Here's our summary of key events overnight that affect New Zealand, with news that we have another disconnect between equity markets and economic data.
Today in the US is a public holiday, Memorial Day. That means Wall Street is closed. London has taken the day off as well for a "bank holiday" so its financial markets are closed as well. So financial market trading volumes have been very light in the past 24 hours and will be light again today. But the rest of the world is open and in business.
And yesterday, Shanghai's equity markets sprang to life, rising an impressive +1.4% on the day. Tokyo was also positive, up +0.3%. And they were followed by European markets overnight that recorded +0.5% gains.
It is not really clear about what is driving these gains at this time. Maybe it is the expectation of new stimulus.
That is because in China, industrial profits are still falling, a trend that started in January. They were down -3.4% in April from the same period a year ago and haven't been positive all year. This is in stark contrast to the +15% rise recorded in April 2018.
And in Hong Kong, their economy is being battered by the trade war. Exports fell for the sixth month in a row, down -2.6% year on year in April, while imports fared even worse, down -5.5%.
Turkey remains under pressure. Yesterday its central bank increased reserve requirements for foreign-exchange deposits by 200 basis points. This will withdraw more than NZ$6 bln of liquidity from their currency market and help them eliminate many smaller official dealers by making it more costly for them to keep forex deposits.
In Germany, their regulators are requiring banks to add a countercyclical capital buffer of 0.25% and they will have to start doing this from July. Authorities are concerned about stability risks from a pumped up domestic property market and a slowing economy.
In Australia, all the betting is for an official RBA rate cut next Tuesday. The Aussie property industry expects this to be a turning point for property prices.
The UST 10yr yield is stable at 2.32% as those big financial centres are on their break. Their 2-10 curve remains at +16 bps and their negative 1-5 curve is still at -21 bps. The Aussie Govt 10yr is at 1.55% and up +2 bps. The China Govt 10yr is also up +2 bps to 3.35%, while the NZ Govt 10 yr is up +1 bp to 1.77%.
Gold is unchanged at US$1,285/oz.
US oil prices are firmer today and are now at US$59/bbl. The Brent benchmark is at US$70/bbl.
The Kiwi dollar will start today little-changed in very light trading at 65.4 USc. On the cross rates we are also unchanged at 94.6 AUc. Against the euro we are similar at 58.5 euro cents. That leaves the TWI-5 at 70.4.
Bitcoin is still firing on all cylinders and this morning is at US$8,722 which is a gain of more than +8% overnight. Since the start of May, this crypto is up +70% and is now over NZ$13,000. 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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32 Comments
Interesting results from the European Elections, for those might want to take a look. BBC European Election 2019: Results in maps and charts https://www.bbc.com/news/world-europe-48417191
UK Labour may well be toast. And the Tories quite possibly too. Working class voters and those who feel their lives have got worse want Brexit. Labour can't win just on middle class public servants from London. Watch as UK Trumpism unfolds. You reap what you sow. Working class people have been shafted by both major parties and they will cast a protest vote and the destabilising force will be felt everywhere. And I don't blame them. Something has to change. A shake up is needed. All those who think a second referendum will vote Remain should be very very cautious about getting what you wish for. Labour in NZ should take note. It needs to deliver something for ordinary people. It could easily be replaced with an enterprising populist politician given the right conditions and leader.
Russel Brand and his Insight on May. https://www.youtube.com/watch?v=9ZXpUmpfqY4&feature=push-u-sub&attr_tag…
Great article about Huawei and the reality of the risks involved in dealing with them
More bad news on the government's pet project - KiwiFail
Dropped the final target by 70% - https://www.newshub.co.nz/home/politics/2019/05/kiwibuild-s-final-targe…
Government forced to underwrite completed houses - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
Mike Hosking on how the govt has destroyed the rockstar economic conditions NZ has enjoyed. I'm sure there will be much head nodding in middle NZ. It's a bit hard to follow as to what the actual issues are but it seems clear that The Hosk believes the govt is critical to the NZ economy in maintaining confidence. OK. He also seems to think low-income people should not by supported by a minimum wage as it's a cost to business. OK. We need a perennial underclass of workers.
What's confusing is that he claims NZ doesn't have an economic base to support public spending. He doesn't really say how this has happened since the govt changed.
I think The Hosk is a good reflection on the general understanding of economics in middle NZ. Make it up as you go along and say whatever makes you feel important and what you want to believe.
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12234892
In part he may be right. I agree with him when he says the Government is critical to confidence. It always has been, even though it generally doesn't do much about the actual conditions. His claim as to the economic base being insufficient to support public spending, may also be correct but this is driven by the free market economy and the exporting of jobs. He will probably blame the current situation on the current Government, when in reality they are the consequence of multiple Governments actions and inactions, as well as denials. Not easy to fix quickly.
His claim as to the economic base being insufficient to support public spending, may also be correct but this is driven by the free market economy and the exporting of jobs.
Surely the exporting of jobs will drive down wages for most, except a closeted elite and highly technical expertise..
The Hosk doesnt try to understand anything. He just knows that National is awesome and Labour is terrible.
The conclusion now drawn its time to draw links with the obvious cause and effects...
We can see that ever since Labour came to power, the confidence fall has dented
- the Australian housing market
- the FED plan to increase rates
- the Highlanders back row tackle percentage
- Ed Sheerans chart domination
etc
Growth has fallen from 3-4% pre-election to 1.8% annualised in last half year. Coalition has destroyed business confidence through talk and deed (punative employment laws, big min wage hikes, regulatory imposts on landlords, anti business rhetoric .....) and business confidence has tanked:
https://www.interest.co.nz/business/99430/business-confidence-stuck-slu…
Public spending is paid for by tax. You want to pay for new policies you need growth. That's driven by business.
Actually tax is paid in NZ dollars which are provided for us to use as a means of exchange via public spending. Ask yourself - where did those notes or more likely reserves you pay to IRD each year actually come from?
G is a giant proportion of GDP - or aggregate spending. Take away G and poor old business has a lot less money multiplying through its cash registers. We have low growth right now in large part due to an excessive government surplus squeezing the life out of us all. Driven by a theological (rather than sound) belief in the virtue of paying down public debt. In my humble opinion.
Stephen Colbert: The Drive-By Milkshaking Of Nigel Farage
https://www.youtube.com/watch?v=oQj1e5ZZdlA
So the point is that political violence is good and proper when it's done by the left? Dildo throwing, mud throwing, milkshake throwing = mock assassinations designed to intimidate and make targets feel physically vulnerable. Do you also cheer when Antifa or BLM attack people they disagree with or Wellington Peace Action planting fake bombs in a Jewish movie showing. All this is intimidation - legally assaults (threatened violence is assault) to try and kow opponents and end dissent. Seems to me KKK burning crosses on people's lawns many decades ago was in a similar intimidatory vein. To laugh is to legitimise this sort of behaviour - which is highly corrosive to proper civil political discourse, and just leads to further deterioration and more violent reprisal.
Why wasn't it funny when far left Corbyn got only-an-egg? Milkshakes and mud are funny - eggs not so much? Or are eggs only funny when used on Aussie Senators?
"A Brexit supporter who egged Jeremy Corbyn while yelling "respect the vote" has been jailed for 28 days."
https://www.bbc.com/news/uk-england-london-47691606
No, it's an important point. We need to maintain freedom to dissent without fear of violence - because if we fail at that we will only see more furtiveness, closed door plotting in echo chambers, and violence from the fringes - as we saw with Left wing terrorism in the 50's-70's in wake of anti-communist suppression and as we are currently seeing more from far right with suppression of dissent/hate speech laws and the like by the currently politically controlling left (Beivik and Tarrant being examples of this). This sort of behaviour engenders worse violence not less.
He he, What was that, can't hear you! You've melted in to your own argument snow flake. Do the world a favor and grow a sense of humor. :)
Plus, I'd suggest that you should stop supporting those Far Right parties, just think the world would have been a much nicer place if someone had thrown a milkshake at Hitler.
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