Here's our summary of key events overnight that affect New Zealand, with news there is a surprise reversal of the American position on multilateral trade agreements.
It is being reported that President Trump has instructed officials to "re-join" the CPTPP - "on our terms, of course". This follows pleadings from US farm state congressmen over their exposure to China's retaliatory tariffs. Now it will get interesting for the US as it seems doubtful that CPTPP signatories will want to be drawn in to capricious American trade bullying led by a President who makes policy on impulse. But Japan and Australia may sense an opportunity, as well as Mexico and Canada who are already in their own NAFTA renegotiation as a result of an earlier capricious Trump impulse. Trump may be about to learn how to eat humble pie.
Conflict fears over Syria appear to be easing with both the US and Russia toning down their rhetoric.
Wall Street is up strongly today, with all major indexes posting +1% gains late in today's trading session.
The WTO said world trade in goods would grow +4.4% in 2018 and above the post-GFC average of +3%. But they are warning this global recovery might falter as a result of tit-for-tat restrictive trade measures, mainly between the US and China.
And the IMF is warning of the dangers to emerging countries signing up to massive increases in debt as a result being part of China's Belt and Road initiative. They see serious balance of payments risks seen for recipients of this infrastructure finance.
The most ironic trade news item of the day (and delivered with a straight face) is a call by Chinese officials for foreign countries to work to protect the intellectual property rights of Chinese companies.
Back in the US, the Federal Reserve is proposing cuts to capital requirements for big banks. These tweaks to the controversial leverage ratio will benefit custody banks in particular.
In Australia, in the first 3 months of 2018, more than half of all appointments to boards of Australian ASX200 companies were women, the first time this has happened. In 2017 it was 36%.
And in Perth, there are reports that Wesfarmers, who are selling out of supermarket chain Coles, is eyeing a takeover of Fletcher Building while it is in a weak position.
The UST 10yr yield is back up today, now at 2.83%, up +4 bps. The Chinese 10yr is at 3.74% (down -1 bps) and the New Zealand 10yr is at 2.81% (unchanged).
Gold is down -US$14 to US$1,336/oz.
Oil prices are holding yesterday's strong gains with the US benchmark now just over US$67/bbl and the Brent benchmark just over US$72/bbl. China is raising retail petrol prices again, their fourth rise so far this year.
Our currency is firmer today at 73.8 USc. On the cross rates we are at 95.2 AUc and 59.9 euro cents. That puts the TWI-5 just under 75 and its highest of 2018 and its highest since September 2017.
Bitcoin is back in favour and up to US$7,667 which is a rise of +11% from this time yesterday.
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16 Comments
https://www.cnbc.com/2018/04/12/new-zealand-set-to-ban-oil-and-gas-dril…
CNBC discusses NZ govt oil and gas exploration ban
The TTP seems to be evolving to become the US and it's official and unofficial allies. Which makes sense from a US point of view. They have been very slow at recognising the benefits of a free trade zone that reflects their security interests (which is surprising as they are really the British Empire Mark Two, you know, control of the sea lanes and all that). Expect Britain to join as soon as they are allowed to do so.
The US economy is larger than all the other TPP countries combined - if the US wants in they will get in. Let's be honest about that.
Got to laugh at the Chinese regarding intellectual property. Maybe we should develop a system that if country does not enforce IP rules then their IP rights cannot be enforced in other jurisdictions.
The Fed proposal cutting banks capital requirements is a little ominous. this would only reinforce their position, making them less responsible, and less liable for the consequences of their actions. More of the rich and powerful protecting their own interests, at the expense of the rest?
It may be that the official position has softened in recent days, or it may just be the dawning recognition that China, contrary to most assessments, is in a much worse overall shape than the United States. We talk about global Japanification including what’s been done to the US economy since August 2007, but it has been far from uniform playing out this way.
The US system, as riddled with imbalance as it may be, no recovery anywhere on the horizon, it isn’t quite Japan 1989. That’s a far darker and more dangerous scenario. And it’s the one China is much closer to than anyone else.
http://www.alhambrapartners.com/2018/04/10/chinas-xi-really-had-no-choi…
Yes. Good stuff. Japanification is what everyone is terrified about. It's even more terrifying when you can consider that the Japan scenario has happened despite of its industrial might. The Japanese establishment fought tooth and nail to stymie the negative impacts of deflation. The West won't accept it on any terms, but its happening regardless, just in more insidious ways.
And you have to cast that shadow over Russia too. Despite all Putin’s chest beating they are skint. The only thing keeping them just bouyant enough is energy. Now if the USA & Middle East should substitute that supply, Russia becomes economically both weak and far from independent.
Trump, eh...How some can attack the NZ left's competency whilst also talking up his competency is quite the display of cognitive dissonance.
Re the USA reentering, let's hope we don't get saddled with their more arduous company-driven requests. E.g. the Mickey Mouse Protection Act that we were previously to be recipients of.
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