Here's our summary of key events over the weekend that affect New Zealand, with news interest rates are rising strongly in secondary markets worldwide.
In Washington DC they are in the second day of a government shutdown with no clear resolution to their partisan differences. There is growing pressure to end the standoff before Monday (their time), when tens of thousands of federal workers will be put on unpaid leave if the dispute isn't resolved. The US Senate is due back in session for a vote to try to end a impasse but there is noting to suggest success. That vote is due at 7pm NZ time. Remember, they are dealing with an attempt to pass a Budget, one that had a 'final' vote requirement in October 2017.
The University of Michigan said its consumer sentiment index was 94.4 in early January, down slightly from 95.9 in December. It dropped in December and November after hitting the highest level since 2004 in October. The fall surprised analysts who had expected a rise. In fact, the January level is now -4.2% lower than for January 2017.
And staying in the US, HSBC has made a deal to pay US101 mln to avoid criminal charges in relation to rigged currency transactions in 2011. But the deal still need to be signed off by a US judge.
The end is getting closer for HNA. Trading in shares of a unit of HNA Group was suspended over the weekend after the indebted conglomerate’s chairman admitted his company is facing liquidity difficulties due to a recent global buying spree. In requesting the halt, HNA-Caissa Travel Group – a international travel agent – said “undisclosed major issues that may have significant impact on the company’s stock price,” required the suspension. This is the fifth HNA company who has had to go into a trading halt.
In Germany, IMF supremo (French) Christine Lagarde has argued that larger German investments could help reduce regional and global imbalances. Her advice did not go down well in Frankfurt.
And here is something you might not have expected. Greece has had it's credit rating raised by one notch, and is now at B by Standard and Poors. Spain also got theirs raised, to A- by Fitch.
Locally, Rocket Lab's successful launch and satellite delivery is turning heads worldwide.
Wall Street ended their week higher yet again, the UST 10yr yield is up +6 bps at 2.66%, and that is a four year high. The equivalent 10yr China sovereign bond is up another +2 bps at 4.06%. The equivalent NZ 10yr sovereign bond is up +6 bps at a fraction under 3.00%. And there was a another fall in the premium investors need for NZ Govt credit default swaps, and that is now just +12.9 bps and a new record low.
Oil prices are lower today with the US benchmark now just under US$63.50 a barrel, while the Brent benchmark is now over US$68.50. American oil production is expected this year to surpass Saudi Arabia’s output, possibly even Russia, upending a global pecking order that has been in place for decades. Crude output in the US will likely climb above 10 mln barrels a day in 2018. This year, the oil price will depend almost entirely on Chinese demand. Chinese local crude production is shrinking.
Gold is also a little lower and now at US$1,331/oz.
Also lower is the Kiwi dollar, now at 72.8 USc. On the cross rates it is at 91 AUc, and against the euro at 59.5 euro cents. That puts the TWI-5 at 74.1 and lower than this time on Friday.
There were big movements in cryptocurrency markets, but bitcoin is actually little changed from where we left it Friday. It is currently at US$11,341 only marginally higher than the US$11,200 level we saw on Saturday. However it did rise to almost US$13,000 at one point over the weekend but has since retraced all that.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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5 Comments
As the current budget stalemate illustrates, the USA government cannot fund it's activities from the tax income that it receives, so keeps having to request Senate to increase the government debt ceiling. How on earth do they think that they will run the country when Trump's tax changes increase the annual deficit from a projected $400 odd billion to well over a Trillion? It is not just Trump who is nuts, he had the support of the other Republican representatives in passing his tax changes. I can't see this ending well for the USA and probably the rest of the world.
Its simple.. The fat cats that benefited from the tax cuts will upgrade their private jets, flooding the market with pre-loved gulfstreams, and Joe average working his part time (Employer can avoid healthcare benefits), minimum wage job can buy a used private jet cheap.. everybody wins. or something..
Wall Street ended their week higher yet again, the UST 10yr yield is up +6 bps at 2.66%, and that is a four year high.
Indeed!!!!!
There’s nothing especially special about 2.62%. It’s a level pretty much like any other, given significance by only one phrase: the highest since 2014. It sounds impressive, which is the point. But that only lasts until you remember the same thing was said not all that long ago.
Back last March, the 10-year yield had then, like now, broke above 2.60%. In doing so, it surpassed the previous recent high set in December 2016. So, on March 13, 2017, the media was filled with stories about the benchmark treasury yield being the “highest since 2014.” That break above the December peak didn’t signal anything other than a break above that prior peak. There was no magic in 2.62%
This doesn’t mean that yields won’t go higher. They can and they might. But we should be aware of what is likely driving them that way – for now. To get a better sense of what’s going on, reviewing the last “rate hike” cycle in the middle 2000’s is very instructive. Read more
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