Here's my summary of the key issues from overnight that affect New Zealand, with news of lowered expectations in China.
But first, American consumer spending fell for a second straight month in January, down -0.2%, as households continued to cut back on purchases, opting to save much of the massive windfall from cheaper gasoline. In contrast, personal incomes rose +0.3% from the prior month. In 'real' terms, American disposable personal incomes rose +0.9%, and that seems to be picking up, which will impress the Fed.
The global manufacturing sector seems to be in better shape than recent chatter suggests. According to comprehensive data out overnight, factories expanded for the 27th consecutive month in February. The rate of output growth accelerated to a six-month high, as companies scaled up production to meet rising levels of new work and new export orders. The US was the main driver, and there was expansion in Europe too, but Australia is being left behind.
Back in the US, construction spending rose +1.8% in January on the same month a year ago, but this was seen as 'disappointing' because it was less than for December.
Things are getting tougher in China. State media is reporting that their economy is expected to slow to an annual 7% in the first quarter of this year, a sign policymakers will have to roll out more stimulus to support faltering growth. That also means they want less public criticism of their pollution problem.
Also falling is eurozone prices, which were down -0.3% in February on an annual basis. But without the suddenly cheaper energy costs, they would have been up +0.6% pa. The eurozone unemployment rate for January was also out overnight, their jobless rate 'falling' to 11.2% from 11.3% in December. Their rigid labour markets keep millions out of work.
In India, following their go-for-growth budget, their government has set up a new monetary policy framework that will make managing inflation the key determinant in the central bank’s policy decisions.
Later today the RBA will review their policy rate and it is a close-run thing whether a rate cut will be made again. The markets are pricing one, but a cut will exacerbate their housing bubble, especially in Sydney, making the possibility of a painful correction greater. Rates in Australia are already too low. They need macro-prudential responses, not rate cuts.
The UST 10yr yields rose in New York earlier today and are now at 2.05% as it becomes clearer the Fed will raise rates in a few months.
The crude oil price rose to just over US$50/barrel but the Brent crude price has fallen to US$60/barrel. Prospects for a nuclear deal with Iran brings the likelihood more supply will come on to markets.
The gold price fell and is now at US$1,208oz.
The New Zealand dollar starts today at 75.1 USc, 96.7 AUc and the TWI is back up to 79.
If you want to catch up with all the changes yesterday, we have an update here.
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