Here's our summary of key events overnight that affect New Zealand, with news of an Aussie tax cut that has flown under the radar.
First, in the US, retail sales unexpectedly fell in April as households cut back on purchases of cars and a range of other goods, pointing to a slowdown in economic growth. In addition to weak retail, American industrial output was also weak in April, and data for business inventories in March show a rise, +5% higher than in March 2018. None of this paints a picture of an economic drive with momentum.
It is not all weak however, The NY Fed's May update to its factory survey shows that region with a "significant pickup" after four or five months in the doldrums. However, it is not yet back to levels considered 'normal' in the 2017 to 2018 period.
In Canada, they released April CPI data overnight which has inflation rising to +2.0%. There was also house sales data out for April and that came in surprising strong. Volumes were up more than +4% year-on-year although prices were little-changed on an annual basis. Unlike the rest of the country however, Vancouver is doing it tough. And a recent official report into money-laundering through the Vancouver real estate market is being called 'alarming'.
In China, updated data for April shows that their economy was also losing some momentum even before the latest hike in tariffs by the Americans. Data for industrial production, retail sales and fixed asset formation all came in substantially lower in April than March, and all well below expectations. Those retail sales are actually a 16 year low.
Yesterday, the Shanghai equity market had a very good day, up +1.9% as the 'home team' came out in support, and clearly bolstered by others. Hong Kong was also higher, up +0.6% with Tokyo was up +0.5%. Overnight, European equity markets were up solidly as well. And this morning, Wall Street is chiming in with its own solid gains, with the S&P500 up its own +0.7% in late afternoon trade.
The Wall Street rise may be because Bloomberg is reporting that the US Administration will delay a decision by up to six months to impose car tariffs to avoid blowing up negotiations with the EU and Japan as they struggle to get leverage in their fight with China. Maybe some near the centre of power in Washington actually understand tariffs are essentially costs imposed on yourself.
In Australia, new analysis has uncovered a 2019 budget tax feature that may help explain why the RBA resists cutting their official interest rate benchmark. Already in place, the tax cut will apply to 10 mln Aussies from mid-July, with almost half of them getting AU$1,080 back as soon as they lodge their 2018/19 tax return. A slightly larger group will get back somewhere between AU$250 and $1,000. All this adds up to a cash stimulus of over AU$7.5 bln and is said to be worth -0.5% in rate cuts. The RBA will hold off to see what this fiscal stimulation does before it acts with monetary stimulus of its own. The tax cuts are reminiscent of the Rudd cash handout during the GFC.
The UST 10yr yield is sinking, now at 2.38%, and that is a -4 bps fall and taking this key benchmark rate back to levels we last saw at the end of 2017. Their 2-10 curve however is still at +21 bps but their negative 1-5 curve is widening and now at -16 bps. The Aussie Govt 10yr is at 1.69% and down -1 bp overnight. The China Govt 10yr is up +2 bps to 3.32%, while the NZ Govt 10 yr is also up +2 bps at 1.83%.
Gold is little-changed, up +US$1 at US$1,296/oz.
US oil prices are higher today, now just over US$62/bbl while the Brent benchmark is just over US$72/bbl. The American government is sending home all non-essential personnel from Iraq as Gulf tensions rise dangerously.
The Kiwi dollar is marginally softer today at 65.6 USc. On the cross rates we are unchanged at 94.7 AUc. Against the euro we are still at 58.6 euro cents. That puts the TWI-5 little-changed at 70.5.
Bitcoin however is still rising. It is currently at US$8,101 which is +1.3% 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 ».