Here's our summary of key economic events overnight with news that in an act of considerable bravery, the leaders of Poland, Czechia and Slovenia have gone to Kyiv for talks with the Ukrainian leader even as Russia is shelling the city.
Separately, this morning's dairy auction has brought a hesitation, albeit one at the top of the range. Overall prices fell -0.9% but stayed within touching distance of its record highs. The dominant WMP volumes fell the most, down -2.1%, but SMP rose +1.6%. This time the exchange rate provided little difference to these results. But these were results lower than market expectations where a further but smallish rise was anticipated.
However, this result is no different to commodity prices generally which made some reversals overnight.
Last week US retail sales gains eased further on a year-on-year basis, but still with an outsized swelling even if it is on a weak year-ago base. The eating into those gains is now quite noticeable, but the rises are still well above inflation.
Also easing is the producer price pressure. US PPI not only came in lower than expected, the February growth levels were lower than January.
But producer price pressure is still very evident in regional factory surveys. The New York one still records high costs, but it also recorded a sharp decline in overall activity - and this was despite a rise in new orders. They may be finding it tougher now, but these firms are also quite optimistic about the immediate (6-month ahead) future.
And staying in the US, their peak securities regulator has launched a probe into how the Big Four accounting firms manage conflicts of interest caused by their consulting services.
In Canada, their housing market is still in full froth mode. Canadian home prices hit a new record in February as a dearth of properties for sale continued to fuel buyer competition.
China released some February data yesterday, and it was all much more positive than some (me included) were expecting - even if it is benchmarked against a weakish base. Retail sales were up +6.7% year-on-year when +3% was expected. Industrial production was up +7.5% on the same basis when +3.9% was expected. Electricity production was up +4.0%, so the activity they are reporting is probably 'real'. But they did report a rise in their jobless rate to 5.5%, a sharpish rise from 5.1% in January.
Of course, the widening pandemic lockdowns in March will take all the gloss off these February results. Equity markets are certain of that. The falls in Hong Kong and Shanghai equity markets are pretty significant now. 'Bloodbath' is a word being used as investors bail out.
And China’s central bank unexpectedly kept all of its policy rates unchanged late yesterday, though many believe the authorities will resume monetary easing soon to support the slowing economy.
In fact, the yuan has devalued sharply overnight. And that is mirrored by a sharpish fall for the Japanese yen as well.
Before the Ukraine war blew up in their faces, EU industrial production was stable in January.
But German firms have reported a massive mood change since. The war in Ukraine and the sanctions against Russia are significantly dampening the economic outlook for Germany. The collapsing economic expectations are accompanied by an extreme rise in inflation expectations. They are expecting stagflation in the coming months.
Later today, Russia is due to make a relatively modest interest payment on some bond debt. But that is the start of a high-risk period where default prospects on Russian debt will grow. There is some contagion risk involved, and although most expect it to be contained, there is a noticeable shift in bond market sentiment to holding cash at present.
Back in the US, the Federal Reserve is meeting and widely expected to raise interest rates to lean in against global inflation. But the return to normal they had hoped to see remains elusive as the global security situation goes bad.
The UST 10yr yield opens today at 2.13% and up +2 bps from this time yesterday. The UST 2-10 rate curve starts today steeper at +31 bps. Their 1-5 curve is steeper too at +87 bps and their 30 day-10yr curve is steeper as well at +191 bps. The Australian ten year bond is unchanged at its higher level of 2.48%. The China Govt ten year bond is +5 bps higher at 2.84%. And the New Zealand Govt ten year is up +10 bps at just on 3.14%.
Wall Street is +1.2% on the S&P500 in Monday afternoon trade. The Nasdaq is recovering yesterday's big drop. Overnight, European all fell an average of -0.2%. Yesterday, Tokyo gained a modest +0.2, but Hong Kong crashed another -5.7% on concerns over Beijing’s close relationship with Russia and renewed regulatory risks that sparked panic selling. And Shanghai also had another bad day, down -5.0%. The ASX200 fell -0.7% while the NZX50 was essentially flat.
The price of gold starts today at US$1929/oz and down another sharp -US$32/oz from this time yesterday.
And oil prices are again very much lower today, down -US$5/bbl. In the US they are now just under US$95.50/bbl. The international price is just under US$99.50/bbl.
The Kiwi dollar will open today marginally softer again, now at just over 67.6 USc. But against the Australian dollar we are now at 94.1 AUc which is another +¼c firming since this time yesterday and our highest in two months. Against the euro we are holding at 61.7 euro cents. That all means our TWI-5 starts today at just on 73.2 and -20 bps lower.
The bitcoin price is little-changed today, up +0.7% from this time yesterday to US$39,196. Volatility over the past 24 hours has been moderate at +/- 2.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
80 Comments
And oil prices are again very much lower today, down -US$5/bbl. In the US they are now just under US$95.50/bbl. The international price is just under US$99.50/bbl.
This is very naughty. You keep us hanging for those three magic little words every kiwi yearns to hear:
"Lower oil prices."
One of the bad things about been in business, is you cannot lose money, so you need to be conservative dropping prices . It was interesting to watch the difference innocent between gull and the local supplied brands. Gull was slower going up, let's see what happens going down.
Let's see how ComCom's conditionally approved acquisition of Z by Ampol is going to affect our fuel retail market.
I hope they've done their thorough homework and its not going to be another doozy like allowing Z to acquire Caltex only to find 2 years later that the market had become too consolidated.
Ampol seems to be getting Z on the cheap here. The acquisition deal is being valued at NZ$1.97 billion for a company that owns 40% of the market share, while it's ongoing sale of Gull NZ (7% of NZ market share) for $509 million.
So getting 6x the market share for 3.87x the price. Sure there are other factors such as ROE etc. but Z has more assets (gas stations, etc.) and income streams (retail, etc.).
Something smells fishy here.
in an act of considerable bravery, the leaders of Poland, Czechia and Slovenia have gone to Kyiv for talks with the Ukrainian leader even as Russia is shelling the city.
That's an interesting idea...Maybe Biden should toughen up and go to Kyiv for "a week of talks". Surely the Russians would pause their attack while he was there...? Get Macron and Alexander de Pfiffle to go for the weeks after...
Churchill loved to be in among the action as well. It's not a bad thing for leaders to observe the situation on the ground first hand from time to time:
As previously identified less than 1000 in a 250,000 strong army. So not significant. I would also suggest every army has it's nutters - Germany recently purged some neo-nazis, our own has recently court martialed a right winger, and I'd bet the Russian army has got more than it's fair share considering what they are doing in Ukraine.
A small minority that has not been weeded out. Like the US in Vietnam there is an important media war. The Ukraine has to win the media war both while fighting now and for when the war ends. It must make a show of eradicating the Nazis who support them - not difficult since those Nazi groups have expressed antisemitism and there are several members of the Ukraine govt with Jewish ancestry.
One battle at a time, and they know which one is more important at the moment. Ukraine has even given early release to prisoners for conscript (The Dirty Dozens).
At this time all Ukrainians are united, despite what individual or group differences they might have in peacetime, and rightly so.
As the saying goes, 'the enemy of my enemy, is my friend.'
They should be aiming a little higher than "making a show of eradicating the Nazis", but if they could not do it before the war it's delusional to think this will be easier after.
Everyone in power in Ukraine has accepted and and a lot have used the violence and influence these groups provide. I am not sure they have the moral high ground required to eliminate them.
There is quite a significant neo-Nazi movement in Ukraine.
Not that it has anything to do with Putin's reasons for invading, but they're there, and in plain sight. NATO had to remove their original International Women's Day tweet after they realised the female Ukranian soldier in the picture was wearing a black sun motif on her body armour.
I bet the Syrians that the Russian are currently training on the borders are a lovely bunch.
Russia continues to face difficulties replacing combat losses and increasingly seeks to leverage irregular forces including Russian PMCs and Syrian fighters. The Ukrainian General Staff claimed that Russian servicemen are increasingly refusing to travel to Ukraine despite promises of veteran status and higher salaries.[1] The Ukrainian General Staff reported on March 14 that Russia has recruited over a thousand Syrian fighters in “recent days” and that approximately 400 Syrian fighters have arrived in Russia.[2] Russia reportedly established training camps near Rostov (in Russia, directly east of Donbas) and Gomel (in Belarus, north of Kyiv). Senior Lieutenant Sergey Zavadsky of the Russian PMC Wagner Group was confirmed killed in Ukraine on March 13, the first verified Russian PMC casualty since the start of the invasion on February 24.[3]
https://www.understandingwar.org/backgrounder/russian-offensive-campaig…
Nazi and other ethnonationalist groups are very influential in Ukraine. They have used violence to successfully influence and control many aspects of Ukraine's politics since 2014.
The MSM has many articles on it if you want to go looking. I think Salon is the best to read. But I also found some from NBC or the Guardian. While their existence is not a justifiable reason for war they will be a road block to any peace.
Edit: Some relevance to us, from Salon:
Violent foreign extremists with links to Azov have included Brenton Tarrant, who massacred 51 worshippers at two mosques in Christchurch
Maybe there is not much action around Kiev anyway. We are blasted with imagery, but little perspective. Remember 2 weeks ago the 60km column of Russians 20km away and 'hurtling' towards Kiev. Seems to have evaporated.??
The real action seems to be in the south and east, which is aligned to the ethnic factors.
"Russian convoy near Kyiv has dispersed and artillery is in firing position, new satellite images show"
https://www.independent.co.uk/news/world/europe/russia-convoy-kyiv-sate…
or no paywall https://inews.co.uk/news/kyiv-russian-assault-kremlin-armoured-column-h…
Of course that's in the news. But did this 'hurtling column' exist at all. Colouful images and language gets reported in the news over real analysis and perspective. So I suggest it's best to believe none of it.
I am not denying that people are dying in terror and pain. That's happening for sure.
"Hurtling" is rather an exaggeration. I don't recall any media using the term? Most commentary I heard, was the column was barely moving. The mass of military vehicles was no doubt meant to intimidate, rather than adhering to some brilliantly conceived battle plan. Putin's men in Kiev told him Ukraine would welcome the invaders, throwing flowers at their rescuers. Javelins and Stingers instead must have been a shock for an over confident Vlad the emperor. https://www.dailymail.co.uk/news/article-10598315/Ukraine-war-Putin-fires-eight-generals-rages-FSB-battlefield-failures.html
Yep, the propaganda from both sides is pretty overwhelming. Like you said, best not to believe any of it, it seems. Even on the ground journalists are participating in the here-say with "I was told this morning that xyz happened..." - so who told you and did you verify? If you couldn't verify because it would have put your life in danger, how do you know it's true and why are you reporting it if you don't know it's true?
Then we even have supposed experts who are clearly biased giving opinion based on their own fact selections, ignoring facts that undermine their opinion. It's a great time to see that truth is the first victim of war.
With the type of warfare the Ukrainians are being forced to fight (small unit, high mobility, guerrilla tactics) they would have to be an inviting target. I wonder what their security is like? Ukrainian special forces, and a few other volunteers using the NLAWS and Javelins could take them out with some care and patience.
Later today, Russia is due to make a relatively modest interest payment on some bond debt. But that is the start of a high-risk period where default prospects on Russian debt will grow. There is some contagion risk involved, and although most expect it to be contained, there is a noticeable shift in bond market sentiment to holding cash at present.
Russia may avoid default getting access to frozen gold and currency reserves, say experts
According to the figures provided by the Finance Ministry, as of February 1, 2022, Russia’s external state debt amounted to $59.5 bln, including indebtedness on external bond loans equaling $38.97 bln. In total Russia has 15 current bond loans due from 2022 to 2047.
And oil prices are again very much lower today, down -US$5/bbl. In the US they are now just under US$95.50/bbl. The international price is just under US$99.50/bbl.
Russia’s cooperation with Iran is protected against sanctions by US guarantees — Lavrov
Moscow has documented guarantees from the United States that the situation regarding imposed sanctions on behalf of Washington will have no impact on Russia’s cooperation with Iran, the Russian foreign minister said on Tuesday.
"We have received written guarantees," Sergey Lavrov said at a news conference following his talks in Moscow earlier in the day with Iranian Foreign Minister Hossein Amir-Abdollahian. "They [the guarantees] are a part of the agreement on the resumption of the Joint Comprehensive Plan of Action [JCPOA] on Iran’s nuclear program."
According to some Russians pay US 50 cents per litre for petrol.
Good morning from #Germany, where the FinMin wants to ease the burden on motorists by offering fuel rebate of 40 cents per liter. Such measure would cost German taxpayers ~€6.6bn within 3mths. Germany has some of the highest fuel taxes in Europe Link
Where from? Fairyland? https://oilprice.com/Energy/Energy-General/US-Shale-Has-Lost-300-Billion-In-15-Years.html
BTC down 33% year-on-year. Ouch. Am I a bad man for feeling schadenfreude?
The narrative in the Coinbase newsletters has been as positive as always in the past few months. A million explanations on why BTC is stronger than ever.
But I guess most asset bubbles work the same way. Except there is no central bank or govt coming to the rescue unless it's property.
Depends on how you look at it. 33% sounds bad, but actually the volatility of BTC can work in your favor. For ex, even though the price is down 33% yoy, if you had bought BTC every week for the past 52 weeks, without fail, you would be up 17%. At the the very least, you're matching inflation.
But yes, no central bank or govt to bail you out. You're on your own.
Reassuringly, my Satoshis are all still recorded on the bitcoin ledger, and I haven’t lost a single one despite all the volatility, and economic carnage occurring everywhere. The system remains impervious to countervailing threats, hashrate security is at an ATH, and the blocks are being ground out every 10mins on it’s fixed inflation rate to 21million BTC. Meanwhile, network adoption continues to grow as billions who live under double digit inflation, are looking for any way to retain their property rights. Those who are looking for stability in an uncertain world, are slowly understanding the importance of a decentralised control structure, and a hard, engineered digital money system. 1BTC = 1BTC
Inifinity? LOL you're kidding right?
So your assumption is that an infinite amount of money will go into it? Over what time frame? Also, what currency? Infinite USD? Or if not money, then infinite "value" such as work and energy?
It's like saying that NZ has a potentially infinite GDP in the long term. Technically might be correct, but also completely meaningless.
Just think about it. If billions will buy BTC and the value goes to 'infinite', will everyone get free yachts? Or how does it work? If the value is infinite, one satoshi will have an infinite value too.
People are only in it to make money, its not a store of wealth.
Approx 85% of BTC are long-term holdings and not on exchanges. The price action represents those "in it to make money." The more that the latter shifts to the hands of those of the former, the much higher the price should go.
But I think you're kind of missing the point. The "price" is represented by different factors. Two important being the disintegration of the purchasing power and value of fiat.
So what do you think those 85% are in it for, if not to make money? A long-term holding is still done with the goal of making money.
The "price" is represented by different factors. Two important being the disintegration of the purchasing power and value of fiat.
If that's the case, why hasn't BTC's price increased significantly this year against the USD? Since USD is being "disintegrated" as we speak...
People haven’t figured it out yet. Give it time though, and they won’t have a choice. Why would anyone store their wealth/economic energy in a system where they (the Fed) can inflate the World’s reserve currency by 40% in the last two years, with no chance of stopping either?
Why would anyone store their wealth/economic energy in a system that can be cloned, copied, reimplemented under a different name at any point? BTC is basically an algorithm applied on a bunch of machines. Just like the banking system. The value is in the infrastructure and the widespread acceptedness (what you're also hinting at). The banking system already has it. BTC can be replaced by other cryptos, new or existing ones. BTC isn't special.
You’d be right if you were talking about the network several years ago before it ate the POW competition. The next closest POW blockchains are failed forks (BCH and BSV) and they are orders of magnitude smaller. Much the same as the TCP/IP protocol won the race and we built the internet on top. The same is happening with Bitcoin and the lightning network.
If that's the case, why hasn't BTC's price increased significantly this year against the USD? Since USD is being "disintegrated" as we speak...
As I mentioned, the price is set at the margins. But the vast majority of it doesn't move. Asking why the fiat price is lower at point A than point B is irrelevant in my opinion.
So while the BTC price might be lower today than at the equivalent last year, it's also approx 700% higher than the same day 2 years ago.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.