Here's our summary of key events over the weekend that affect New Zealand, with news China's debtbook diplomacy is spreading.
But first, May 18 is a key date for the renegotiation of the NAFTA trade agreement between Canada, Mexico and the US triggered by the US President. But talks are faltering and the latest week of discussions has broken up without a deal in sight. All sides say they will resume 'soon', but the US is raising the rhetoric and the other two are tiring of the gamesmanship. If a deal isn't before Congress by May 18 (NZT), it can't be passed by them in the current session. But it is not only Mexico and Canada resisting the base urges of the US President; a powerful Republican senator crucial for a trade vote is as well. calling the President's tactics "blackmail".
In Canada, employment growth evaporated in April. Markets were expecting a gain of about +20,000 jobs but in fact a small loss of -1,100 was recorded. That was not enough to change their jobless rate, but it did mean their participation rate sagged to 65.4%. The overall result is raising a few eyebrows. Also raising eyebrows was the +3.6% rise in the average hourly rate, now at C$27.02 (NZ$30.32), and that is the fastest wage growth in six years. In the key provinces of Ontario and B.C. the average hourly wage expanded by +4.3% and +5.6% respectively. This is the first major economy where strong wage growth has started.
China added ¥1.18 tln new loans in April, according to data from central bank, ¥79.7 bln higher than in the same period a year earlier (+7.2%) and about what analysts were expecting. This is a key China metric given their commercial life is essentially based on bank debt.
China is using debt to trap vulnerable small Asian and Pacific nations and pull them into its orbit. It is loaning hundreds of billions to countries that often can't afford to pay it back, and it is going to want something in return for that money. Laos and Cambodia are already being termed "wholly owned subsidiaries of China" while concerns are growing for the financial hooks into Vanuatu, the Philippines, Thailand, Malaysia, Sri Lanka, Tonga and Micronesia. The recent Malaysian election has seen as one of its early signals, a demand to renegotiate their economic relationship with China. As in all cases, the deal works via corruption; those at the top get to keep a slice of the loaned money, but the country gets a sovereign obligation to repay, something both parties know at the outset is unlikely. The overall scheme is just a way to buy UN vote support.
India’s factory output expanded at the slowest pace in five months, up only +4.4% in March from a year ago. This is a sector that has cooled quickly, and may be trouble for their economy. The result was far below analysts expectations and far below the 7.0% growth in the year to February.
The UST 10yr yield is still at 2.97% and unchanged from this time on Friday. The Chinese 10yr is at 3.71% (down -1 bp) while the New Zealand equivalent is at 2.75% (down -4 bps). We have more on these shifts here.
Gold is at US$1,318/oz in New York. That is down -US$3 since Friday morning.
Oil prices are also lower and are now just over US$70.50 and the Brent benchmark is now just over US$77/bbl.
The Kiwi dollar will start the week at 69.7 USc. On the cross rates we are at 92.4 AUc and 58.3 euro cents. That puts the TWI-5 just under 72.2.
Bitcoin is now at US$8,610 and that is down -6% from this time on Friday. South Korean prosecutors raided the offices of Upbit, one of the world’s largest cryptocurrency exchanges, and that certainly hasn't helped sentiment.
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