Here's my summary of the key events overnight that affect New Zealand, with news of a remarkable Kiwi win in Australia.
But we start today with news that stock markets are surging higher. Wall Street's Nasdaq index is up over 6,000 for the first time and the Dow registered triple-digit gains. Strong earnings underscored the health of Corporate America.
Meanwhile American consumer confidence fell from a 16 year high in April, but a surge in new home sales to an eight-month high in March reinforced the underlying strength in their economy reversing an apparent sharp slowdown in the March quarter. The median price of a new-built home in the US is NZ$455,000.
But house prices generally are on the way up in the US. The latest review shows a +5.9% gain year-on-year.
And in a sign of fraying relations between the US and Canada, the American government has imposed special duties on Canadian softwood exports to the US of up to 24%. The Canadians have blocked most dairy imports from the US. The duties involve more than US$1 bln. Trade lobbying in Washington can now payoff with unexpected protections. This is trade policy by lobbyists and follows a renewed focus on steel imports from China.
China’s government bond yields hit their highest levels in 20 months, the latest sign of stress in the country’s markets as officials crank up their rhetoric about containing credit growth and financial risks.
But a new Report out shows how fast consumer credit has grown there - and how much more it is expected to grow. It is currently NZ$1.25 tln and is expected to grow rapidly and double by 2020, just 30 months away. Now that is a real credit bubble.
And rising defaults in China are unearthing hidden debt at companies across the country.
Riding the coat-tails of this frenzy has been HNA Group, the company ANZ has agreed to sell UDC to. But major questions are being asked about how they 'grew' so fast and they are being drawn into an unwelcome spotlight in China. Credit rating agencies have already panned the UDC move. Whether HNA is a fit and proper owner of a major New Zealand financial institution is now up to our regulators. UDC depositors will be sweating their decision.
In Australia, we win again. The Bledisloe Cup. The Chappell-Hadlee Trophy. Now New Zealand has taken the title of Australia's most reputable company. Air New Zealand has grabbed number one spot on the annual Reputation Index produced by research group AMR and the Reputation Institute. Our national carrier, which jumped from its sixth-placed ranking last year, beat out retail giant JB Hi-Fi, car company Toyota and Australia's flag carrier Qantas for the top spot. It is highly unusual for a "clearly overseas" company to take a spot on a list of most reputable companies.
In New York, the UST 10yr yield is back up today and now at 2.34%. Rates may be rising but risk premiums are falling. And overnight we had a remarkable fall in CDS spreads for sovereign French debt. Investors are betting big that Marine le Pen has no show in round two and that France will reaffirm its EU membership strongly.
Oil prices are holding lower at now just over US$49.50 for the US benchmark, while the Brent benchmark is now just over US$52 a barrel.
The gold price is sharply lower, down -US$22 and now at US$1,263/oz.
The New Zealand dollar is also sharply lower today at 69.5 USc. On the cross rates the Kiwi dollar is at 92.2 AU¢ but against the euro at 63.5 euro cents. The NZ TWI-5 index is just on 74.1 which is actually a nine month low.
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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China’s government bond yields hit their highest levels in 20 months, the latest sign of stress in the country’s markets as officials crank up their rhetoric about containing credit growth and financial risks.
Bond traders perceive greater return opportunities in the private business sector?
While overall Claims had declined in normal seasonality, the primary source of expansion the past three years, the MLF, increased significantly. The PBOC reported a total MLF balance of more than RMB 4 trillion for the first time last month. It was an increase of RMB 303 billion, double the rate of expansion in February. In just the past five months going back to (and including) November, MLF usage has nearly doubled, rising an astounding RMB 1.95 trillion. It is that short amount of time which is exactly the period this “tightening” policy has supposedly been in place according to the narrative.
Not only that, someone in China has been using the SLF (Standing Lending Facility), like the MLF a relatively new tool supposed to operate like the US Federal Reserve’s Discount Window. The balance at the end of March was RMB 70 billion, an unusually high figure for any climate. Read more
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