Here's my summary of the key issues overnight that affect New Zealand, with news of sharply falling commodity prices.
But first and going the other way, sales of American homes rose in June to their highest level in more than eight years. Median prices there have also jumped, hitting US$236,400 (NZ$360,900). Their housing recovery is in full swing. It is another sign of growing household confidence, even pent-up demand, and that won't discourage the US Fed from raising their benchmark interest rates later this year.
Even more dramatically on the house price front, in Sydney the median house price there has topped AU$1 mln for the first time ever. That's an eye-popping +23% rise in one year.
Real estate may be going up in price, but most commodities aren't. The World Bank today said it expected non-energy commodities to drop -12% in 2015 while energy-related commodity prices will drop almost -40%. Movements of these magnitudes are powerful and reshape economic trends. In this cycle, consumers are the beneficiaries, producers the losers. But cycles being what they are, the tables will turn. We will probably see savvy investors buying in the dip.
In New York, the UST 10yr yield benchmark is lower today, now at 2.31%.
Oil markets are also lower. The US benchmark price is now just on US$49/barrel, and Brent crude is down to US$56/barrel. Higher than expected crude and petrol stocks are weighing on prices, right in the middle of their 'driving season'.
And in China, the regulated price of petrol has been cut in an official move overnight.
The gold price is down too, now at only US$1,089/oz. That is now back to its 35 year average and a big come-down. By my count that is a -7% fall in US dollars since the beginning of the year, but a +7% gain in New Zealand dollars over the same timeframe. However if you had held US dollars over the same period you would have had a +16% gain. That makes gold seem a poor hedge.
The Kiwi dollar has also slipped with the general fall in commodity prices. We are start today at 65.8 US¢, at 89.3 AU¢, and at 60.4 euro cents. The TWI-5 is at 70.7.
Tune in at 9am today for the latest on the Reserve Bank's latest OCR decision. Markets will be surprised if the rate is not cut -0.25% to 3.00%.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »
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11 Comments
How plunging oil prices have created a volatile new force in the global economy
http://www.theguardian.com/business/2015/jul/21/falling-oil-prices-frac…
And when will these dramatic falls in petrol prices arrive for us here ?
The oil companies are worse than the banks when prices move , quick to move up ( in hours) and slow to move down ( in months) .......... its a price rigged cartel .
Its also un-competitive to have just 3 players dominating all aspects of the downstream process , importing , processing, refining, packaging , transport and retail sales of oil products is dominated by just 3 companies with disproportionate market dominance
Andrew
that story make out there are global political forces in play but the reality this is instability caused by the production cost premium of the marginal supply, Iraq coming on line will smash the US shale producers and push the price down, the ongoing demand increase and decline of conventional production will cause a rinse and repeat - fun days
Andrew
that story make out there are global political forces in play but the reality this is instability caused by the production cost premium of the marginal supply, Iraq coming on line will smash the US shale producers and push the price down, the ongoing demand increase and decline of conventional production will cause a rinse and repeat - fun days
Even more dramatically on the house price front, in Sydney the median house price there has topped AU$1 mln for the first time ever. That's an eye-popping +23% rise in one year.
Wow!!!! - one cannot afford to work and be in receipt of fiat wages and expect to live a normal family life - what is society demanding the citizens of Sydney evolve to?
meanwhile our coming summer looks interesting for farming especially,
"The present El Niño event, on the cusp of attaining “strong” intensity, has a chance to become the most powerful on record.
The event — defined by the expanding, deepening pool of warmer-than-normal ocean water in the tropical Pacific — has steadily grown stronger since the spring.
The presence of a strong El Niño almost ensures that 2015 will become the warmest on record for Earth and will have ripple effects on weather patterns all over the world.
A strong El Niño event would likely lead to enhanced rainfall in California this fall and winter, a quieter than normal Atlantic hurricane season, a warmer than normal winter over large parts of the U.S., and a very active hurricane and typhoon season in the Pacific."
So hot and dry in NZ? Maybe our Govn will need to bail farmers out again due to drought at tax payers expense?
As for california,
"“It’s a sweet promising start,” said Bill Patzert, climatologist for NASA’s Jet Propulsion Laboratory in La Cañada Flintridge, but then added: “Except for all the damage it does…. Be careful for what you wish for. Great droughts usually end in great floods.”
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“Look at all the damage a couple of inches of rain caused in Southern California in the last couple of days. Can you imagine 30 inches?” Patzert asked."
http://www.washingtonpost.com/blogs/capital-weather-gang/wp/2015/07/20/…
Hence the push for water storage and irrigation: when ya kin throw the big red switch on the pump, who cares about the state of the eastern Pacific? Especially when 90%+ of flood peakjs in South Island rivers flow straight out to sea....check the river gauges for actual data here: http://ecan.govt.nz/services/online-services/monitoring/river-flows/Pag…
DC - it seems that Fear of Furreners is the zeitgeist for 2015: see Singapore...http://www.economist.com/news/special-report/21657607-space-island-gett…
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