Here's my summary of the key events overnight that affect New Zealand, with news China is tightening its grip on its major enterprises as their economy slows.
Firstly in New York however, local Fed President William Dudley signaled overnight that market expectations that the US central bank would begin trimming its balance sheet were not unreasonable. He also said another rate rise is on the cards this year, a view not shared by markets.
In Japan, their economy grew much more strongly than expected in the June quarter, extending the longest streak of uninterrupted growth in 11 years. It was up +4.0% year-on-year. In the recent past, much of the growth they have had under the stimulus of Abenomics has been in trade and exports. But now we are seeing strong local consumption growth driving this latest data. And that is fundamentally different, and better. Exports were down, imports were up, private consumption was up, and even private residential investment starred, up 6.0%. That is a big change for them.
In China, the Communist party is writing itself into the articles of association of many of the country’s biggest companies in a blow to investor hopes that Beijing would relax its grip on the market. More than 30 Hong Kong-listed state-owned enterprises, representing more than US$1 tln in market capitalisation, have this year added lines to their constitution that places the party, rather than the Chinese state, at the heart of each group. Investors in these companies are buying into a party machine and it invalidates Beijing’s claim they want market forces to play a greater role in these SOEs. There is no transparency on the Party officials controlling these businesses. Claimed SOE reforms will be a mirage.
And economic data out of China indicates a bit of a deceleration in July as Beijing’s crackdown on property speculation and rising debt levels started to filter through into the world’s second-largest economy. The pace of Chinese industrial output, energy production, retail and housing sales, and fixed-asset investment all slowed in July from the previous month. In some cases, it is a growing trend. Some see the end of a cycle.
And in Europe, industrial production fell unexpectedly in June and at its sharpest pace in 2017, suggesting their economic recovery may be settling down after an acceleration in growth during the first six months of the year.
In New York, the UST 10yr yield is up marginally, now at 2.22%.
The price of oil is down more than US$1 today and now at just over US$47.50 a barrel, while the Brent benchmark is now just over US$50.50.
The price of gold is also lower, down -US$10 to US$1,280/oz.
And the Kiwi dollar will start today also a little lower at 72.9 USc. On the cross rates we are unchanged at 92.8 AU¢, and at 61.9 euro cents. As a result the TWI-5 index is at 75.5.
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.