Here's our summary of key events overnight that affect New Zealand, with news it may be dawning on some US policy makers that China may come out on top in the trade war and they have chosen the wrong strategy to address the imbalances.
But first, the NY Fed's survey of factory business conditions, a key one among the regional Fed surveys, has come in surprisingly flat. Analysts were expecting a minor indication of softness but have been delivered something more concerning. It is true that the overall levels are still relatively high, but most of their key sub-indicators fell and some quite sharply. And some of the rises - like for inventories and input prices - aren't positive either. The only positive bit is that the employment indicators held steady, neither rising or falling.
EU inflation dipped in July, slipping -0.1% to +2.1%. For the euro area, it was down to +2.0%.
In Canada, their existing house sales fell -3.8% in volume in August compared with the same month in 2017. There are two important reasons - major volume drops in British Columbia housing, and stricter national mortgage regulations are starting to bite. The data from Vancouver is eye-catching, down -37% year-over-year in volume terms. Nationally, the average price was up +1.0% to C$475,500 (NZ$554,700) - and in Vancouver the average price was up +4.1%.
Meanwhile, the OECD updated its June quarter G20 growth stats, showing this key group grew at +3.9% pa. That is unchanged from Q1-2018, but is bolstered by improvements from India, China, Indonesia and a small set of others, and restrained by the US, the EU, Japan and Australia among many others. India's +8.0% was the highest, South Africa's +0.5% the lowest.
On the trade war front, the Chinese don't seem eager to engage. The US is almost pleading for new talks, but China is looking away. In fact, there are reports that China might cut key exports to the US. That would be a whole new front in the battle. Certainly, it is driving China to insulate itself from US tariff pressure. The overall cost to China? - perhaps as many as 700,000 jobs. But that represents less than 0.1% of their employed workforce and may not even be noticed in their labour market statistics. The net result is that China may become more competitive, not less, through all this.
Markets are getting increasingly skittish over all this chest-beating. Today Wall Street is down -0.7% and yesterday Shanghai was down -1.1% and Hong Kong even more. But how much of that relates to recent storm damage consequences is a bit up in the air at present, although probably not much.
The UST 10yr is unchanged today at just on 3.00%. Their 2-10 curve is at +21 bps. The Aussie Govt 10yr is at 2.63% (up +3 bps), the China Govt 10yr is at 3.66% and down -2 bps, while the NZ Govt 10 yr is at 2.61%, up +3 bps.
Gold is up +US$8 today at US$1,201/oz in New York.
US oil prices are lower today and under US$69/bbl. The Brent benchmark is now under US$78/bbl.
The Kiwi dollar is starting today firmer at 65.8 USc. On the cross rates we are marginally firmer too at 91.6 AUc, and unchanged at 56.3 euro cents. That puts the TWI-5 at 69.5.
Bitcoin is now at US$6,304 and -2.8% lower than this time yesterday.
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