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Wall Street completes full recovery; US new home sales up; more regional restraint; DiDi struggling; China tax cut stimulus spreads; EU sentiment weak; UST 10yr 2.57%; oil up and gold down; NZ$1 = 66.8 USc; TWI-5 = 71.2

Wall Street completes full recovery; US new home sales up; more regional restraint; DiDi struggling; China tax cut stimulus spreads; EU sentiment weak; UST 10yr 2.57%; oil up and gold down; NZ$1 = 66.8 USc; TWI-5 = 71.2

Here's our summary of key events overnight that affect New Zealand, with news of a new and somewhat surprising record on Wall Street.

The S&P 500 has jumped +0.9% today and is now above its all-time closing high in afternoon trading. Upbeat profit reports have pushed major Wall Street indexes higher across the board. Remember it was just seven months ago this market was undergoing a severe downturn, slicing -20% off the S&P500 index, so to be back at a record high so quickly is one of the fastest round trips in market history.

In the US, new home sales came in better than expected in March. A sharp drop from February was expected (-2.7%) but in the end a good rise was posted (+4.5%). But this was still below the very good gains recorded for February (+5.9%). And for the first time in a while, this latest March data was above the same month a year ago. Recall, existing home sales levels were quite weak in March and these represent about ten times the level of new home sales.

Meanwhile, the latest update of their House Price Index revealed only a very modest change for February, but standing +4.9% above the same month a year ago. Regional variances are large.

The next regional Fed review of manufacturing activity has brought a restrained view, with new order and shipment levels slipping. It is a story being repeated in most Fed districts.

The US economy may be delivering record earnings for the major listed companies, but on-the-ground economic activity seems fairly lackluster.

And speaking of lackluster, in China, one of their largest ride-sharing companies said its current business model is unsustainable and "can't last long" amid continuing losses. The failure of a big ride-sharing company somewhere in the world seems closer these days.

China's tax cut program is underway, delivering NZ$75 bln in cuts in the first quarter of 2019. This is another plank in their stimulus support of economic activity. The overall tax cut will ramp up to NZ$450 bln over all of 2019 so there is a lot to come yet.

The April survey of EU consumer sentiment is still negative, but this result largely reversed the improvements we have reported in the first three months of the year.

The UST 10yr yield has drifted down by -2 bps overnight and is now at 2.57%. Their 2-10 curve is firmer at +21 bps but their negative 1-5 curve is little-changed at -8 bps. The Aussie Govt 10yr is at 1.90% and down -5 bps, the China Govt 10yr is up +1 bp to 3.43%, while the NZ Govt 10 yr is down -2 bps to 1.98%.

Gold is marginally softer, down -US$2, and now at US$1,272.

US oil prices are firmer again today, now just over US$66.50/bbl while the Brent benchmark is just over US$74.50/bbl. That is a 16 month high. But it is worth noting that the Chinese refuse to accept the US sanctions on Iran. This could complicate their trade talks. India also seems unlikely to respect these sanctions.

The Kiwi dollar is unchanged at 66.8 USc. On the cross rates we are at 93.7 AUc. Against the euro we are at 59.3 euro cents. That puts the TWI-5 at 71.2.

Bitcoin is at US$5,582 and another good gain, this time of +4% 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 ».

Daily exchange rates

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Source: CoinDesk

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5 Comments

David,

My data has NZD losing about 0.4% since yesterday, and was at 0.665 this morning. It is bouncing back from the overnight low of around 0.664 so maybe it will get back to 0.668 soon!

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As its soon Gubmint Budget 19/20 time, let's dust off the previous Treasury assumptions for last year's Budget and see how they sit now:

TWI - 72.64, Treasury BEFU assumption 'The trade-weighted exchange rate is assumed to remain broadly stable around 75 over the forecast period'. Looks to me as though the TWI (17 currency basket) would have averaged 72.5 over the forecast period....

WTI - 66.18 Treasury BEFU assumption 'West Texas Intermediate (WTI) oil prices fall from US$62.9 per barrel in the March 2018 quarter to US$60.0 by mid-2018 and remain stable thereafter'. Looks to me, if the 1Y graph on the link is chosen and the graph embiggened, that a reasonable average for the year would be $USD62-63.

In both cases, the budget Assumptions about both these external factors were optimistic. Commenters may be able to confirm or deny this opinion, as the only analytical instrument I've used is the Mk I eye-o-meter.

In any case, it will be Interesting to see what the 19/20 equivalent assumptions are....I'd not be surprised to see Treasury lowball 'em.

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So, is the US trying to pressure China by cutting off its oil supply? Wasn't that what led to Pearl Harbour when they did the same to Japan?

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Having read Mr Kerr's pleadings over the past few weeks for the NZD and OCR to turn in the direction he sees as appropriate, he may well be rewarded, at least in relation to the OCR. Although Mr Kerr misunderstands how the quarterly petrol prices are calculated, the June quarters numbers relating to petrol at present are tracking to reverse all of the March quarters and them some. Importantly Stats NZ also introduce its new rental methodology in the June quarter. With the potential for two significant outliers in the June quarter CPI, Mr Orr ,thankfully now helped by committee ,may well sit on their hands .

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Bitcoin just had its first golden cross since 2015 - and combined with rumors that it looks like Nasdaq will soon list Bitcoin and Litecoin.

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