17, 8:03am by Jenée Tibshraeny

Here's my summary of the key events from overnight, with news France's centrist president has appointed a prime minister from the right to lead his bid for a parliamentary majority in June’s elections. Emmanuel Macron has chosen Édouard Philippe, the mayor of Le Havre, to take up the role. The choice is seen as an attempt to draw in key figures from both the right and left of French politics.

On his first full day as president, Macron has also got straight to work showing his commitment to the European Union. Meeting with German Chancellor Angela Merkel in Berlin, the pair have agreed to develop a medium-term roadmap on how to deepen the EU's integration and make the euro zone more resilient.

There's more evidence of slowing growth in China. Retail sales in April grew 10.7% year-on-year - down from March and a little slower than expected. The softening was particularly pronounced at larger enterprises. However online sales growth for the year was pretty spectacular at 25.9%. Year-on-year urban fixed asset investment growth, private investment growth and industrial production growth slowed, while there was a slight rebound in investment by state-controlled firms. All this softening comes despite new loans growing by 7.8% in the month to April.

The spread of one of the world's largest co-ordinated cyber attacks has slowed. While more than 200,000 computers in around 150 countries have been hit by the 'WannaCry' virus, the number of infections has fallen dramatically since Friday’s peak when more than 9,000 computers were being hit per hour. The countries most affected are Russia, Taiwan, Ukraine and India. There are unconfirmed reports some New Zealand computers have been affected too.

Over to the US, business activity has levelled off in New York, according to firms responding to the May Empire State Manufacturing Survey. The headline general business conditions index fell, as did the index for new orders and shipments. Labour market indicators pointed to a modest increase in both employment and hours worked.

In New York, the UST 10yr yield has inched up today to 2.34%.

The US benchmark crude oil price has jumped to just below US$49 a barrel. The Brent benchmark is just below US$52. The increases follow production cut comments from Saudi Arabia and Russia.

Gold is stable at US$1,229/oz.

The New Zealand dollar is continuing to consolidate after last week’s "fireworks" (in the words of ANZ). It's strengthened slightly to 68.8 USc. It's down a little to 92.7 AU¢ and 62.6 euro cents. The TWI-5 index remains at 73.6.

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

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

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15 Comments

by Stephen Hulme | 16th May 17, 9:05am 1494882300

The New Zealand dollar is continuing to consolidate after last week’s "fireworks" (in the words of ANZ)

Indeed.

MOSCOW, May 15. /TASS/. Low exchange rate restricts production capacity of the economy, according to the analytical note of the Research and Forecasting Department of the Russian Central Bank.

"By supporting labor-intensive tradable industries, weak currency subsidizes economic sectors with low labor productivity at the expense of the rest of the economy. This, in turn, preserves production structure by not allowing resources to move to more productive labor-intensive or capital-intensive industries. Enterprises in such industries, have weak incentives to increase labor productivity," the regulator said. Read more

A view that certainly resonates with the outcomes on the New Zealand productivity front.

by Advisor | 16th May 17, 10:04am 1494885889

True. The only industries to benefit from a lower NZD are the agricultural and logging export. The dollar spread will bring in more tourists at the expense of high skilled workers who would rather earn in higher Aussies and Pounds than a low Kiwi.

by profile | 16th May 17, 8:17pm 1494922642

457 million ha of forest found! I wondered where it had got to. If only I bagged the carbon credits in time. And here was me thinking those rampant population hordes had cut it all down.

"Our estimate is 40 to 47% higher than previous estimates, corresponding to 467 million hectares of forest that have never been reported before. This increases current estimates of global forest cover by at least 9%."

Just goes to show what can happen when models meet a bit of hard data.

http://science.sciencemag.org/content/356/6338/635

by Roger Witherspoon | 16th May 17, 9:29am 1494883779

Sheesh, next you'll be telling us that the Taiga is putting on biomass at a rapid clip cos plants like carbon dioxide...

by Roger Witherspoon | 16th May 17, 9:30am 1494883840

Whittakers chocolate needed urgently:
deepen the EU's integration and make the euro zone more resilient
Translation: complete the process of colonisation of the rest of Europe

by Stephen Hulme | 16th May 17, 9:30am 1494883843

In turn are those undertaking that which you describe under orders from across the Atlantic? A European Union of vassal states, no less?

by Roger Witherspoon | 16th May 17, 9:35am 1494884100

Hmm, interesting. Certainly Britain was "encouraged" to join the EU in the first place, and the US paid for the propaganda, oops sorry, promotion, ah, I mean publicity about why it would be a jolly good thing (omitting that it might not be a thoroughly jolly good thing for everyone, of course).

by steven | 16th May 17, 9:42am 1494884573

Encouraged? who by? from what I recall the french very much wanted the British kept out and succeeded for some time.

by Stephen Hulme | 16th May 17, 9:24am 1494883492

There's more evidence of slowing growth in China.

Oops.

Perhaps the biggest disappointment was Fixed Asset Investment. Much like capex, FAI is the real engine of China’s social harmony as well as its economic progress. Private FAI accounts for that country’s urbanization and therefore modernization. Throughout the past four years, the private sector has been cutting back sharply in Fixed Asset Investment leaving the economic system hugely vulnerable. By my calculation, it actually contracted year-over-year in July last year, a serious warning for a system where FAI is supposed to grow at better than 20% consistently.

Authorities had already responded months before that negative number, ushering in a massive “stimulus” through the FAI channel but in the state-owned rather than private sector. For several months last year and to start 2017, it appeared to be working. Private FAI growth rates turned positive and then modestly accelerated. It was that middling rebound that should have caught focus instead of the mere direction for it, but in this day and age every small positive is amplified into the greatest thing ever. Read more

by Roger Witherspoon | 16th May 17, 9:39am 1494884380

Microsoft most miffed about malware outbreak and NSA involvement:
https://blogs.microsoft.com/on-the-issues/2017/05/14/need-urgent-collec…

by steven | 16th May 17, 9:47am 1494884872

I cant blame them, a) the NSA kept mum on this to use it for their own advantage. I'll assume this was probably being used actively by them for some clandestine use(s). b) many organisations are IMHO, not giving enough priority to keeping their systems fully up to date.

by dictator | 16th May 17, 11:04am 1494889452

I didn't realise the patch was two months old. That's a long time in terms of security and it's obvious that it's not just a matter of automatic updates being switched off. There's clearly a lot of old unsupported OS and pirated OS that people are using.

I'm expecting that they've made enough that these attacks will continue for some time. I guess people are going to be learning about computer security the hard way.

by profile | 16th May 17, 10:24am 1494887090

OPEC in for more pummelling from the free market.

"Flush with cash from a short-lived OPEC-led crude rally, North American drillers plan to lift their 2017 outlays by 32 percent to $84 billion, compared with just 3 percent for international projects, according to analysts at Barclays Plc. Much of the increase in spending is flowing into the Permian Basin, a sprawling, mile-thick accumulation of crude beneath Texas and New Mexico, where producers have been reaping double-digit returns even with oil commanding less than half what it did in 2014.

That’s bad news for OPEC and its partners in a global campaign to crimp supplies and elevate prices. Wood Mackenzie Ltd. estimates that new spending will add 800,000 barrels of North American crude this year, equivalent to 44 percent of the reductions announced by the Saudi- and Russia-led group."
https://www.energyvoice.com/marketinfo/138915/bad-news-opec-us-shale-dr…

by Stephen Hulme | 16th May 17, 10:29am 1494887365

A story of the recent rise in US dollar real yields.

A month ago, the US 5 year real yield (as measured by the TIPs market) was almost negative 30 basis points. Last week, at its worst, the real yield had pushed up to just a hair under positive 20 basis points. That’s almost 50 basis points of real tightening. Read more

by dictator | 16th May 17, 11:19am 1494890349

The Fed seems to have actually stopped buying up bonds, shares and who knows what else they've been propping up the price of. Some have been suggesting that they will start selling off assets. Maybe they have started? If they have there will be more assets in circulation and money will start draining from the market. Difficult to say for sure right now.