Here's our summary of key events overnight that affect New Zealand, with news China's Belt & Road network is also an enabler of Chinese organsied crime activity.
But first in the US, new research by the NY Federal Reserve points out that their proposed steel tariffs will be an own-goal. They will cost the American economy jobs; “Although it is difficult to say exactly how many jobs will be affected, given the history of protecting industries with import tariffs, we can conclude that the 25% steel tariff is likely to cost more jobs than it saves," they say.
Wall Street has closed down with most benchmark indexes shedding almost -1%. Tech stocks fared worst.
In Canada, their consumer prices rose +2.3% on a year-on-year basis in March, following a +2.2% increase in February. This was the largest such increase since October 2014. But excluding petrol, their CPI rose +1.8%, matching the gain in February.
The EU's latest survey of consumer sentiment moved slightly higher for April, holding the elevated levels seen in 2018, the highest since the survey began in 2005.
In the depths of their crisis, Greece sold its main port at Piraeus to a Chinese state-owned shipping company COSCO. It brought a lifeline of cash when they were desperate. It was also one of the earliest of China's Belt & Road investments. It is working out for both parties, but perhaps in some unexpected ways. EU authorities now see it as an entry hub for Chinese organised crime where they defraud EU nations of VAT. And in the US, COSCO is seeking approval to buy a major new port facility in the Port of Long Beach. American authorities are wary. These issues come after concerns are heightened over the debt countries take on to be part of China's B&R network.
In India, markets reacted aggressively with bonds being hit hard as unexpectedly hawkish central bank minutes were released. They add to higher oil price pressures that higher official interest rates are just around the corner. The rupee fell to its weakest in more than a year.
The US may be excluded, but Australia thinks the UK is showing "real interest" in joining the TPP.
The UST 10yr yield is now at 2.96% and up +4 bps overnight. The Chinese 10yr stopped falling and is at 3.54% (up +2 bps) while the New Zealand equivalent is at 2.88% (unchanged).
The VIX is just marginally lower than this time last week and the index is now just over 17 and still elevated. The average index level over the past year is 12. The Fear & Greed index is at "fear" levels and has pulled back from its crisis level of a week ago. Interestingly, it is now slightly lower that level it was a year ago, so the 'fear' conditions have eased a lot in the past week.
Gold markets have not yet closed but at this time the price is at US$1,335/oz in New York. That is down -US$10 since this time yesterday.
Base metals have had an extraordinary spurt after the US imposed sanctions against Russian companies, prompting fears of a supply squeeze. Aluminium rose more than +5% overnight and is now up more than +23% over the month. Nickel jumped more than +7% last night, while zinc (+3%) and copper (+2%) were also bid up. These are big moves in these markets.
Oil prices however are unchanged overnight at just over US$68 and the Brent benchmark just over US$73.50/bbl. The North American rig count moved even higher this week. And the US President sharply criticised OPEC, blaming them for the higher recent prices. It has had no impact on them however, leaving oil at three year highs.
The Kiwi dollar is ending the week up at 72 USc and that is now a substantial retreat over the week; it was 73.6 at this time last week, so a fall of -1½c. On the cross rates we are at 94 AUc and 58.6 euro cents. That puts the TWI-5 at 73.6 and -100 bps below last weeks closing level.
Bitcoin is however at US$8,532 and that is a net gain of +5.5% in the week.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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6 Comments
"Today, the Ministry of Internal Affairs reports Japanese consumer prices fell -0.4% month-over-month, bringing the CPI back down to just 1.1% year-over-year, leaving it still only about halfway to its target. Excluding fresh food prices, the Japanese “core” rate was less than 1% yet again.
Obviously, this is a problem not unique to Japan. It’s as if the island chain’s “deflationary mindset” has been its chief export since 2008. None of the central banks around the world seem able to answer for the persistent undershoot (if they ever do, then they might then be able to tackle the more important and related issue of global Japanification)."
http://www.alhambrapartners.com/2018/04/20/transitorys-japanese-cousin/
We've all heard about tenants from hell, but what happens when the tenants are diplomats from China's Ministry of Foreign Affairs?
According to sources here (https://www.radionz.co.nz/international/pacific-news/355634/china-s-law…, https://www.radionz.co.nz/international/pacific-news/354694/tahiti-woma…, https://thediplomat.com/2018/04/trouble-in-paradise-a-chinese-occupatio…), the Ministry refuses to have its staff in Tahiti vacate after expiry of a fixed-term rental contract involving a residential property, and have additionally barred the landlord from entering her own property, and threatened her for discussing the matter on social media after local authorities have effectively ruled out bringing a legal case for fear of offending China. They have also apparently modified the house without permission by installing satellite dishes on the roof.
I think this would have to be the only time I have really felt sorry for a landlord! Joking aside, this story is worth keeping an eye on regarding whether Chinese state organs consider themselves above the rule of local law. This story deserves to be widely known.
This isn't necessarily a Chinese thing as a similar(ish) thing happened here recently with an EU diplomat (http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12035158). Apparently diplomatic immunity means they are in fact above the law!
That's interesting; I didn't know about that case with the EU diplomat.
Articles 31 and 32 of the Vienna Convention on Diplomatic Relations 1961 (to which pretty much the whole world is a signatory) set out that diplomats in the conduct of their duties have immunity from civil and criminal jurisdiction in the host country, but that doesn't stop the sending country from waiving or otherwise modifying that immunity, as an act of goodwill or in the bringing about of justice after a crime, for example.
The whole diplomatic mission also has to abide in some manner with local law otherwise a mission would be able to squat anywhere and claim immunity, including in anyone's lounge! That's covered in Article 4 of the Vienna Convention on Consular Relations 1963, and Articles 30 and 31 add that the consular premises are off limits to interference, which presumably is why the landlord was banned from entering the property. Article 55 of the same also states that consular staff still need to respect local laws and regulations, which also includes property rights.
Andrewj - But you know, hyperinflation and massive currency devaluation are just around the corner should governments dare to deficit spend even a little a bit...... Of course, Japan with it's huge public debt illustrates this case well of how government spending always and inevitably creates hyperinflation.
Interesting article about the reducing efficacy of debt in major economies (https://www.advisorperspectives.com/commentaries/2018/04/19/quarterly-r…):
The law of diminishing returns is already evident in all major economies as well as on a global scale (Table 1). Global GDP generated per dollar of total global public and private debt dropped from 36 cents in 2007 to just 31 cents in 2017. Diminishing returns is even more apparent in the case of China’s public and private debt, largely internally owned. In terms of each dollar of debt, China generated 61 cents of GDP growth in 2007 and only 33 cents last year. In other words, in the past ten years the efficiency of China’s debt fell 45%. Thus, even in a command and control economy, the law of diminishing returns prevails. The most advanced sign of diminishing returns is in Japan, the most heavily indebted major country, where a dollar of debt in the last year produced only 22 cents of GDP growth. This economic principle applies equally to businesses.
On the current debt track that the world is on, something will have to give, sooner or later.
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