Here’s my summary of the key events over the weekend that affect New Zealand, with news the TPP negotiations failed in Hawaii, for now at least.
But firstly, in the US we had important payroll data released over the weekend. Wages and salaries increased +2.1% in the year to June, while benefit costs increased +1.8% in the same period. While no faster than in the March quarter (and this disappointed some and gained the headlines), these levels are at a rate that will encourage the Fed to hike. Barring an outlier result in the non-farm payrolls report due at the end of this week, a September rate hike looks more likely now.
But the big news is the ending of the TPP negotiations in Hawaii, without any agreement.
The deal now seem to hang on three issues, two of which affect New Zealand. There is a car industry issue and Canada and Mexico seem to be the holdouts.
There is a drug patent-protections issue. Reconciling how long patents apply between countries has not been resolved. The US has a 12 year law. Australia a 5 year law. NZ and Japan have eight years. For the TPP to work there needs to be a common period that allows research to get a payback before generics become available. (Everyone wants the research, “no one” seems to want to pay.) Late in the day, the US said it will compromise.
And there is dairy, the hold outs are Canada, Mexico, Japan and the US. Most everything else seems agreed. Negotiators did agree to resume at the end of August for what will be one last effort.
Over the weekend, Russia cut its official interest rate by 0.5% to 11%. They have tough choices to make. High interest rates hold back investment they desperately need. But lower rates drive down their currency making inflation even higher and painful.
On Friday, the iron ore was down sharply by more than -3%, reflecting soft commodity prices everywhere. At US$52.90/tonne that will be a tough place for Australian miners.
The US oil price is also lower at US$47/barrel, and Brent crude is at US$52/barrel.
The gold price is a bit stronger today at US$1,095/oz.
The New Zealand dollar starts the week at 65.9 US¢, at 90.4 AU¢, and at 60.1 euro cents. The TWI-5 is at 70.8.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »