Here's our summary of key events overnight that affect New Zealand, with news the US is trying to change the art of diplomatic negotiation, replacing 'compromise' with 'bullying'.
Talks between Canada and the United States to update the North American Free Trade Agreement soured sharply today after the US President said a pact would be on American terms, and Ottawa stood firm against signing "just any deal." The key sticking point is whether Chapter 19 will survive. That is section that resolves disputes over arbitrary tariff actions by the other party. The US wants freedom to break the agreed terms without consequences; Canada is wary of giving the dominant party such leverage. It looks like there will be no agreement this weekend as hoped.
And the US is threatening to pull out of the WTO, also over the restriction of having to go to arbitration for disputes.
Wall Street is closing on a weaker note, with the S&P500 down -0.3% on the day. The bond market is also posting lower yields.
Emerging market troubles are spreading. The dramatic interest rate hike in Argentina has failed to stop the rout of its currency. Turkey is facing a faster falling currency as well. And Indonesia and Brazil are watching their currencies fall to fresh lows. (One consequence might be rising demand for gold.)
But within the past few hours, the IMF has pledged "full support" for the Argentina government and that has staunched the bleeding for now.
All this comes as the US and China seem to be making no progress at all in their trade dispute.
India has reported its economy grew at the rate of +8.2% in the June quarter. That was up from +7.7% in the March quarter, and well above analysts expectations.
In China, their factory activity expanded faster in August than July according to official data, and to be fair that is matched by private surveys. But the absolute level of factory expansion is pretty modest. And the sub-category "new export orders" in the index reveals a fall, which may be telling. The service sector expansion also picked up and that is growing at a much more healthy rate.
New Australian energy policies promoting coal-fired power plants to "get power prices down" may well cause them real trouble with their free trade deal aspirations. The EU is saying the level of Aussie coal exports is a "red line for us" and the proposed EU-AU FTA may be stillborn.
The UST 10yr is lower today at 2.85% but their UST 2 yr is also lower and that has put their 2-10 curve at +22 bps. The Aussie Govt 10yr is at 2.51% (down -4 bps), the China Govt 10yr is at 3.60% and down -4 bps, while the NZ Govt 10 yr is at 2.56%, down another -2 bps. New Zealand swap rates are also lower with the 2 year now at 1.98%, a -5 bps fall in the past week and a -16 bps fall over the past month.
The VIX has moved higher this week reflecting rising volatility and is currently at 13.9. slowly by inevitably political risk in the US is getting factored in and rising emerging economy risk is in there too. The average index level over the past year of 12. The Fear & Greed index is unchanged and still firmly on the 'greed' side.
Gold is marginally firmer from yesterday and is now just on US$1,201/oz in New York, up +US$2, although it has slipped -US$3 over the week.
US oil prices are softer today from yesterday and now just under US$70/bbl. The Brent benchmark is now just under US$77.50/bbl. The US rig count rose this week.
The Kiwi dollar is ending the week sharply lower than at this time last week at 66.1 USc, partly from a rising greenback, but mostly from the effects of declining local business confidence. On the cross rates we are firmer at 92.1 AUc, and softer at 57 euro cents. That puts the TWI-5 at 70 and -50 bps lower over the week.
Bitcoin is now at US$7,044 and +6.5% higher for the week.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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