US business investment falls; US PMIs up; US house sales down; China limits Aussie coal imports; Japan & EU PMIs weak; ALP saves brokers; UST 10yr 2.69; oil and gold down; NZ$1 = 68 USc; TWI-5 = 72.6

US business investment falls; US PMIs up; US house sales down; China limits Aussie coal imports; Japan & EU PMIs weak; ALP saves brokers; UST 10yr 2.69; oil and gold down; NZ$1 = 68 USc; TWI-5 = 72.6

Here's our summary of key events overnight that affect New Zealand, with news the Chinese are moving to 'remind' Australia who is boss.

But first, in the US:China trade talks, there are some suggestions that an outline of a deal is taking shape. China's carrot is soybean purchases and Trump is interested. But most of this is just rumour so far.

A widely-watched measure of how much businesses are investing fell for the fourth time in five months at the end of 2018, signaling firms are feeling less confident in light of domestic and global economic uncertainty. Overall orders for durable goods, rose a seasonally adjusted 1.2% in December from the prior month, and that was far less than the +1.7% markets were expecting.

The first look at US business activity in February is positive. Private sector output growth is regaining momentum this month, with a good upturn in service sector activity more than offsetting a slowdown reported by manufacturing firms.

US house sales (excluding new-build ones) fell -1.2% in January from the prior month. Sales volumes were -8.5% lower than the same month a year ago. Median prices are -2.4% lower than for December although +2.8% higher than a year ago. The American housing market is in the doldrums even though mortgage interest rates are lower.

All this data has Wall Street slightly lower today.

In China, customs officials at China’s northern port of Dalian have banned imports of Australian coal and will cap overall coal imports from all sources to the end of 2019 at 12 mln tonnes, an official at Dalian Port Group told Reuters. This could be a major blow for Australia and the Aussie dollar fell sharply on the news, taking the Kiwi dollar down with it. Beijing has denied the report, but it fits with a pattern of actions aimed at getting Australia (and New Zealand) to be more subservient to China's way of thinking.

The flash February PMI for Europe is stagnant. Although output across the eurozone is increasing at a slightly faster pace, the rate of expansion remained timid. The manufacturing sector is dragging on overall economic performance, falling into contraction this month.

In Japan the factory outlook is not looking good. Their manufacturing PMI fell to 32-month low of 48.5 in February (from 50.3 in Jan) mainly on the back of sharper falls in production and new orders. And future output expectations turn negative for the first time since November 2012.

In Australia, the ALP has now seemed to joining the Government in flagging that no action will be taken on changing the compensation model for brokers. The clear conflict-of-interest situation is deemed less of an issue than "the importance of brokers for competition".

The UST 10yr yield is up +5 bps at 2.69%. Their 2-10 curve has held at +16 bps. The Aussie Govt 10yr is unchanged at 2.10%, the China Govt 10yr is down -1 bp at 3.14%, while the NZ Govt 10 yr is down -4 bps to 2.22%.

Gold is sharply lower today by -US$16 to US$1,329/oz.

US oil prices are about -US$1 lower today, now just over US$56.50/bbl while the Brent benchmark is down to just over US$66.50/bbl. American government data showed a fifth weekly build in crude inventories and record local production. Meanwhile concerns about slowing global economic growth weighed on the demand side.

The greenback has risen overnight, pushing the Kiwi dollar lower by -¾c to 68 USc. On the cross rates we are gaining on the Aussie and now at 96.2 AUc and you have to go back to September 2016 to find a higher level. Against the euro we are lower at 60 euro cents. That puts the TWI-5 down to 72.6.

Bitcoin is also softer at US$3.889, a -1% fall on the day. 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 ».

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22 Comments

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The US now has a long history of making concessions to Communist China. Avoid the question of Tibet, of Taiwan, of religious suppression, gulags etc.I guess they set a precedent we now have to follow.

I tend to think that what goes on in China stays in China but I don't know why we need to tacitly endorse it and practically encourage it.

The rot set in with Nixon's visit to China in 1972. Why this was necessary I don't know. An investigation should be done to find out what happened, what was the real motivation of the people involved? Why did the Anglo West encourage and support first the Soviet Union and then Red China?

The Australian coal thing was covered in Zerohedge too. Does anyone know what they mean when they say

Just days after it warned its citizens against traveling to New Zealand, Beijing... ?

https://www.zerohedge.com/news/2019-02-21/miner-shares-slide-beijing-ban...

There was an article in one of the big Chinese papers featuring people who'd been robbed, turned away at the border etc..

The Consulate-General of the People's Republic of China, in New Zealand, issued a notice to tourists in December warning of robberies, a low rate of police investigation, dangerous driving conditions, and cases of Chinese citizens being refused entry to New Zealand, despite having a valid visa.

In January, another notice was issued in a similar vein, focusing on the dangers of driving on New Zealand roads. Later that month, a separate notice listed risks relating to the safety of people and their property, as well as road safety and issues relating to visas and travel documentation.

https://www.stuff.co.nz/national/politics/110613922/warnings-to-chinese-...

"...warning of robberies, a low rate of police investigation, dangerous driving conditions"

Sounds more like they were warning of travelling domestically, to me.

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All sound reasonable enough. Nobody can debate the driving an the robberies. Certainly INZ visa dept is the most useless govt dept. - they welcome louts from my country of origin the UK but put every obstacle possible in front of my wife's melanesian family members even when proven honest, sponsored by NZ citizens with million dollar properties, repeat visitors who have never broken any law who are visiting to attend church conferences. Do I sound angry?

Quite right, who would dispute that? There is far too much crime in NZ. China of course has the social credit scoring system which encourages good behaviour and penalises bad behaviour. Citizens whose score drops too low are barred from flying etc.

Thanks for clarifying Solidname and Doris. Wow, so much for the China-NZ year of tourism.

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Good that NZ & Australia is getting some early warning signs.
Maybe the public will see what compromises and risks are involved when dealing with an unbalanced power trading relationship with a country with a government that has a value system very different from NZ/Aus Government/society.

Auckland housing stock for sale levels continue to grow.
listings on Realestate.co.nz now at 7178 Houses, 1778 Apartments, 661 Townhouses and 395 Units.
on 16 Jan these were 5898 houses, 1672 Apartments,512 Townhouses and 320 Units.

Barfoots clearance rates were off to a good start, 50% clearance at Highbrook on Tuesday, but then they dropped like a stone at Shortland Street and Pukekohe.

And Trademe will break 13500 today, higher than at any point last year. This will not end well.

And in Australia, risks of falls of up to 50% are now being reported in the mainstream media. Sunrise News yesterday was an interesting watch.

https://www.youtube.com/watch?v=R_8EE99V2sY&t=315s

Eurodollar futures and UST’s, they are both still inverted. The former sharply inverted. The only thing that has changed since early January is the narrative – and not in a charitable way. It is treated as a positive when it is a pretty visible signal about deteriorating circumstances.
https://www.alhambrapartners.com/2019/02/20/fomc-minutes-the-new-narrati...

Japan exports drop worst in over 2 years as China slowdown bites

https://www.ft.com/content/99132430-34a3-11e9-bd3a-8b2a211d90d5

Wow they have gone to great lengths to ask their people to stop travelling to NZ, squeeze our exports etc. I wonder if the Chinese government will ask it's citizens to sell property in NZ to show us who is boss. If that happens, expect Auckland house prices to fall by atleast 30% as the rush to the gates to exit starts from the so called 3% of foreign owners. Interesting times ahead:)

Looks like the horse has already bolted on that one GS. I have noticed a lot more Chinese owned property being put on the market as mortgagee. Take a close look at the decor that usually gives them away: https://www.trademe.co.nz/property/residential-property-for-sale/auction...

They have already taken the proceeds with them. What if every time a property is flipped a mortgage document is written and funds deposited into a bank account care of a Chinese resident?