Here's our summary of key events overnight that affect New Zealand, with news of spreading economic anxiety.
Equity markets are generally in negative territory today, even though yesterday Shanghai delivered another strong (+0.9%) gain. Elsewhere the anxious mood is palpable.
In the US, their current account deficit increased more than expected in the fourth quarter of 2018 amid declining exports, pushing the overall shortfall in 2018 to -2.6% of GDP and its highest level in 10 years. And this came even though American companies repatriated a record amount of foreign earnings last year but that was relatively small, and a brief blip at the beginning of the year. The Administration's goal was repatriation of US$4 tln of the US$6 tln parked offshore avoiding tax. Their policies actually only encouraged back US$465 bln. The policy is a failure; it was a key basis for giving large corporate tax cuts.
Most of that current account deterioration was because of poor export growth and rising imports. But the data for January 2019 shows exports picking up for the US (+3.3%) faster than the rise in imports (+1.1%). Services trade is unchanged from the same month a year ago. The deficit with China decreased -US$5.5 bln to -US$33.2 bln in January as imports fell. The balance with Canada shifted from a small deficit to a surplus of +US$1.4 bln.
The American trade war with China is delivering a winner; Mexico. Supply chain companies are basing themselves there for trade with the US and the US deficit with Mexico is up more than 23% year-to-date.
Canada also reported a narrowing of their trade deficit in January, more based on stronger prices for oil exports.
Official data in China reveals that industrial profits dived there in February, down -14% from the same month a year ago. Actually state-owned enterprise profits were the hardest hit, down -24% on that same basis. These are the steepest drops on record.
Japan is set to raise GST to 10%. The move is not popular and may affect the election of Prime Minister Abe.
In Europe, ECB boss Mario Draghi said they are starting to worry about the adverse effects of negative interest rates, a controversial policy tool it introduced almost five years ago to encourage European banks to lend.
In Turkey, a crackdown on short selling has seen a sudden withdrawal of liquidity; short tem interest rates there shot up to over 1200% for overnight funding. And all this comes in the middle of an election campaign, one where their strongman president installed son-in-law into the top finance job. He is out of his depth, as perhaps is the President.
In Australia, regulator zeal to 'claim scalps' in the banking industry has lenders fearful. ASIC is pursuing any misstep, APRA is threatening to regulate pay. Bank boards are instructing bankers to lend. But simple fear of being an unwitting scalp for something missed that creates an issue in the future is building a growing credit crunch. Regulators have become deaf to the issue and implications. There could be echos felt in New Zealand.
The UST 10yr yield has fallen again and is now just on 2.37%. Their 2-10 curve is now +13 bps while their negative 1-5 curve is at -24 bps. The Aussie Govt 10yr is down -5 bps at 1.76%, the China Govt 10yr is up +1 bp at 3.10%, while the NZ Govt 10 yr is down a disconcertingly large -11 bps to 1.78%.
And we should note that Germany has sold its government bonds at a negative yield for the first time since 2016.
Gold has slipped, down -US$3 to US$1,312/oz.
US oil prices are softer today and now just under US$59/bbl while the Brent benchmark is just under US$68/bbl.
The Kiwi dollar is down the -1c that yesterdays RBNZ induced tone brought at 68 USc. On the cross rates we are softer at 96 AUc. Against the euro we are lower at 60.4 euro cents. That puts the TWI-5 sharply lower at 72.6, but just where it was at the start of the month.
Bitcoin is up a bit more than -1% at US$4,001. 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 ».