Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
BNZ raised its floating rate by +20 bps, but only up to where most of its rivals already were. More here.
TERM DEPOSIT/SAVINGS RATE CHANGES
None today.
LABOUR MARKET GROWS STRONGLY, BUT SIGNS OF COOLING
The unemployment rate rose to 3.6% in June from 3.4% in March as the workforce hits record size. 25,000 more people were employed in June than March, +100,000 more than a year ago. The spike coincides with a surge of over +72,000 migrants over the last year. Labour force participation has lifted again with the higher migration, now at 73.2%. But the labour market may be beginning to cool as employers fill long-standing vacancies and cash-strapped households work more hours. The number unemployed rose +4,000 in the quarter.
DEEP SHADOW
Car sales fell sharply in July in the shadow of the major changes to the clean car discounts. Buyers responded to the tax subsidies both sides of the ending of this program. Petrol vehicles saw the largest reduction in registrations, down -54% below the average of the first five months of 2023. All vehicle types also saw declines, albeit of a less severe magnitude, with diesels down -38%, full BEVs down -33%, PHEVs down -19%, and non plug-in hybrids down -17%.
DOWNSIDE RISK GROWS
WMP prices slumped sharply overnight, but other dairy products didn't. But the WMP component is the dominant part of the auction offerings. There is now downside risk to the farmgate milk payout for the 2023/24 season, even if we are only just starting it.
BALANCING THINGS UP
The retirement village industry is facing some fairness changes. These include stopping fees after a unit is vacated or shortly after, introducing a partially standardised occupation right agreement. replacing the current dispute resolution scheme, requiring operators to meet the direct costs of maintaining and repairing operator-owned chattels and fixtures, requiring disclosure documents to include more information on transferring within a village to aged residential care, and introducing a mandatory timeframe for repaying a resident’s capital when they move out, and/or requiring an operator to pay interest if the repayment is not made after a certain time.
BANK STRIKE
First Union says that 95% of its members who work at Westpac will be striking next week for higher pay than offered in their negotiations. There are 800 members at Westpac. Westpac's total staff is ~5000, so about 15% of their workforce will be striking, 85% not.
TOUGH RETAIL TRADING
Consumer spending lifted a little across the country ahead of the Matariki long weekend, according to Worldline (Paymark) payment network, but otherwise retailers continued to face tough trading conditions in July.
TEACHERS WIN BIG PAY INCREASE FROM LABOUR
The Labour government has agreed to support an arbitration panel’s recommendation to lift secondary teachers’ base salaries by +14.5% by the end of 2024. Beginning teachers will start with a salary of $61,329 in 2024 and the top band will be $103,085. This would be up from $46,889 and $75,949 at the start of 2017. This will mean cutting $374 mln from other parts of the education budget and pre-committing another $306 mln from the Budget 2024 allowance.
WANT TO INVEST IN CREDIT CARD DEBT? THE MARGINS ARE LARGE
Humm Groups Q Card receivables are to be securitised and sold to investors. There will be $152 mln available. The best of them attract a margin of +145 bps over the 1 month BNBM base. The worst of them will have a +925 bps margin. The term is two years. The 1 month BKBM rate was 5.61% recently. But these total rates will be still far below what the Q Card charges its clients (25.99%).
DOWNGRADED
In the US, credit rating agency Fitch has cut the US Federal Government one notch from AAA to AA+, echoing a move made more than a decade ago by S&P. Moody's rates the US Aaa. Tax cuts and new spending initiatives coupled with multiple economic shocks have swelled budget deficits, Fitch said, while medium-term challenges related to rising entitlement costs remain largely unaddressed. The White House isn't happy. The Fitch move didn't seem to have any immediate impact on bond yields or the currency. As it came after equity markets closed we will have to wait until tomorrow to asses any Wall Street impact, but the S&P500 futures barely moved and the small move they did make was 10 bps higher.
SWAPS A TAD FIRMER
Wholesale swap rates are probably slightly firmer today. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +1 bp at 5.67% and now +17 bps above the 5.50% OCR. The Australian 10 year bond yield is up +1 bp from this time yesterday at 4.03%. The China 10 year bond rate is unchanged at 2.69%. And the NZ Government 10 year bond rate is up +2 bps from this morning at 4.79%, and still higher than the earlier RBNZ fix which was up another +5 bps bps at 4.73%. The UST 10 year yield is up +6 bps from yesterday at 4.03%.
EQUITIES FALL EVERYWHERE
The S&P500 ended down -0.3% in Wall Street trade in their Tuesday session. Tokyo has opened its Wednesday session down -1.2%. Hong Kong is down -0.8%. Shanghai is down -0.3%. Widespread disappointment in Beijing's economic policy responses is undermining equity markets. The ASX200 is down -0.7% in afternoon trade. The NZX50 is down -0.1% in late Wednesday trade.
GOLD SOFTER
In early Asian trade, gold is at US$1947/oz and down -US$13 from this time yesterday. It closed earlier in New York at US$1944/oz and earlier still in London at US$1947/oz
NZD FALLS
The Kiwi dollar is down -¾c, now at just on 61.3 USc. Against the Aussie we are firm at 92.6 AUc. Against the euro we -¾c weaker at 55.7 euro cents. That means the TWI-5 is up slightly to 70.2.
BITCOIN BACK ABOVE US$29,000
The bitcoin price is up +2.9% from this time yesterday, now at US$29,784. Volatility has been moderateat just over +/- 2.5%.
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65 Comments
"The United States faces serious long-run fiscal challenges. But the decision of a credit rating agency today, as the economy looks stronger than expected, to downgrade the United States is bizarre and inept"
- Larry Summers.
But then you look at the following chart:
https://pbs.twimg.com/media/F2fZdETW4AA1J4I?format=jpg&name=medium
Compare the interest payments you linked (or here) to federal tax receipts. Interest is rising to around a third of revenue, that can't end well.
For comparison in NZ it's around 5% of tax revenue as our debt levels are much lower and taxes higher
The federal tax receipts chart is interesting that you link above. There is a very high correlation between falling tax receipts and recession (which appears obvious when you think about it) - and as it stands US tax receipts have peaked and are falling.
Recession here we come (or not?) - even though Powell and the Fed have just come out and said they are no longer forecasting a recession?!
Borrowing to keep the lights on is hardly a sign of strength.
I wonder how much of this debt had to be accumulated because the US has been running ultraloose corporate welfare programmes for decades. How much do tax havens such as the Caymans and Ireland owe their economic success to the US alone?
Agree.
And yet savings need to be found to address the government’s deteriorating position:
https://www.nzherald.co.nz/nz/politics/public-service-bosses-called-in-…
suggestion - cut the Wellington bureaucracy in half.
Likelihood of happening under current government- nil
likelihood of happening under NatAct - quite good?
Interesting moves for BTC and Microstrategy today (and no I still don’t have enough BTC or MSTR stock)
Michael Saylor announces not only have they bought even more bitcoin, they are now selling stock to buy $750 million more bitcoin (which will prop the price up substantially).
What is interesting is that MSTR is up 200% this year vs a mere 80% for BTC. So it seems the appreciation in price of BTC boosts MSTR up by multiples. This is true for most other crypto stocks – bitcoin miner stocks are up as much as 700% this year.
So until the correlation is properly aligned, MSTR can keep buying btc, boosting its stock by a much larger multiple and then selling stock to buy btc.
Sounds like some like Luna type play but as long as trade-fi stock buyers value crypto stocks more than crypto itself, the strategy could
Interesting moves for BTC and Microstrategy today (and no I still don’t have enough BTC or MSTR stock)
Michael Saylor announces not only have they bought even more bitcoin, they are now selling stock to buy $750 million more bitcoin (which will prop the price up substantially).
What is interesting is that MSTR is up 200% this year vs a mere 80% for BTC. So it seems the appreciation in price of BTC boosts MSTR up by multiples. This is true for most other crypto stocks – bitcoin miner stocks are up as much as 700% this year.
So until the correlation is properly aligned, MSTR can keep buying btc, boosting its stock by a much larger multiple and then selling stock to buy btc.
Sounds like some like Luna type play but as long as trade-fi stock buyers value crypto stocks more than crypto itself, the strategy could work
I find this comment interesting: "Michael Saylor announces not only have they bought even more bitcoin, . . . . . (but buying) $750 million more bitcoin (which will prop the price up substantially)."
Why would one announce that if they are going to buy $750million Bitcoin knowing that it will prop the price up? Seems like shooting one's self in the foot . . . and no onus or requirement to declare one's intent.
Reminds me of Bob Jones back in the 1990s(?) talking of how good his company was, which pumped up the share price, and later to declare that at the same time he had sold a substaintial shareholding.
Why would one announce that if they are going to buy $750million Bitcoin knowing that it will prop the price up
This is what you might expect from the banter around the water cooler (if not "Saylor? MST? Who dat"?).
MST has to file a prospectus supplement to the SEC to announce its sale of common stock. This has been done and is subject to approval.
These are serious filings, not Mickey Mouse Club tactics to prop up the price of ol' ratty.
You trying to tell me Bitcoin is regulated?
No. BTC is not a security or run by a company therefore it is not subject to SEC regn. Public companies are regulated. The filing is on the websites of both MST and the SEC.
https://www.microstrategy.com/content/dam/website-assets/collateral/fin…
When someone owns most of a market they can manipulate and control supply and price.
Kind of correct. If most BTC is not for sale, this has some impact on the fiat price of BTC that is for sale. And with increasing demand for something that is scarce, the fiat value usually increases.
Someone can flood the market and wipe out a bunch of minor investors.
Which is why you have to understand what is on- and off-exchange. Now at lowest levels since 2018 (approx 6% of total supply).
https://twitter.com/santimentfeed/status/1668796757009104898
There really is no magical thinking to get around that scenario.
I don't think you understand how Bitcoin exchanges work. For example, if 10 million BTC were placed on global exchanges at USD30K, it would be exhausted when people were prepared to pay those prices. If the price was set at USD10K, it would be swallowed quickly.
Regardless, whales do not use exchanges. They use OTC (over the counter) dealers.
I don't think you understand how Bitcoin exchanges work
I don't think you understand basics about markets, and supply and demand. Market gets flooded, price goes down. Market is constrained, price goes up. Changing the mechanism of exchange changes nothing, whether it's BTC, Diamonds, or Oil.
Shiller was right, a whole bunch of people have lost sight of fundamentals with BTC, and been razzle dazzled by the technical aspects.
Regardless, whales do not use exchanges. They use OTC (over the counter) dealers.
They could use either, depending on their motivation.
Tony Alexander: Where buyers are in a panic about house prices: https://www.oneroof.co.nz/news/44029
'Under pressure and at breaking point': South Auckland landlords are selling up: https://www.oneroof.co.nz/news/44028
Great to see FOMO is back again already, only been calling the market bottom for about a week now. Have to say I'm surprised however because with an election this close the housing market should be in a holding pattern right now. Clearly people think things will be picking up fast after the election, its not just current prices flatlining.
In the US, credit rating agency Fitch has cut the US Federal Government one notch from AAA to AA+, echoing a move made more than a decade ago by S&P. Hmmmm.....
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.” - Ernest Hemingway, The Sun Also Rises
Lol, flat out I'm sure.
What gets me, is that we are seeing a rapid decline in educational standards and outcomes. Teachers are part of this system and it's going backwards.
Time to break up the failing state controlled curriculum? Give schools, teachers and parents more ownership!
Another great piece over at Macrobusiness on the train wreck that is China’s property development sector:
https://www.macrobusiness.com.au/2023/08/evergrande-2-0-warns-chinese-p…
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