Equities rise on trade hopes; Fed mulls pause in normalisation; Canada retail sales weak; China P2P industry in crisis; AU super risks; IMF calls for deposit guarantee fees; UST 10yr 2.65; oil and gold unchanged; NZ$1 = 68.5 USc; TWI-5 = 72.8

Here's our summary of key events overnight that affect New Zealand, with news the IMF wants Australia to charge a levy for their bank deposit scheme.

But firstly, the China-US trade talks are getting more intense. They are trying to wrap up a week of talks that have seen the two sides struggle to detail how to bridge their deep differences.

Still, markets are betting that a trade-favourable outcome will result.

The S&P500 is up +0.5% in mid-afternoon trade on Wall Street and the NASDAQ is up more at +0.7%. Over the past week the S&P500 has gained +1.1% and the NASDAQ +0.6% so that shows it is tech stocks driving today's modest rally. Yesterday, the Shanghai stock market zoomed higher, up +1.9% and Hong Kong was up +1.7%. That puts the Shanghai market up a double-take +3.9% for the week, Hong Kong up +2.2%. Investors there have even higher hopes for these trade talks. Europe and our local markets are on the sidelines in these market bets.

And some senior Fed officials are publicly mulling whether to stop draining its QE reservoir from its current US$4 tln level. If acted on, it would push the return to 'normalisation' back even further.

Canadian retail sales came in lower in January and this was as expected. But the slippage was kept from being larger by ok car sales; the rest of their retailing was weaker than expected although some of that was just lower petrol prices.

In China, a major upheaval is underway in their peer-to-peer (P2P) finance sector after numerous cases of fraud and negligence. As loans helped finance cars and property, could the crisis worsen the country's economic slowdown? The Chinese government this week confirmed it had frozen US$1.5 bln in assets from unscrupulous P2P lenders and around 100 executives are under investigation - some of whom have fled overseas. Regulators have remained quiet on the overall investment losses, but analysts say "millions of people" were victims and "billions of RMB [Chinese yuan]" have vanished.

In Australia, their industry superannuation funds are under pressure to act in an industrial dispute. "Industry funds" are essentially run by unions and are large, acting like default KiwiSaver funds. Now the ACTU has demanded they intervene in an industrial row with mining giant BHP over jobs on ships transporting iron ore. It is the type of political pressure to twist the fiduciary relationship the funds have with investors that regulators worry about.

And as the next Federal election campaign develops, and interesting split in the Labor Party is also developing, especially in Queensland, South Australia and Western Australia; they are either "for jobs" (read, coal jobs) or "for climate action" (read, the political wing).

And staying in Australia, the IMF is calling for a levy on banks to help to cover the multibillion-dollar costs of running the deposit guarantee scheme. If implemented it is hard to see how this won't drive down term deposit rate offers which are already low. As you know, New Zealand doesn't have such a scheme although the RBNZ has signaled that it will look to review its position on that after it completes it bank capital review.

The UST 10yr yield has given up yesterday's rise and now back down -4 bps to 2.65%. Their 2-10 curve has held at +17 bps. The Aussie Govt 10yr is down -2 bps to 2.08%, the China Govt 10yr is up +1 bp at 3.15%, while the NZ Govt 10 yr is down -1 bp to 2.21%.

Gold is little changed at US$1,330/oz.

The VIX volatility index is marginally lower this week and is now at under 14. The average over the past year has been 17. The average for 2017 was only 11 however. The Fear & Greed indexwe follow is unchanged at the mid point on the 'greed' side.

US oil prices are marginally higher today, now just over US$57/bbl while the Brent benchmark is down to just over US$67/bbl. The US rig count is marginally lower this week.

The Kiwi dollar is firmer 68.5 USc, rising by about +½c overnight. On the cross rates we are gaining on the Aussie and now at 95.9 AUc. Against the euro we are higher at 60.4 euro cents. That puts the TWI-5 firmer at 72.8.

Bitcoin is also firmer at US$3,940, a +1.3% gain 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 ».

Daily exchange rates

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The '¥en' chart will be drawn here.
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End of day UTC
Source: CoinDesk

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My book of the week

The Secret Team by Fletcher Prouty


Yes AJ, a darn good book.

Perhaps you should read also by Fletcher Prouty: JFK - The CIA, Vietnam and the Plot to Assassinate JFK.
IMO a better book.

Amazing what happened at the end of WW2 when supplies and equipment on Okinawa to invade Japan was sent to Vietnam and Korea when it became surplus because of the atomic bomb attacks.
It was enough equipment for an army of 500.000 men to last a year.

Guess where the next 2 wars started.

(edit) here the link:

Reuters - Property bust rattles Australia's record-breaking economy


Regulators have remained quiet on the overall investment losses, but analysts say "millions of people" were victims and "billions of RMB [Chinese yuan]" have vanished.

And found their way to Aussie, NZ, Canada...

Politicians are peons of the worst order. If they had half a clue of what was really going on it would be a fine thing. But they don't. They are all short term Charlies & shallow to boot. My suggestion (& it has been for a while) is to halve central government income & halve their responsibilities accordingly. Halve the political numbers in people & their departments & spread them around the provinces to lower the risk of the next Wellington earthquake. Power is then given to the provinces to run their kingdoms by the best local business people they can employ & each region becomes its own corporation, competing against all other regions, to better the whole nation, region by region. Each region could keep it's own Gst for example & hire the best people to run the cutter. It is a system using the best of what you have, of what you know & lastly, but equally importantly, of being known. By this I mean that everyone in the region has a part to play and everyone else knows exactly what that is, why that is & how much it's contributing to the whole region. Everyone needs to be known. It helps create personal accountability & as a result, better relationships across the board. The stronger the relationships the stronger the region, the stronger their contribution to the reduced central governments role in things that everyone agrees is best handled by them. It is, if you like, the business of Aotearoa New Zealand & it's successful journey into the remainder of the 21st Century. Everyone is accountable for something, big or small, we can all make a contribution to something, somehow.

Everyone is held accountable for their actions, including those unwilling to hold others to account.

Did people see this:


Headline should be - “Entitled Muffin Break manager slams millennials for having the temerity to expect payment for work.”

It is a weird publishing decision where the Herald felt her rant about a generation was worth printing.

If I was the Board of Muffin Break I’d because asking her some questions about her judgement in slamming a large portion of the people they hope will be customers. If she loses her job I’d encourage her to put herself forward for some unpaid work while she rebuilds her reputation.

... agreed ... that was a ridiculous display of petulance on her part , having a whinge about millennials ...

I'll be steering well clear of Muffin Break if that's the attitude of their top boss in this country ...

... reckon her bosses ought to demand she does a summer of work unpaid ....

Maybe having a set of autistic twin boys is taking its toll on her, understandable when the father isn't around.

And this about a lack of interest in jobs in tourism.


“"Current employment practices, such as casual insecure work arrangements and minimum wage rather than living wage results in an unsustainable drain of talent," Mooney said.

"The lack of visible career paths exacerbates the high turnover."

We are going to have to grapple with the fact that some of our leading export industries pay appallingly. It doesn’t really help to have a $36B industry if it’s lot creating good jobs. We’d be better off taxing tourism more, reducing the value, and developing competitive advantage in something else.

I’m not seriously suggesting we tank our tourism industry but I am suggesting we need to understand what contribution export industries make to NZ beyond their size. The case of an extra $20 per visitor is strong if the industry isn’t delivering on jobs.

Yep. Agree. Deranged.

Maybe its the b/s message of our ''clean green image''that young people don't want to get trapped into.