Here's our summary of key events overnight that affect New Zealand, with news the consequences of aggressive American trade moves are exactly working out as intended so far.
First, the latest survey of American consumer sentiment shows it slipping again, but from a relatively high level and still historically high.
June data out in the US shows their terms of trade improving. Import prices are up +4.3% year-on-year while export prices are up +5.3%.
Meanwhile, their trade deficit with China grew. The June Chinese data shows it at -US$29 bln for goods. And it may get even larger as US importers try to front run their requirements ahead of the expanded tariffs the Americans have announced. In fact, that was probably the reason for the large June result between the two countries, related to the first tariff announcements.
But overall, China's goods trade surplus shrank because it shrank with neatly everyone else. And part of that was a moderating of import demand. Chinese exports rose +11.3% year-on-year in USD terms to reach US$216.7 bln in June, while imports increased +14.1%, down from +26% in May. (Data for New Zealand is here.) Part of that import drop is a -12% fall in iron ore imports, a diect consequence of Chinese clean air regulation.
One perhaps surprising consequence of the US tariff action is that a number of car companies are swiftly moving to set up expanded manufacturing - in China.
Another consequence is that the Chinese are slowing their financial market 'reform' in the face of the trade tiff risks. An example is the earlier-claimed policy move to slow the growth of corporate debt; instead they are letting it run as stimulus support. Bank lending was up almost +13% year-on-year to June. In June alone, Chinese banks extended ¥1.84 tln in new yuan loans, up from ¥1.15 tln in May and ¥1.18 tln in April. Now that is heady, recent growth.
China’s NZ$1.4 tln sovereign wealth fund is seeking the authority to invest in their domestic stock and bond markets for the first time. It wants to end restrictions on its mandate following government moves to open up financial markets.
The new Italian government has 'announced' that it will not ratify the CETA trade treaty with Canada. But no-one is really taking the position seriously; the provisions of the deal are largely in place already, so formal ratification means diddly. The Italian statement is mainly for domestic consumption, holding their shaky coalition in place.
Yesterday equity markets were calm, holding on to small rises. Today in New York, markets are also calm with the S&P500 holding on to minor gains
The UST 10yr yield is weakening at the market close at under 2.83% and down -2 bps in New York. Their 2-10 curve keeps going down, now under +25 bps. At -1 bps per day, inversion could come quicker than markets expect, and when that realisation dawns it may be self-fulfilling. The Chinese 10yr is at 3.52% (down -2 bps from yesterday) while the New Zealand equivalent is now at 2.88%, down -1 bp.
The VIX is generally trending down and now just below 12.4 and that is slightly lower than this time last week. The average index level over the past year is 12. The Fear & Greed index has moved to a neutral level.
Gold is weaker in New York but now a just US$1,241/oz in New York which is a -US$13 drop for the week.
US oil prices are up today from yesterday and now just under US$71/bbl. The Brent benchmark is now just under US$75/bbl. Today's rise comes even after reports indicate that the US is considering dipping into its strategic reserve to get more supply into the marketplace. But these both represent a small retreat in the past week. The US rig count has risen a few this week, again.
The Kiwi dollar is ending the week at almost exactly where iw was this time last week at 67.6. USc. On the cross rates however we are lower at 91.1 AUc and the lowest level in six months, and at 57.9 euro cents. That puts the TWI-5 at 71 and at its lowest for the week.
Bitcoin is now at US$6,184 which is locking in almost a -6% drop for the week.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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14 Comments
Is your coverage of Italy a bit flippant? Are you, in fact, turning a blind eye to the failure of representative democracy to serve the people's interests? This subject seems to be the issue of the day. It is ignored by those who feel that the people can't be trusted to make decisions on complex matters.
It seems to me that if the representatives ignore the concerns of the people for long enough, you get a violent backlash. Pure Burke and Hayek. This has happened here in non violent form, so far, but there is deep concern and dissatisfaction about housing and immigration that has been consistently ignored by our representatives for decades. Looking at where current policy settings lead us suggests we will have the problems of Italy, Britain, and the US before too long. These are difficult issues, but smugly siding with the elitist world view is a dangerous path for us to follow.
I'm not sure we know what the causes of our current difficulties are, much less what to do about them, but seeking to trivialise the issues and shut down discussion serves us poorly indeed.
Sad America do we really look up to this country?? Why??? I'd hate to see NZ to end up like this:-
BBC article: Toothless in Virginia: Pain relief for the uninsured of America
https://www.bbc.com/news/av/stories-44807411/toothless-in-virginia-pain…
If you have a good amount of money or a good job with good benefits – the US Health Care system is for some excellent and for others at least pretty good.
If you don’t have either of those 2 pre-requisites – barring some exceptions you’re screwed until you hit 65 – and even then you’ll be dipping into your retirement funds.
Every so often some eager free-marketer NZ politician holds the US Health care system up as the benchmark and the ideal– I wonder if they have the faintest idea how it actually “works”.
It might have its moments and drawbacks – but overall all NZ’ers are very fortunate - our universal NZ Health Care system is wonderful.
doing Business in China
https://www.bloomberg.com/news/features/2018-07-13/did-china-hack-rio-t…
Positive article about the UK, up to Brexit
https://www.zerohedge.com/news/2018-07-10/brexit-doomsayers-could-not-h…
Andrewj, okay, let me use this article to illustrate my point about needing to take alt-media sources with a giant pinch of salt. Zerohedge is no more accurate or objective than MSM.
Here are a few of the biases and inaccuracies in this particular article;
1." May’s plan was clearly the “softest possible Brexit” - this is an utter misrepresentation, I could even go so far as to call it a lie. There are MUCH softer Brexit options, including remaining in the customs union and maintaining free movement of labour. The White Paper is no way near the softest possible Brexit.
2. The article does not address one of the fundamental issues with the harder Brexit options, which is Ireland. England has greatly wronged the Irish people over many centuries. During the Brexit debate no one ever mentioned the Irish problem, or our duty as a nation to do our upmost not to destabilise Northern Ireland again. This sorry article mentions that Italy should be a concern? No. Ireland is a much bigger concern for the UK and yet it is not mentioned at all in this article.
3. The article also doesn't mention Scotland, who are progressively devolving and have a very different voter demographic and agenda on Brexit and how as part of the UK, their rights and needs also need to be represented. NOT MENTIONED by zerohedge as part of a very significant context. A hard Brexit poses a risk to the very unity of the United Kingdom but it's not even a consideration in these kind of articles as to why May might be seeking a softer Brexit.
4. Brexit "doomsayers" were wrong in several ways. They exaggerated and put forward extreme worst case scenarios. However, comparisons of growth between the UK and the EU is not part of or evidence of that, so why is zerohedge suggesting it is? The "doomsayers" said there would be an economic slowdown if we voted to leave and there has been but the UK's economy has always been a separate entity to the EU so why is he raising that as an issue? Most of the economic upset has been caused by the uncertainty caused by the Tory party infighting and the fact that the Leave camp had NO ACTUAL PLAN for Brexit, and only began scrabbling around to create one after they won the referendum (but mostly just squabbling between themselves). As I have mentioned before, the UK voters have not be given a choice one what sort of Brexit they want. The Tory party never gave them that option. Instead they rushed to the polls, wrongly assuming that they would gain a bigger majority after the election. Turns out the British voters had actually lost faith in the Tories after the Brexit campaign and they lost even more seats. Their attempts to sure up their fractured party caused even more instability and created an even weaker negotiating position for the UK against the EU. But that wasn't the "doomers" fault, it is the Tory party who caused ALL of it, the Eurosceptics who suddenly felt emboldened by the referendum result and have thrown their weight around like petulant children ever since. And the fact that the Leave politicians never had a flipping plan! It's taken them this long to get anywhere near a plan, and the entire 18 months since the referendum the Tories have continued to split and disagree over what the plan should look like. This is weighing on the UK economy and is massively irresponsible. And those politicians who have walked out in the last week are simply weakening the UK's negotiating position and causing further destabilisation. Again, none of that is mentioned by zerohedge.
4. Inflation.... the UK higher inflation rate is massively impacted on by the value of the pound, which has gone down since the Brexit vote. The BOE had an extremely lose monetary policy since 2008 and yet inflation did not raise its head until after the pound devaluation. Zerohedge neglects to mention this to try and peddle their own bias which includes twisting and misleading facts. Clearly the recent return of inflation in the UK has been largely caused by a devalued pound and therefore has everything to do with Brexit.
gingerninja, although this article is on zerohedge, it is actually written by Daniel Lacalle who is a Spanish economist I follow.
Thats the problem with zerohedge, it has some excellent articles surrounded by a lot of junk.
I am is a similar situation as your husband, I am thinking about a spousal visa to the UK, £2500. I have no problems entering the UK at an airport but the ports are a nightmare, they hold me up question me for ages and then begrudgingly let me in. It all depends how many of our children settle in Europe. At present they are here for Uni but from the end of this year only one will be at Uni here, the rest all tell me the opportunities and wages are way better in Europe. Did I tell you I have five daughters?
I apologise for my ambiguity, perhaps It hides an insecurity.
AndrewJ My husband achieved his visa by himself via a highly skilled migrant visa... exceptionally expensive and hard to achieve. So many hoops to jump! By the time we were married, he was already well down that route and was stubbornly attached to achieving it based on his merits rather than our marriage.
5 daughters!?!?! Goodness. I have two and that is plenty. There seems to be a well trodden path for many Kiwis of degrees in NZ, then work in UK, Oz or somewhere and then back to NZ when they have kids. I think there is a pull for many young adult Kiwis who live abroad to return home when they start families, so even if your daughters do settle overseas, they may ultimately return again.
Our daughters are 10 and 6, they are already computer literate, both can code. I hope that the opportunities will be better for them here in NZ by the time they reach adulthood but it's hard to imagine. We will do our best to give them as much choice and opportunity as we can but I think adaptability is perhaps one of the greatest skills to ensure future success. The rapidity of change and technological advancement is unlikely to slow down and the world economy is likely to require a major transition over the next decade or two, so i'm disinclined to wed myself to strongly to a single plan.
gingerninja, the best thing we ever did was was make our children learn the piano. It wasn't always easy but they all have good music skills, including theory.
Otherwise my kids spent their youth riding horses, playing in the river and helping me on the farm. Now they are everything from rehabilitation at the NHS, violinists, Lawyers, artists and the one in the middle has some sort of technical ability I haven't got my head around yet, studied in Stockholm and works for govt in NZ at present.
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