Wall Street falls; US: China trade war grows; US PMI down; US new home sales fall; Japan's factory downturn; Aussie PMIs show growth; UST 10yr 2.30%; oil down and gold up; NZ$1 = 65.2 USc; TWI-5 = 70.3

Wall Street falls; US: China trade war grows; US PMI down; US new home sales fall; Japan's factory downturn; Aussie PMIs show growth; UST 10yr 2.30%; oil down and gold up; NZ$1 = 65.2 USc; TWI-5 = 70.3

Here's our summary of key events overnight that affect New Zealand, with news hardened political positions on trade are biting in the real economy.

Firstly, Wall Street is taking a hammering today, down -1.6% so far. This follows European markets that were down all of that and more. Yesterday Asian markets were down as well with Shanghai down -1.4%.

And it is not only equities; international bond yields are under renewed pressure again.

This collective mood swing seems to be all about trade and the inability of anyone to get policy right. Trade wars are getting impossible to win. The US is being forced to splash cash subsidies on farmers just to keep them in business. Factories are slowing everywhere, and the once resilient services sectors are now barely expanding. It's getting more serious by the month.

May American PMI data revealed a sharp and unexpected slowdown in private sector output growth. Their factory PMI is now at a ten year low while at the same time their service sector is in a notable downshift in gear to a three year low. Worse may be to come as inflows of new business showed the smallest rise seen in ten years.

New home sales in the US fell too from recent highs, and a bit more than analysts were expecting. But they are still running more than +6% higher in April than in the the same month in 2018.

Following some tentative signs that the downturn in Japan’s manufacturing sector was turning for the better in April, flash PMI data for May revealed these were short-lived, as output and export orders fell at faster rates.

European factory PMIs are stagnant in May revealing their expansion is still very weak - in fact their factory sector is contracting.

The IMF is noting that consumers are the biggest losers in the US:China trade wars. This is borne out by reports from China where exporters say US consumers will ultimately end up paying more in the next round of tariffs by the Trump administration which is expected to cover smartphones, toys and bicycles.

Workers everywhere might be about to feel the effects of the trade war as well.

But it isn't all one-way traffic. With new data showing Australian companies increased their business activity in May for the first time in four months amid signs of a pickup in demand after a recent
soft patch. New orders rose at the fastest pace in 2019 so far according to their lastest PMI readings.

The dud PMIs have driven the UST 10yr yield down sharply again today, down 9 bps to now under 2.30% and that is a very big move. Their 2-10 curve is now at +17 bps while their negative 1-5 curve has pushed out to -23 bps in a fast shift. The Aussie Govt 10yr is at 1.53% and down another 8 bps since this time yesterday. The China Govt 10yr is up 2 bps to 3.34%, while the NZ Govt 10 yr has gotten off lightly so far, down 1 bp and now at 1.80%.

Gold is up US$10 this morning at US$1,286/oz.

US oil prices are being thrashed today, now just at US$57.50/bbl and a drop of almost US$4 while the Brent benchmark is just on US$67/bbl.

The Kiwi dollar is up marginally on a falling greenback to 65.2 USc. On the cross rates we up too at 94.5 AUc. Against the euro we are little-changed at 58.3 euro cents. The TWI-5 is now at 70.3.

Bitcoin is down 2.5% to US$7,761. 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 ».

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

16 Comments

Comment Filter

Highlight new comments in the last hr(s).
16
up

Somehow falling consumer sentiments and slowing factories across the world are being blamed on Trump's policy and Britain's indecisiveness. I would do that too if I were a political leader; easier than admitting that we fell asleep at the wheel on structural decisions and let central bankers run the show with their quick-fix tools.

10
up

Yes, I was thinking something along the same lines. Higher consumer prices are seen as good by the reserve banks at the moment, unless they are from Trump or Brexit. The point being that higher consumer prices can mean higher profits in the productive sector and thus better paid jobs in the future. As manufacturing becomes more domestically focused, the economy becomes less reliant on fickle export customers and thus more resilient. The pendulum may just have swung a bit too much in favour of globalisation and the financialisation that enables it.

Not sure about the NZ 10 year yields quoted. If they were 1.76% last night there is no way after the session last night that yields are up.

Also the rates quoted in the morning and evening update are rarely remotely close to the rates on the bond pricing page.

It could be worth a look at price sources for both the report and the pricing page.

Haven't seen the Global economic situation in this bad a state since the GFC.

I would say it is a continuation of the GFC, we still have European QE and low interest rates with no sign of a return to pre GFC conditions.
Curiously, low Interest rates may be about the post second world war rates, so perhaps we are at a long term average.

Auckland ans Wellington among most expensive cities in work for public transport. 3rd and 7th respectively. Kiwis punching above their weight again.

https://www.statista.com/chart/18084/average-cost-of-a-monthly-ticket-fo...

Yes thank you Steven Joyce for your 'innovative' farebox recovery ratio targets. Making public transport expensive and pushing people back into their cars has really helped with congestion.

I think it's hilarious when some people say NZ isn't expensive.
Usually the people who say it are mortgage free, or have small mortgages, so the housing side of the equation is effectively negligible for them in terms of cost of living

Orakei village to Britomart 2 people return ~ NZD20+. It's insane pricing if you want to get traffic off the roads. The price of the new Auckland rail links imply pricing on those journeys will be even higher.

So Auckland Council ~ you are building expensive rail systems that are too expensive to use ~ how does that make sense ?

Compare that to HK and Singapore where a long journey ride is about NZD2 max, significantly less for short rides.

that's a joke.
More subsidies are needed. That's the cost of trying to unclog our roads, and reduce emissions.

Does anyone else have problems with the speed of this website. Scroll down an article takes on age for me. Also ads that cover entire screen provent scrolling.??

Yes, it's highly annoying. I find that interest is unusable on my phone now (heh guys, all your adverts are just pi**ing me off - I'll be making sure that I never use them - pass THAT on to your advertisers and see what response you get). Plus, I'm now hardly here as I'm not wasting my time to find the latest comments when there used to be a handy sidebar for that. Very disappointed in, and annoyed with, the 'new' look.

Yep, same for me plus typing comments sometimes freezes or goes into semi paralysis.

it's generally ok for me on the laptop. Seems to be an issue on phone

No issue on PC, but android tablet and phone it's near on unusable.

No problems on PC or Android phone (Android Version 7.1.2 on 5 inch phone)