Here's our summary of key events overnight that affect New Zealand, with news equity markets seem to have topped out.
The American and European stock markets have opened to a sea of red this morning. Most European indexes were down about -1% with the exception being London which was only marginally down. Wall Street indexes are down less in late trade but don't look like turning higher today. Since the beginning of 2018 the S&P500 is level pegging, unable to push on after the 2017 +50% rise. (Locally, the NZX bucked the trend and has added almost +7% in 2018, after adding +22% in 2017.)
In the US, new evidence is emerging that the recent tax cut is benefiting American multinational companies in substantial ways. One effect was supposed to be that it not longer benefited them to hold their profits untaxed offshore, which was expected to lead to a larger taxable base even if it was at a lower rate. It seems the reverse has been enacted, allowing these types of companies to shield even more income offshore.
Japan has posted a surprisingly large -US$5.2 bln trade deficit in May; which comes after a +US$6.5 bln surplus in April. It's their first deficit in 3 months. Imports rose more than +14% on the higher cost of oil, while their exports rose just a bit more than +8% driven by high tech machinery and equipment. However, most focus was on Japan's goods trading relationship with the US due to the politicised and partisan nature of trade conversations these days. That changed rapidly, with their surplus with the US shrinking to its lowest level since 2003, a fifteen year benchmark. The US Administration will no doubt give no 'credit' for the change and will willfully ignore the services surplus they enjoy over Japan, as well as their huge MNC surplus, such is today's adolescent trade conversation.
In the emerging economies of Asia, they are being buffeted by the fallout from the US Fed's rate rise track. As most of these economies have their debt unhedged and in US dollars, first world investors see rising risks. New data shows that these funds withdrew almost US$20 bln from countries ranging from India to the Philippines so far this year and the pace is accelerating. Local central banks are finding they need to respond by raising their policy interest rates to arrest the outflows and avoid a South American-type crisis. But the result will see a sharp slowing in the expansion of these emerging economies.
The UST 10yr yield is holding at 2.93% and up +1 bp. The Chinese 10yr is at 3.65% (unchanged) while the New Zealand equivalent is now at 2.92%, down -2 bps.
Gold has stayed down in New York when it opened again today after the weekend and is still at just US$1,279/oz.
Oil prices are up about +US$1/bbl today with the US price is now under US$66/bbl. The Brent benchmark is now just over US$75/bbl.
The Kiwi dollar will start today at 69.4 USc and little changed from this time yesterday. But on the cross rates we are firmer at 93.4 AUc, and 59.7 euro cents. That keeps the TWI-5 at 72.8 and still in its very tight June range.
Bitcoin is up +$200 today and now at US$6,741, a gain of +3.6 in 24 hours.
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