Most equity markets rise; US ends shutdown; Canada probes non-bank lender risk; China adds stimulus; Malaysia goes after KPMG, Deloitte; UST 10yr 2.76%; oil firm and gold jumps; NZ$1 = 68.4 USc; TWI-5 = 72.3

Here's our summary of key events over the weekend that affect New Zealand, with news the world seems to be on a low growth, low inflation track, and consumer confidence is faltering. But despite that, markets appear optimistic and ready to embrace risk.

But first, there will be no video version today because it is a public holiday north of Taupo, and we are based in this region. It is also a public holiday in Australia.

Wall Street is ended last week unchanged from where it started, erasing the losses it took in-between. The S&P500 was just one of nearly every market that rose on Friday - all except Argentina, India and London. This week Alphabet (Google) and Apple are among some bellwether companies reporting earnings. And there is a three-week funding extension agreed, without anything for the border wall, and reopening the US Federal Government. But the whole thing will be back as an issue within a month.

In Canada, they are weighing whether to subject private lenders to the same mortgage stress-test rules faced by banks to prevent housing markets from being destabilised. This has suddenly become an important consideration in Australia too, on the impending release of the Hayne Report. That is likely to degrade banks from supplying mortgage finance for some time and during that readjustment period non-bank mortgage funders are expected to rush in to fill the gap. In fact, they have already started doing that. In Canada, tighter bank regulation has opened the door to opportunities for non-banks and those alternatives are now becoming significant players, large enough for regulators to worry about financial system stability.

In Japan, Tokyo inflation data for December came in higher than analysts were expecting - at +1.1% vs expectations of +0.9%.

Slower growth in China at the end of 2018 has prompted Beijing to announce a series of growth-boosting measures to avert the risk of a sharper slowdown. These include hundreds of large infrastructure projects, cuts in income taxes and government fees, looser guidelines for local governments to issue much more debt for their own projects, and a cut in bank reserve requirements. Most of these measures have been building from late 2018.

In Malaysia,the country's new government is going after Goldman Sachs for the role they played in their 1MBD sovereign wealth fund fraud. It has also emerged that they are going after the auditors involved as well - KPMG and Deloitte - "were [they] aiding and abetting in this scandal, or merely negligent".

In Germany, business sentiment slipped yet again and this time by more than expected.

Wholesale swap rates will start the week slightly lower than this time last week, especially at the long end. The two year is down -2 bps at 1.90% but not quite at its all-time low (of 1.87%). The five year is down -3 bps on the week while the ten year is down -5 bps over the same timeframe. The UST 10yr yield has bounced back to be just on 2.76% but a small fall for the week. Their 2-10 curve is now under +14 bps. The Australian Govt. 10yr yield is at 2.21% and a chunky -12 bps weekly drop. The China Govt. 10yr yield is firmer at 3.16%, and the New Zealand Govt. 10yr yield is at 2.34% and almost unchanged for the week.

Gold was up +US$19 to US$1,297/oz last week and over the weekend in offmarket trading has pushed up to US$1,303. That is also a good +1.2% gain for the week. In London, intrigue about Venezuela's gold holdings is a developing story.

US oil prices moved a little higher are now just on US$53.50/bbl while the Brent benchmark is just on US$61.50/bbl. Both are small gains but are similar to the levels of a week ago. US crude oil and petrol stocks are unusually high, but the upward pressure is coming from the uncertainty in Venezuela.

The Kiwi dollar starts today up strongly at 68.4 USc and almost a +¾c gain on Friday That takes it to its highest level of 2019. On the cross rates we are little changed at 95.3 AUc, and at 60 euro cents, also a 2019 high. And that pushes the TWI-5 up to 72.5 which was a +1.1% gain last week.

Bitcoin has changed very little this week and is holding at US$3,546. This rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

Select chart tabs »
The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

16 Comments

Australia and Auckland move closer to their merger / Union as one of the first steps was synchronising Australia Day & Auckland Anniversary. The rest of NZ plans to stay independent of the AU (Australasian Union).

Best video on credit/money creation yet and the effect it has on house prices from our friend at DFA in AU:
https://m.youtube.com/watch?v=oSobNFYdtzM
It’s great to see the different factors quantified and some myths dispelled. Well worth a watch!

The headline is misleading but if this technology works - and I have no idea whether it will or not - the implication on energy prices would be significant.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=121...

Edit: I should say the article is about a technique that might unlock deeper shale gas reserves - particularly in China.

It's looking pretty dry across the country, I wonder if this is causing global warming?

A 1 degree increase in temp results in 9% more moisture being taken from the ground/sea. This has an effect at both ends as the dryer periods are getting worse, but then that 9% extra moisture makes for larger rain clouds, which makes for larger rain storms/cyclones and an increase threat of flooding.

I thought it was 8.943% more moisture evaporating.

And if water causes >80% of the greenhouse effect then we need to seriously look at ways of making it rain!

Just as long as we don't get one of them ther ice ages, she'll be 'right. Them ice ages are a real doom scenario. As is a big meteor strike and nuclear war. Global warming? Maybe, maybe not.

http://www.diercke.com/kartenansicht.xtp?artId=978-3-14-100790-9&stichwo...

Global warming can be stopped in its tracks practically overnight by careful use of atomic explosions over the Amazon jungle. No one ever goes there and it is sparsely populated. You can travel for days without seeing a living thing and then when you do see it it is some hideous flesh eating fish or slimy toxic frog. After a few years it will grow back and the process can be repeated.

This is why I know that they don't really take global warming seriously apart from using it as an excuse to establish an Orwellian dystopia.

Our council is boasting about sail cloth shades for our children's playgrounds. It is technically possible to place a large reflective foil mirror in orbit that would cut solar radiation to earth by say 1%. Global warming solved. The one problem would be persuading countries that benefit from global warming Russia, Canada, Argentina.

Brains taken a public holiday too I see.

This link examines some geoengineering mitigations for climate change - the modelling seems to suggest that although temperatures could be reduced by reflecting sunlight or spraying materials into the atmosphere, it would cause drastic changes in rainfall patterns leading to devastating droughts and floods.
https://www.theguardian.com/environment/2014/nov/26/geoengineering-could...

AAGH, HELP. The cure looks far worse than the disease. Perhaps adapting is the best response. Heresy, possibly, but scepticism is necessary, especially in science. No scepticism = no science. (It is a good job the Catholic Church didn't execute them all when they had the chance).

https://www.zerohedge.com/news/2019-01-27/life-threatening-arctic-blast-...

I stole t he idea from a science mag from years ago. Back then it was stated as very expensive but feasible. But a political minefield - or a cure worse than the disease to steal again.
Spraying anything into the atmosphere would be worse since the atmosphere moves whereas a satellite can be positioned. I remain a climate change believer but my skepticism about the quality of science has two reasons - after 9/11 all planes grounded in the USA and the temperature went up one degree. That was far more than the 0.15 degrees average that was being discussed back then and no scientist predicted the effect ~ only rational conclusions were climate change is worse than current measurements showed and the scientists had only a mild grasp of the complexities. My second reason for doubting the predictions: it all is based on computer models and after a lifetime writing software I have many reasons to be skeptical of computer models.

Cooling or warming the issue remains the same.

"Why on earth would I be concerned about global cooling? Given the dangers of global warming, one would think that signs of a cooling trend would be welcome news. Phew! Ecological catastrophe averted! Now we can go back to business as normal.
This is precisely my concern. Business as normal is ruining the planet – regardless of whether the climate is warming or cooling."
https://charleseisenstein.org/essays/why-i-am-afraid-of-global-cooling/

https://www.nytimes.com/2018/11/20/magazine/palm-oil-borneo-climate-cata...
"This article illustrates in horrific detail one of the main themes of my book: that the primacy of carbon reductionism in environmental discourse inevitably leads to the devaluing and destruction of whatever doesn't fit into its metrics. In this case, the rush to "climate-friendly biofuels" led to the razing of the world's third-largest rainforest."