Here's our summary of key events overnight that affect New Zealand, with news there is a sudden fall-off in the growth of airfreight volumes.
But first, US pending home sales data for contracts to buy previously owned homes fell in July for the seventh straight month. A lack of supply in the market is the reason the industry is giving and the fall-off in volumes is particularly noticeable in the West. Separate data shows home prices rising at the rate of +6.3% pa in an affordability challenge that may be impacting sales volumes.
The second revision to the second quarter American GDP growth data has been released confirming it was the best growth since the third quarter of 2014 with the annual growth rate up marginally to +2.9% pa compared with the annual rate in Q2-17. (This is the consistent basis we use for all other countries and different to what the American publicise.)
The same data shows that US corporate profits rose +16.1% as a result of the large tax cuts and the expanding economy. (see page 16.) This data has pushed the S&P500 up by +0.5% today.
Canada has now joined the NAFTA negotiations and claims a deal can be achieved by the end of the week. They already have agreement on car manufacturing; dairy trade seems to be the current sticking point and the Canadians are expected to concede that one, a bargaining chip they have been holding back until this moment. And Canada has won a rollback on newsprint tariffs.
And staying in Canada, graphic new evidence that raising the tax rates at the top income bands actually reduces the tax-take collected. The Trudeau Government has a -C$4.6 bln shortfall from the effect. Of course, the American experience of cutting top-rate taxes doesn't generate rising tax collections either.
In emerging markets, pressures seem to have escalated in the past 24 hours. The Turkish currency is taking a new hit. And the Argentine bond risk premiums have suddenly blown out. Both stem from investors losing faith that the local governments can control the pressures facing them.
All these trade pressures are strangling the growth of international air freight. It was up only +1.9% in July, the slowest annual growth rate since May 2016. In the huge Asia/Pacific region, growth was only +0.5% pa as momentum leaks away fast. Further, the OECD is reporting a contraction in trade in the June quarter among the G20 nations.
In Australia, Westpac is coming under severe margin pressure which has forced it to raise mortgage rates suddenly. It is raising is variable rate by +14 bps to 5.38% and is the first of the big banks to do that, although most of the smaller ones have already moved higher following the same pressures. The increase applies to all its customers, new and existing. It's a rise that could add AU$300 mln to Westpac's bottom line. The pressure on Westpac is somewhat unusual but the other three big banks are expected to follow at some point. Westpac New Zealand doesn't seem to be suffering the same pressure, according to the RBNZ Dashboard data. (P3) Also, see this.
The UST 10yr is unchanged at 2.88% and the 2-10 curve is now at +20 bps. The Aussie Govt 10yr is at 2.55% (down -1 bp), the China Govt 10yr is at 3.63%, down -2 bps, while the NZ Govt 10 yr is at 2.64%, up +1 bp.
Gold is unchanged today at just on US$1,205/oz in New York.
US oil prices are much firmer today, now just over US$69.50/bbl. And the Brent benchmark is just under US$77.50/bbl.
The Kiwi dollar is softer at 67.1 USc. On the cross rates we are firmer at 91.9 AUc which is as high as it has been in a month, and at 57.3 euro cents. That leaves the TWI-5 at 70.7 and still at its average over the past month.
Bitcoin is at US$7,017 and virtually unchanged from than this time yesterday. This price is tracked in the exchange rate charge below.
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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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