Here's our summary of key events overnight that affect New Zealand, with news officials are watching slimmer economic data, but ship movements suggest things may be turning up again.
First, the OECD has cut its global growth forecasts from +3.6% in 2018 to +3.3% in 2019 on concerns over trade and consumer spending. It says the global economy will slow this year as confidence wanes and trade battles bite. Europe, a big part of the OECD, is the main culprit.
In the US, the ADP employment report is out today with a much tamer result than last month. Analysts were expecting another +190,000 new jobs in February after January's unusual +300,000. But there has been a small undershoot with this actual level coming in at +183,000. (Recall that the non-farm payroll actually came in at +304,000 in January and analysts are now expecting +185,000 when the data is released on Saturday.)
The American trade deficit in both goods and services surged +12.5% to -US$621 bln and a 10-year high in 2018. However that is only -3.0% of GDP although up from -2.8% in 2018. The politically sensitive shortfall with China also hit a record peak of -US419 bln (up +12%) for the year, despite the imposition of tariffs on many of their goods in an effort to shrink the gap. The US ran surpluses with many other counties, including Australia (+US$15 bln) and New Zealand (+US$0.9 bln).
Wall Street is sharply lower (-0.7%) in afternoon trade today. This follows European markets that were slightly weaker yesterday, and Asian markets that were mixed with Tokyo (-0.6%) lower but Shanghai (+1.6%) sharply higher - again.
Canada reported a smaller merchandise trade deficit in 2018, down to -1.2% of GDP from -1.5% in 2017.
In China, Premier Li said the country faces a "graver and more complicated environment" with risks that "are greater in number and size." Spending on the military is being increased +7.5%. And tougher new economic policies now mean that investors can no longer rely on either Beijing or China's local governments to bail out state-owned companies that have trouble paying their debts. We can expect more of these defaults. It is intentional policy. But this comes as China loads up local authority enterprises with more debt. A sharp re-rating of these risks is imminent as this bond issuance rises.
However, an interesting indicator of the real health of world trade is the number of ships passing through the Singapore Strait. Apparently, this has swelled recently so much that there are regular traffic jams of ships in the area. The Baltic Dry index, while still low, has risen +10% over the past month.
The UST 10yr yield is down at 2.69%. Their 2-10 curve is now at +17 bps while their negative 1-5 curve has returned. The Aussie Govt 10yr has slumped -9 bps to 2.07%, the China Govt 10yr is down -1 bp to 3.22%, while the NZ Govt 10 yr is down -2 bps to 2.18%. Local swap rates also fell yesterday.
Gold turned and is up today, up by +US$4 to US$1,287/oz.
US oil prices are little-changed today at US$56/bbl while the Brent benchmark is just over US$65.50/bbl.
The Kiwi dollar is at 67.7 USc and a little lower from yesterday. On the cross rates we higher at 96.4 AUc after the Aussie GDP fail. Against the euro we are little-changed at 59.9 euro cents. The TWI-5 is now at 72.5.
Bitcoin is marginally firmer at US$3,844. 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 ».