Here's our summary of key events over the weekend that affect New Zealand, with news that India is about to make international economic waves.
But first in the US, new orders for durable goods fell in April by more than markets were expecting. Excluding orders for military spending, they were down -2.5% from March. Markets were expecting a -2.0% fall on this basis. In a year they were down only -1.1 from April 2018. But things are not so close for non-defense capital goods which were down -4.6% year-on-year.
Moderating demand and weaker prices are raising concerns and the first place to feel the pinch is America's road freight market.
But in the international bulk shipping market, the Baltic Dry index is rising, and has done so steadily since early April. It is now up to a level last seen in January. Airfreight seems to be where the hard trade pressures are being felt however.
On the trade war front, the US President said his complaints against Huawei might be resolved within the framework of a US-China trade deal, while at the same time calling the Chinese telecommunications giant "very dangerous." Apparently that 'danger' is a tradeable bargaining chip.
And the US is moving to allow companies to seek tariffs on goods from countries found (by them) to have undervalued currencies. It's a move that would further escalate its assault on global trading rules. And India is in their sights too.
A Chinese car maker is claiming that it has developed an inexpensive vehicle fuelled by water. Its engine runs on hydrogen produced by a chemical reaction when a catalyst is applied to a mixture of aluminium powder and water.
In Japan, they have adopted a record-breaking fiscal 2019 budget that includes NZ$28 bln in stimulus, measures aimed at softening the impact of a looming consumption tax hike on an economy already facing broader uncertainty.
In India, their prime minister has won re-election with a resounding majority. Growth is slowing from its fever pitch rate, and with a transformation from an informal economic base to a more formal one dominated by companies, India could be a winner in the trade war between China and the US with both sides realising its size and trajectory will matter to them. The new Government is about to go on an eye-popping US$1.4 tln spending spree. There is no way the rest of the world won't notice. That is equivalent to more than 2% of world GDP.
The RBNZ deputy governor Bascand was in Australia at the end of last week facing Aussie criticism of his plans to require their big banks to hold more capital in New Zealand. He is reported as saying he is "open minded" about modifying the drafted requirements.
The UST 10yr yield has risen back to 2.32%, but that is -7 bps lower in the week. Recall it fell -7 bps in two of the previous weeks too. Their 2-10 curve is now at +16 bps but their negative 1-5 curve is wider at -21 bps. The Aussie Govt 10yr is at 1.53% and down -12 bps over the week. The China Govt 10yr is up +3 bps in the week to 3.33%, while the NZ Govt 10 yr is down -6 bps this week, now at 1.76%.
Gold is little-changed at US$1,285/oz.
US oil prices have recovered somewhat from the sharp drop late last week and are now at US$58.50/bbl, but that is still down more that -5% in a week. The Brent benchmark is at US$68.50/bbl.
The Kiwi dollar will start the week firmer at 65.5 USc. On the cross rates we little changed at 94.6 AUc. Against the euro we are similar at 58.5 euro cents. That all makes the TWI-5 little-changed at 70.5. The yuan has stopped depreciating against the US dollar and Beijing has clamped its value at 6.89 every day last week.
Bitcoin is back over US$8,000 this morning at US$8,018 which represents almost a +US$1,000 gain since this time last week. This rate is charted in the exchange rate set below.
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