Here’s my summary of the key events overnight that affect New Zealand, with news of more ructions in the Chinese stock market.
But firstly, in the US data out for their key durable goods orders series came in better than expected, and a jump was expected. There was a healthy gain in new orders, and both shipments and the level of unfilled orders rose, reversing recent trends. Going the other way was a fall in sentiment in the oil patch, but that was expected.
However, the big news overnight is from China.
Chinese shares tumbled more than 8% yesterday amid renewed fears about the outlook for their economy, and reviving the specter of a full-blown market crash that prompted unprecedented government intervention just a couple of weeks ago. In response to yesterday’s sharp fall, the local regulator said it was prepared to buy shares to support the market, and denying its own actions caused the latest wobble.
This is today’s crisis for China. But an even bigger one is looming. The country will grow old before it gets rich. The baby boom expected with the easing of the one-child policy at the end of 2013 has not happened. Many couples permitted to have two children have decided not to, putting financial circumstances, living conditions and careers first. That has meant a rapid ageing of their society and in consequence, a fast shrinking workforce, growing numbers of elderly and, due to a preference for males, a vast gender imbalance.
The worse the demographics get, the greater the economy will suffer through low productivity, a decline in consumer demand and the need for more government funding for pensions and health care. They don’t have long to fix things before it gets unfixable. You can beat embedded demographic trends.
In Australia, new research there shows that three out of four people over 50 are willing to stay in the workforce longer to boost their retirement savings, reflecting people’s increasing concerns about their financial security.
In New York, the UST 10yr yield benchmark is holding at 2.24%. Our swap rates are lower again and the flattest in eight weeks. The flattening of the 1-5 curve has been sharp recently.
Oil markets are again lower. The US benchmark price is now about US$47/barrel, and Brent crude is at US$53/barrel. Iraq is shipping record volumes.
The gold price is not reflecting the uncertainty and is still at only US$1,095/oz.
The Kiwi dollar starts today stronger, believe it or not especially against the US and Aussie currencies. It is now at 66.1 US¢, at 90.8 AU¢, but lower at at 59.6 euro cents. Overall, the TWI-5 is basically unchanged at 70.8.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »