Here's our summary of key events overnight that affect New Zealand, with news that the major economies are starting to slow just as tariff imposts kick in.
The first readings for the American PMIs were out today for August and they show a slowing of their expansion. Their factory PMI slowed to its lowest rate in 9 months, their services slowed to its lowest rate in four months. This slowing is consistent with a recent poll of economists who think it is being caused by the US-inspired trade wars.
Sales of new US single-family houses fell in July, down -1.7% from the June annual rate, but they are almost +13% above the annual rate for July 2017. Median prices rose to US$328,700 (NZ$495,000).
In Japan, their flash PMIs shows factory activity up slightly, with both input and output price inflation at multi-year highs. Overall demand improved, but export orders showed no gain for a third straight month.
The same measure in Europe showed little change with services up, but factory activity down. Their consumer sentiment however is turning less optimistic. But the ECB thinks their recent slowdown will only be a temporary bump and growth will pick up soon.
Overnight, both the US and China started levying previously announced tariffs on each others goods, the start of the first NZ$20 bln tit-for-tat actions. There is much more to come that has been announced. This comes as both restart talks on resolving the issues, but beither Beijing nor Washington are holding out much hope that more talking will resolve anything. Essentially, it is now a zero-sum game with each hoping the pain to be caused will have the other concede. There is a long way for this to run.
In China, they are facing a major biosecurity threat. Their pork industry is dealing with a major outbreak of African Swine Fever, and the crisis is spreading. Given the role of pork in their food chain, this is a really major issue for them. It has the potential to raise meat prices for other animals, significantly.
All eyes will be on Australia this afternoon as the ruling party tries to resolve its leadership issue. There are major implications for New Zealand in this contest.
And Australia has told two Chinese companies that they can no longer supply any components for its 5G networks on the basis of a national security risk assessment. One of those companies is supplying that infrastructure in New Zealand, at least on a test/trial basis.
The UST 10yr is has held over the past 24 hours at 2.82% but the US 2-10 curve is now down to just under +21 bps and a new eleven year low. The US Treasury Department will auction US$217 bln in securities next week, comprising US$104 bln in new debt and US$113 bln in previously sold debt. The flood is starting. The Aussie Govt 10yr is at 2.53% (down -1 bp), the China Govt 10yr is at 3.62% (down -3 bps), while the NZ Govt 10 yr is at 2.60% (down -2 bps).
Gold is down -US$8 at US$1,187/oz in New York.
US oil prices are softer today at just under US$68/bbl. The Brent benchmark is now just under US$75/bbl.
The Kiwi dollar is starting today slightly softer than yesterday at 66.4 USc but right where it was at this time last week. On the cross rates we are firmer at 91.6 AUc, and at 57.5 euro cents. That puts the TWI-5 at 70.3.
Bitcoin is little changed yet again at US$6.456 and only marginally up from this time yesterday. That is now five days of virtually unchanged prices.
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The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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