Here's our summary of key events from over the weekend that affect New Zealand.
Chinese authorities have ordered the country's banks and insurance companies to ease the pain caused by slowing economic growth and trade war fears. The China Banking and Insurance Regulatory Commission has called for financial institutions to address “weak points” in the country’s infrastructure sector, and instructed them not to “blindly” withdraw funding from companies with good credit ratings that are experiencing “temporary operational difficulties”. It’s also said support should be given to import/export-oriented firms.
Both Moody’s and Standard & Poor’s have cut Turkey’s sovereign credit ratings deeper into “junk” territory. Downgrading its rating a notch to B+, S&P cites extreme lira volatility and forecasts a recession next year. It also expects Turkish inflation to peak at 22% in the next four months.
Inflation is picking up around the world, largely off the back of higher energy costs. Annual inflation in Canada rose to 3% in July, from 2.5% in June. Meanwhile inflation in the Euro area rose to 2.1% in July from 2% in June.
The US's latest consumer sentiment index has come in much lower than expected. The University of Michigan’s index has dropped to its lowest point since September last year, largely due to a decrease in optimism from low income earners. Of particular concern is that buying conditions for large household items sank to their lowest level in nearly four years – this being an indicator of coming stagflation.
A new study has found that while climate change will be bad for the world's food security, a carbon tax big enough to slash emissions, will be worse. A paper in the Nature International Journal of Science concludes that while the changing climate will directly hit agricultural productivity, a hefty carbon tax will raise energy prices, making food production more expensive and thus threatening supply. The Productivity Commission says the price of carbon in New Zealand needs to increase 10 to 12-fold for us to reach net-zero emissions.
Finally, a Reuters news report that can only be read as a word of warning to our neighbours in the Pacific. China is boycotting the tourism industry it largely built in Palau, as the tiny Micronesian nation refuses to ditch Taiwan as an ally. China last year effectively banned tour groups from visiting Palau, branding it an illegal destination due to its lack of diplomatic status. While the Chinese have been buying up real estate in the islands, and accounted for half its tourists in 2017, Palau's hotels are now empty, with an airline even canning its China route. China last year halted tours to South Korea after Seoul installed a controversial US missile defence system.
The UST 10yr has fallen since this time on Friday to 2.86%.
Gold is down a few dollars to US$1,177/oz.
Oil is up slightly. The US crude price is at US$66/bbl, while the Brent benchmark is at US$72/bbl.
The New Zealand dollar has jumped to 66.4 USc, but remains at 90.7 AUc and 58.0 euro cents. The TWI-5 is up to 70.3.
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