Here's our summary of key economic events overnight that affect New Zealand, with news the positive global economic news rolls on, despite the best efforts of some regional forces to risk everything with crazy adventures.
First, today's dairy auction brought a welcome, if small, rise. And it is maybe more than it looks given the signals from the derivatives market and the recent GDT Pulse events all pointed to softness. Recent global tensions may have played a part. Turkey suspended all trade with Israel and that included their regionally important dairy trade. Middle East buyers were prominent overnight. Overall prices rose +1.8% from the prior event in USD terms but were little-changed in NZD terms. The important WMP price rose +2.4%, butter was up +2.1% and cheddar cheese impressed with a big +8.0% gain. Perhaps we need to see these shifts as part of the global rise in overall commodity prices recently as the world's major economies build some upward momentum.
In the US, one measure of American economic optimism among investors declined sharply in May, but there seems to be big disconnect between 'opinions' (everyone has one), and behaviour. For example, retail spending at bricks & mortar stores was up +6.0% last week from the same week a year ago, a trend that has built to its highest level since the end of 2022. Equity prices are rising still.
And the US logistics industry is on the rise with a solid April expansion.
Meanwhile the latest UST 3 year bond tender was very well supported, and a feature today was that yields rose much less from the prior even that we have seen in a while. Today's event brought a 4.55% median yield, not too different to the 4.49% we saw in the prior equivalent event a month ago. This is only one tender, but perhaps the rising demand is finally suppressing the upward yield trend. They have a lot of funds to raise but investors are showing they have an even faster-growing appetite for this paper.
Across the border in Canada there was also a positive surprise. Their closely-watched Ivey PMI jumped to its highest level in two year, recording an expansion only currently matched by India.
Japan is on a roll. Their services PMI for April has come in at a strong level (54.3), outpacing the US (51.3), China (52.5), and the EU (53.3). Only India (60) tops them among the world's largest economies.
In Europe they also surprised on the upside. Retail sales surged (for them) in March to be up +2.0% in volume (real) terms from the same month a year ago, and far better than what was anticipated.
In Australia, or more importantly Western Australia, their state government has launched a AU$5,000 incentive to vacant property owners to bring them onto the long-term rental market for Western Australians to lease.
Overall in Australia, retail sales are disappointing. In the March quarter they fell, making this the fifth of the past six quarters of retreat in retail volumes.
Yesterday, the Reserve Bank of Australia held its monetary policy positions and rate, and issued guidance that you could take any way. The most you can say is that they remain vigilant to the risks of higher inflation. Pretty lame really. More here.
For those of you anxious about coffee prices (the main media is just picking up on the April rise), be assured current prices are retreating as fast as they rose with good supplies re-entering markets from Brazil and Vietnam.
The UST 10yr yield is now at 4.46% and down -3 bps from yesterday. The key 2-10 yield curve inversion is deeper at -38 bps. And their 1-5 curve inversion is now at -68 bps. Their 3 mth-10yr curve inversion is now at -94 bps and another 3 bps deeper. The Australian 10 year bond yield is now at 4.43% and a massive -12 bps lower from yesterday after the RBA positioning. The China 10 year bond rate is is also unusually sharply lower at 2.23%, a sudden drop of -9 bps and a new record low for them. The NZ Government 10 year bond rate is now at 4.78% and down -5 bps from yesterday.
Wall Street is ending its Tuesday trade unchanged in late trade after being much higher earlier. Overnight, European markets were all up about +1.2% on average. Yesterday Tokyo ended up +1.6%. But Hong Kong fell -0.5% while Shanghai rose +0.2%. Singapore ended down -0.1%. The ASX200 was up +1.4% in its Tuesday trade but the NZX50 slipped another -0.2%
The price of gold will start today down -US$9 from yesterday at US$2316/oz.
Oil prices have risen a minor +50 USc to just under US$78.50/bbl in the US while the international Brent price is now just under US$83.50/bbl.
The Kiwi dollar starts today little-changed from yesterday at just under 60.1 USc. Against the Aussie we are firmer at 91 AUc. Against the euro we are unchanged at 55.8 euro cents. That all means our TWI-5 starts today just under 69.4 and marginally firmer from yesterday.
The bitcoin price starts today at US63,355 and up +0.4% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.3%.
[There will be no video version today. It is graduation day locally here.]
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20 Comments
Hooray for coffee.
https://surplusenergyeconomics.wordpress.com/2024/05/07/277-at-the-limi…
Well worth the read.
so having worked hard and saved some money how do you protect it?
Buy property
and voila prices keep rising
Even the US, though, can hardly carry on adding government debt at a rate of $1 trillion every hundred days before the markets, and the public, start to ask hard questions about the real character of economic “growth”, and recognise that – whether in America or elsewhere – our growing mountains of debt and quasi-debt can never be honoured ‘for value’ from the proceeds of “growth”.
I think houses were the preferred hedge for many as they could leverage the hedge, I think across Asia physical gold, perhaps BTC is becoming more fashionable, as its more mobile.
I believe in the past wars have helped write off the excess credit, and exposure has been less globalised.
On this basis, we’re entitled to conclude that we’ve been manufacturing “growth” through the breakneck expansion of credit, and that this “growth” could only be regarded as genuine if we assumed that debt and broader liabilities need never to be honoured.
If it takes somewhere between $3 and $8 of new debt or quasi-debt to generate a dollar of GDP growth, paying off debt incurred in the present from growth generated in the future is a mathematical impossibility
Interesting read indeed. Perhaps the big question on everyone's minds is what will trigger the next global bank run in the sense that there will be an event or series of events that leads to either the write off of some of the debt in order to balance the material and credit mentioned in the article, or will result in a shifting of global power and order that will potentially cause countries to bail on their international debts to each other and forgo past alliances therewith.
In the US, one measure of American economic optimism among investors declined sharply in May, but there seems to be big disconnect between 'opinions' (everyone has one), and behaviour.
ISM NM also had really bad news for employment. This one fell below 46 for the second time in five months, another solid recession signal. It's looking more and more like the HH Survey and JOLTS (hires) view of the US labor mkt is the right one. https://youtu.be/d8_J8SBSfKI Link
Meanwhile the latest UST 3 year bond tender was very well supported...This is only one tender, but perhaps the rising demand is finally suppressing the upward yield trend. They have a lot of funds to raise but investors are showing they have an even faster-growing appetite for this paper.
Hardly a surprise, safety combined with liquidity and a coupon payment are an irresistible combination.
Poor chap. He fell for the MMT intentional misinformation that central bank = the government. If it was true, then indeed the borrowing at interest wouldn't make sense. But it's not true. The central bank is privately owned and it's creation forced the gov't to borrow at interest Link
Wrong. It's mostly China finally refusing to buy US Treasuries & instead investing in African infrastructure & gold. Gold imports are great at hiding the accumulation of what is similar to, but better than FX reserves: they reduce the trade surplus & hide the foreign investment. Link
Quote Tom Craig @LTDManagement ·3h
China. FDI. Western companies pulling out? Is this supply chain diversification or investors? If supply chain shift, where to? Nearshoring and reshoring (aka, Mexico) volumes do not seem dramatically significant. x.com/robin_j_brooks…
"MMT intentional misinformation"? Is it really or a genuine misunderstanding? It sort of looks like an off shoot of Milton Friedman's free market BS, but the Fed was formed in 1913 by Woodrow Wilson. The board of Governors are appointed by the President so most would interpret that the Fed represents the government in it's actions. It is not really 'privately owned' either but answers to Congress, but clearly is influenced by much outside of Government.
The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Their purpose is to serve the public. So is the Fed private or public?
The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends. Holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans. Member banks also elect six of the nine members of each Bank's board of directors. Link
"Dour opinions can't knock blossoming data"... But they will try
Ignorance is no excuse
Some consumers save while others spend, the way its always been
Ok, I’ll start. Blossom? We gotta get through winter first.
Can we rename the "Breakfast Briefing" to Audaxes Breakfast Briefing"?
How about simply ABBA. Audaxes Breakfast Briefing Again.
"In Australia, or more importantly Western Australia, their state government has launched a AU$5,000 incentive to vacant property owners to bring them onto the long-term rental market for Western Australians to lease"
WTF? I mean I'll reserve judgement to see if it works but in principle wouldn't a disincentive (tax) be a more equitable?
Not sure but you would think, just for a start, that the former would offer far greater loopholes & potential rort than the latter.
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