Signs of economics strength emerge as labour market develops
At lunchtime today, Assistant Governor Kent will speak on "Recent Labour Market Developments" and should add some perspective on the recent strength of the labour market.
The Westpac/Melbourne Institute index of consumer inflation expectations rose in August, increasing to an annual rate of 3.7% from 3.4% in July.
Share markets in Europe saw a positive tone following good results from food giant Nestle and German travel services company TUI.
The Dax rose 0.8%, the Euro Stoxx was up 0.9% but the FTSE100 was flat. In the US, markets were subdued. The Dow was flat, while the S&P500 fell 0.1%.
Government long bond yields rose yesterday as investors sought the safely of government paper in the midst of market uncertainty flowing out of China.
US 10 year yields rose 4 basis points to 2.19% while their 2 year yields also rose 4 basis points to 0.71%. Australia also saw yields rise with 10 year government yields up 8 basis points to 2.74% and 2 year yields up 6 basis points to 1.94%.
After a dip the previous day, the US dollar index was steady overnight.
The AUD begins the day a little weaker against the USD after attempting to work through the implications and reasons behind China's modest 'devaluation'.
Was it a welcome stimulus for the economy or a sign of further weakness to come in China? The former view appears to have prevailed and the AUD picked up after earlier losses.
Oil sank to a six-year low as rising crude output and signs that China's economy is weakening increased concern that the global surplus will worsen.
Gold was marginally weaker as the weaker yuan is expected to dampen demand from China. The price of copper was steady as was the price of iron ore.
The Chinese Central Bank set its yuan reference rate 1.1% lower at 6.401 yesterday.
This follows reductions of 1.9% on Tuesday and 1.6% on Wednesday.
Although the yuan has weakened for three consecutive days, the rate of decline is slowing and the yuan appeared to stabilise yesterday.
There is strong evidence that the PBoC intervened in markets to prevent a further sharp fall in the Chinese yuan.
In a statement, the People's Bank of China Deputy Governor Yi Gang stated that there was no basis for continued depreciation of the yuan.
The Bank's desire to ensure normal fluctuations in the exchange rate was also stated.
German consumer prices rose 0.2% in July, also rising 0.2% in the year to July.
Both final readings were unchanged from the preliminary estimates released at the end of July, as expected.
Machine orders fell 7.9% in June, after a slight increase of 0.6% in May. In the year to June, machine orders were up 16.6%, stepping back from 19.3% in May.
Q2 core machinery orders were up 2.9%.
The Business NZ manufacturing PMI fell to 53.5 in July from 55.1.
The manufacturing sector is now into its 34th month of expansion. However, the rate of growth is slowing.
Business NZ indicated falling dairy prices as a major issue, while the lower New Zealand dollar was a positive factor for manufacturing.
No major data released.
US retail sales rebounded in July as households boosted purchases of automobiles and a range of other goods, suggesting the economy was growing solidly early in the third quarter.
Sales rose 0.6% for the month, bolstering the case for a Federal Reserve interest rate hike.
The US Labor Department reported that initial claims for state unemployment benefits increased 5,000 to a seasonally adjusted 274,000 for the week ended Aug. 8.
Although claims have risen for three straight weeks, they have remained below the 300,000 threshold for 23 consecutive weeks. This threshold level is associated with a firming jobs markets,.