Here’s our summary of key events overnight that affect New Zealand, with news the trade wars are about to start in earnest.
For months, talk of a trade war between the United States and China has been everywhere. That talk will become reality at 4pm NZT when major US tariffs against Chinese goods come into effect.
China says it won’t move first, but is ready to respond almost immediately after they are imposed. Game on.
The release of the US Fed minutes of their last meeting in June shows they discussed whether recession lurked around the corner, and are concerned how those global trade tensions could hit their economy, which by most measures looks strong at the moment. They say they are on track to raise rates, however.
How strong their employment situation is will become clearer tomorrow with the latest update to the US non-farm payrolls report. Today, the precursor ADP Employment report showed growth that was lower than expected, and its second lowest expansion in the past eight months.
Further, the latest jobless claims report came in worse than expected – an improvement was forecast by analysts.
There were two reports out on the state of the US service sector overnight, giving different views. One has it slipping a little from a healthy level; the other still expanding. Take your pick. Worldwide, however, the whole service sector expansion is gathering pace.
German factory orders for May came in much stronger than expected, a positive surprise for markets.
A report at the Bank of International Settlements (BIS) is saying that leaving interest rates too low for too long could lead to a surge in inflation that forces central banks into dramatic rate hikes, pushing the world into another recession.
New data for air passenger travel has brought another very good level of growth, up +6.1% in May from the same month a year ago. That is a small improvement in the growth rate from April. International traffic didn’t grow as fast however – the star was domestic growth in India (+16.6%) and China (+11.9%), but international growth in the Asia/Pacific region was up a very impressive +8.0%, the strongest region worldwide.
The China-led Asia Infrastructure Investment Bank (AIIB) has hit back against accusations it is failing to live up to its commitment to green investment, arguing that its support for projects involving fossil fuels is needed to achieve the long-term goal of sustainable energy.
In Australia, a senior RBA official says the regulator is watching their housing market more closely these days for signs of price retreats and the drag that could impose on their consumer sentiment and economic growth. They are pointing out the retreat in the past two years. But it is only a ‘watch’ at this stage, not a ‘concern’.
The UST 10yr yield is up +1 bp at 2.84% after the US holiday. The Chinese 10yr is at 3.52% (unchanged) while the New Zealand equivalent is now at 2.81%, also unchanged.
Gold is down -US$2 at US$1,255/oz.
US oil prices have slipped a little, now just under US$73/bbl. The Brent benchmark is now just under US$77.5/bbl. Rising US crude and petrol stocks are behind the small shift.
The Kiwi dollar starts today a little firmer at 67.8 USc. On the cross rates we are also marginally firmer at 91.9 AUc and at 58.1 euro cents. That puts the TWI-5 at 71.2.
Bitcoin is now at US$6,473 which is down -3% from this time yesterday.
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