US data mixed; Canada GDP up; trade talks run on; China stimulus widens; Brexit messier; equities up; negative gearing addiction; UST 10yr 2.41%; oil firm, gold up; NZ$1 = 68.2 USc; TWI-5 = 72.9

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Here’s our summary of key events overnight that affect New Zealand, with news the week has ended with a data whimper, but more optimism on global share markets.

Firstly, American consumer spending barely rose in January and income increased only modestly in February, suggesting the economy was still losing momentum after growth slowed in the fourth quarter of 2018.

However, there was better news on new home sales in the US, which firmed nearly +5% in February from January, to get back to the same level they were a year ago.

The other main survey of American consumer sentiment reported a better level in March, but that is at odds with its rival survey.

And a key regional PMI reported a weaker result overnight for March, even if the expansion level remains quite good.

In Canada, their January GDP result came in with better growth than was expected (yes, they do their GDP monitoring monthly).

In Beijing, the United States and China said they made progress in trade talks that concluded overnight that the Americans called “candid and constructive” as the world’s two largest economies try to resolve a bitter, nearly nine-month trade war. But these talks will go on again next week.

Meanwhile, Beijing is taking a different tack in their new round of stimulus – using its big four state-owned banks to pump out for debt finance. The amounts involved are not small. It is can-kicking that the Americans would be proud of.

In Japan, they got some quite good data reported overnight. Vehicle sales were up again in February and that follows very strong (+7%) production rises in January, and housing starts rose (+4.2%) as well.

In Europe, the main news is the continuing failure of the British to agree on anything related to Brexit, with the latest series of parliamentary votes all resulting in rejection. A crash-out is now inevitable it seems. The EU isn’t holding its breath and seems to have abandoned any hope of an organised divorce.

Global equity markets are ending the week in a positive mood. The S&P500 is up +0.5% today so far, ending the week with a +1.1% gain. In Europe overnight – despite the continuing Brexit fiasco – equities were up even more. They also rose aggressively in Tokyo (+0.8%) and Hong Kong (+1.1%). They were up a spectacular +3.2% in Shanghai, making back mid-week losses, and ending +1% higher for the week. It was foreign buyers who fueled yesterday’s rally. Even the NZX50 kept pace, up +0.8% on Friday and up +3% for the week. (The ASX200 was flat on Friday and marginally lower for the week.)

In Australia, their tax office data shows how crazy Aussie landlords have become with their attachment to negative gearing. It is being seen as positive progress that the proportion of Australia’s 2.2 mln landlords who are negatively geared fell to 60% in fiscal 2017, the lowest level since 2003. No wonder a correction in their housing markets have hit them so hard. And debt growth for housing has now hit its lowest annualised level since records started there in 1977. The opposition Australian Labor Party has said it will scrap negative gearing for new investors from the start of 2020.

The UST 10yr yield has risen today and is now at 2.41%. Their 2-10 curve is narrower at +14 bps and their negative 1-5 curve is also narrower at -17 bps. The Aussie Govt 10yr is slightly firmer today at 1.78% but right where it was at the start of the week, the China Govt 10yr is lower on that basis however, now at 3.08%, while the NZ Govt 10 yr is at 1.83%, up +5 bps since this time yesterday. Yesterday, local swap rates rose firmly off their lows.

Gold has risen +US$6 overnight, up to US$1,295, but that is a -1.2% loss for the week.

The VIX volatility index is lower this week at 14. The average over the past year has been 17. The average for 2017 was only 11 however. The Fear & Greed index we follow is is now right at a neutral level.

US oil prices are firm, now just on US$60/bbl while the Brent benchmark is at US$68/bbl. That is about where they were this time last week. There was another drop in the US rig count this week, and a weakening trend that is building.

The Kiwi dollar is firmer this morning at 68.2 USc. On the cross rates we are back up to 96 AUc. Against the euro we are at 60.8 euro cents where it was at this time last week. That puts the TWI-5 at 72.9. Yes, the currency did fall sharply earlier in the week on the RBNZ signal, but it is ending right at its average for the month.

Bitcoin is also a firmer at US$4,072 and a +2.4% weekly gain. 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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Source: CoinDesk

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