Here's our summary of key economic events overnight that affect New Zealand with news of more momentum in the commodity super cycle.
Firstly, the US reported a big drop in jobless claims for last week, reinforcing the recovery in their labour market. There are now 'only' 3.8 mln people on these benefits, a very sharp decrease from the 22 mln a year ago. In fact, the latest data suggests 'normal' pre-pandemic claims levels are now in sight. In fact, announced layoffs and job cuts fell in April to their lowest level in more than 20 years.
In Canada, home prices could climb +14% this year as low rates stoke demand, their housing market regulator says.
But today it is all about commodity prices. Increasing optimism over the global economic recovery has pushed all higher. Government stimulus measures and rising investment is doing the job. However, supply side issues are also contributing to market tightness.
For copper, the transition to sustainable energy networks has powered its price to over US$10,000/tonne. Iron ore prices rose sharply again yesterday despite (or maybe because of) rising political tensions between China and Australia. Coal prices are shooting up too on rising steel demand.
And global food prices shot up again in April. Output is up in most places, but sharply rising demand especially out of China is keeping stocks low and prices high. Meat and dairy prices are part of this global trend, but the big gains are for soy, canola and palm oil, again mostly based on Chinese demand. You can see the consequences in the Brazilian and Borneo rainforests.
China's frustrations with Australia have boiled over and Beijing has announced it will stop talking to Canberra. In a notice on an official website, Beijing has applied an "indefinite suspension of all activities under the China-Australia Strategic Economic Dialogue Mechanism". It is particularly unhappy with "certain people in the Australian federal government". It is a largely symbolic move, and one that underlies China's weakness to be able to respond in a way that really hurts Australia without hurting itself more.
The same issues are holding the EU back from ratifying its big investment agreement with China - and the Chinese are frustrated with that delay too.
And now China has expressed anger at New Zealand for the unanimous Parliamentary condemnation of how China are 're-educating' their Uighur minority. But given this was a statement from their Wellington embassy rather than from Beijing directly, the trade consequences may be mild for us.
In China itself, there are going doubts about the strength of the recovery in their factory sector, especially that part focused on exports. Chinese exporters are still reluctant to invest even after shipments surged during the pandemic, partly due to a sharp rise in labour costs and partly due to lingering uncertainty from the US-China trade war. Beijing wants to talk to the US about easing tensions. But the US wants to talk about China living up to the deal it had with Trump.
On Wall Street, the S&P500 is meandering along, up just +0.2% in midday trade. Overnight, European markets recovered and were up a similar +0.2%. Shanghai reopened yesterday and ended down -0.2%, but Hong Kong traded +0.8% higher. Tokyo reopened also and had an impressive +1.8% rise. The ASX200 was down -0.5%, while the NZX50 Capital Index gave back another -0.8%.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 155,425,000 have been infected at some point, up 891,000 in one day, still largely driven by rises in India. Global deaths reported now exceed 3,247,000 and up +16,000 in one day. Vaccinations in the world are also rising fast, now up to 1.215 bln (+20 mln), and in the US almost half of their population have had at least one dose as they keep up their fast rollout. Almost one third have been fully vaccinated (108.8 mln people). The number of active cases there has fallen to 6,699,000 with -21,000 fewer new infections than recoveries in the past day.
The UST 10yr yield starts today at 1.56% and down -2 bps overnight. The US 2-10 rate curve is flatter at +141 bps. Their 1-5 curve is flatter at +74 bps, as is their 3m-10 year curve at +155 bps. The Australian Govt ten year benchmark rate is down -4 bps at 1.62%. The China Govt ten year bond is down -2 bps at 3.17%. And the New Zealand Govt ten year is down -1 bp at 1.73%.
The price of gold starts today at US$1815/oz and that is up +US$30 since this time yesterday to its highest since mid-February.
Oil prices are down -US$0.50 today at just under US$65/bbl in the US, while the international Brent price is at just on US$68/bbl.
The Kiwi dollar opens today at 72.3 USc and firmer again since this time yesterday. Against the Australian dollar we are still at 93 AUc. But against the euro we are still at 60 euro cents. That means our TWI-5 is still at 74.1.
The bitcoin price is now at US$56,960 and a mere -0.8% below this time yesterday. Volatility in the past 24 hours has been a moderate +/- 1.7%. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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26 Comments
https://www.rbnz.govt.nz/news/2021/05/why-the-reserve-bank-is-concerned…
Even now RBNZ mentions that they are trying to understand ...
Also mentioning that government policies after covid led to jump in house price covinently ignoring their role and policies.
Another news : https://www.newshub.co.nz/home/money/2021/05/housing-crisis-no-sign-yet…
How much noise was made when changes were done to rental house condition to make it warm and not to forget the warning and blackmail that were thrown by investors when tax change was done in March as if they were about to quit in mass BUT.....
Moral of the story is that whenever any changes are done - so called investors will throw everything - blackmailing to try and stop and unfortunately most of the time government / RBNZ gets cold feet or they themselves are not actually interested (besides public postering) to act so use those blackmailing reason to not act.
Just like what Mr Orr is using now - fear / blackmailing to avoid taking action on Speculators.
Mr Orr is a shadow of his former self and is lately nowhere to be seen. Such is the crushing stress of running a central bank as an outlier of the Federal Reserve. Who would have thought suppressing interest rates and 'printing money' could cause so many problems?
‘Cost push’, let’s get some central bank lovers on here to explain why it won’t cause inflation, as apparently ‘cost push’ inflation isn’t a thing.
https://www.investopedia.com/articles/personal-finance/073015/understan…
These will be the same people saying Mises got it wrong about the epic bust that we headed for, while saying we need central banks to help stop the ‘boom bust cycle’.
Ouch. A bunch of people are about to find out that the Austrian Economists were right all along.
The eggheads that couldn't see the GFC coming will go with 'mathematical modelling' over the kind of predictable human behaviour that Blind Freddie should be able to see.
Irrational exuberance, speculative mania's, fear vs greed....all real. All deeply and inherently related to human psychology. Good luck with the 'mathematical modelling' when GFC II hits, there will absolute pandemonium in the markets.
there will absolute pandemonium in the markets
The cruelest thing about being locked into trickle-down economics, like in our case right now with RBNZ's 'wealth effect' experiment, is if the rich lose some of their vanity (wealth on paper), the poor end up losing their livelihoods.
Successive governments in NZ have had no long-term industrial policy or wage growth agenda; their only job as they see it is to keep consumer confidence high at all costs. The wellbeing focus is a sham!
Agreed. This is an incredibly lazy economy built on nothing more than mass immigration to serve two ends: 1/ To suppress wages and salaries - with an infinite pool of global labour there can never be tightening in the labour market. 2/ To ensure constant supply on new entrants into the housing Ponzi.
This is a confluence of the interests of the economic Right and the ideological Left, both strongly in favour of mass immigration but for their own ends, and with pragmatic but lazy governments who are happening to twiddle their thumbs while pointing at 'GDP growth'. Anyone questioning the current status quo and its impact on scarce resources, infrastructure, housing availability and affordability, and carbon emissions is immediately met with howls of "Xenophobia!!!!!" from powerful voices on the economic Right and idealogical Left.
...if the rich lose some of their vanity (wealth on paper), the poor end up losing their livelihoods.
This. And yet people still can't seem to see the value in a global decentralised ledger outside of any central government or bank control that quantitatively hardens and is is fast becoming the new default store of value - Bitcoin. FYI the poor, young and financially maligned are flocking to BTC in droves.
The price of gold starts today at US$1815/oz and that is up +US$30 since this time yesterday to its highest since mid-February.
The UST 10yr yield starts today at 1.56% and down -2 bps overnight.
While a UST will rise in value during a liquidity event partly or even mostly because of its status in repo, the opposite happens in the gold market. Though gold is a collateral of last resort, too, it isn’t as flexible and so it gets dumped whenever deployed that way. Very negative for its price.
So, it ends up in a tug-of-war between what I’ve called collateral gold (negative price) and fear gold (positive price). What ultimately might determine which one wins out is hard to predict, and it’s not a precise and straightforward mix at least inferring ahead of time.
As I wrote last December during the landmine:
"Gold may be collateral of last resort but many still treat it as a hedge against everything going wrong – including central banks and their numerous big errors (forecasts). Therefore, even with renewed deflation and market liquidations tied right into collateral problems gold has been moving in that other direction – UP…In other words, if there wasn’t this fear bid, gold would probably be down huge likely more than it was after April 18. That it’s not and is in fact at multi-month highs is a testament to the level of anxiety permeating global markets right now."
In 2008, for example, collateral gold was unleashed in the immediate aftermath of Bear Stearns – which makes sense given what Bear taught the marketplace about illiquid securities and the need for repo reserves. Gold was down sharply as collateral became very hard to source. Courtesy of Alhambra Investments 27-08-19.
https://www.cnbc.com/2021/05/06/fed-warns-of-possible-significant-decli…
“Rising asset prices are posing increasing threats to the financial system, the Federal Reserve warned in a report Thursday.”
Quite odd – shouldn’t they be warning themselves – aren’t they the ones holding the steering wheel.
Extend & Pretend and Pretend & Extend.
- is there no beginning to GRs talent?
https://i.stuff.co.nz/national/politics/300301532/less-than-half-of-sho…
Less than half of the Government’s ‘’shovel-ready’’ infrastructure projects have begun by its first self-imposed deadline, with just 44 per cent of the 150 projects under construction by the end of February....
..... The Government said in April that “shovel-ready” meant ready to begin within six months, although it pushed this out to 12 months when the projects began to be announced in July 2020.
... Robertson said the timeframe for the shovel-ready projects changed last year.
He [Grant Robertson] said the new commitment was that the projects would begin within 12 months, but the clock would only start ticking on those 12 months when the projects were contracted
So no need to 'fast-track' projects now through the long planning, design and consultation processes after insisting on the urgency to kickstart the economy this time last year.
This man has turned so arrogant since winning the last election that he isn't even trying to cover up all the lies, deceit and incompetence anymore.
Can't believe I voted for this party!
... I'm in a minority ... one who has never cast a vote for Ardern ( nor for John Key ! ) .... and never will ... a smug pyrrhic victory for me , as I watch my beloved country mire itself in debt and political correctness ...
Any coincidence that Robbo shares a similar name as the last destroyer of our economy , wrecker Rob Muldoon ..
Friday Shout-out: self-identify with necessary detail What could possibly go wrong?
On 3 December 2020, following Cabinet agreement, the Government announced a new progressive procurement policy with a focus on Māori businesses. This policy requires all government agencies that are subject to the Government Procurement Rules (the Rules) to set and report against a target that at least 5% of the total number of their annual procurement contracts are awarded to Māori businesses.
For the purposes of this procurement policy, a Māori business is defined as either a Māori authority as classified by the Inland Revenue Department (IRD) or one that has at least 50% Māori ownership.
This policy is intended to increase the diversity of suppliers engaged by government agencies and to provide more opportunities for Māori businesses to tender for government contracts.
The Ministry is seeking information from Māori and Pasifika Businesses who supply to MFAT currently and those that wish to in the future, to self-identify with necessary detail to inform our baseline. We are collecting this information via GETS and also via commercial@mfat.govt.nz. The Ministry intends on storing this information for our records to inform our baseline and report against the cabinet target.
You can find out if you are eligible to be classified as a Maori Business by IRD by looking at Section YA 1 of the Income Tax Act 2007 (Financial institution special purpose vehicles (ird.govt.nz)) defines a Māori Authority as ‘a person who has made an election under section HF11 (Choosing to become Maori authority)’. Section HF 2 states who is eligible to be a Māori authority.
Please contact us if you have any questions.
Company Name:
NZBN Number:
Contact person:
Māori Business classification through IRD: Yes/No
Māori Business by 50% ownership: Yes/No
For more information please visit Progressive Procurement (tpk.govt.nz)
What about Dutch, Thai, Korean, Scottish (remember the clearances), Irish.....
Next?
Already happening,
folk from Wellington coming down, contracts in hand, saying (to private companies) "love your work, but from your website your mgt don't seem so mdiverse"....
Businesses getting segregated & separated depending upon the workforce culture and race.
Well the govt doesn't consider Maori are able to compete. Other Polynesians can compete without any favouritism and fortunately for the pride of my Melanesian family they are considered equal to all (except Maori) and in no need of a special helping hand.
Will this enhance the wealth of Maori more or less than the wealth of those bureaucrats doing the processing?
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