Here's our summary of key economic events overnight that affect New Zealand, with news global trade is in the spotlight today.
The run of dairy price rises ended in today's Global Dairy Trade auction today. Overall prices fell -0.7% in USD terms, down -1.2% in NZD terms. The key WMP price fell -2.7% in a key shift, but one signaled by the weekly GDT Pulse events although today's price was actually higher than last week's Pulse result. Keeping the dip limited were rises for SMP, up +2.3% and for Cheddar cheese, up +4.5%. These two suggest better demand from the food service sector, especially in China.
In the US their logistics managers index (LMI) rose and quite sharply, indicating rising demand for these key distribution services, although freight rates actually decreased in this survey.
Meanwhile the US September trade result (for goods and services, that is, on a balance of payments basis) came in with a modest but continuing deficit. Overall exports rose +2.2% which overall imports rose +2.7%. This involved an increase in the goods deficit of $1.7 bln to -$86 bln and a decrease in the services surplus of $1.2 bn to +$25 bln. But still, this is the third lowest trade deficit since 2021.
Last week, the rising retail sales gains evaporated. Their weekly Redbook index of retail sales at brick & mortar outlets on a same store basis was up only +3.1% from the same week a year ago, barely beating inflation. Although to be fair, much of this was an unusual rise in last year's base.
Overnight we also got an update on US household debt levels and they actually changed very little in September from the prior quarter, mainly because housing debt rose very little. Year on year, housing debt is up +4.2% but non-housing household debt is up +6.4%, mainly credit card debt.
In Canada, September exports rose +2.7% in September to the highest since June 2022 and the third consecutive monthly increase. Imports rose +1.0% to their highest since January. That meant they recorded a +C$2 bln surplus, twice what was expected.
The IMF has been reviewing China's economy and now says it will expand by +5.4% in 2023, up from an earlier forecast of a +5% rise. Most of the extra is down to Beijing support initiatives, they say. For 2024 they say China will expand +4.6%.
In China, exports fell -8.1% in October from September to be down -6.4% from October in 2022. Meanwhile imports fell -1.4% from the prior month even though they were up +3.0% from a year ago. As the West de-risks from China, (exports down -15% to the US, down -10.6% to the EU and down -8.6% to Japan) clearly selling more to Russia (up +52%) isn't going to save them. Only Africa (+8.0%) is the other region they made gains. China's exports to New Zealand are down -14.9% and to Australia down a much lesser -4.2%.
China's foreign exchange reserves at the end of October were marginally lower at US$3.1 tln, as expected.
Meanwhile Taiwanese exports fell rather sharply in October, down -4.5% from year ago levels. A small rise was expected. Imports fell very sharply, down more than -12% although this was pretty much as expected.
In Europe, data for industrial production in Germany for September came in lower than expected, down -3.7% from the same month a year earlier.
In Australia, and in an about-face the Reserve Bank of Australia is no longer standing on the sidelines as inflation turns back up. It has pushed through a new +25 bps rate hike to 4.35% and markets are thinking a December rise may come too
The UST 10yr yield is down from yesterday as bond prices rise again, now at 4.57% and a drop of -8 bps. And their key 2-10 yield curve is more inverted, now by -34 bps. Their 1-5 curve is now inverted by -78 bps and that is a little more. Their 3 mth-10yr curve inversion is now -80 bps and also more than yesterday. The Australian 10 year bond yield is now at 4.62% and down a sharp -12 bps from yesterday. The China 10 year bond rate is unchanged at 2.68%. The NZ Government 10 year bond rate is higher at 5.32%, up +4 bps.
Wall Street has opened modestly with the S&P500 up a modest +0.3% in its Tuesday trade. Overnight European markets closed little-changed, except Paris which was down -0.4%. Yesterday Tokyo ended its Tuesday session down -1.3%. Hong Kong ended down -1.7% giving up all the prior day's gain, and Shanghai was unchanged. The ASX200 ended its Tuesday session down -0.3%, actually recovering earlier deeper losses after the RBA decision, while the NZX50 also fell -0.3% but unaffected by the RBA hike.
The price of gold will start today at US$1964/oz and down another -US$18/oz from this time yesterday.
Oil prices have fallen overnight, down a very sharp -US$3.50 to be just under US$78/bbl in the US. The international Brent price is now just over US$82/bbl. These are three and a half month lows. In fact it first reached this level 16 years ago, so after inflation it is now unusually cheap.
The Kiwi dollar starts today at 59.3 USc and down -½c from this time yesterday, dragged lower by the Aussie dollar. Against the Aussie we are slightly firmer however at 92.3 AUc. Against the euro we are little-changed at 55.5 euro cents. That all means our TWI-5 starts today at just on at 69.1, down only -10 bps.
The bitcoin price starts today at US$34,665 and down -0.8% from this time yesterday. Volatility over the past 24 hours has been low too at just on +/- 0.9%.
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53 Comments
Another mortgagee sale. This was very rare during the GFC ans all the banks held hands and did nothing as rates went down.
This time it’s different. No rate reduction bailout.
https://www.trademe.co.nz/a/property/residential/sale/listing/4400172103
Unfortunately for the owner, the 2.4 million asking isn't that appealing and probably explains why it didn't sell in the last seven months
"The property will be sold by Mortgagee Tender on Wednesday 5th April 2023. If you have any interest in the property please contact the agents in the first instance for more information."
Feel free to troll. It says more about you than me.
btw it’s not a ‘flip flop’. Although I spend a bit of time on this website, I also have a busy working life. The 7% assumption was very rushed. 5% was slightly more considered. And that’s assuming ‘buying at cost’.
I hope you have worked out what I mean by ‘buying at cost’. If not - it’s buying them at the cost of the land and to build ie. less the developer’s profit margin (25-30%)
Agree fresh development always a better margin.
Hard to tell yield though on 14 units with a mix of 3 to 4 bedrooms. Purchase price would need to be pretty sharp but as a medium/ long term hold it would be a money spinner with economies of scale for maintenance etc over 14 seperate rentals
Priced at 3million or so? For a terraced house? Lordy you could get VERY nice stand alone homes in a top blue chip area for that.
I have a rental just down the road - say around $1.3M value. It rents out for $715 but market rent more like $780. So my house rents at the lower estimate of these houses despite the price between nearly triple
If the OCR were instead compulsory Kiwisaver contributions above a member's base contributory rate, then that would take out any potential inflationary impacts of the current OCR mechanism.
Bonus being that money is available for people's retirement. Young home owners with mortgages paying an extra $500 per month will never see that money again.
That is a really good idea. Company and Individual percentage contributions become the inflation adjustment lever.
One flaw unfortunately is it would miss the exchange rate control that it also serves. If we did not raise the OCR as we were using the Kiwisaver mechanism we might just end up importing the inflation as well, multiplying the effect.
Perhaps a mix of smaller OCR increases and the Kiwisaver contribution leverage might be the right fit?
Not having a go at you but it sounds like "If we spend our money instead of giving it away to foreign banks then it may reduce the strength of the NZD". And your solution is the current, where we give away our money through higher interest rates. But yeah there does have to be some interest and cost on money to pay for the money managers.
"Markets Are Pricing For Utopia Of Low Rates, Rising Stocks, Low Inflation, No Recession And No War"
https://www.zerohedge.com/markets/markets-are-pricing-utopia-low-rates-…
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