Here's our summary of key events overnight that affect New Zealand, with news the opening shots in a serious trade war are now being fired.
On Wall Street the three major equity indexes fell -1.5%, on track for their steepest drop in six weeks, gripped by the growing threat of a global trade war.
The US Administration announced it will impose tariffs on about US$60 bln of imports from China, as well as impose restrictions on technology transfers and acquisitions by Chinese companies. A range of countries ("allies") are to be exempted from the steel and aluminium tariffs, but New Zealand doesn't appear to be one of them. Nor is Japan.
At the same time, Congress is working its way through passing a massive stop-gap funding bill, designed to keep their Federal Government operating until September. It is a pork-laden US$1.3 tln measure with something-for-everyone, except perhaps some Trump-favoured projects. There is little in there for the "border wall", for example.
Meanwhile, China is reported to be readying a trade war response against the US with their own tariffs focused on American exports of soybeans, sorghum and live hogs. These products are core US exports and originate in states that are at the core of Trump's support base. Officially, they say they will take “all necessary measures” in response. Keep an eye on what the China does regarding tariffs on commercial aircraft. Yesterday, a unit of China Southern Airways has signed a US$3.2 bln deal to purchase 30 narrow-body planes from Boeing. Huge future orders are in play here and this is a real leverage point for China.
And China lifted a key interbank interest rate yesterday in response to the US Federal Reserve’s raising of its key lending rate in a likely bid to fend off potential downward pressure on the yuan and a possible surge in capital outflows. The increase is the third time in a row that China has shifted interest rates following a Fed move.
In the real world of business activity, the US factory PMI reading for March is strong but the same reading for services slipped. Of note is the reported rises in input costs which are said to be rising their fastest in four years. In Europe, the pace of expansion has slipped to its lowest point since the start of 2017. And in Japan, they are reporting improvements, but at a slower rate.
In New York, the UST 10 yr yield is lower today at 2.84% after a flight to safety following the opening salvos in the Trump trade war. This has completely overshadowed the Fed's hawkish dot plot from yesterday, but investors should note that this remains in place.
The gold price is up +US$2 today and now at US$1,327/oz.
Oil prices are marginally lower today and now at just under US$64.50/bbl and the Brent benchmark now just under US$69/bbl.
The Kiwi dollar will start today little changed at 72.2 USc, even after the US tariff news. On the cross rates we are ½ higher at 93.7 AUc and at 58.7 euro cents. That puts the TWI-5 at 73.3.
Bitcoin is now at US$8,670 which is -1.3% lower than this time yesterday.
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