Here's our summary of key events over the weekend that affect New Zealand, with news that how China and the EU separately react to issues facing them will set the tone this week.
Markets will open on tenterhooks later today after Wall Street was down -4.9% last week and Shanghai was down -5.8%. The NZX was down -4.0%. Bond market yields fell after the UST 10yr rose to 3.23 at the start of last week and ended lower at 3.17% as doubts started to appear about the sustainability of higher rates.
But surprising everyone over the weekend was Chinese export performance. For the fifth consecutive month where markets were expecting to see sharp declines from the effects of the trade war and rising tariffs, they have defied expectations and risen. In September they were up almost +15%, and the countries’ trade gap with the US hit a fresh high of -US$34 bln in the month. More American tariffs are on the way, but so far the ones imposed only seem to have juiced up the trade between the two countries. Its a trend full of irony and quite unexpected. The "rush-to-beat-tariffs" narrative can't go on forever. On the other hand, Chinese imports fell -14% reflecting subdued domestic demand.
However car sales in China fell for a third straight month in September, and it now looks like they will have their first yearly decline in passenger-car sales in almost three decades. Foreign manufacturers had a particularly rough month.
Europe could prove the center of global market focus this week as Italy's budget and Brexit talks overshadow economic data and central banks. Politicians are gathering to address the EU biggest current challenges.
"History suggests that the world is about due for another financial crisis. One of the places it might start is Italy. Many of the ingredients are there. A pile of questionable debt. Weak banks. An erratic government. And a sizable economy able to inflict collateral damage outside Italian borders." And its new unstable government might find an angry Germany, fed up with all challenges, only too ready to push it out of the EU. The EU is playing with matches again, confident they know what they are doing.
In Australia, house prices are likely to slip further as the demand for new mortgages dries up. The number of new mortgages fell by a larger-than-expected -4.5% in August, to be down more than -10% over the year. It is weakest result in almost eight years when the property market was still struggling in aftermath of the GFC.
The UST 10yr yield is slightly firmer at 3.17%. Their 2-10 curve has at +31 bps. The Aussie Govt 10yr is at 2.74% (down -1 bp overnight), the China Govt 10yr is at 3.61% and also down -1 bp, while the NZ Govt 10 yr is at 2.68%, and up =1 bp. New Zealand swap rates have risen a minor +3 bps across the curve over the past week.
Gold is at US$1,218/oz and that puts it up +US$17 for the week.
US oil prices are little changed today at just under US$71.50/bbl. The Brent benchmark is now just under US$80.50/bbl. But both are large pullbacks from this time last week.
The Kiwi dollar is starting the week little changed from Friday at 65 USc, but up +60 bps in the past seven days. On the cross rates we are little changed at 91.4 AUc and unchanged on the past week, and little changed at 56.2 euro cents (although more than +60 bps up on the week). That puts the TWI-5 at 69 and a good weekly gain.
Bitcoin is now at US$6,274 and unchanged from Saturday but a net loss of almost -5% 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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