Here's our summary of key events over the weekend that affect New Zealand, with news that is turning sour almost everywhere.
Equity markets shifted gear lower at the end of last week. On Friday on Wall Street, the S&P500 dropped a sharp -1.9% wiping out more than a tenth of its 2019 gains. And that follows Europe which was down a similar amount (London fell more than -2%). An this was even though Asian equity markets closed largely unchanged.
Driving the rout has been very weak factory data for March. The Eurozone flash manufacturing PMI dropped sharply, down -1.7 points from an index that was already showing a contraction. It is now at a 6 year low.
In the US, the same survey dropped as well even if it is still indicating an expansion - but it is weakening fast. The output, new orders, and employment components all weakened.
After Japanese markets closed, the Japan PMI came in worse; factory output fell at its fastest pace in three years and the sector is now contracting.
But before we all jump from the nearest ledge, we should also report that the services sectors in the US and Europe are still expanding. But the rate of expansion is slowing here as well.
Not only are equities dropping, bond yields are as well. And a key rate curve inversion, the 1-5yr UST curve, suddenly grew. And the spread between three-month Treasury bills and 10-year note yields inverted for the first time since 2007. It is this second inversion that has had investors in a double-take.
Not helping the mood, the US Federal government posted its widest monthly budget deficit on record (see pg 5) in February of -US$234 bln, amid falling corporate and individual tax revenue and increasing federal spending. That was 9% more than the same month a year ago and exceed the record set in 2012.
Add to this news that the chances of a successful US-China trade deal seem to be slipping with intransigence on both sides. And further, the Brexit mess just seems to be getting messier. Heck, there's more; the Trump Administration has nominated a sycophant and TV analyst to the US Federal Reserve board. He is a Trump campaign adviser. But there is pushback. Still, it is hard to be positive that the economic future will work out well.
Not all news is bad in the US. Home sales jumped almost +12% in February on a seasonally adjusted basis from the previous month. However, they are still down -2% from the same month a year ago.
China is applying the screws to Canada in an effort to bully it over Huawei. It is stopping all canola imports and slow-tracking import procedures for most other agricultural products from Canada.
In Australia, it is becoming clear that real action resulting in real change from the Hayne Royal Commission looks less likely now. Not only did those who wanted a full inquiry not get the result from it they expected, now with no meaningful legislative changes, entrenched industry structures that Hayne recommended be reformed - like for brokers and insurance agents - now seem unlikely to change either.
The UST 10yr yield has fallen sharply and is now at 2.44%. Their 2-10 curve is narrower at just +12 bps while their negative 1-5 curve has blown out to -21 bps. The Aussie Govt 10yr is down -20 bps this past week to 1.77% (and don't forget it was down -14 bps last week), the China Govt 10yr is down -2 bps at 3.14%, while the NZ Govt 10 yr is at 2.01%. and a drop of -9 bps this week.
Gold is firm, up to US$1,313, which is also a gain over the past week.
US oil prices are falling and quite sharply, down more than -US$1 and now just on US$59/bbl while the Brent benchmark is down to just on US$67/bbl. But to keep that in perspective, that is about where they were this time last week.
The Kiwi dollar is at 68.8 USc. On the cross rates we are marginally firmer at 97.1 AUc. Against the euro we are up at 60.8 euro cents. That puts the TWI-5 at 73.3.
Bitcoin is little-changed at US$3,970. 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 ».