Here's our summary of key events over the weekend that affect New Zealand, with news rising Trump-risk is changing many settings at our local level.
For example, our interest rate swap curve has flattened markedly, now at just 88 bps and its flattest in almost 18 months. Further, CDS spreads for Australsian investment grade corporate debt are now their most positive to American equivalents since before the GFC and probably ever.
Our currency has shown little reaction, but the Aussie dollar has weakened. The NZD is now priced just over 94 AUc, its highest in eight months.
On Wall Street, they ended last week down -2% on the day, the tech-heavy NASDAQ down more than -2.5%. The appointment of John Bolton to a senior US Administration role isn't helping markets feel good about what the future holds.
This is a 'fear' phase based on dodgy trade tensions, but some core commodities are winning with price rises - oil, gold. However, US soybean and hog prices have dropped. And the iron ore price is also lower, but not by as much as you might have expected.
American data out over the weekend saw durable goods orders rise much more than expected. But new home sales fell again, when a good rise was expected, and average selling prices for new homes were actually the lowest they have been for a year. The top end is softer.
In Canada, their consumer inflation came in much higher than anyone expected, up +2.2% in February compared with +1.7% in January and an expectation of +1.9%. That is quite a shift, and a rapid one and will surely see the Bank of Canada action.
And Canada has won a reprieve in a trade dispute with the US. Boeing is sensing it will be a loser in Trump's trade war plans so has withdrawn its claims against Canada's Bombardier's C-Series jets, trying to take some heat out of the growing trade issues. It is a a move that undercuts the Administration. And this is also positive for Northern Ireland.
And Canadian province Ontario has a major budget and debt problem after years of profligate spending on teachers and health care systems in support of sector unions that supported its Government. Moody's has it pegged as the sub-national government with the highest debt of any globally. A severe crunch is imminent there.
China is mulling further responses to US trade actions. Their ambassador to the US wouldn’t rule out the possibility of they will scale back purchases of US Treasuries in response to tariffs imposed by President Donald Trump. If that happened, the expectation is that the fast-swelling US Federal debt will cost a lot more very fast. The US Fed is already on a path to sell US Treasuries, so finding new demand to keep interest rates restrained will be doubly tough. Trump has just signed a US$1.3 tln spending splurge that will see that debt jump. Each time he signs these increases he has a 'never again' moment of theatre, but always does. Congress passed the measure overwhelmingly.
China may also be about to unleash a 'peoples war' against US companies, cutting off demand for American brands operating there. This can be very damaging; just ask Korea and Japan. Tight control of media including social media gives the Chinese State vast power to trigger such responses.
And Moody's says its initial assessment of the US tariff penalties is they won't have much impact on China at all.
It is enough for some senior US officials pining to get back into the TPP.
The UST 10yr yield has weakened considerably and the US Fed signals have faded in the face of the Trump actions. It is now just 2.81% after having hit 2.91% on Wednesday. The Chinese 10yr is at 3.76% (unchanged) and the New Zealand equivalent is at 2.84% (also unchanged).
The gold price was up +US$20 in New York on Friday and now at US$1,347/oz.
Oil prices are up strongly again today, up about +US$1.50 with the US benchmark now just under US$66 and the Brent benchmark under US$70.50/bbl. The US active rig count is now at its highest level in three years and just under 1,000. These high prices will no doubt push it over in the coming week. In fact, US shale drillers are now entering the mainstream, no longer speculative plays.
The Kiwi dollar will start the week at 72.4 USc, marginally higher at the Wall Street close. On the cross rates we are higher at 94 AUc and at 58.6 euro cents. That puts the TWI-5 at 73.3.
Bitcoin is now at US$8,593 and little changed from this time on Friday (down -1%).
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