Asian equities tumble; Wall Street dips; US data soft; EU prepared for hard Brexit; China order big from Airbus; India's growth weakens; UST 10yr under 2.40%; oil unchanged and gold up; NZ$1 = 69.1 USc; TWI-5 = 73.6

Asian equities tumble; Wall Street dips; US data soft; EU prepared for hard Brexit; China order big from Airbus; India's growth weakens; UST 10yr under 2.40%; oil unchanged and gold up; NZ$1 = 69.1 USc; TWI-5 = 73.6

Here's our summary of key events overnight that affect New Zealand, with news investors are still in a risk-off mood.

Yesterday, equity markets in Asia tumbled to follow Wall Street and Europe at the end of last week. Tokyo was down -3%, Hong Kong and Shanghai were both down -2%. But although these are big daily falls, that still leaves the Shanghai index up +23% so far in 2019. (Recall, it fell -24% in 2018.) Hong Kong is up +14% year-to-date after yesterday. And Tokyo is still up +7% so far this year. So, yes, yesterday's falls were large but only a short-term correction.

And this morning, Wall Street is flat-lining just below even, and European markets did the same in the earlier session. But as today's session goes on, the Wall Street decline is inching down and the S&P500 is now another -0.2% lower.

The National Activity Index released by the Chicago Fed earlier today won't be changing any minds. But it does not support the view that the US economy is expanding. It shows a recent fall away in activity.

Things are certainly challenging in the oil patch. A Dallas Fed survey points to growth that is falling away faster than expected. Of particular concern for them is the quick pace in the fall-away of new orders.

In Europe, the EU has announced it has completed 'no deal' preparations for Brexit which is now scheduled to happen on April 13 (NZT).

There is little data out to give direction to markets in Asia. General fears of trade prospects are driving market investors. But the Chinese ordered 300 airplanes from Airbus overnight, completing a long-awaited and expected deal.

In India, ahead of their election, things are not as rosy as you might expect. They are having slowdowns in their exports, and their rural economy. In addition, credit availability is under pressure. All this is likely to undermine their high growth expectations. India's economy may not yet be central to world trade, but a faltering there will be noticed.

And to balance out the gloom, we should note that iron ore prices are remaining high. And benchmark copper prices, often a signal of future economic trends, are also remaining high. Neither of these commodities would remain elevated if Chinese demand wasn't resilient. Actually, there is an interesting dearth of economic news out of China. The state clamps are on.

The UST 10yr yield has fallen sharply and is now under 2.40%. Their 2-10 curve is now +16 bps while their negative 1-5 curve has widened to -24 bps. The Aussie Govt 10yr is holding low at 1.78%, the China Govt 10yr is down -3 bps at 3.11%, while the NZ Govt 10 yr is at 1.93%. and a sharp drop of -8 bps yesterday. The NZGB 1-5 curve is negative now. The spread of negative yield curves seems to have everyone's attention these days. Even our own wholesale swap 1-5 curve has just slipped negative.

Gold is rising, up +US$9 to US$1,322/oz.

US oil prices are little-changed today at just on US$59/bbl while the Brent benchmark is just on US$67/bbl.

The Kiwi dollar is also rising broadly and now at 69.1 USc. On the cross rates we are firmer again, at 97.2 AUc. Against the euro we are up at 61.1 euro cents. That puts the TWI-5 at 73.6.

Bitcoin is little-changed at US$3,960. 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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11 Comments

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Xi is obviously very pleased with whatever ports he bought in Italy. A big order for Airbus is the reward.

Interesting dynamic. The US will not be pleased. Expect retaliation against Nord Stream pipeline bringing gas from Russia direct to Germany. Asymmetric warfare the yanks call it, but the Chinese and Russians are the experts, they probably have better words for it too.

you got it Roger..Trumpy asked for a trade war and he's getting one alright.

Signs of a recession looming. Time to withdraw cash from the ol' machines and stuff it into your mattress.

https://www.cnbc.com/2019/03/25/the-us-bond-yield-curve-has-inverted-her...

Now that Mueller is done, perhaps the US media can focus on the US Federal record deficit of $234 billion in Feb..a record high....

Deficit? It just stimulus MMT style...

Yeah I'm not surprised that Wall Street is flat-lining just below even as the rest of the global economies tumble. There must have been a huge wail of 'Oh No!' and disbelief when they got the results of the Muller report. Yep now we are in for a long global recession.

Charles Hugh Smith has a nice post about the Big Con that was the MSM Narrative about the witch-hunt Mueller circus.

Here's the fundamental "story" of the Mueller Investigation: elites don't like "the little people" democratizing public narratives. The elites--who reckon their right to rule is self-evident--want to set the narrative and the context, because that's the foundation of power: once you get the citizenry to agree on your narrative and context, you secure two valuable things: 1) political legitimacy and 2) their obedience.

And Scott Adams (Dilbert...) skewers the whole circus as the 'Elephant Hunt that bagged 16 Squirrels'....ht Small Dead Animals.

Have we had the results from immigration this month?usually it'd come through by now?

We had them on March 15. Next data due April 12

Michael Reddell spots a Woefully Weak Tradeables Sector in last week's GDP-per-capita releases. Not looking great for employment there, for tax revenues outta that sector, or for confidence within that sector.

That is the worst run of per capita GDP growth, outside recession periods, we’ve had in the three decades for which we have data....
It is an astonishingly bad performance – well, it would be “astonishing” if we hadn’t become so used to New Zealand’s underperformance, and ministers (in successive governments) hadn’t got so used to glossing over failure. Successful economies – and most especially small successful economies – tend to succeed when firms that can take on the world markets and successfully compete find it profitable to develop, locate, expand and remain in the country in question. That simply hasn’t been the New Zealand story

But hey, at least we focus on taxing companies and people who work for them...rather than taxing say, windfall gains or land and instead encouraging more investment in productive enterprise.