Here's our summary of key events overnight that affect New Zealand, with news we seem to be moving to a new phase in the trade wars.
But first, some of what was lost yesterday on major equity markets has been recovered today with the S&P500 up +1.1% so far today. That is about half of yesterday's drop. In European markets they seem to have recovered it all. Yesterday in late trade, Shanghai, Hong Kong, and Tokyo all posted steeper drops although nothing like the Wall Street falls of yesterday.
The driver of today's improvement is an expectation that the trade talks underway after the ratcheting up of tit-for-tat tariffs may result in a deal. But it actually more of a hope than based on any talking because the talking in Beijing hasn't actually started yet.
One growing factor in all this is that the Chinese currency is depreciating faster. Yesterday it reached 6.8 yuan to the US dollar and 7 is in sight. At the latest level, this represents a -1.3% depreciation in less than a month. At 7 to the US dollar, that would involve a -4.3% depreciation. This is the narrative the Americans will be focusing on, but actually it is the rising greenback that is moving the most. (The NZ dollar has depreciated -3% against the US dollar in the same past four weeks.) With little effort, the Chinese could manipulate their currency and it is surprising they haven't done so yet.
With tariffs in place, the China - US arm-wrestle is now entering a new phase, one that is both unclear and very uncertain. Currency may come into play, and the Chinese holdings of US Treasuries may also.
Across the Atlantic, EU industrial production is falling, but the "good news" is that these latest falls are not as steep as analysts were fearing.
And the closely watched German ZEW sentiment survey turned down in May, mainly on fears of what the US:China trade "squabble" will bring.
In Australia, the widely-watched NAB business sentiment survey for April was out late yesterday. It showed business conditions fell 4 points to +3 index points with declines across each of the components. The employment index saw a particularly sharp decrease, falling to -1, while trading and profitability each declined by 4 points.
The UST 10yr yield is now at 2.42%, and that is a small +2 bps rise so far today. Their 2-10 curve however is still at +22 bps and their negative 1-5 curve is settled at -13 bps. The Aussie Govt 10yr is at 1.70% and up +1 bp overnight. The China Govt 10yr is down -2 bps to 3.30%, while the NZ Govt 10 yr is also down -2 bps, now at 1.81%.
Gold is down -US$4 and now at US$1,295/oz.
US oil prices are a little higher today, now just under US$62/bbl while the Brent benchmark is near US$71.50/bbl. The flare-up in Persian Gulf tensions is growing with a new drone attack on a Saudi oil installation. The oil price seems remarkably relaxed in the face of this. And OPEC sees higher demand for its products in 2019.
The Kiwi dollar is little-changed at its lower level and now still at 65.8 USc. On the cross rates we are up at 94.7 AUc. Against the euro we are still at 58.6 euro cents. That leaves the TWI-5 at 70.6.
Bitcoin however is still rising strongly. It is currently at US$7,996 which is +2.5% higher than this time yesterday. And that means it is now above NZ$12,000. 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 ».