US retail sales growth slows, ditto factory production and imports; EU trade balance lower; Russia and Indonesia feel the pinch; China slows, turns to houses; UST 10yr at 3.00%; oil and gold prices fall; NZ$1 = 65.5 USc; TWI-5 = 69.4

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Here’s our summary of key events over the weekend that affect New Zealand, with news Northern hemisphere holiday makers are returning to an economic situation that is far from upbeat for most. And the storms in the US and China are not the issue.

Firstly, American retail sales recorded their smallest gain in six months in August as consumers cut back on purchases of cars and clothing. Although that was below market estimates, it is +6.6% higher than the same month a year ago. And we should note that there were upward revisions to July data. Essentially this data doesn’t change economic growth expectations in the third quarter, even with its weak car sales component.

A key measure of industrial production and capacity utilisation came in at modest levels, and about what was expected.

And interestingly, August imports at the two huge Los Angeles seaports were down -3.1% at a time they normally grow. This does suggest that some of the tariff front-running may have peaked.

But a widely reported index of consumer sentiment came in higher than expected, but staying on the same overall track it has been on since 2009.

Across the Atlantic, data for the EU trade balance in July was lower than expected and by quite a bit.

Feeling the pinch of sanctions, and the more general emerging market squeeze, Russia has moved to defend their currency, raising official interest rates by +25 bps to 7.50%. It was their first rate hike in four years.

Indonesia is also feeling the pressure. It is reported to be delaying infrastructure projects (and the debt they require) to reduce its vulnerability to the international currency stresses they are now facing.

There are widespread reports that the American President has ordered staff to proceed with the second set of tariffs on China – covering about US$200 bln of trade – and this sort of undermines his Treasury Secretary’s attempt to restart trade talks with China. And China is quickly adjusting to its own rejection of US imports. And they think they have moneatry policy options too.

In China, new data has revealed signs of softness, as the pace of investment has slowed to a new low (for them). Stable figures for retail sales growth and industrial production have done little to ease concerns of a cooling in their economy.

But property prices in China rose at the fastest pace in almost two years in August. As their export economy cools, and stresses the in P2P sector turn ugly, speculation in the housing market is turning up, adding to the likelihood of more government tightening in the housing market.

New data in Canada shows their household debt ratio up slightly to 169.1% but still well below its high in 2017 and today’s data suggests it may be turning to an improving track. (New Zealand’s equivalent data is 166.0%.)

The UST 10yr is higher today at just on 3.00%, +15 bps higher over the past week. Their 2-10 curve is at +21 bps, -3 bps lower in the week. The Aussie Govt 10yr is at 2.60% (down -1 bp), the China Govt 10yr is at 3.68% and up +3 bps, while the NZ Govt 10 yr is at 2.58%, unchanged. New Zealand swap rates have changed very little over the past week, or even the past two weeks.

Gold is weaker and is now just on US$1,193/oz in New York, down -US$8 and lower than level as this time last week.

US oil prices are little changed at just under US$69/bbl. The Brent benchmark is now just over US$78/bbl. The US rig count moved up this week.

The Kiwi dollar is starting the week slightly softer at 65.5 USc, but little changed on the week. On the cross rates we are marginally softer too at 91.5 AUc, and softer at 56.3 euro cents. That puts the TWI-5 at 69.4 and exactly where it was seven days ago.

Bitcoin is now at US$6,488, a similar level to this time last week but -1.4% lower than where we left it yesterday.

This chart is animated here. For previous users, the animation process has been updated and works better now.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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