Here's our summary of key events overnight that affect New Zealand, with news China is back after a long holiday only to find the cost of a core commodity it needs is very much higher.
But first, it is groundhog day in Washington with negotiations to fund the US Federal Government stalled just days before funds run out on their three-weeks-old previous agreement. The same sticking point; funds for extending the border wall.
Wall Street ended last week back where it started, unable to hold earlier gains. Earlier, European markets were lower. The week closed even lower in Tokyo which was down -2.0%. Shanghai will be back later today after their national holiday week, but if Hong Kong is a guide, they will return with not much net change.
In Canada, employers added +66,800 jobs in January, far better than the gain of +8,000 that analysts expected. The Canadian jobless rate ticked up however to 5.8% as more people sought work. The Canadian currency rose on the news. It was also bolstered by better-than-expected housing starts data.
And there was data out in Europe. The German trade data actually came in a bit stronger than expected with both exports and imports rising while their trade surplus eased back a bit. But French industrial production data was weak as expected in December but not as weak as the prior month. Italian industrial production data was similar.
China is returning to normal today after their Spring Festival week-long holiday. The mood will be interesting to assess. Many indicators are weak, but not all. The pace of official stimulus will get special attention. And China loves public-private partnerships (PPPs). They are reporting that in 2018, a total of 8,654 PPP projects had been registered, worth NZ$2.9 tln. The projects for which construction has started totaled 2,237, with these adding up to NZ$700 bln in investment.
The price of iron ore, especially in the key Chinese market, is rocketing higher. This is despite the China slowdown. The dam disaster in Brazil has triggered a sudden supply shortage, extended by Brazilian outrage at the miner which may further reduce shipments from more mines there while remediation work is undertaken. Brazil is Australia's largest supply rival to China.
But on the flip side, this now means there is a sudden drought in demand for iron ore carrying ships. The Baltic Dry index, which measures ship charter pricing, has plunged, now down to 2016 lows. This is a sudden -56% drop since the beginning of 2019.
In India, a general election will be held in the next 60 days or so and the reelection of prime minister Modi is not a certainty. With India rising as an economic power, more international attention will be focused on this likely-to-be fractious campaign. One aspect to watch is the extent that relationships with rival China play out. Another is growing unease over the pace of job creation.
The OECD is reporting that gross borrowings of member governments from the financial markets are set to reach a new record level in 2019 by exceeding US$11 tln. But the increase is confined to a few countries, particularly the United States. As QE is wound back, governments are switching to market funding sources. New Zealand is among a small group of members (including Denmark, Iceland, and Sweden) where the debt load is considered at "very low levels". If it wasn't for the US's voracious debt-funding appetite, the OECD would be reporting good overall progress in reducing this budget load.
The UST 10yr yield is lower at 2.63% and back to where it was at the end of January. Their 2-10 curve is just on +17 bps. The Australian Govt. 10yr yield is at 2.10% and holding at its new lower levels. The China Govt. 10yr yield will open this week at 3.15%, while the New Zealand Govt. 10yr yield is at 2.11% and a new all-time record low.
In fact, local wholesale swap rates fell sharply again on Friday and every duration out to seven years is also at new all-time record lows. We are being infected by an assumption that our OCR is more likely to follow the RBA down.
Gold is up +US$4 at US$1,314/oz.
US oil prices are unchanged at just under US$53/bbl while the Brent benchmark is just over US$62/bbl.
The Kiwi dollar is starting the week little changed in offshore markets at 67.4 USc. On the cross rates we are at 95.1 AUc, and at 59.6 euro cents. That leaves the TWI-5 at 71.9, about where it has been for a few days.
Bitcoin is up +7.5% to US$3,611 and taking it back over NZ$5,000 for the first time in two weeks. 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 ».