Here's our summary of key economic events overnight that affect New Zealand, with news the week is ending it a bit of a muddle even as investors push equity prices up sharply.
Markets are unsure of what to make of today's signals. In the US it was reported that Republican negotiators walked out of a debt ceiling meeting. On the other, Fed Chair Powell said that because of stress in the banking sector, it might be unnecessary to raise rates to curb inflation.
The debt negotiations were reportedly going well with no key sticking points - but House Speaker McCarthy intervened to call a 'pause' and calling the Whitehouse negotiators 'unreasonable'. McCarthy was not at the negotiating meeting. It just seems silly theater, designed to cause maximum stress and damage. But still, markets think it will get resolved as it always does.
In Canada, data for March retail sales was weak coming in only +2.4% higher in value terms than year ago levels but falling from February levels. But in volume terms, retail sales were up 1.2% in Q1-2023, so the March result is a bit of an aberration. The same data shows that things will likely be back with a good +2.5% pa annualised rise in April from March. The falling petrol price is causing these signals to be a bit odd.
In China, their currency continues its devaluation, falling well past 7 to the US dollar, and now up to 4.43 to the NZD. From the start of April, the Chinese yuan has devalued -2.3%. Against the NZD the devaluation is -3.0%. It may have been more if it hadn't raced to put in place direct deals with many developing countries, oil exporters, and Russia. These effectively hide demand and supply transactions from the open market. That opacity is holding the yuan from falling further. At some point the non-Chinese traders will tire of having a discount imposed on them.
And it isn't helping that foreign buyers seem to be shunning the important Canton Trade Fair this year.
Japanese inflation came in at 3.5% in April, well above the expected +2.5% and above March's 3.2%. Japanese inflation is settling in above the Bank of Japan's 2% target rate. That's twelve consecutive months higher than that target.
And perhaps we should note that there is a good chance that Pita (Tim) Limjaroenrat will likely become the next Prime Minister of Thailand, having led the Move Forward Party to an unlikely front-running and winning position in their recent elections. As a young student, he was sent to Hamilton for his high school years, so there is a Kiwi connection. He later graduated from Harvard. The final decision about whether he actually gets the Prime Minister job rests with the Thai military who have to consent, and they will find that hard given their candidates too a heavy drubbing at the hands of Move Forward.
German producer price inflation rose +4.1% in April from a year ago, the smallest increase since April 2021. The annualised rate between March and April was even lower.
Australia is feeling left out of inbound travellers from China. There were 26,810 short-term visitors from China in March compared to 124,370 in March 2019. This semi-official snub has a flow-on impact on New Zealand where only 7119 short-term visitors from China arrived here compared to 41,063 in March 2019. China may be punishing Australia, but we get blowback too.
The UST 10yr yield starts today at 3.69%, and up another +3 bps from this time yesterday and a two month high - and up +25 bps for the week. Their key 2-10 yield curve is a bit less inverted at -59 bps. Their 1-5 curve is a bit less inverted too at -127 bps. But their 3 mth-10yr curve is little-changed at -179 bps. The Australian 10 year bond yield is now at 3.63% and up another +6 bps. That is a +24 bps rise in a week. The China 10 year bond rate is unchanged at 2.73%. And the NZ Government 10 year bond rate is at 4.46% up another +10 bps from yesterday and up a massive +40 bps in a week.
Wall Street has opened its Friday session with a -0.2% dip on the S&P500 but heading for a weekly rise of +1.6%. Overnight European markets were all up +0.6% excpt London which was up a lesser +0.2% on the day. Yesterday Tokyo closed up another respectable +0.8% to end its week up a massive +4.3%. Hong Kong fell -1.4% on the day to end the week down -0.4%. Shanghai was down -0.4% in its Friday session to end up +0.4% for the week. The ASX200 closed its Friday session recovering +0.6% for a weekly rise of +0.3%. And the NZX50 ended up +1.0% on Friday to be +1.3% ahead for the week.
The price of gold will start today at US$1976/oz and up +US$19 in a day, but down -US$35 for the week.
And oil prices are unchanged from yesterday to be just over US$71.50/bbl in the US. The international Brent price is still just over US$75.50/bbl. These levels are +91.50/bbl higher than this time last week.
The Kiwi dollar is up +¾c against the USD from yesterday and now just on 62.8 USc. And it is up a full +1c in a week. Against the Aussie we are up +½c at just under 94.5 AUc. Against the euro we are up nearly +½c too at 58.1 euro cents. That means the TWI-5 is up to 71.3 and up +50 bps from this time yesterday and up +120 bps in a week.
The bitcoin price is lower today, now at US$26,882 and up +1.5% from this time yesterday. Bitcoin was at US$26,359 a week ago, so very little change since then. Volatility over the past 24 hours has remained modest at just on +/- 1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
35 Comments
China won't get close to their goal of reserve currency at this rate
Any idea where the photo is taken
My pick is a ski resort in the Swiss Alps.
Thats Ruapehu the new building after last one burnt down.
Quite an impressive view.
Knoll Ridge Cafe building... looks superb, hope it wasn't too expensive 🍻
Maybe it was - RAL is in receivership
That's what happens when you award your tenders directly to a director's company for an outrageous price, plus continued pay increases despite poor peformance.
As long as right processes are followed like declaring an interest and not involved in the decision, then could be ok
No transparency, no reserve currency
China may be punishing Australia, but we get blowback too.
They might be, but what are Chinese outbound tourist numbers like in general, in early 2023?
Methinks their travel patterns will take more than 3 months after coming out of a nationwide lockdown to recover.
Fair point Pa1nter, its all relative and the comment "seems" skewed or biased, take your pick
I question if rates will be dropped like they were post-GFC even in the case of a recession. Or at least I highly doubt that we will see a repeat of the period from 2000-2021 where rates were dropped and housing was enabled to explode much more quickly than real wage growth. There is just too much widespread awareness now of what a problem this was for many people and the political consensus to return to this status quo would be fragile at best.
If rates do drop I suspect that other legisilation and policies around DTI would be implemented to prevent another housing market boom. It just isn't sensible or sustainable policy to have the price of housing so heavily outstrip real wage growth.
If real estate is to be prevented (low DTI) from underwriting the credit expansion what then will be used for the required collateral?
Swaps higher...........
Why is nobody commenting on this? Pretty important if you have a floating or commercial mortgage.
And perhaps we should note that there is a good chance that Pita (Tim) Limjaroenrat will likely become the next Prime Minister of Thailand, having led the Move Forward Party to an unlikely front-running and winning position in their recent elections.
2 years ago I warned about the ongoing political capture of #Thailand by the US government & documented US interference in Thai elections. I warned about the eventual transformation of Thailand into a US client state & the orgs involved... Link
The credibility and independence of central banks around the world is at risk if stubbornly-high global inflation rates are not bought under control, the head of the Bank for International Settlements has warned. The BIS, often referred to as the central bankers' bank, has been calling for a robust attack on inflation over the last year..."If trust evaporates, the capacity to make effective public policies disappears," Carstens said, explaining that it was the first time younger generations in many countries had experienced inflation
https://www.reuters.com/markets/inflation-fight-risks-central-banks-cre…
I see they've wheeled out the reason we are all here, Ben Bernanke and his lunatic past policies, to combat Powell's initiatives.
https://www.thestreet.com/investing/powell-bernanke-talk-fed-policy-mar…
From the start of April, the Chinese yuan has devalued -2.3%. Against the NZD the devaluation is -3.0%. It may have been more if it hadn't raced to put in place direct deals with many developing countries, oil exporters, and Russia. These effectively hide demand and supply transactions from the open market.
EU calls out India on Russia sanctions
Apparently, differences cropped up at the meeting over India’s purchase of Russian oil at discounted price and exports of petroleum products to the European market. External Affairs Minister S Jaishankar was put on advance notice by Borrell who is known to be a politician with a colonial mindset — he recently described Europe as a garden that is threatened by the “jungle” (Global South) — when he resorted to megaphone diplomacy via an FT interview on the eve of the Brussels meeting that he’d raise with Jaishankar that “we (EU) will have to act” against India as it has turned into “a centre where Russian oil is being refined and by-products are being sold to us.
Did you see the press conference on this? The Indian Minister basically read out the EU rules verbatim, which clearly state that Russian crude that has been through substantial processing in a third party country (e.g. in India, being turned into fuel) is no longer subject to any restrictions. Embarassing.
Yes.
Mixed signals and world volatility are exactly why we need to "balance our books" now. Given where we are located and what we trade we are exposed to any event in the world that causes confidence to collapse - and while Robbo is busy telling us that the govt's books are sound that only applies if the world is a benign place which currently it is not
a 1/4 of a trillion in debt is not insignificant nor are the external deficits we are running - which are being ignored and treated as unimportant - until suddenly they will no longer be so
I have zero confidence that the current leadership troupe even recognise the issue let alone know how to address it
Seems Google finance is having a moment: https://www.google.com/finance/quote/USD-NZD?sa=X&ved=2ahUKEwiwyovDz4L_…
Or is there something going on?! (I'm going with a glitch)
German producer price inflation rose +4.1% in April from a year ago, the smallest increase since April 2021. The annualised rate between March and April was even lower
I might have missed it, but worth noting that NZ producer price inflation in March came in at 4.7% - the smallest increase since March 2021. The annualised rate for Q1 2023 was an on the floor 0.9%.
Amazing that our little central bank holds such sway over German prices, or maybe, just maybe, we live in a global economy and our prices blow in the wind of international trade?
Do you think we should have kept the OCR low? What about our tight labour market and I'm pretty sure we're experiencing a wage price spiral. The higher OCR should sort both of those out.
The OCR was too low for too long without the necessary controls in place to stop credit flowing to speculative activities. But, 500 points in 18 months is reckless stupidity.
Now, you're pretty sure we're experiencing a wage price spiral? Maybe look at what the numbers are telling us instead. Wages are borderline irrelevant for the biggest sectors of our economy at the moment (though they played a part a year ago). The biggest cost burden now for businesses up and down the country is interest rates - the cost of loans, revolving credit, commercial property mortgage etc. The biggest risk we now have is an interest rate / price spiral. If RBNZ have any sense they will back down and let the price moderation that is already being experienced on imports wash through the economy.
I agree interest rates were too low for too long, that's partly how we got into this mess. I believe interest rates going up will help and as everyone was fooled about inflation being transitory, they've had to play catch-up. If they just raised the OCR a couple of percent our housing market would still be going up and our inflation would be higher than now, as we wait for our imported inflation to drop.
I work in one of the biggest sectors and we're struggling to retain staff. Wages this year will be going up, on average, at a rate close to inflation. They're the numbers I can see. There needs to be more unemployment to take the steam out of the market.
Some companies don't have high debt, some don't have any at all, they'll outperform those that do.
If your wage increases are not matching price increases then you are slowing inflation down.
What matters for prices overall is total interest costs, not whether business A or B has debt or not.
Slowing inflation down? From, say, 6% to 5%, not good enough.
With your second comment, that sounds very macro / text book. I disagree. In a high interest rate environment surely businesses that are structured with less debt are going to perform better than those with more. It's similar to the housing market.
Imagine being a good person for over 90 years and then go a bit mental, only to have a dumb-arse fire at you. The 95 year old was approaching officers using her walking frame. Only in Australia
NSW Police use of Taser on 95-year-old Clare Nowland goes against police force’s handbook
https://www.nzherald.co.nz/world/nsw-police-use-of-taser-on-95-year-old…
Someone made a tax receipt thing. Credit to Walter Lim.
Chuck in your income and spending to see where your taxes went.
GST calculation wrong
Thanks for posting
Probably requires people to know what their spending is sans non-gst expenditures like rent, mortgage, etc.
Orr was on the liberal interest rate agenda well before the big debt print of 2020. His 0.5% reduction in August 2019 showed where his head was at, 6 months before the covid crisis in March 2020. For me, he was showing off his liberal leanings to his new boss FM Robertson which worked a treat long term, as he got another 5 year gig as RB guvna, rubber-stamped by guess who - yep, that Robbo bloke again.
Be very interesting to know what happened to the MPC member's property portfolios over the last 5 years, and when they finally divested themselves of the debt...
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