Here's our summary of key events over the weekend that affect New Zealand, with news the trade war consequences are now starting to bite in economically significant ways.
But first, Canada and the United States are in intense 'last-minute' negotiations over NAFTA and seem to have narrowed their differences. But there is no certainty an agreement will be reached according to various sources in Ottawa and Washington.
A measure of the US dollar's influence internationally, the IMF's quarterly review of global foreign exchange reserves, shows a rather sharp fall in holdings of the greenback, down to 62% and a sharp fall from over 65% at the beginning of 2017, and its sharpest fall ever. This data is on top of data showing the US is, for the first time, failing to attract foreign investment - in fact, there is a net outflow - and this will become a fast-growing problem for a country that runs huge deficits unless it is reversed quickly.
In Canada, housing affordability is at its worst ever. It now takes an eye watering 54% of household income to afford Canadian housing - on average. It is much higher in Toronto (76%) and Vancouver (88%). And the situation is expected to get worse before it gets better because interest rates are rising there. It's grim in Canada for first-home buyers. (The New Zealand average is 34% for FHBs, and the Auckland level is 43%.)
In Japan, and in somewhat of a market surprise, retail sales there turned up strongly in August. Factory output data came in positive as well. Their unemployment rate fell to 2.4%, and new data shows that 70% of Japanese women of working age are now employed, a new high.
In Europe, Italian stocks and bonds fell sharply at the end of last week as investors took fright over the fiscal stability of a country that is continuing to weigh down European markets. The immediate cause is an October budget from the new antiestablishment "Italy-first" coalition government, which has pledged spending and tax cuts that will likely put the country’s debt on an unsustainable course.
In China, the Caixin PMI signals a sharp slowdown in China's factories in September. Outbound investment fell in August for the first time ever. Mostly, that was a sharp pullback from investing in the US, but there is a redirection towards the EU. But the EU is also starting to push back.
China is on its Golden Week holiday this week and travel activity will likely reach gigantic proportions.
Pakistan is the latest emerging economy to raise official interest rates. And it has been the most aggressive so far. Over the weekend it raised its 7.5% rate +100 bps to 8.5%.
In Australia, their banks have been shamed for their sales culture which bred 'greed' according to the interim report from their Royal Commission into financial services. But the long-running inquiry stopped short of recommending any penalties, sending bank shares rallying. The main sectors in the Hayne cross-hairs are advisers and brokers, as well as insurers. Conflicts of interest in the way industry staff are paid are likely to change dramatically.
But one important consequence of the Hayne Report for banks is that they are going to be held responsible for borrower's claims about their income and expense commitments. If a borrower (or broker) lies about that, it is the lender who will be responsible if they don't pick it up on their verification process. This is almost certain to slow the approvals process to a crawl. Mortgage approvals are going to be a very much slower process.
Sydney and Brisbane are on holiday today.
The UST 10yr yield is at 3.07%. Their 2-10 curve is now under +24 bps.
Gold will start the week up +US$8, now at US$1,192/oz in New York.
US oil prices are up at just under US$73.50/bbl. The Brent benchmark is now just over US$82.50/bbl.
The Kiwi dollar is starting the week at 66.2 USc. On the cross rates we are little changed at 91.6 AUc, and at 57 euro cents. That puts the TWI-5 at 70.2.
Bitcoin is now at US$6,606 and and a dip of -1.3% over the weekend. This rate is charted in the exchange rate set below.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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