Global equities mark time; China mulls joining the TPP; India eyes humongous development plan; France eyes tax cuts; China invests less in Australia; UST 10yr 2.52%; oil firm, gold up; NZ$1 = 67.5 USc; TWI-5 = 72.1

Global equities mark time; China mulls joining the TPP; India eyes humongous development plan; France eyes tax cuts; China invests less in Australia; UST 10yr 2.52%; oil firm, gold up; NZ$1 = 67.5 USc; TWI-5 = 72.1

Here's our summary of key events overnight that affect New Zealand, with news international markets are quiet this Tuesday, in something of a holding pattern ahead of some important data releases later in the week.

On equity markets, Wall Street is marking time today, European markets moved little overnight although if there is any trend it is lower, and yesterday Asian markets gave up their early enthusiasm to close flat.

The latest update monitoring world trade levels shows that momentum is now negative, even if there was an uptick in January.

The only market showing any life is the crude oil market where the price is now at a five month high.

China is reportedly wrestling with the question of whether to seek to join the TPP trade group. But to do so, they would need to commit to some tough and major reforms first. However the mere fact they are weighing their options is something pretty significant. It is something the Americans will be nervous about given their somewhat irrational pullout.

China's foreign exchange reserves rose more than expected to just under US$3.1 tln in March and that is the fifth straight month of increase.

And it is increasing its gold holdings as well, adding more than 11 tonnes in March, taking its total holdings to 1,885 tonnes. That is now four straight months of net buying.

As India nears voting in its national elections, both major political forces are promising to spend up big on development investment with the goal of eliminating poverty. Backing up the goal is a broad consensus that massive spending will be required in infrastructure, as much as US$1.5 tin. A project like this, even if it is over many years, will have global implications, similar to the investment development drive that China undertook.

In France, it seems tax cuts are on the way for many people, in part as a result of the Yellow Vest protests. France is a high-tax, high-social-spending (income transfers) country with taxes equivalent to 46% of GDP. (In New Zealand, that ratio is 34%.).

In Australia, Chinese investment dropped by more than -35% in 2018, to its second lowest level since the global financial crisis of 2008. An updated report from KPMG and the University of Sydney Business School found that Chinese firms invested a total of just over AU$8 bln in Australia last year (just 0.5% of GDP), down from AU$13 bln the year before (0.9% of GDP). That was despite overall Chinese outbound investment increasing globally by +4.2% last year.

The UST 10yr yield is firm at 2.52% and that is +2 bps higher than this time yesterday. Their 2-10 curve is at +16 bps and their negative 1-5 curve is wider at -11 bps. The Aussie Govt 10yr is little-changed at 1.89%, the China Govt 10yr is up +2 bps to 3.29%, while the NZ Govt 10 yr is at 2.00%, and that is down -3 bps since this time yesterday.

Gold is up +US$6 at US$1,297/oz.

US oil prices are sharply higher today rising more than +US$1 overnight, now just under US$64.50/bbl while the Brent benchmark is at US$71/bbl.

The Kiwi dollar is a little firmer this morning at 67.5 USc. On the cross rates we are marginally softer at 94.6 AUc. Against the euro we are still at 59.9 euro cents. That leaves the TWI-5 at 72.1.

Bitcoin is firmer at US$5,223 and a +1.7% 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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Not as long as the Chinese government continues to to either wholly or partly own most of their large businesses, they need to be as at risk of failure as any other, not backed by seemingly endless funds of the govt. I would not have a bar of anything else.

That's right. It is incorrect to classify China's exports as free trade, given that so many of their manufacturing activities are heavily subsidised by their provincial and central governments.

Intriguing. Why on earth should Haier keep Fisher& Paykel Appliances floating despite FPA hasn't made any profit for years? Why would you still own a relevantly unknown appliances manufacturer who doesn't make money after you got big brands like GE? Why bother to make FP as a premium brand like Miele and Smeg? Maybe Haier is willing to take the risks and bear the current loss in the exchange of FP's full potential. Of course, some people will argue this is a purely political matter. :)

I think that Haier held F&P design and technology in high regard and had them in their sights for quite a while. I believe the comment from Haier was when F&P were eviscerating themselves by shutting down all their NZ production. "we will not buy you yet, we will wait because you are going to destroy your company"
As I said the value to Haier was F&P's technology and design excellence. I am told that they used the NZ designers to review and improve all the Haier products and are now trying to move the F&P brand into the top end of the market world wide alongside the Meiles etc.

Something to buy out Miele or Smeg in future with?

I see you guys are flying John Key's flag on your economic calendar page: https://www.interest.co.nz/economic-calendar, very bad.

Please change it back to the Union Jack in the top left corner with the Southern Cross on the right.

@jock silver ............ firstly it was NOT John Key's flag , and secondly it is a pity we did not change the flag and in so doing take another step to unshackle ourselves from Britain.

I agree, it is a pity we did not change the flag when we had the chance. The fact remains that the alternative flag does not represent New Zealand. We had an expensive referendum, and the majority voted to stick with the current flag, and I think that should be respected.

We would have changed our flag if a decent option was offered up. All we got was a fish skeleton on a black and blue rag, a worse colour combination I could not think of.
For an example of a striking flag that pretty says it all, see the Australian Aboriginal one, stunning, stunning, stunning. If we are to change, let's make it to something as equally stunning and evocative as that.

The flag debate had a significant attribute in common with Brexit - the people said they wanted change but they could not agree on the change. And I still prefer the united tribes of NZ flag - oldest and chosen by original indigeneous inhabitants.

The NZ flag may be rather stupid but people who died fighting for NZ are buried in it so any change must not be taken lightly.

Purely from a visual point of view, the Tino Rangatiratanga flag is far, far better

It was more a personal vanity project than any unshackling from Britain. As evidenced by bringing back British honours rather than sticking with the more independently-minded Order of New Zealand etc.

10
up

China in the TPP is the last thing that we want. Similarly the USA. The moderate and modest economies of the world need some way of independently strengthening their economies and trade, free of the bullying and overbearing influence of both China and the USA.

Very well said Chris-M

That would be my first pick as well, the big boys can go play their games without us smaller countries.

I am no fan of Shane Jones but the Semenoff Trucking case warrants investigation .

The Company is massive , is one of the country's biggest fleets , it does over 30,000 trips a year and covers almost 5,000 ,000 kilometres .

Given the scale of the operation, it is naturally going to have more infringements than almost any other transporter.

And their record of accidents or incidents per vehicle is not outside the norm .

The Northland Police need to start catching proper criminals, and gangsters in Whangarei and further north, instead of looking for the low hanging fruit outside the log yard at Marsden Point Harbour .

Imagine having US$ 3,000,000,000,000.00 in reserves .

This is a ridiculous analogy, and its a wild guess , but they likely have enough US$ to buy practically every square metre of land in the whole of NZ .

I'm also curious about the fact they're buying up gold. Wonder what motivates that.

They think paper money is a risk. Why?

Knowing they are going to pull the rug out from under the world's economies which they can then use the gold to buy up what is left of any worth and land at bargain bin prices? Voila, the world is conquered.

Basel III?