Here's our summary of key events overnight that affect New Zealand, with news the world's economies seem to be separating between those in trouble (emerging markets) and those doing well. Fortunately, the signals are that New Zealand is in the latter group.
Firstly, Wall Street has ended the week on a positive note, and the NZX's Friday gains were similar. But Asian equity markets booked big losses at the end of the week and some of them were quite substantial. Hong Kong was down -1.8% on Friday, Shanghai was down -1.4%. Jakarta was down -1.9%. Even Tokyo was down -0.6%., and the ASX was down as well.
In Canada, their May employment data showed a surprise loss of jobs. But wages rose at an unexpectedly quick pace, up overall +3.9% year-on-year. Within that, female wages rose +4.1%. Wages for non-unionised employees were up +4.5%. These are impressive gains.
And Canadian housing starts surprisingly fell in May compared with the previous month as multi-unit urban starts declined, principally because multi-unit housing starts in Toronto slumped.
China’s trade surplus shrank sharply in May on strong imports. The overall monthly surplus was down to +US$24.9 bln and well below the +US$32.6 bln analysts were expecting. But the gap with the US widened, representing 98% of the total monthly surplus. Advance shipments to the US ahead of possible new tariffs may be behind the unusual data.
And analysts are expecting a record wave of bond defaults in China as their the government’s national financial deleveraging campaign squeezes companies that have weak funding bases. But they seem confident the situation won't result in international contagion.
In India, officials are getting very bullish about their economic prospects. A key minister there is saying India could grow at an +8% rate in the next year or two, taking the size of their economy up to US$5 tln by 2025. It is already the world's fifth largest economy with GDP at US$2.8 tln. Fast growth could make it economically larger than Germany soon.
Argentina and the IMF have agreed on a three year deal to lend it US$50 bln to help it deal with its currency and reform crisis. They say they will draw on the first tranche of the loan, but the rest is just for emergencies. Part of the deal requires the country to reduce its fiscal deficit to zero by 2020. This deal gives President Macri the cover to make some tough choices to rein in crippling inflation and bloated public spending.
Yesterday, the Turkish central bank raised its policy interest rate yet again, and sharply to 17.75%. Today we can report that the Turkish lira is still falling quickly, bank equities are taking a hammering. The issue is that they have an election in October and markets don't believe the country will address its issues properly after its strongman president engineers another dodgy win. He has no international credibility so any formal policy actions taken by the bureaucracy are undermined.
And this is the weekend Switzerland votes on its 'sovereign money' referendum. We should know the result on Tuesday, NZT. A recent poll by their public broadcaster suggests it will be defeated.
The UST 10yr yield is holding at 2.95% and up +1 bp in New York today. The Chinese 10yr is at 3.69% (unchanged) while the New Zealand equivalent is now at 3.02% and that is up +15 bps overnight according to our records. That is a very big move indeed and we will need to confirm it, so hold fire for that.
The VIX is back into a normal range at 12.2, lower than this time last week. The average index level over the past year is 12. The Fear & Greed index is moving over to the 'greed;' side of the index, the first time we have seen that in more than a year.
Gold markets have closed in New York up just +US$1 at US$1,298/oz in New York.
Oil prices are again down today and the US price is now at US$65.50 which is where it was at this time last week. The Brent benchmark is now just under US$76.50/bbl also similar to this time last week. The US rig count has inched higher again. Apparently it would be higher, but there are real problems getting sufficient labour now in the major US oil producing basins.
And this is an important milestone.
The Kiwi dollar is ending the week up at 70.4 USc. On the cross rates we are higher too at 92.6 AUc and at 59.8 euro cents. That puts the TWI-5 at 73.1 and approaching a seven week high.
Bitcoin is now at US$7,648 and little changed from where we left it last night.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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