Here's our summary of key events overnight that affect New Zealand, with news we are tenterhooks for this afternoon's RBNZ Monetary Policy decisions.
First up today however is the dairy auction. It was another tame affair with prices rising just +0.4% although that does make it the eleventh rise in a row and an overall gain over than time of +28%. But over the past year, the gain is only just +4%. However, yesterday the local currency slipped to near its lowest level in six months on the back of the RBA rate decision. And that means the dairy price rise was almost +3% since the last auction in New Zealand dollars, and it has been a more than +10% gain in a year. The volume offered and sold in this auction was not high.
US data showed a good rise in job openings in April, slightly more than expected. And consumer credit outstanding expanded to levels +4.9% higher than in March 2018. But consumer credit flows were up only +2.5% in March from the same month a year ago. US consumers are having real issues paying back the obligations they are taking on.
But this is detail. Markets are focused on the deteriorating trade situation much more.
The key Chinese trade negotiator says he will go to Washington for more trade talks on Friday and Saturday, setting up a last-ditch effort to avoid the sharp increase in tariffs on Chinese goods threatened on Twitter recently by President Trump. The US is accusing China of reneging, but more likely it is just the US not getting the outcome it wants through negotiation.
Equity markets aren't expecting any success however, with Wall Street slumping a grim -2.4% in trading so far today. In Europe large falls were also suffered in overnight trade. EU cuts to growth forecasts didn't help.
In Tokyo yesterday they were down -1.5% but Hong Kong and Shanghai recorded a +0.7% bounce following even sharper falls at the start of the week.
Slumping international trade growth is seen directly in international airfreight data out for March overnight. This data was essentially unchanged from the same month a year ago but is actually in reverse for Asia/Pacific international trade, being down -3.8% in a year.
In a bit of an historical release, the OECD reports that growth in real household income per capita, which provides a better picture of changes in households’ economic well-being than the equivalent GDP measure, picked up to +0.5% in the OECD in the fourth quarter of 2018, compared with +0.1% in the third quarter of 2018.
In Canada, their central bank is calling on banks to offer longer terms in their mortgage options. Like New Zealand, the currently longest option is about 5 years.
Malaysia cut its policy rate yesterday, for the first time in almost three years. The rate went down by -25 bps to 3.0%.
In Australia yesterday, their central bank did not cut interest rates as many had expected. Essentially they set a jobs test; if their unemployment rate keeps going down, there will be no change if inflation stays low, (as expected). But that could change if the "strong" current jobs situation reverses. It is telling that their eye is off inflation for now, for what drives their policy decisions. Analysts in New Zealand should also take note.
Stay tuned for today's RBNZ rate review at 2pm today. We will have a livestream of the press conference by Governor Orr. Remember, this decision is the first under their new committee structure where some of the voting members are outsiders. Markets are now expecting a -25 bps cut; but recall, markets expected a cut in Australia yesterday too, something that didn't happen.
The UST 10yr yield is now at 2.45%, and that is -5 bps lower in trading today so far. Their 2-10 curve is little-changed at +17 bps but their negative 1-5 curve is wider at -12 bps. The Aussie Govt 10yr is at 1.76% which unchanged since this time yesterday, the China Govt 10yr is at 3.36% and -2 bps lower, while the NZ Govt 10 yr is at 1.89% and unchanged overnight, after the RBA decision and before the RBNZ decision.
Gold is up +US$4 at US$1,285/oz.
US oil prices are down sharply today by more than -US$1, to just over US$61/bbl while the Brent benchmark is just over US$69.50/bbl.
The Kiwi dollar will start today a softer at 65.9 USc. On the cross rates we lower at 94.2 AUc. Against the euro we are at 59 euro cents. That puts the TWI-5 down at 70.7.
Bitcoin is +3% higher from this time yesterday at US$5,884. 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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