Markets turn positive

Kia ora,

Welcome to Tuesday'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 with news of a respite in global tensions.

Wall Street is +½% higher today on the general news that trade tensions seem to be easing, and Middle East political tensions are as well. Overnight, European equities slipped on most exchanges, except London - a rare reversal.

Yesterday, Asian equity markets were quite bullish. Shanghai was up +0.8%, Hong Kong was up +1.1% and Tokyo was up +0.5%. The Aussie equity market slipped -0.4% while the NZX50 was virtually unchanged.

In Canada, businesses there are slightly more optimistic heading into 2020. Like consumers, they expect inflation will remain low. And they still expect to invest and hire at a similar rate to 2019.

In China, even though it is the largest car market in the world selling more than 26 mln vehicles per year, they expect sales will decline -2% in 2020. Generous state subsidies for non-petrol/diesel vehicles will continue.

This is having a flow-on impact as China's steel manufacturers continue output at record levels even as key customers are buying less. Beijing is alarmed at the rising losses. A big shakeout is coming. Australia is unlikely to ship as much iron ore in 2020 as it did in 2019.

[Advert]

And here is a message from our friends at Hatch.

With Hatch, anyone can invest in the US share markets.

Billionaire Warren Buffett says investors should stick to areas they know, so it’s no surprise that Kiwis are backing technology companies through our investing platform. Companies like Nvidia, Apple, Amazon, Netflix, Disney and Tesla regularly feature as our most popular shares. 

Visit www.hatch.as/investing to buy any of these US-listed shares and learn more.

In the Philippines, the Mt Taal volcanic eruption, while initially dramatic, is now expected to burst into a huge event soon. Large numbers of people are being evacuated. The fear is that it could have wide regional climate impacts.

In Australia, the bush fire emergencies have changed the political views on climate change, and they are likely to get embedded following their Royal Commission inquiry into the disaster. Fossil-fuel-energy jobs will become the flash-point.

And the wider financial markets are likely to be impacted, according to Standard & Poors. They said, "The recent bush fires will have a flow-on effect on local employment in industries such as tourism and agriculture, which could lead to debt-serviceability pressures for affected borrowers."

The UST 10yr yield is now up to 1.84% and a rise of +2 bps overnight. 

Gold will start today down -US$11 at US$1,551/oz.

US oil prices are lower again today now just over US$58.50/bbl and the Brent benchmark is down too at US$64.50/bbl.

The Kiwi dollar is unchanged at 66.3 USc. On the cross rates we are slightly softer at 96 AUc. Against the euro we are at 59.6 euro cents. That puts our TWI-5 at 71.5. Beijing is still letting the yuan strengthen deliberately against the US dollar and its now back to levels we last saw in August 2019. It seems to be part of the Phase One trade deal.

Bitcoin is also unchanged since this time yesterday at US$8,096. 

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

Get more news affecting the economy in New Zealand from interest.co.nz and subscribe to receive this podcast in your favourite podcast app - we're on Apple Podcasts, Google Podcasts, Spotify or subscribe on our website.

Tell your friends and leave us a review - we welcome feedback.