Here's our summary of key events overnight that affect New Zealand, with news investors are clinging to one Chinese factory stat to upgrade their risk-on mood.
Global equities are stronger today, building on gains from their best quarter since 2010, as investors cheered upbeat factory activity data in China, and signs of progress on the US-China trade front. The S&P500 is up +1% so far today. Shanghai was up an impressive +2.6% yesterday. Japan (+0.8%) and Europe (+1.0%) did well too.
American economic data released overnight however was ho-hum. US retail sales actually shrank in February from January, although they are +2.4% higher on a year-on-year basis
The two factory PMI releases for March were not inspiring either. The ISM one posted a minor rise, the final Markit one was downgraded.
US construction spending data for February was also ordinary, up +1.1% from the same month last year.
And American business inventories keep on rising, which is not a good sign. (Check out the inventory-to-sales ratio in the link.)
We were sceptical this time yesterday when we reported the official China factory PMI which showed a jump back into expansion territory. Yesterday afternoon, the private Caixin/Markt PMI was also reported and that also showed a good return to a modest expansion. It seems the recovery in factory fortunes in China is for real. Markets around the world noticed. But one Chinese company not getting any investor love is Beingmate.
And the Xi-Ardern meeting is being reported internationally as a part of China's attempts to pry New Zealand away from its close relationship with the US.
The EU said its inflation rate is falling, now down to +1.4% pa, although this is the same rate it was a year ago. They also said their jobless rate at 7.8% is the lowest it has been since 2008.
In Australia, their home builders report unusually low sales in February. And CoreLogic is reporting that Aussie main centre house prices are down the most since their 1990s recession. Property prices in Sydney have now fallen almost -14% since they peaked while Melbourne is down almost -11%.
Meanwhile, business conditions have improved across The Ditch, bucking a six-month downward trend.
The UST 10yr yield is up strongly, by +8 bps this morning to 2.49%. Their 2-10 curve is wider at +17 bps and their negative 1-5 curve is narrower at -10 bps. The Aussie Govt 10yr is sharply higher at 1.86%, up +7 bps, the China Govt 10yr is also higher, up +5 bps to 3.13%, while the NZ Govt 10 yr is at 1.86%, up another +3 bps since this time yesterday. Yesterday local swap rates firmed, especially at the long end.
Gold has dipped another -US$2 overnight to US$1,290.
US oil prices are firm again and up +US$1.50 to start the week, now just on US$61.50/bbl while the Brent benchmark is at US$69/bbl. OPEC oil output has hit a four year low on Saudi cuts and the collapse in Venezuela.
The Kiwi dollar is holding this morning at 68.1 USc. On the cross rates we are marginally lower up to 95.7 AUc. Against the euro we are at 60.7 euro cents. That leaves the TWI-5 at 72.8.
Bitcoin is also a firmer at US$4,137 and another +1% gain overnight. 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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15 Comments
As anticipated, Auckland median house prices now down -4% to March YOY. Number sold dropped 25%.
Urban centres such as Hamilton will soon feel it soon too.
https://www.oneroof.co.nz/news/36149?ref=nzhhome
That is not really news. They have been consistently below zero since July 2017 in Auckland. Auckland volumes have been consistently well below zero since December 2015. The real news is whether it is getting worse or better. The recent 'peak lows', were in 2017 and from there neither measure has gotten worse. Best to wait for the REINZ update befor calling this one.
It depends. In Auckland, median price figures won't and don't confirm anything, but people cling to them because it's an easy number to digest, like a CV, and just like a CV it's meaningless. Thousands of new dwellings being completed each year, almost all at the lower end, and thousands upon thousands of sections being released in fringe areas - all of which move the median lower. The basket of properties that gave us this month's median price is different to the basket that gave us the median a year ago. The only thing that would actually tell us if the market is weaker or not is how like-for-like properties are tracking, and REINZ/OneRoof/QV/etc. median prices will not tell you that at all. Nor will automated models like CoreLogic's estimate which has the same flaw.
Not that anyone will care, because it's too hard to figure out. We'll just obsess over a number we don't understand and talk ourselves into a slump.
Why? Values only organise a spread of the rates, they don't set the rate amount. If your CV revaluation is lower than in other neighborhoods, then your rates bill will decline. If your CV revaluation is higher than in other neighborhoods (even if it falls), then your rates bill will rise.
Your rates are more determined by the Rate set by the Council, rather than the valuation.
Technically right: the equation is (Required Rates Income divided by Available Tax Base total) times Your Rateable Value.
Practically, the actual rate is obfuscated by differentials, uniform charges, special-rating-district levies and so on: it makes your Actual Rates increase something =of a lottery. The conspiracy-minded would add - By Design.
My own take on the Rating Process is here: in a former life I once wiped the debt owing on a small rural water supply by rating an amount calculated on only half the base, over the entire base. Not one ratepayer noticed enough to call the Council out on it......but those were easier, less litigious times.
More capital controls for China; BBC article: China to curb all types of fentanyl, following US demands. https://www.bbc.com/news/world-asia-china-47772484
And as a sidebar to the "$5.4m vote of confidence" noted in Granny Herald. when placed alongside the minimum wage increase yesterday, such technology will hasten the demise of the front-line burger-flippers and servers at a fast food joint near You....
Consequences, consequences, some unintended.....
Economists and markets talk it up and talk it down because talk can make a lot of people way better off or equally it’s a bad day at the races. I’m not a financial expert but to me both the US and China aren’t going to grow their economies fast enough to please the punters so they shake the tree and sure enough plenty will hop on board the money train. There’s nothing new here some will do well and others will fall by the way side.
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