US data soft, Trump worried; US Fed meeting; Canada & Mexico growth low; China PMIs stall; EU data brighter (but still weak); UST 10yr 2.50%; oil and gold up; NZ$1 = 66.8 USc; TWI-5 = 71.6

US data soft, Trump worried; US Fed meeting; Canada & Mexico growth low; China PMIs stall; EU data brighter (but still weak); UST 10yr 2.50%; oil and gold up; NZ$1 = 66.8 USc; TWI-5 = 71.6

Here's our summary of key events overnight that affect New Zealand, with news the signs continue of a rising business cycle that is nearing its end.

In the US, the regional data continues its trend of subdued results. The closely-watched Chicago PMI fell sharply in April, falling to 52.6 from 58.7 in March. That's the lowest reading since January 2017. Four of its five components declined, and new orders fell for the second straight month.

Meanwhile, the giant US housing market is showing some signs of picking itself up from the canvas, although it is still one one knee. The March pending home sales data rose from February although it was still -3.2% below the same month a year ago. Still, that is better than the -5% year-on-year deficit it showed in February.

Another sign of cooling perhaps come from tech giant Google who reported lower ad revenues in Q1-2019, down -9% from Q4-2018.

Wall Street is in reverse today, especially tech stocks. And the continuing drip of negative data has the US Administration worried. They are now calling for a -1% slash of the Fed's official interest rate. The FOMC is meeting today and will release its decision this time tomorrow. (It is unlikely to change rates or policy positions however.)

Canada's GDP growth for February undershot expectations and actually fell from the previous month, although it is still up a meagre +1.1% year-on-year. And a separate report for Mexico they also reported a contraction in the March quarter from Q4-2018, taking annual growth down to +1.3% pa.

In China, there was a bump in the road with their official factory PMI coming in lower than expected in April and barely expanding, reversing the good (and surprising) gain in March. The official Chinese services PMI also undershot (although not significantly). The private sector Caixin PMI was also released for April and that showed a very similar weakness even if it was an improvement.

And the average salary for white-collar workers in China fell in the first quarter of 2019 despite official data, according to a report by a major Chinese job website.

In Europe, the March 2019 quarter GDP data was released overnight showing a fractional improvement from a year ago. EU growth was up +1.5% with weakish contributions from both France and Italy although both actually recorded tiny gains in real output.

Also surprising was inflation data for Germany which came in at +2.0% in April, and well above the +1.5% rate expected.

And it turns out Australia is the favoured place for millionaires to escape to as they come under pressure in their home countries. A new report for 2018 says 12,000 high net worth individuals moved there in 2018, more than even the United States. New Zealand was the seventh most popular destination with more than 1000 such HNWIs arriving here. China, Russia, India and Turkey are the main places they are escaping from.

The UST 10yr yield is now at 2.50% and down -4 bps from yesterday. Their 2-10 curve is still at +24 bps and their negative 1-5 curve is at -10 bps. The Aussie Govt 10yr is at 1.80% and down -2 bps, the China Govt 10yr is little-changed at 3.42%, while the NZ Govt 10 yr is also unchanged at 1.93%.

Gold is up +US$4 from yesterday at US$1,283/oz.

US oil prices are a little higher today, now just under US$64/bbl while the Brent benchmark is just under US$73/bbl.

The Kiwi dollar will open today marginally firmer again at 66.8 USc. On the cross rates we are now at 94.7 AUc, a small rise on the day. Against the euro we are little-changed at 59.5 euro cents. That leaves the TWI-5 at 71.6.

Bitcoin is at US$5,251 and that is a +US$100 gain or +2% higher than this time yesterday. 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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7 Comments

“with news the signs continue of a rising business cycle that is nearing its end.”
Do we still have business cycles? It seems they have been superseded by credit cycles hence the record amount of zombie companies.

Indeed, with historically low interest rates for 10 years, and no end in sight to that, especially if the housing market declines, that's the main cycle these days.

How quickly the cycle changes. From 4 days ago - "Gross domestic product rose at an annualised pace of 3.2 per cent during the first three months of the year, an initial reading from the commerce department showed on Friday, handily topping Wall Street predictions for 2.3 per cent growth. It is also a leg up from the 2.2 per cent pace of expansion recorded during the fourth quarter.

...The data quelled previous fears that the US is running into an imminent recession, and leaves the economy on track to hit its longest-ever expansion later this year."
https://www.ft.com/content/0fe1aea0-680d-11e9-9adc-98bf1d35a056

Why spending should be focused on natural disaster resilience not climate change doom fantasies. "Normalised insurance losses from Australian natural disasters: 1966–2017: "When aggregated by season, there is no trend in normalised losses from weather-related perils. In sum, the rising cost of natural disasters is being driven by where and how we chose to live and with more people living in vulnerable locations with more to lose, natural disasters remain an important problem irrespective of a warming climate."
https://www.tandfonline.com/doi/full/10.1080/17477891.2019.1609406

Profile. You clearly missed the 'news' stories of Haumoana beach houses being swamped and of water flooding roads in south Dunedin. And Granity where mass evacuations have been made necessary by rising sea levels inundating this heaving megatropolis. All presented by funereal 'reporters' intoning the nonsense trope that climate change is to blame. As someone with a lifetime career exposure to reinsurance and the long understood causal linkage between increased economic severity of disasters and asset aggregation in weather and fire exposed environments, I used to be frustrated by the purile nonsense spouted by media and commentators. These days I'm more amused.

Climate doom porn is the classic Baptists - Bootleggers strategy.

The Chicago PMI result is a regional one, and in a region long famed for economic mismanagement par excellence. So the PMI is more the result of Consequences in a notoriously corrupt state (the 'Chicago Machine'....) than perhaps of wider US implications. After all, the linked article claims 'the machine is dead'....but economic consequences aren't, all too apparently.