Here's our summary of key events overnight that affect New Zealand, with news New Zealand's currency is rising on improved global risk appetite for emerging market exposures.
But first, the US reported a smaller current account deficit in the June quarter of -2.0% of GDP, down from -2.4% of GDP in the March quarter, which is the level it was in 2017. (Yesterday, New Zealand reported a wider current account deficit of -3.3% of GDP.)
American housing starts grew only marginally in August from July, boosted by an outsize jump in apartment building that covered weakness in starts for single- and multifamily housing. The weakness is more when you realise new building permit data is -5.5% lower than for the same month a year ago.
The latest review of its monetary policy and interest rate settings by the Bank of Japan brought no changes. But they did say they are worried about the trade war fallout.
On the China:US trade war front, not much happened overnight, but it is worth noting that the Shanghai stock exchange rose more than +1% yesterday - and most other major Asian equity markets made similar gains. Markets are turning bullish on the prospects for emerging markets. And China is adjusting to a long-term war of attrition with the US.
There is no progress to report on the NAFTA negotiations between the US and Canada. Both sides are expressing frustration, however, over the other's intransigence.
In Europe, new car sales grew very strongly in August, up more than +30% compared with the same month a year ago. True, it is usually the year's smallest month but that growth is exceptional. And it comes on top of July year-on-year growth of more than +10%, and June growth of more than +5%. 2018 car sales are shaping up to be very strong indeed.
In the UK, inflation hit an unexpected six-month high of +2.7%. And London house price growth has gone into reverse.
The World Bank reports that the global population living in extreme poverty has fallen below 750 mln for the first time since the World Bank began collecting global statistics in 1990, a decline in extreme poverty of more than 1 bln people in the past 25 years.
Locally, all eyes will be on our Q2 2018 GDP result. Expectations are low, with growth expected at the +2.5% level and that may be the weakest result in four years.
The UST 10yr is up today at now just on 3.08% and a new three month high. Their 2-10 curve is wider at +27 bps. The Aussie Govt 10yr is at 2.71% (up +5 bps), the China Govt 10yr is at 3.69% and up +2 bps, while the NZ Govt 10 yr is at 2.67%, up +4 bps.
Gold is up +US$6 today at US$1,203/oz in New York.
US oil prices are up sharply today and now over US$71/bbl. The Brent benchmark is now over US$79/bbl. American stocks of crude oil are diminishing.
The Kiwi dollar is starting today up the thick end of +½c at 66.2 USc. On the cross rates we are marginally softer at 91.1 AUc, but firmer at 56.7 euro cents. That puts the TWI-5 at 69.8.
Bitcoin is little changed at US$6,297. This price is tracked in the currency charts below.
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12 Comments
Brazil Money Math
http://www.alhambrapartners.com/2018/09/19/brazil-money-math/
https://www.rba.gov.au/speeches/2018/sp-ag-2018-09-19.html
Quote - One final word on the creation of money is that as fun as it is to teach students about traditional money multipliers, I don't find them to be a very helpful way of thinking about the process. In Australia, simple regulatory regimes – which had earlier required banks to hold a minimum share of their deposits as reserves with the Reserve Bank – have been replaced with modern prudential regulation and market discipline. Again, the demand for and supply of credit is the real driver of money. That point can be reinforced by examining the behaviour of credit and money over time.
Bond traders are pricing in multiple rate hikes from the Fed due to several market indicators pointing towards sustained high inflation in the US - tariffs on Chinese import pushing up retail prices, rising fuel prices amid falling crude stockpile, higher wages from increased bonus payments to American workers etc.
Back in March, the Kansas City branch of the Federal Reserve stated the obvious. US home construction was stuck near the lowest level in the 60 years of records being kept. Despite a decade having passed since the prior bust turned to boom, and with the economy booming, it was apparently worth mentioning.
http://www.alhambrapartners.com/2018/09/19/news-housing/
Yes, hundreds of thousands of construction workers, tradies and engineers lost their primary source of income and were owed hundreds of millions for work done on stalled projects, when construction companies, banks and building consultants went belly up.
The economic outlook of the construction industry is yet to recover from the nightmares faced post-GFC.
This trend is clearly visible across the monthly building permits issued across the United States. More building permits were issued monthly by US authorities in the 60s and 70s than in 2018. The sector is seen as a drag on the otherwise booming US economy.
This is the boxed canyon countries on the periphery are in ... their currencies are losing the ability to be able to afford (energy) imports ... as US$ / US gobbles up their share of a shrinking pie ... so interest rates must go up till something breaks
"“South African policy makers may be about to consider whether to follow counterparts from Russia to Turkey and raise interest rates — even when the country is battling a recession… The South African Reserve Bank is contending with a currency that’s lost 17% to the dollar this year…”
https://www.timeslive.co.za/sunday-times/business/2018-09-19-south-afri…
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