China reacts to Trump threats; China trade surplus shrinks, except with the US; air travel growth weakens; Aussie regulators set legal trap; UST 10yr 2.49%; oil firm and gold soft; NZ$1 = 65.7 USc; TWI-5 = 70.5

China reacts to Trump threats; China trade surplus shrinks, except with the US; air travel growth weakens; Aussie regulators set legal trap; UST 10yr 2.49%; oil firm and gold soft; NZ$1 = 65.7 USc; TWI-5 = 70.5

Here's our summary of key events overnight that affect New Zealand, with news we seem to be moving to an end-game of sorts in the US:China trade row.

China has commented for the first time on the American moves to raise tariffs sharply on Chinese goods. It said it will take "necessary countermeasures".

Meanwhile, April data shows Chinese exports fell -3.7% and imports rose +4.0%, narrowing their trade surplus to NZ$21 bln which is about half of what it was in the same month a year ago. But their sensitive surplus with the US edged higher as China bought far fewer American goods, and the Americans keep buying Chinese goods.

Yesterday the Shanghai stock exchange closed down -1.1%, but this morning the S&P500 is up +0.3% after yesterday's big trade-worry-induced fall, while overnight European markets rose slightly more. Despite the real risks, markets seem oblivious to the chance the trade talks will unravel.

Trade is under pressure everywhere. Yesterday we reported the vanishing of global airfreight growth and the reduction in the Asia/Pacific region. Today, March data for passenger travel reveals the softest growth in nine years, slowing to just +3.1% year-on-year. In the Asia/Pacific region, international travel grew just +2.0%. Aussie domestic traffic levels fell more than -3%. All these changes represent fast fall-backs.

In Canada, housing starts jumped unexpectedly, up +23% in April from March and far above analysts estimates.

In Germany, they are moving to deploy overhead electric wires so that hybrid trucks can use their freeway system on an all-electric basis.

In Australia, the lawyers are out in force at their major regulators. Senior officials from ASIC and APRA said the effects of climate change no longer presented merely ethical issues for Australian businesses but must be considered a major financial risk. In fact, they have laid the legal trap of saying the long-term risks posed by climate change are "legally material, forseeable and actionable now" and therefore companies, their boards, and individually directors will have liabilities if they don't act 'now'. But these regulators shied away from saying what should be done.

The UST 10yr yield is now at 2.49%, and that is +4 bps higher in trading today so far. Their 2-10 curve is little-changed at +19 bps and their negative 1-5 curve is narrower at -9 bps. The Aussie Govt 10yr is at 1.74% which is down -2 bps since this time yesterday, the China Govt 10yr is at 3.36% and unchanged, while the NZ Govt 10 yr is at 1.89% and unchanged overnight after a strong dip and then a recovery post the RBNZ decision. Market reaction to yesterday's rate cut has been remarkably modest.

Gold is down -US$5 at US$1,280/oz.

US oil prices have recovered slightly today after yesterday's sharp fall, to just over US$62/bbl while the Brent benchmark is just over US$70/bbl.

The Kiwi dollar will start today a at 65.7 USc and actually very little changed from yesterday just before the RBNZ rate cut. On the cross rates we are a touch lower at 94 AUc. Against the euro we are similar at 58.8 euro cents. That puts the TWI-5 down only marginally at 70.5.

Bitcoin is unchanged from this time yesterday at US$5,885 - but it is almost touching NZ$9,000. 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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14 Comments

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Highlight new comments in the last hr(s).

https://www.resilience.org/stories/2019-05-07/a-green-new-deal-beyond-gr...

"But it’s equally essential that we dethrone GDP growth as the utmost political priority and start building a post-growth alternative for human prosperity and ecological sustainability".

Ain't that the truth?

PDK - You think AOC's New Green Deal is a good proposal?

Good question. Looking forward to PDK's analysis.

Its a proposal and hence has no flesh to really comment on, but while it looks inadequate its better than do nothing or do worse which is Trump's position.

Well ya sorta have to have some idea about how you want to achieve something though, right?

I think it's heading in the right direction. Which put it so far ahead of economics, as taught, that it has to be lauded.

But most first-world inhabitants (including most of them, thus far) are starting with a belief in a false narrative, encouraged by those who 'sit on' challenges to said narrative. The reality is that exponentially-increasing physical extraction-consumption-excretion cannot continue on a finite planet - the last doubling-time beats you every time. The First-World reality is that it has taken advantage of others - both in slave-labour terms, in energy terms and in resource-appropriation terms (Nauru being a local classic), within that bounded system.

So most youngsters, correct though they are about Climate and Extinction concerns, miss just how their lives will be altered, should they 'win'.

And regardless of your focused defense of a particular financial format, no growth-inducing or even growth-accommodating tabulation system will be future-appropriate. If their proposal is growth-accommodating, it has to go, just as our current one has to. The simplest move is to remove interest - it's a parasitic rort on real activity even in a growth paradigm, let alone during no or de-growth. (NZ'ers just get poorer as the 'interest' on those key-strokes goes offshore).

Ultimately, physical rules have to be written, and enforced. How you interact within the set parameters is up to you - but I'll give you the tip; most human interaction is cerebral rather than financial. We have seen the high-water-mark of commodification of the Commons - including of human interactions. It just signified that the growth opportunities were becoming curtailed, warning that the end of growth was nearing.

I wonder how many loan-shouldering Economics students were told, pre sign-up, that growth opportunities were about to go negative? Would it have made them reconsider? I'd suggest they'll want their money back, except that like all money, it's really debt so they don't want it 'back', they just won't want it.

Okay so not really here, nor there. Just a broad "it's heading in the right direction."
Along with the usual "I have a better understanding because I saw the light via a non formal education."

You realise how they proposed to pay for this transition, right?
I would have thought that would be completely abhorrent to you.

With cognition like that, I hope you don't mark essays.

meanwhile climate change threats to the cost of your insurance emerging as a significant worry,

https://www.soa.org/globalassets/assets/files/resources/research-report/...

So yes continue to worry that gold/oil is up, down or the same today or tomorrow, utterly meaningless.....

Dont you worry, Steve. The team have a plan to correct all climate issues by 2050. National is also on board with their recent plan to get rid of all pests by 2050.
So thats it all taken care of. Now what about the rugby?
.... What - you want some details on those plans??

For those who are thinking, rather than defending the undefendable:

https://www.postcarbon.org/renewable-energy-will-not-support-economic-gr...

"The globalized consumer society was always unsustainable anyway, and we might be happier without it. But unless we plan for the post-growth renewable future, existing economic institutions may tend to shatter rather than adapt smoothly".

Heinberg is one I have a lot of time for (hence my moniker here) and it's worth reading every word.

Humm... I wonder how long Mr Trump can keep up this charade. Excellent article from the New York Times not surprising why Donald is so desperate to hide his tax returns.

Decade in the Red: Trump Tax Figures Show Over $1 Billion in Business Losses
https://www.nytimes.com/interactive/2019/05/07/us/politics/donald-trump-...

Teresa Gattung lost more than that at NZ Telecom in a much shorter time.