Here's our summary of key events overnight that affect New Zealand, with news 'economic growth' is under pressure worldwide.
At their just-ended meeting in Bali, the IMF lowered its forecasts for global economic growth in 2018 to +3.7% and down from +3.9% in their April estimate (which itself was a downgrade), saying the trade tariff wars and instability in emerging markets is cooling many economies. By their new estimates, they think China's growth will cool to +6.2% in 2019. US growth will cool to +2.5%. They say New Zealand will grow +3.1% this year and +3.0% next. (That compares with the last RBNZ estimates of +2.5% this year and +3.3% in 2019.)
China’s effort to support its slowing economy is putting pressure on the yuan. Their challenge is to keep the growth going without triggering capital outflows. To do that they are letting the yuan depreciate - and it hit a 21 month low against the greenback yesterday - while at the same time engineering a very sharp rise in the cost borrowing yuan in offshore markets, especially Hong Kong. That makes the costs of large sudden capital outflows much less attractive. The overnight cost of borrowing yuan for Hong Kong banks jumped to 5% from 1.7% a day earlier, hitting its highest level since May. The rate for one-week lending reached 7.6% yesterday, up +4 percentage points since last week to its highest level in over a year.
To encourage trade, China is increasing the size of its tax rebates for exporters. Plus it has announced an expanded program to clear away shantytowns and replace them with 'modern' housing facilities.
In Hong Kong, there are serious worries that a housing market crash is imminent. Banks are slashing valuations in the face of a turn in the market and industry insiders are claiming this will just make the turn faster and deeper. But of course no bank wants to be behind the trend of declining market prices. A big reveal of the housing market's reliance on 'confidence' underpinning valuations is about to be exposed in Hong Kong.
In Canada, housing starts slipped to a 19 month low. They were particularly weak in Vancouver, but growing in Toronto.
In Mexico, their inflation topped 5% in September and for the first time since March, establishing a new rising trend.
The Gerrman trade surplus grew larger than expected in August, but for all the wrong reasons. Exports actually fell when they were expected to rise, and imports slumped when a small rise was expected. Perhaps the data is seasonal because August is the height of their summer holidays. But it is a worrying sign for them nonetheless.
The UST 10yr yield is lower today at 3.21%. Their 2-10 curve is now at +32 bps. The Aussie Govt 10yr is at 2.78% and up +1 bp from this time yesterday. The China 10yr is at 3.65%, up +2 bps, while the NZ Govt 10yr is at 2.69%, also up +2 bps.
Gold is at US$1,187/oz this morning, a small US$2 rise overnight.
US oil prices are up by about +US$1 today at just over US$75/bbl. The Brent benchmark is now just over US$85/bbl.
The Kiwi dollar is starting today at 64.6 USc having changed little since this time yesterday. On the cross rates we are at 91.1 AUc and at 56.2 euro cents. That leaves the TWI-5 at 68.8 and just off its three year low.
Bitcoin is now at US$6,587 and that is a tiny slip of less than +1% overnight. 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 ».