Kia ora,
and welcome to Monday'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 the US corporate earnings season is in full swing. Last week 488 companies reported Q3 results on Wall Street and tomorrow another 368 will report on that day alone.
Wall Street ended last week up a marginal +0.7%. That Q3 earnings season isn't generating much enthusiasm so far. Shanghai ended lower by -1.9% while Hong Kong was up +0.7%. Tokyo was the Asia star, up +3.4%. The NZX50 rose +1.3% and the ASX200 rose +0.6%. European markets all ended they week on a downer.
In Japan, they have negative interest rates at the official level, but their central bank explained overnight that they can "certainly" lower them further to support a weakening economy. The current market speculation is that the Bank of Japan will go further into negative-rate territory when it meets next week.
China's Q3 GDP growth downshifted to +6.0%, and below the expected +6.1%, itself lower than the Q2 rate of +6.2%. In an economy the size of China's, a 0.1% miss is still a lot and takes it to a 30 year low. But interestingly, the main depressor was in their factory sector. Retail sales rose pretty much on target at +8.2% and unchanged from Q2 (and better than analysts expected). They reported higher industrial production, but lower fixed asset formation.
One sector still growing strongly is the food and beverage sector, which now accounts for NZ$1 tln in annual revenues, up impressively even if the recent food price rises are discounted.
And staying in China, a second province has decided to ban all peer-to-peer lenders, concluding that the risks to consumers are too high and the efforts to regulate them too costly.
In Hong Kong, tens of thousands of protesters flooded the streets again this weekend, this time targeting mainland Chinese-owned retail stores. There is no sign the anger is subsiding, nor the support for democratic reforms.
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In the US, they have now imposed a 25% tariff on US$7.5 bln of selected EU goods after the World Trade Organisation ruled in its favour earlier this month on the issue of subsidies for Airbus. The EU says it will retaliate at the same level.
In the EU, the London Parliament debated the EU-Johnson Brexit deal and when it voted on it, it handed their prime minister yet another defeat; he hasn't won one parliamentary vote yet. He has asked the EU for an extension. Parliament may vote on related matters again this week.
In Australia, it is becoming clear that having a buy-now, pay-later is toxic when applying for a home loan. Apparently banks there see it indicating irresponsible money management and a lack of understanding of credit obligations. Mortgage brokers are reporting credit-quality issues with potential borrowers who have this type of debt.
The UST 10yr yield has held its level of 1.75%, and is -2 bps lower that this time last week.
Gold is down -US$1 overnight to US$1,490/oz.
US oil prices are little-changed, now just over US$53.50/bbl. The Brent benchmark is just under US$59.50.
The Kiwi dollar is firm against the greenback today, now at 63.9 USc and the highest level in more than five weeks. On the cross rates we are still at 93.1 AUc. Against the euro we are at 57.2 euro cents. That puts the TWI-5 at just on 68.7 which is where it was at this time last week.
You can find links to the articles mentioned today in our show notes.
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