Here's our summary of key economic events overnight that affect New Zealand, with news the American economic juggernaut rolls on, dominating global markets.
American new home sales levels in February missed estimates, but ~7% mortgage interest rates basically explain that. They eased by a minor -0.3% from January to an annualised rate of 662,000, and below market expectations of a 675,000 rate.
Although the Dallas Fed factory survey eased back a bit in March, it is still at levels better than for most of the past two years. A contracting oil patch doesn't really qualify as 'news' any more.
Nationally, the US Chicago Fed's National Activity Index expanded in February and pushing past the January retreat. But to be fair it is in a bit of a yo-yo pattern and has been since the end of the pandemic.
Recent estimates of American economic activity generally agree its economy is expanding at about a +2% (real) clip in Q1-2024. For an economy as large as their, this represents the bulk of the global economic expansion, adding more than +US$1 tln in nominal economic activity at an annualised pace. Nowhere else comes close.
Interestingly, today's UST 2yr bond auction has brought slightly lower yields. It ended with a median 4.54% yield today, compared with the equivalent event a month ago at 4.64%. Investors are not demanding higher yields from these benchmark bonds despite the rise in issuance. The doomsters are still waiting for their moment - its been a very long time for them.
In China, the IMF has noted that China needs to take a different path to recovery. It's "fork in the road" comments challenge China's standard paybook to stimulus. Presently they are using their considerable reserves to support the yuan against market challenges.
In Taiwan, retail sales grew an eye-catching +9.3% in February from the same month a year ago, a sharp rise from January on the same basis. This was their sharpest growth in retail activity since June 2023. Clothing and food drove the expansion.
But things aren't so bullish for Taiwanese industrial production which fell -1% from year-ago levels in February data released overnight.
We have noted the rise and rise in cocoa prices before, but they reached new extreme levels overnight, based on recent poor harvest results in West Africa. US$10,000/tonne (NZ$17/kg) beckons.
The UST 10yr yield will today at 4.26% and up +6 bps from this time yesterday. The key 2-10 yield curve inversion is little-changed at -38 bps. And their 1-5 curve inversion is also little-changed at -77 bps. Their 3 mth-10yr curve inversion is less at -114 bps. The Australian 10 year bond yield is now at 4.06% and up +3 bps from yesterday. The China 10 year bond rate is holding at 2.33%. The NZ Government 10 year bond rate is now at 4.61% and down -3 bps from yesterday.
Wall Street has opened its week with a minor -0.1% drop. Overnight European markets were mixed with London down -0.2%, Paris unchanged, and Frankfurt up +0.3%. Yesterday Tokyo closed down a sharp -1.2%. Hong Kong closed down -0.2%. Shanghai closed down -0.7%. Singapore ended its Monday session down -0.6%. The ASX200 closed up +0.5% however, and the NZX50 closed up +0.7%.
The price of gold will start today firmer by +US$10 from yesterday at US$2175/oz.
Oil prices have risen +US$1 to US$81.50/bbl in the US while the international Brent price is now up at US$86/bbl.
The Kiwi dollar starts today at just on 60 USc and marginally firmer than this time yesterday. Against the Aussie we are -¼c lower at just over at 91.8 AUc. Against the euro we are still just on 55.4 euro cents. That all means our TWI-5 starts today under 69.3 and little-changed.
The bitcoin price starts today up strongly at US$70,247 and a +7.4% rise since this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.3%.
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101 Comments
How much debt underwriting that US claim, David?
And how much is real (as in: not virtual) activity?
The big news is that the planet is moving closer to war (over 'what's left of it). The US and UK have just upped the rhetoric, and I wouldn't mind betting the CIA is in back of the recent Russian massacre (interesting that Russia promptly reduced oil supply). The joke is that the West cannot go to war with those who are its parts suppliers.....
You probably think Russia caused the Nord Stream 2 explosion as well?
I agree with PDK as do others. And one can offer an opinion without having evidence. ISIS was doing the west’s dirty work trying to remove Assad in Syria until Russia funded forces helped put a stop to that.
https://strategic-culture.su/news/2024/03/23/its-war-real-meat-grinder-starts-now/
An interesting aside..
And just as terror was striking Moscow, the US and the UK, in southwest Asia, was bombing Sana’a, the Yemeni capital, with at least five strikes.
Some nifty coordination. Yemen has just clinched a strategic deal in Oman with Russia-China for no-hassle navigation in the Red Sea, and is among the top candidates for BRICS+ expansion at the summit in Kazan next October.
Isis was trying to set up a Caliphate in Syria. It was not working for the US or any of it's agencies. Even the Arab states recognise how dangerous that form of fundamentalist Islam is. Iran is an on-going proof but even they are not that bad.
The US was backing the Kurdish groups which ironically puts them at odds with Turkey. And the Kurds are a significant international problem that won't go away anytime soon.
to complicated for PDK and threecents - sometimes the most obvious answer is the correct one but a conspiracy theory sounds better -and I guess now that the CIA have wound up their fake moon landing operation and stopped dealing with the aliens at Roswell they will need a new project to get their teeth into
Of course ISIS dunnit. Their friends, not the government, in Ukraine were going to help them go back home to K'stan. The Yanks and the Russkies have a common enemy again. What's the bet a quick resolution in Ukraine, and then beat up ISIS together. We all love a happy ending.
I was being simplistic, however the west including the US was involved with the development of ISIS.
https://www.theguardian.com/commentisfree/2015/jun/03/us-isis-syria-iraq
A revealing light on how we got here has now been shone by a recently declassified secret US intelligence report, written in August 2012, which uncannily predicts – and effectively welcomes – the prospect of a “Salafist principality” in eastern Syria and an al-Qaida-controlled Islamic state in Syria and Iraq. In stark contrast to western claims at the time, the Defense Intelligence Agency document identifies al-Qaida in Iraq (which became Isis) and fellow Salafists as the “major forces driving the insurgency in Syria” – and states that “western countries, the Gulf states and Turkey” were supporting the opposition’s efforts to take control of eastern Syria.
Raising the “possibility of establishing a declared or undeclared Salafist principality”, the Pentagon report goes on, “this is exactly what the supporting powers to the opposition want, in order to isolate the Syrian regime, which is considered the strategic depth of the Shia expansion (Iraq and Iran)”.
Which is pretty well exactly what happened two years later. The report isn’t a policy document. It’s heavily redacted and there are ambiguities in the language. But the implications are clear enough. A year into the Syrian rebellion, the US and its allies weren’t only supporting and arming an opposition they knew to be dominated by extreme sectarian groups; they were prepared to countenance the creation of some sort of “Islamic state” – despite the “grave danger” to Iraq’s unity – as a Sunni buffer to weaken Syria.
I can see it three possible ways.
- US attempting to undermine Putin at home. Showing he can't protect all Russians.
- Russia undertaking a false flag to declare Ukraine a Terrorist state and gain much needed international support.
- A bunch of IS freaks just being IS.
None would surprise me, although Occams razor would favour the third.
I guess you get your Bitcoin info from him as well?
Peter Zeihan confidently embarrassed himself on Joe Rogan's podcast recently by going on a short rip regarding Bitcoin's negative value and how a reliable, fixed money causes economic disaster but the inflated, debt drowned political currency is more valuable. And how counterfeiters have rightfully earned the wealth they steal, but savers gaining some purchasing power as the economy grows is "unviable."
"The US has a long history of funding, arming and facilitating proxy groups" So do Russia. Where you find one you will find the other. https://en.wikipedia.org/wiki/Wagner_Group_activities_in_Africa#:~:text….
That the main directorate of the Federal National Guard is situated less than a 10 minute drive from the Crocus City Hall, yet took 90 minutes to get there, could be a clue? Perhaps they were all too busy beating up people laying flowers at Navalny memorials?
Sometimes things are just as they appear. ISIS has claimed responsibility, the US and Ukraine had nothing to do with it, the suspects had their ears cut off and fed to them on the way to Belarus and the Russian national guard is too busy with violently "Russifying" occupied Ukraine.
No stretch at all. You do pretty good, most of the time, but you have a militarily-restricted geopolitical stance. Historically-gained?
The CIA puts its hegemonic fingers into anything which doesn't serve the interests of the the US - more specifically, the incumbent US elite.
As others have pointed out above, they tend to shoot themselves in the foot, by being a tad narrow in this-instant scope.
I note the sudden departure of Victoria Nuland - who I've had eyes on for a few years now - and the post-shooting reduction in Russian oil output (from a country ostensibly on its knees because of US-directed embargoing) - and can connect dots. They always get someone else to do their dirty work (Ukrainian neo-Nazis, for instance) and to post-action, blame. But they've blundered often - that innate US arrogance personified. And remember, those who need the oil, are the ones playing the big game. Pretend this isn't a once-off, planetary-wide, fight to the death over 'what's left', and you end up making a whole lot more incorrect knock-on assumptions.
It's a real crapshoot with their service.
I've got to travel to Europe later this year for work, and being the moron I am booked the wrong outbound flight. Got a call back within 5 minutes, problem solved by a very helpful CS rep who even waived the service fee for me. But then for a domestic change to something I had to wait hours and hours for service.
Big issue for Air NZ (or at least for customers) is now they are having their lunch cut every which way in terms of international travel - so many cheaper, better options from economy all the way up to Emirates' First Class sometimes being on-par cost-wise with Air NZ business class.
So this means increased shafting of domestic customers, particularly regional ones in order to claw back revenue I guess. I just paid $800 for a return flight from Chch to Napier, it's an obscenity (work trip, have to go)
I find it so funny and bizarre how many Air NZ fan boys and fan girls are out there, who seem to worship at the national carrier’s feet. Yet another case of weird, small island country, nu zillund exceptionalism. And at the other extreme, the haters.
For me they are somewhere in the middle.
Same here. Air NZ is 'ok'. Some things they do very well (e.g. the Skycouch system is probably the best way to travel long haul with children - we deliberately seek that option out as it makes such a difference) but then a lot of the service and product is pretty mediocre.
My biggest concern is that the increasingly prohibitive cost of regional flying is having real economic impacts. To fly a 2 adult 2 child family from somewhere like Chch to Napier return could easily cost $2000 depending on dates, which for many families is unaffordable (and then the alternative is driving for hours and hours and taking some expensive ferry that will probably break down, and you'd need to probably add a night in Wellington each way at vast expense).
I know regionally-based businesses for whom the cost of flying is having an impact on sales, as they used to be able to travel more regularly to pitch for new business, connect with existing customers but now it's so expensive that this is being 'rationed' in effect.
Flying to Dunedin last month, all I could think of is how much better the experience would be if you could go on a fast train.
I picked a random weekend in April - 2 adults and 2 children flying with seat + bag to Napier (from Chch) is $1904 for the roundtrip, prior to credit card fees, any seat selection fees etc.
Of course exact cost will depend on amount of luggage, dates and so on, but it's not cheap.
Before Quantas entered into an information sharing agreement with AirNZ years back, Jetstar (Quantas group) would have flights from $29-59 Wellington to Nelson every day and usually around $29 between Auckland - Wellington and Wellington - Christchurch routes. Within a month or two of the agreement taking effect, 'suddenly' Jetstar canned the Nelson route (now they had access to AirNZ's information on # of bums on seats on their planes). If there is sufficient competition then prices will be competitive. Just like with the supermarket oligopoly, there are structural issues with certain markets in our fair country.
Agreed. What I find bizarre is that it is a twice failed company which the tax payer keeps bailing out. “Yeah but now we own half of of it so we’ll get our money back” they tell me. Owning half of it isn’t going to help when it goes tits up again, which is highly likely. “Yeah but we need our planes landing in New York so everyone sees our name out there” they tell me. Like who? The baggage handlers?
Those bail outs though appear well forgotten by some staff who remain elitist and arrogant. Recall in transit meeting up with an old workmate who had since become a steward, international long hauls etc. He said, and in all seriousness, that it would be the best job in the world if it wasn’t for the passengers. Reportedly when Norris became CEO he requested all the top echelon of staff to provide him a paper, basically where AirNZ had been, was now, and where it was going. Once digested he advised them that there was some excellent work and suggestions, but every submission was about flying planes, no mention of the question of passengers. It’s a culture issue, NZrs are far from naturals in the service industry.
It seems clear that Covid has culled/ constrained many lower cost airline services in Australasia without state support & subsidies.
AFIK, there are now no frills options ex NZ available (pre Covid AirAsia use to fly ex AKL via Gold Coast to KL).
For quite a few years I used Jetstar ex Wgtn to GC, visit family there then pickup either AirAsia or Scoot up to either KL or Singapore. Worked very well usually at less than half the $ of the state carriers options (helped by cheaper tier airport charges)
I'm currently in Oz & while not currently traveling onwards have discovered that there are now no low cost airline options except out of the main Oz cities.
Which is probably a bit of a problem for Coolangatta airport because they just spent a lot of money on a new international terminal and transit hotel which are now only used by Jetstar to NZ.
I've submitted 8 different upgrade requests so far this year on Air NZ (same status as you). 7/8 of those have cleared, with one for a flight from Auckland to Singapore for premium economy to business pending (apparently this is a hard route to get upgraded due to demand). This is using a combo of recognition upgrades, short haul upgrades and airpoints dollars.
So I wouldn't say I personally find it hard to use the upgrades but it's dependent on where you are travelling, what sort of plane, and what sort of class upgrade (e.g. most of my upgrades are economy to premium economy).
It's annoying that you can't see in advance when booking your ticket online if you'll get a free upgrade (I believe you can get that if you call up and find a date when there's availability for upgrade seats).
AFAIK you've never been able to use upgrades on codeshared flights?
Thanks DT, the route I want to upgrade from Premium to Business x 2 pax, is indeed Auckland to Singapore… (next month on the way to the Maldives).
AirNZ accepted my request for the AKL-SIN trip, but not the return SIN-AKL leg, even though it's an AirNZ flight with AirNZ crew, because it's code shared with Singapore Airlines...
Sure can broaden the mind, but not to the extent the planet can support an industry flying 40 million times a year and planning a doubling. A broad mind would view this as suicidal stupidity for the human species. I guess even self entitled air travellers can suffer a "broadened mind" deficit?
Breakfast briefing: US economic dominance rolls on
US Treasury issuance has expanded in recent years, sending the size of the US govt bond market to a record ~$27tn. Up ~70% since the end of 2019 & nearly 6x larger than before the ’08-’09 GFC. That is making some Wall Streeters nervous. https://wsj.com/finance/the-27-trillion-treasury-market-is-only-getting-bigger-a9a9d170?st=11vrvz7duqbpyrg HT@knowledge_vital Link
Paying the Defense Bill: Financing American and Chinese Geostrategic Competition
Or have them in as either agency workers or contractors at x3 the cost.
Seems farcical but 100% true.
This is what happens when you get people who object ideologically to govt trying to implement govt. Having Act in power is like putting a faith healer in charge of the medical system. *** I mean this incarnation of ACT led by David Seymour, no real life experience or evidence to back up his positions just 'reckons' and 'feels'.
Willis is proud that the subsidy is going straight to the parents.once they submit invoices to the IRD. The poorest may not have the nounce or ability to d this.
Neither party looked at the elephant in the room , why is childcare so expensive in N.Z , and why can't schools or kindergartens provide a viable alternative?
Listening to Luxon, he seems convinced that there is a competitive market for ECE and that people will just change childcare providers based on them increasing their fees. What planet does he live on? There is a 6-12 month waitlist for most ECEs in big cities, and if there isn't, there is probably a good reason why.
They'll be lambasted for owning a smart phone or a laptop if they're poor. Instead they must trot down to the local library to use a computer. It's only $1 to scan/email at our local library, hopefully the charge is not per page.
To serve what purpose? Could the ECE centers not post all invoices directly to the IRD? They already post PAYE information.
Luxon and Willis both in the post cabinet standup yesterday spoke how high the cost of childcare was in New Zealand and their approach to dealing with that. And PM Luxon did the same again today on Morning Report.
but yes. Why not Kindergartens and Schools. Also Playcentre.
"From what I read this morning, people are going to have to submit their Childcare invoices to IRD to claim the new ECE Tax Credit. What kind of convoluted mess is that?!"
I've designed systems for many years and I can't think of a worse one since Dot-Com days where people made orders online and then 00's of people scurried around manually processing them while pretending the system was automated.
As designed, it is a system designed for the rich. Only they can afford 3 months without support until the refund is received. I expect the ECE industry steps in and does the paperwork on behalf of their customers ... no doubt clipping the ticket on the way.
Investors are not demanding higher yields from these benchmark bonds despite the rise in issuance.
I love it that economists still cling onto the idea that yields on a bond will rise if the quantity available increases. As if the price will drop because of 'over supply'. Govt Bonds aren't sugar or flour. Govt spending creates the 'money' that is used to buy the bonds. So the more Govt spends, the more money there is to buy bonds and the more the market will absorb.
Interestingly, in NZ, our bonds have a higher yield than other advanced economies. This is in part because there are not enough of them in the market - so they are not as liquid as other bonds. If we issued more bonds, we could well see lower yields .
So, is that the reason (or part of the reason) why China 10 yr bonds are at 2.33%, but US, Aust and NZ are at 4.26%, 4.06% and 4.61% respectively?
Because it certainly doesn't seem to me likely that the Chinese rate is lower because investing there is less risky ...
Chinese government bond rates are low because large investors seek safety and liquidity when bad things are happening. US example
Large Chinese banks.
I used to work at a large US bank in London which did the same.
Banks don't take deposits and they never lend money. They are in the business of purchasing securities. When one gets a bank loan, the loan contract is a promissory note. The bank purchases that contract from the borrower. Now the bank owes the borrower money and it creates a record of the money it owes, which we call deposits - source.
Replace promissory notes with government securities and you get the picture. Furthermore, the capital risk weights are zero for government security assets.
They don't. See my link above - US example
"Immaculate disinflation"
- the end of NAIRU ?
https://www.abc.net.au/news/2024-03-26/immaculate-disinflation-rba-cent…
I suggest they don't get too chipper about what's going on. What's happening is fairly typical at this point in the cycle. Articles such as these can be found at similar points in previous cycles. Check back in 3-6 months and see if the situation remains the same. (Hint: It won't. Normal service will resume.)
Investors are not demanding higher yields from these benchmark bonds despite the rise in issuance. The doomsters are still waiting for their moment - its been a very long time for them.
The Fed tells markets they are tightening policy. Yet Liquidity is up $500 billion in the last year. We are witnessing a QT Sterilization. Thread. 1/ Link
Look for the obvious and simple.
Russia has had a load of trouble out of the various Stans. This another atrocity in a series over a couple of decades at least. Been a lot of deaths. Mad and murderous. Often the same characters were/are major actors in Syria.
The murderers were stopped two thirds of the way to Ukraine border. As Putin has mentioned. But of course with or without Ukraine involvement that's the best escape direction. Just didn't work.
New Zealand is addicted to low skill immigration, which puts pressure on rents and creates a dependence on migrant exploitation, according to economic commentator Bernard Hickey.
https://www.1news.co.nz/2024/03/26/low-skill-immigration-is-nzs-dirty-l…
I don't know how many times I've read, (especially by goldbugs) that the US is doomed because of its debt.
The USA has never defaulted on its debt and never will, which is why everyone loves the USD and it just keeps on going up.
Who in their right mind would load up on a 'BRICS' currency, or worthless Russian washers?
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