Here's our summary of key events over the weekend that affect New Zealand, with news China has relaxed its term deposit interest rate caps.
But first in the US, politics is hurting consumer sentiment. The University of Michigan’s consumer sentiment index fell in April to a reading of 97.8, down from 101.4 in March. Analysts expected a reading of 101 so this is a noteable drop. Getting the blame were fears of a trade war, and fears of rising interest rates.
A US Fed board member has expressed concern over the growing American fiscal deficits, saying recently passed tax cuts and spending increases are raising risks that authorities won’t have a full tool kit to counter the next downturn, a 'certainty' says Bill Gates.
And a drought in key US states is forcing more cattle on to feedlots and into slaughterhouses, putting extreme downward pressure on beef prices. Given the size of the US cattle markets, this can't be a good thing for international prices.
In China, they reported a surprising trade deficit of nearly nearly -US$5 bln in March, a turnaround from a surplus of +US$33.5 bln in February. This is the first monthly deficit since February 2017. China’s imports rose +14% year-on-year in March, while its exports dropped -3%.
And the crackdown on shadow banking is weighing on credit growth in China. That adds to uncertainties facing their economy already dealing with trade tensions with the US. Data out the weekend shows that Chinese banks extended ¥1.12 tln in net new yuan loans in March, and under analysts’ expectations. But that is an improvement from February’s much weaker-than-expected ¥839.3 bln.
China has also relaxed the ceiling on bank term deposits interest rates in a new financial sector reform move. But it is retaining rate caps for other types of deposits.
Freight rates are set to rise for New Zealand as a result of climate change policies adopted at the end of last week. Slow steaming by ships is one of the outcomes from the new global agreement. New ship technologies required will also had billions to ship owners costs. All this will add up to higher freight rates for countries far away from markets.
The Australian stock exchange has virtually stopped allowing mainland Chinese companies to list on their exchange over concerns of poor transparency and bad corporate governance. This comes after a string of serious issues from such companies. The ASX is even moving to clamp down on those that remain listed, delisting some. Mainland Chinese companies are now seen as cowboys, disrespectful of laws and regulations.
The UST 10yr yield ended the week down at 2.82% (-1 bp). The US 2-10 rate curve is now under +50 bps and that is its lowest since before the GFC. The Chinese 10yr is at 3.74% (unchanged) while the New Zealand equivalent is at 2.84% (+3 bps). Neither have 2-10 rate curves moving lower like the Americans do.
Gold is at US$1,345/oz in New York, up +US$9 on Friday.
Oil prices have inched ahead and are still just over US$67/bbl and the Brent benchmark just over US$72.50/bbl. JPMorgan reckons it could hit US$80 during the Syrian crisis. The North American rig count moved even higher last week.
The Kiwi dollar ended the week up at 73.6 USc. On the cross rates we are at 94.8 AUc and 59.6 euro cents. That puts the TWI-5 at 74.7 and still near the top of its 2018 range.
And the Trump's US Treasury again resisted a formal opportunity to designate China a currency manipulator. Even though it faulted Beijing for doing too little to open its economy and retained China on a formal monitoring list for possibly receiving the designation in the future, it won't call them a manipulator, or impose the sanctions that would come with it.
Bitcoin is back in favour and flirting with US$8,000. It is now at US$8,301 which is a rise of +8% from the last time we looked on Saturday.
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