90 seconds at 9 am: Bears stirring?

Yellen positive but cautious; key US data droops; eyes on migration stats; UST 10yr yield up to 1.69%; oil and gold lower; NZ$1 = 71.4 US¢, TWI-5 = 74.4

22nd Jun 16, 7:28am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news the bears are stirring in the absence of major economic data releases to counter them.

Janet Yellen is testifying before Congress today and there seems to be no surprises in this. A few news outlets are trying to make a big deal about sub-par economic growth but in fact she has maintained a positive tone about second quarter growth tracks.

But there are reasons to be concerned about American growth. Hiring is slowing, car sales are slipping, business investment is drooping, and company profits are stagnating. Together, these are all classic signs of an economic downturn. But does that means a recession is coming? At this point it seems unlikely. The essential point is, the health of the American economy is the core that keeps the international economic juices flowing. It has an out-sized influence on everything, and certainly everything related to New Zealand, even if through other economies like Australia, China and Japan.

Today, equities on Wall Street are higher, reacting little to the Yellen testimony.

There seems to be no shifts in Brexit polling to report; Remain looks likely. (But if they do Leave, expect the US dollar to rise strongly, pushing down the US dollar price of most commodities, including dairy.)

And later this morning we will get local data on migration and tourism for May. Will that show we have topped out in long term migration, or this is still building? It will almost certainly show the tourism industry to having a banner year - impressive because it seems to be immune to the level of the currency. But these days - apart from agricultural commodities - most trade seems to have the same immunity. Perhaps it is a sign our economy has transitioned away from its commodity roots.

In New York, the benchmark UST 10yr yield extended its rises and this morning is up a further +2 bps to 1.69%.

However, the oil price is slipping today. The US benchmark is now just under US$49/barrel and the Brent benchmark just over US$50/barrel.

Gold is down even more, losing $20 so far and is currently at US$1,270/oz.

And finally, the NZ dollar starts today stronger yet again at 71.4 US¢, at 95.5 AU¢, and at 63.4 euro cents. The TWI-5 index is at 74.4 and at a level back to where it was in June 2015.

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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39 Comments

by sharetrader | 22nd Jun 16, 8:05am 1466539522

today I expect to see the headline immigration reaches new high

by vesper | 22nd Jun 16, 12:29pm 1466555371

Will this do instead?
Liam Dann: Has migration reached its peak? http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116…

by rastus1 | 22nd Jun 16, 8:26am 1466540808

You forgot to mention the petition against Jong Keys mate Hosking......

https://www.change.org/p/tvnz-get-rid-of-hosking-1347aa6d-8044-4a33-ba5…

by David Chaston | 22nd Jun 16, 9:26am 1466544401

I don't get this impulse. No one is forcing you listen or watch. He isn't my cup of tea either (and I have stopped listening or watching), but why do some people think that because they don't like him, no-one else should either? It is fundamentally arrogant and controlling.

If you have alternate views, start making your case directly to people. Today there are really powerful ways to do that: blog, Twitter, Facebook, WeChat, YouTube, etc. etc. These are all as powerful as NZME radio and TVNZ, especially when used in combination.

But if you can't gather a crowd, or don't achieve the same influence, don't expect much sympathy from me (or anyone else) if all you want to do is shut off views (no matter how shallow) of others.

A decade or so ago, you may have had a point; radio and TV were the only ways to share views with millions. Today that is just not the case. If your views are rejected by most, man up and accept that. Maybe it is you who needs to change, either your views or how you are presenting them.

by Zachary Smith | 22nd Jun 16, 9:26am 1466544383

Good advice!

by Independent_Observer | 22nd Jun 16, 10:29am 1466548154

ZS - are you actually Mike Hosking?

by MikeM | 22nd Jun 16, 11:08am 1466550493

I agree with DC. I don't pay any attention what so ever to Mike Hosking but I don't believe his political leanings should be gagged because of his occupation. He's a voter like all the rest of us and is entitled to an opinion. How that awful 7 Sharp show is still in existence is beyond me but ultimately it's the viewers/listeners who will have the final say on Hosking or anyone who choses a career in the public eye.

by ngakonui gold | 22nd Jun 16, 12:09pm 1466554154

I agree,,i very rarely watch or listen to him.Last week I thought it strange when his co host on 7 Blunt was critical of Trump for trying to look young,while next door with his hair dyed and a little plug of hair on his forehead sat Mr Hosking.
Knuckle rap was no doubt given.

by PeakEverything | 22nd Jun 16, 9:40am 1466545200

So you're going to change the flag on your site?

But I agree with your point. It's like people who are anti assisted suicide, that is fine if you want to die slowly in pain losing your dignity don't use the option but to stop other people who want to avoid that. It's fundamentally arrogant and controlling.

by sharetrader | 22nd Jun 16, 9:41am 1466545270

i dont watch him as i find him more of a PR and out of touch, unwilling to ask the tough questions that need to be asked or take certain people to task.
interesting that you say people should use social media, as that is what they are doing. its not so much about signing a petition as letting NZ know that there are many like themselves that do not like what the guy is doing.
i dont expect TVNZ to take any notice as they are only interested in ratings and ratings rule in TV land
but i will be watching with interest to see where it heads and if it does lead to lower ratings

by KH | 22nd Jun 16, 9:48am 1466545715

Who needs twitter or Hosking. Be a common tater on interest.co and change the world !

by DFTBA | 22nd Jun 16, 9:55am 1466546116

The problem isn't just with what he's saying. the problem is his prominent and unchallenged position in the (rather small) New Zealand media.

His views are hardly mainstream, but because he's been given such an unobstructed platform to shout, the average kiwi might be forgiven to think his views are mainstream.

He's also a bully, ex-colleagues testimony verifies this. if we try to stamp out bullying in other places, like schools and the workplace, why should we condone and encourage it from the likes of him?

He's a national party stooge, and he's clearly not qualified to hold a position of prominence in our media. Those positions should go to people who have moderate views, and can manage to steer public debate in a fruitful direction. Mike Hosking is a shock jock, and h's only out to serve his own (and John key's) interest.

it's not his freedom of speech I object to, it's his disproportionate prominence which is jarring.

by Justice | 22nd Jun 16, 10:18am 1466547527

Arrogant?controlling? We mustn't smear without putting at least "IMHO"at the end of the sentence. :-)

by rastus1 | 22nd Jun 16, 11:28am 1466551690

....youre being silly David..just follow the link and vote.

by Kermit The Frog | 22nd Jun 16, 9:24am 1466544295

Perhaps we could start a Give A Little page to fund remote controls for the 14,000 who have signed the petition......

by middleman1 | 22nd Jun 16, 10:31am 1466548311

A good start but we would also need to set up a ministry of truth to monitor peoples homes to ensure they were not using them for other frivolous purposes such as exercising ones freedom to watch whatever nonsense they like. Would a more foolproof method be for the state to supply program blockers that can be fitted to the TV to specifically filter out 'the Hosk'?. I hear there is a factory in pyongyang producing these things at bargain prices.

by notaneconomist | 22nd Jun 16, 4:40pm 1466570444

Hosking has attitude and that is a good thing! He obviously works long hours, is not afraid to say what he thinks, seems to have done well for himself.....so in good old kiwi fashion people want him knocked down......and right there is your problem with NZ !!!!

by DFTBA | 22nd Jun 16, 8:50am 1466542204

If the signs are there that our economy has transitioned away from being too reliant on commodities, we should be encouraging the reduction of dairy farms/herds.
They are disproportionately polluting. They also use an enormous amount of our fresh water, just look at what's going on in Canterbury.
We need to be planting more native forests, studies are showing that totara and kauri timber fetch a much higher price than pinus radiate.
And we need more manuka and kanuka, for honey. Need to look after bees, and what better way to do it than this?

by sharetrader | 22nd Jun 16, 9:47am 1466545646

while i love our natural forests and tramping through them the business case for kauri over pine does not stack up. its takes 2.5 times longer grow one for haversting so unless you can get 3-4 times the price not good on the returns,
then you would also have the problem of the price lowering if more are available for harvest as supply would increase

by DFTBA | 22nd Jun 16, 9:58am 1466546299

have a read of the pureadvantage article I shared in response to Belle's post..
.
It might change your mind.
.
Another advantage to native forest is the increased use of NZ native plants in various cosmetic products - this in itself is a money maker and a reason to grow the amount of native forests we currently have.

by sharetrader | 22nd Jun 16, 10:23am 1466547787

thanks have read it, would love it to happen, but can not see it anytime soon as you first would have to change a mindset of a generation.
my only reservation is if you had big plantations would that not start to lower the price of the logs as they would lose their rarity and price advantage due to increased supply.
i can see small plantations working as they could take advantage of the price difference without effecting the price by oversupply
dairy farms and kiwifruit both come to mind were everyone rushed to invest in the new gold rush increased supply to fast

by DFTBA | 22nd Jun 16, 10:32am 1466548374

According to the article, there's 'a real hunger' for alternatives up north, as plantation owners see their logs shipped off for a pittance.
So it's really only a small subset of people whose mind needs changing. And this can be done easily enough through dialogue, and now that we have data to back up claims.

I don't think there's a real fear that our native logs would 'flood the market', they would be valuable because of the quality of the timber. harvesting can be done in a sustainable fashion, and a greener NZ can benefit other businesses, too, such as the cosmetics industry, perhaps the pharmaceutical industry, and most certainly tourism.
There already is an insatiable demand for our manuka honey, and looks like kanuka have even stronger antiseptic properties.

Our native taonga should be appreciated for what it is, and if sustainably managed could earn us a nice income, too.

by rastus1 | 22nd Jun 16, 11:24am 1466551440

The price of carbon might change all that. Its gone for a few dollars up to $18. Wether we like it or not, the growing concern over carbon levels will see this price continue to rise. Bennet wants to cap it at $25, but if we dont get our levels down it will rise as it will need to to force a behavoural change. This will see value rise as just planting trees and leaving them - locking them up ,it will become economic.

This is

by DFTBA | 22nd Jun 16, 12:18pm 1466554693

yes it will. become economical good sense, I mean.
.
the $25 cap should never have been put in place, nor the two for one deal when the ETS was first introduced.
Plus: agriculture should not be exempt, given they are responsible for half of our total emissions. It's ludicrous.
.
This old thinking which sacrifices the planet and the environment for immediate economic gain needs to go. We can't afford it anymore. We need to get a lot smarter about how we make money.

by rastus1 | 22nd Jun 16, 12:32pm 1466555559

..i suspect they are kidding themleves with the cap. If the price isnt high enough, net carbon output will not decrease sufficiently to fulfill iternatinal obligations. So either it is allowed to go up or if capped then the govt (taxpayer) starts coughing up. Its a bit of an elephant in the room re future price increases etc some believe a cap as high as $100 is required - that will hurt.

by DFTBA | 22nd Jun 16, 3:54pm 1466567655

no cap.
If anything, a floor is required, not a cap.
Otherwise there is no incentive to reduce emissions.

by KH | 22nd Jun 16, 10:05am 1466546754

Know a guy in the UK who imports large size oak from forests in France. He buys it from very successful family businesses, who planted the tree 150 years ago and looked after it throughout. When a particular tree comes out they put in another. These savvy business people are probably on their second and third rotation.
That derives from the days of Nelson and Trafalgar. The British destroyed their forests, the French realised they should plan for the future.
There is more to business that the result for this financial year.

by profile | 22nd Jun 16, 5:29pm 1466573380

MAF have put paid to that idea on a commercial basis. Kiwis much prefer clear felled SE Asian hardwoods - else they would have stuck up for West Coast Rimu/Beech sustainable cut heli logging. The Green don't even support people milling trees that have fallen over.

Native species harvesting is a bureaucrats wet dream.

"MAF requirements around logging native timber are stringent. Management plans must include an inventory of the mature trees on owners' land and measurements and GPS coordinates for those with potential to be logged.

...authority also keeps a record of which trees are milled and carries out audits."

by Belle | 22nd Jun 16, 9:08am 1466543325

You are in it for the long haul with Kauri and Totara. I am with you on the dairy being needy and crappy, but how do you suppose we pay the health bills etc in the time it takes to grow a totara? Cash flow is king, business studies 101. Milk.....x2 per day. Totara x1 per 100 years?

by DFTBA | 22nd Jun 16, 9:48am 1466545712

In the long run Totara and kauri are a lot better at sequestering CO2, too, it's not just the quality of the timber. Let alone the benefits to native wildlife of planting native forests.
.
And recent studies have shown that on optimal sites, kauri productivity comes close to that of radiate pine.
Any forest takes time to grow, so instead of planting more pine, we should plant a variety of natives.
.
Not saying we should stop dairying today, we need to build the herd own, continually, consistently. There are a lot of other things we could be doing as a country to make money, and making our money from mistreating animals should not even be on our list, ultimately.
It'll take a year or 20 of investing in R&D, so we can develop our technology and service sectors a bit more.
These are also less energy intensive and less polluting, plus more sustainable. So it's win-win-win.
.
Have a read of this

http://pureadvantage.org/news/2016/06/21/going-native/

by Didge | 22nd Jun 16, 10:34am 1466548470

What about Kauri dieback?

by DFTBA | 22nd Jun 16, 10:40am 1466548838

Yes, another reason to look for a cure against the pathogen which is causing it.
.
Also a reason to plant masses of kauri, in places which have not yet been infected, so as to keep a healthy seed bank.....

by Belle | 22nd Jun 16, 11:17am 1466551077

I agree with you DFTBA, we need to find alternatives and as capitalist as I am we do need to be lead up this path. I like Key, but his imagination is pretty limited. I fear we have been lead up the wrong path and time is running thin....many other countries ahead of us.

by 69er | 22nd Jun 16, 11:34am 1466552042

Native timbers also have other advantages such as natural durability, higher strength and better aesthetics than pine, so don't need the same level of chemical treatment. That's got to have cost savings and potential health benefits.

by Sluggy | 22nd Jun 16, 2:48pm 1466563703

No chemical treatment with Kauri does just fine.

by Stephen Hulme | 22nd Jun 16, 9:16am 1466543774

The essential point is, the health of the American economy is the core that keeps the international economic juices flowing. It has an out-sized influence on everything, and certainly everything related to New Zealand, even if through other economies like Australia, China and Japan.

Hmmmm.....

The IMF Tells Japan: Abenomics Is A Miserable Failure, Recommends "Forcing Companies To Raise Wages.. Or Else!"

I suggest those with money and time take more than a moment to note: Why QE Will Never Work

by Afewknowthetruth | 22nd Jun 16, 9:47am 1466545637

By keeping the financial 'plates spinning on sticks' via artificially low interest rates and money-printing, central banks and governments continue to exacerbate all the factors which will ultimately cause 'the plates to wobble and fall' and cause global financial-economic system to collapse.

Whether it will be the lack of easily-extracted fossil fuels or the consequences of burning fossil fuels that will bring the house down is still unclear but the latter now looks the more likely of the two, with atmospheric CO2 ALWAYS at a new record much higher than the previous year, and the effects of that excessive atmospheric CO2 loading becoming more apparent by the month. Just three examples:

Lowest Arctic ice cover ever recorded and declining at a phenomenal rate (portending further climate destabilisation and massive sea level rise).

https://ads.nipr.ac.jp/vishop/vishop-extent.html

'The coral bleaching event sweeping the globe and destroying vast tracts of valuable coral reef is now officially the most widespread in recorded history, and is likely to continue for an unprecedented third year, according to the US weather agency. '

https://www.theguardian.com/environment/2016/jun/21/coral-bleaching-eve…

Lake Mead level is at the lowest level ever, and there is no indication of the situation getting any better.

http://mead.uslakes.info/level.asp

by Stephen Hulme | 22nd Jun 16, 10:25am 1466547927

Bond buyers are betting rising bad debts for banks or a housing market shock would take a toll on lenders’ dividends and equity capital rather than imperiling creditors. Australia & New Zealand Banking Group Ltd., Commonwealth Bank of Australia, National Australia Bank Ltd. and Westpac Banking Corp. raised a combined A$20 billion ($15 billion) in capital in 2015 to meet stiffer regulation requirements and also haven’t increased interim dividends to stockholders this financial year. That hasn’t happened since 2008.

"Australia’s largest lenders are low risk, back (sic) by a AAA rated sovereign, and offer attractive yields for international investors grappling with zero to negative rates,” said David Ellis, a Sydney-based analyst at Morningstar Inc. “The record amounts of capital they raised last year have strengthened their balance sheets further. For equity investors the risks are rising with pressure on dividends and profits.” Read more.

In respect of the New Zealand subsidiaries of these Aussie banks, the risks extend to RBNZ Open Bank Resolution capital haircuts applied to unsecured depositor's savings. Due to ideological constraints, so called "moral hazard" could not be extended to our side of the ditch.

by Cowpat | 22nd Jun 16, 1:02pm 1466557341

NZD having another at the AUD. With Brexit on tap , a weekly finish around the 96 cent mark or 1.04 could see this pair propel to parity quite quickly. (not investment advice of course)