China-US trade deal seems close

Kia ora,

and welcome to Friday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead news a China:US trade deal might be close.

Wall Street rallied earlier this morning on American claims that the trade deal is very close. But the US is only offering to cut "some" tariffs, it seems. And China doesn't want to put its ag buying promises in the deal document. It is since lost some steam however, losing half the jump on those comments to be up a more modest +0.4% in afternoon trade. But it does seem like a deal of some sort could be close.

In the US, the growth of household net worth actually fell in the third quarter, down to +3.4% from +4.9% in the June quarter. That was because the value of holdings of equities fell by -US$300 bln in the quarter. This is a slowing that was more than expected and comes as household debt rose +6.3% pa in the same period, historically a high increase; in fact the second highest increase in at least the past ten years.

The number of Americans filing applications for unemployment benefits jumped to more than a two-year high last week.

At the same time, American producer prices rose just +1.3% pa, also the fastest slowing of producer output prices since late 2006.

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In China, steel output is expected to it almost 1 bln tonnes, a rise of more than +6%, driven by their domestic stimulus plans. This has seen the iron ore price turn up recently, and metallurgical coal prices will likely follow. They need that stimulus - carmakers there said they expect yet another year of declining sales.

And there are more bond defaults for companies that earlier binged on debt. Corporate bond defaults are now common. The latest is unique because it is the first offshore default by a SOE in more than twenty years.

And it’s not only China; Canadians are defaulting on non-mortgage debt at highest third-quarter pace since 2012.

In Australia, rebounding demand for their minerals in China will give their Federal budget a boost.

The ECB, at its first meeting under Christine Lagarde, has kept it key policy rate at +0.0% and its deposit rate at -0.5%. Lagarde struck an optimstic note about the 2020 prospects for the EU economy.

In the UK, voting is underway. Currency markets are nervous as most pollsters say the result is "too close to call" and the UK currency is falling.

The UST 10yr yield is at 1.88% and up +7 bps overnight. 

Gold is now at US$1,469/oz and down-+US$2 overnight.

US oil prices are just over US$59/bbl. The Brent benchmark is back just over US$64/bbl. Ther IEA says that global oil inventories could rise sharply despite OPEC output cuts and fast-slowing American production growth.

The Kiwi dollar is marginally higher again today at 65.8 USc. On the cross rates we are slightly lower at 95.5 AUc. Against the euro we are unchanged at 59.2 euro cents. That puts the TWI-5 firmer at 70.9.

Bitcoin is a little-changed at US$7,197.

You can find links to the articles mentioned today in our show notes.

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