Here's our summary of key economic events overnight with news markets are having second thoughts after yesterday's across the board surges.
First, American mortgage applications fell rather sharply last week, and mortgage interest rates rose sharply too. These shifts are undoubtedly related.
Perhaps they are taking a toll on new home sales, which fell unexpectedly in February. A bounce-back from a weakish January was expected but didn't eventuate. The median price of a new home in the US fell to US$400,000 (NZ$575,000) indicating the market is shifting to less expensive units.
The US Treasury auctioned a 20 year bond today, and event that was well supported even without much Fed activity. They sought US$19 bln and were offered US$47 bln. The median yield rose from 2.33% at the prior event (five weeks ago) to 2.60% this time.
Singapore's inflation rate rose to 4.3% in February, a rise from 4% in January and a new nine year high for them.
Taiwan's industrial production is staying very elevated and was up +10.1% in February, impressive because this is a month with extra holidays for them. Those holidays didn't boost retail sales there however.
In China, the country’s agriculture minister said last year’s record-breaking floods have created “big difficulties” with food production, especially for wheat. The drive for food security apparently isn't yielding results. Rising demand has pushed imports of corn, soybeans and wheat to record levels, making Beijing increasingly vulnerable to trade tensions and supply shocks. At the same time, climate change-induced disasters have caused widespread crop damage and shrunk the amount of arable land, making it harder to boost local production.
China is also increasingly concerned about energy security.
In Thailand, they have effectively banned the use of cryptocurrencies as a means of payment, saying the wider use of digital assets threatens the nation’s financial system and economy.
As you might expect, the March survey of European consumer sentiment has turned quite dark. The security situation in Ukraine has had a sharp major impact on how people in the EU see the future. A sharp shift negative was anticipated, but the actual level is lower again.
In the UK, they reported their highest inflation rate - 6.2% pa - in 30 years.
In Russia, some brave officials are resigning top Kremlin positions - or want to. But they are second-tier, not inner-circle officials. They include an ambassador and the central bank boss.
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The UST 10yr yield opens today at 2.31% and a -7 bps correction from this time yesterday after yesterday's jump. The UST 2-10 rate curve starts today unchanged at +20 bps. Their 1-5 curve is however flatter at +82 bps. Their 30 day-10yr curve is little-changed at +218 bps. The Australian ten year bond is back down -8 bps at 2.69%. The China Govt ten year bond is unchanged at 2.85%. And the New Zealand Govt ten year is up further, up +4 bps at just on 3.36%.
On Wall Street, the S&P500 has opened lower, down -0.6% in Wednesday afternoon trade. Overnight, European markets all fell about -1.3%, except London which was down only -0.2%. Yesterday, Tokyo ended up a very strong +3.0%. Hong Kong rose another +1.2%. Shanghai ended up a minor +0.3%. The ASX200 ended its Wednesday session up +0.5% while the NZX50 dropped a hard -1.2% as market leader FPH shed -7.5%.
The price of gold starts today at US$1934/oz and up +US$14/oz from this time yesterday.
And oil prices are up strongly today, up by +US$5.50 to US$113.50/bbl. And the international Brent price is up to just on US$117.50/bbl. New restrictions on buying Russian oil are driving the rises.
The Kiwi dollar will open today firmer again, now at just on 69.6 USc and a new four month high. In fact, our currency has now appreciated +4% since the start on the month and that is a lot. Against the Australian dollar we are down at 92.9 AUc while the Aussie dollar makes even bigger gains. Against the euro we are up at 63.3 euro cents. That all means our TWI-5 starts today at just at 74.9 and a new four month high.
The bitcoin price is virtually unchanged from this time yesterday at US$42,549. Volatility over the past 24 hours has been modest at +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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72 Comments
And oil prices are up strongly today, up by +US$5.50 to US$113.50/bbl. And the international Brent price is up to just on US$117.50/bbl.
Hmmm - the front month (spot) Brent contract
Rouble firms past 100 vs dollar after Putin announces gas currency switch
"I think you’ll see a huge backwardation and I do think you’ll see $150 this summer."
Historically, once the Russians get their balance back, they become a lot more effective. Logistics and tactics will improve. As the soldiers resign themselves to waging war they start to embrace it, an esprit de corps develops, an immunity to shock, carnage and bloodshed, perhaps a certain sort of pleasure in destruction. The norms of civilized life will be discarded. There is a compelling reason to win too, as the victors will write history. Whether they are viewed as heroes or monsters depends upon it.
There is no evidence of this. Russia is fighting on four axis, at least three are fully stalled. Ukraine is waging counter attacks around Kyiv (on both western and eastern sides) and near Kherson. The counter attacks near Kyiv are threatening Russian supply lines.
NATO estimates 7,000-15,000 Russian troops KIA and 30,000-40,000 total casualties including wounded, desertions, and POWs out of a force of 150,000-200,000. There are reports of Russian troops looting (due to a lack of food), deserting, and suffering frost bite due to a lack of winter equipment. There are also reports of a lack of modern tourniquets with the troops only having basic rubber band style options. Nothing demoralises troops more than bad medical care and leaving bodies behind.
The Ukrainian airforce is still flying and denying Russia air superiority. The first of the latest shipment of US military supplies has arrived and includes more stinger missiles, javelins and armed drones. Germany has also recently provided 2000 anti tank munitions.
Whatever way you look at it militarily, it is not a convincing display by the armed forces of Russia. By comparison German forces, largely horse drawn logistically, took the then Kharkov in just four days in October 1941. After the Soviets had retaken in May 1942, completed in sixteen days at terrible cost, the Germans returned in February 1943 and recaptured in a month. No wonder they changed the name! Russians have lived with century after century of tragedy, so too the Ukrainians. Impossible for outsiders to acquire much understanding as to what the history of that has created. Russia has its own way of doing things, so too the Russians.
I've not seen any evidence of what you say here either. Particular that Ukraine is maintaining air superiority.
I have seen a barrage of obviously fake you tube vids.
They are invading a large, populated country. The cities are full of apartment blocks and natural defense points. And lots of civilians they'd rather not kill...
You expect them to just charge in? Or alternatively just park just outside and build up staging points and supply depots (whilst lobbing the occasional shell). Then negotiate.
I've seen footage of the Russians building temp military supply pipelines from the border up to these new staging areas.
No evidence of the Russians being pushed back at all.
You need to think more strategically. You are talking about a country that celebrates the sacrifice of many millions of brave souls during ww2. A few thousand is nothing in a game of princes. Control of the Ukraine (or negotiating so that Nato stays out) is a huge strategic win. It will significantly decrease the amount of border the Russians need to defend against increasing Nato build up along former eastern block countries.
Any why not? its not like anyone (west) is going to directly challenge this, few sanctions and arms shipments aside. The US doesn't need oil anymore and EU doesn't have the capacity to intervene.
This will drag on for years.
Wars are won and lost on logistics. Has Napoleon said " an army marches on its stomach". Truck logistics of the Russian armed forces only allow for about a 120 mile range from Forward operation points. This means that the Russians can only move so far before the troops at the front run out of supplies (food, ammo and gas). In the South the Russian army pushed up to this maximum before halting. Now they have to establish supply lines and set up new Forward operating bases before the next push.
The UK and USA report daily on the status of the war - those reports usually include an update on the air situation which is that Ukraine is still able to fly missions, that the Russian’s fly more missions, but that many missions remain within or close to Russian territory.
Here is a recent article talking about the missions the Ukrainians are flying.
Ukraine’s fighter pilots have taken the battle to an enemy that has 'five times more planes'. Weeks into the invasion, they're defying the odds.
https://www.stuff.co.nz/world/europe/300548388/outnumbered-five-to-one-…
This group produces a good daily map of the situation. This is from yesterday so look for todays update soon which I expect will show more action around Kyiv.
https://twitter.com/thestudyofwar/status/1506398415890038788?s=21
You need to consider there are many cities in Ukraine and in a month, how many cities has Russia captured? They are still working to level Mariupol which is Ukraines like 10th largest city or something. Kharkiv is predominantly Russian speaking and on the border with Russia and is still controlled by Ukraine - Russia just bypassed it because it was too hard.
Every western expert I’ve seen has said before and after the war that the number of troops is insufficient for an occupation and a major stretch for an invasion. The last month proves that is true. The fact that Russia has not moved into cities and taken them (versus bombing them) shows they know they lack manpower. Losing 30,000-40,000 troops to attrition is not going to help their manpower problems.
There is no way out of this for Putin. Even if Zelensky surrendered today, Putin wouldn’t have the manpower and resources to control a country as big and defiant as Ukraine.
Here is some confirmation from The US of the counter offensive east of Kyiv:
’NEW: Ukraine's counteroffensive near Kyiv has pushed Russian forces ~35 mi to the east of the capital: senior U.S. defense official
Russia was ~20 mi to the east of Kyiv earlier in the week. Ukraine has begun to take back territory from the Russians this week, officials said.’
And confirmation that Russia still has not achieve air superiority:
’Russia has not achieved air superiority over Ukraine a month into the conflict: senior U.S. defense official
Russian pilots remain reluctant to fly in airspace covered by Ukrainian surface-to-air missiles, the official said.’
UK defence intelligence update also confirms Ukrainian counter offensive:
https://twitter.com/defencehq/status/1506753922224074756?s=21
it’s an image so you have to click on the tweet.
the British consider it is possible Ukraine could encircle Russian forces which is more bullish than other sources I’ve seen.
Based on what Zac?
I think the true capability of the Russian military has been exposed here. Strongmen fear other capable leaders coming up. Putin will have surrounded himself with 'Yes men'. Russia has a history of liking 'Strongmen' but in the pissing contests that that produces the fights are to the death and only the strongest rules. To be secure at the top Putin has ensured incompetent leadership in the military and now reaps the rewards for it. Sending his Generals to the front line to have them take charge is only getting them killed (five so far according to some reports), and ignores the calibre of those he chose to lead the military. It seems that Putin may have been sufficiently efficient in removing potential rivals, or at least preventing them from having the necessary power and influence to be secure in his position. That means that the only real threat to him will be a peoples revolt, and the police have already demonstrated they are ready to enforce his decrees.
waymad,
Precisely. Here is a quote from a report The Mining of Metals and Limits to Growth prepared by the Geological Survey of Finland. "It is apparent that the goal of industrial scale transition from fossil fuels into non-fossil systems is a much larger task than current thinking allows for. To achieve this objective, among other things, an unprecedented demand for minerals will be required."
Second quote; "Mining of minerals is intimately dependent on fossil fuel based energy supply. Like all other industrial activities, without energy, mining does not happen".
EROI and its long-term decline is relevant here.
There's nowhere left to drill. Discoveries peaked in 1964, and you cannot produce what you have not discovered.
https://oilprice.com/Latest-Energy-News/World-News/Oil-Gas-Discoveries-…
'the volume of oil and gas discoveries globally is set to reach 10 billion barrels of oil equivalent (boe) this year, avoiding a repeat of the multi-decade low during the previous crisis in 2016, Rystad Energy said in a new analysis on Monday. In 2016, just 7.7 billion boe were discovered globally.'
We went through 35 billion in 2020 - a covid-restrained year........
Cue Profile with some obfuscation.......
That's true in the long-term, but in the short-term there are a few billion barrels a day being held back by OPEC, and, bizarrely, by US oil companies who are basically saying 'no' to increasing supply. Why? Because shale fields are only viable at prices of around $60 per barrel and shareholders / investors lost a fortune when oil prices dropped below this. So, now the investors want their dividends, and that means keeping supply low and prices high.
All of this just demonstrates to me that we should not be leaving energy to the markets - nationalise and decarbonise the lot for the good of the planet and our security!
A few million being held, I think you mean. And not 'a day', just held. So they can be dribble-released, to take up a slack for a rate-determined time.
Nobody is holding back production; most taps are wide open and all fields are depleting, exporters are turning importer.........
Bodes not well for debt. Luckily a financial journalist has recently assured us that for every dollar loaned out, there was a dollar deposited. I hadn't heard that nonsense since the Post Office fellow circulated through schools, telling us our shilling would end up as a million pounds............
Peddled hype aside, there isn't enough global energy left to underwrite the extant debt, at currently-understood $$$$ values. Hence inflation taking off.....
"There's nowhere left to drill" - despite proven oil reserves going from 300 billions barrels when the Club of Rome was written to 1.6 trillion barrels today.
US CPI vs M2 money supply
https://twitter.com/Mark_J_Perry/status/1505261617621127172/photo/1
Hydrogen may be an alternative as usable in IC Engines and Fuel cells for Electric vehicles - Honda/Toyota& Ford all developing the technology. These companies are renowned for forward think and well made products so I respect their view that Hydrogen is a worthy future fuel.
What happens when that battery pack in your car runs out in the middle of nowhere? I assume a Hydrogen fueled vehicle could be refuelled and on the way in considerably less time, assuming the safety issues around filling are sorted.
From what I have read, 1kw = 0.8kw for battery vehicles but 1kw = 0.4kw for Hydrogen. But it's generally much easier to store surplus energy in containers than storing electricity in batteries......So while you might need twice as much solar panels for Hydrogen than Battery Electric for example, the waste energy can be harnessed and stored in a usable product.
‘We’re going back to a USSR’: long queues return for Russian shoppers as sanctions bite
https://www.theguardian.com/world/2022/mar/23/were-going-back-to-a-ussr…
I enjoy this channel where they ask Russians about day-to-day life:
Meanwhile average americans are signing a petition to save the triceratops
Try this old you-tube link on Ronald Reagan telling jokes from and about the Soviet Union. https://www.youtube.com/watch?v=mN3z3eSVG7A
They might be heading this way again.
If only China had the foresight like NZ to plant their wheat field in pine trees they could staved off their "climate change" record floods that didn't kill 2-3 million people like in 1931.
"in providing an example of how satellite-based measures of CO2 can complement field experiments
to ensure external validity of the effect of CO2 on agriculture and ecosystem functioning at
a large scale. Second, our finding that 10-40% of historical crop yield improvements in the
US are attributable to CO2 fertilization has implications for the literature on the drivers of
agricultural productivity, which can have very large economic spillovers (Gollin et al. 2021)"
https://www.nber.org/papers/w29320
I generously pay $15/tank to the landed gentry/foreign investor - to plant pine trees on farmland, to stop floods in China, take the climate back to the Little Ice Age, make our food exports less competitive, and our 4x2's more expensive domestically. You're welcome.
Yip - until the editors of this site stop tolerating this sort of climate change denial rubbish (Stuff.co.nz managed it so why can't they?) they won't be getting a penny from me. Astonishing to think - if you posted something on WW2 Holocaust denial they would remove it in an instant (quite correctly) - yet all varieties of climate change denialism find a home here (despite daily evidence of the planetary holocaust to come - three days of East Antarctica temperatures 40C above normal anyone?). They made a big song and dance a few weeks ago about removing a ton of the anti-vax posting that was taking place in the comments on the basis that it was pseudoscience nonsense - well wake up editors, what the hell do you think the climate change denialism is?
Look at this dude wanting to live in his bubble and not discuss anything that doesn't conform to his world view...
A decent proportion of the antivax nonsense is actually getting proven to be more correct as time goes on as well as the "science" changes...
But you are welcome to "Trust the science" if you like.
Try reading more widely whiner. Posting papers from the NBER on a financial website isn't akin denying 6 million Jews were systematically exterminated in WW2.
Rest easy on Antarctic mate, it's got your back.
Wider reading from that Holocaust denying Nature magazine.
"The Antarctic continent has not warmed in the last seven decades, despite a monotonic increase in the atmospheric concentration of greenhouse gases."
In this study, we’ve identified Antarctic orography as one of (likely) several factors that reduces the magnitude of CO2-forced warming over the Antarctic continent. Further factors may also be responsible for a weak climate change signal over the Antarctic continent, including heat uptake by the Southern Ocean37
So basically the elevation of Antarctica and the large South Ocean slows Antarctica's warming in response to CO2. Good to know Profile. Why don't you post about the Artic next.
Why would interest.co.nz want to be anything like stuff?
And another thought provoking article fwiw https://www.rationaloptimist.com/blog/how-global-warming-can-be-good/
Yip - until the editors of this site stop tolerating this sort of climate change denial rubbish (Stuff.co.nz managed it so why can't they?) they won't be getting a penny from me... Well wake up editors, what the hell do you think the climate change denialism is?
Sorry what? You don't even pay a penny and you want to complain that only IF they do what you want, you won't contribute financially to them doing what you want? Privileged and entitled much?
“ROBINHOOD TRUTH & CONSEQUENCES
GameStop, the meme stock that newbie investors used to show the pros how smart they were, has reported a surprising loss after trading closed on Wall Street - and is due to open at a big discount in Friday trading there. Recall it traded at less than US$20/share before the greater-fool bug got it up to US$325 in January 2021. Earlier today it closed at US$87.70 and in off-market trading it has slumped further to under US$80. It might be fun to watch what it does in tomorrow's trade. The music is about to stop, it seems. (Or in Warren Buffet's analogy, the tide is going out.). 18/03/22
Well that statement aged well.
Here's an amazing(?) video to summarise the GME story:
https://www.reddit.com/r/wallstreetbets/comments/tldlqk/gme_after_the_earnings_dip/
I blew some money on Gamestop but was just a little too late. I fancied sticking it to a hedge fund so was prepared to loose a little. I think the same joker "in charge" of the Gamestop action is/has tried it on silver as well. Probably came unstuck there as well but never followed up on that story. Probably too young to know about the Hunt brothers.
I have learnt so much along the way.
The amazing thing (that the media is not reporting), is that retail buyers know there are too many synthetic shares, so they are direct registering (DRS) their shares with Gamestop's transfer agent. The last earnings report showed 10.8m shares registered, with thousands being DRSd daily. From SEC filings, retail know the free float and know it won't be long before the entire free float is registered. What will all those SHFs and brokers who are lending out shares do then? The borrow fee is going up daily as the supply of shares is drying up.
Thanks for that slight(!) $5.1b loss Robbo. “However, the changing values of the bonds from when they were bought will cause a slight loss for the Crown, a loss that is not covered by lower cost of borrowing. This cost was estimated to be $5.1b by Treasury.”
https://www.nzherald.co.nz/nz/politics/treasury-warns-new-zealand-has-m…
Duh, even the dumb gardener( meself) remarked on that lilkelihood to friends ,when they started. So obvious that long-term interest rate rises were going to devalue bonds . And so much more likely than going zero or negative.
How is it an " oops" when it was so likely to happen?
Is someone accountable for another 5 billion ( on top of other wasted billions) on the Tax payers long term Tab?
Who is accountable?
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