Here's our summary of key events over the weekend that affect New Zealand, with news China is reacting to economic pressures that are building on it.
All eyes will be on Shanghai after 2:30 pm today when its stock market opens after their week-long holiday. While they have been closed, Hong Kong has dropped -7% and US benchmark interest rates have risen +18 bps. Combined with the growing impact of US anti-China tariffs, a rout could be on the cards.
And late yesterday, the People Bank of China cut the reserve ratio for the country's major banks by -1%, effectively freeing up more money for their state-controlled banks to lend out. It is their fourth such cut in 2018 and an unusually large and broad policy move. It comes after many other methods to spur growth have been tried, like boosting major infrastructure spending - so it has the look they running out of options. And it is something of a surprise given the instructions to officials and their media not to report or talk about negative data building in their economy.
China's foreign exchange reserves fell more than expected in September, down -US$23 bln to US$3.09 tln in data released a few hours ago.
In the US, markets fell at the end of last week as well. A ho-hum jobs report - even though the jobless rate was near a record low, the growth was in low-paid jobs, the rate of wage increases slowed, and their low participation rate didn't move - markets are sensing the sharp rise in benchmark interest rates with another rise almost certain in 2018 will be bring the day of reckoning closer.
The US trade deficit for August brought a goods deficit of -US$77 bln (up +17% on the same month in 2017), and a services surplus of +US$24 bln (up +10% year-on-year).
The amount of US consumer debt grew at a faster rate in August than July, rising at a +6.2% pa rate and a jump from the July rate of +5.1%. Neither are sustainable and even the year-on-year increase of +4.6% isn't either. These sort of increases are reminiscent of the 2007 rises. So at some point a slowdown will come.
Canada also released its labour market data over the weekend and that came in apparently very much better than expected. They had a gain of +63,000 jobs with a participation rate of 65.4% in September. Their unemployment rate held at 5.9%. The downside of this data is the rise in part-time jobs at the expense of full-time employment.
In Japan household spending jumped +2.8% in August at the fastest annual pace in three years as bigger bonuses boosted consumption. This was way above market expectations for a -0.1% fall.
In India, their central bank surprisingly held its key interest rate at 6.5% despite fears of accelerating inflation. It was a decision that saw their currency drop sharply to a new low. And may think another rate hike can't be far away.
The Aussies posted retail sales up +2.6% in the year to August and marginally better than for the year to July. This data also beat expectations.
A key high court decision in Australia tested whether a computer-generated notice can issue a penalty against a taxpayer on behalf of the tax authority. And the full Federal Court said such notices "can't be relied on" unless a real person issues them, not just a computer. Given that the NZ IRD issues computer generated rulings and claims against taxpayers in a wholesale way here, this opens up a new avenue of challenging the rulings of the tax authorities.
The UST 10yr yield was up strongly at the end of last week at just over 3.23%, a gain of +18 bps in seven days. Their 2-10 curve has widened to +34 bps.
Gold will start at US$1,203/oz a +US$12 gain for last week.
US oil prices are little changed today at just under US$74.50/bbl. The Brent benchmark is now just over US$84/bbl.
The Kiwi dollar is starting this week sharply lower at 64.4 USc having fallen -2c in the past seven days. Because our benchmark interest rates aren't reacting to the US and global rate rises, it is our exchange rate that is making the relativity adjustment. On the cross rates we are at 91.3 AUc and at 55.9 euro cents. That puts the TWI-5 at 68.6 and a three year low.
Bitcoin is now at US$6,552 and that is a tiny net loss of -1% over the past week. 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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