Here's my summary of the key events overnight that affect New Zealand, with news China has pushed its currency lower as global woes are to the fore at present.
In the UK, equities slumped in trading overnight. the FTSE100 was down -2.5% today. Other key EU markets were down even more. Wall Street is down -2% in mid-afternoon trade.
Ratings agency S&P has stripped Britain of its AAA credit rating, slashing it by two notches to AA. They also said they see a higher risk that Scotland will create "constitutional issues".
In the US, new data out for their service sector shows continued expansion but at a more subdued pace.
In China, new data out for Shanghai shows a fast pace of new home buying. It was up +20% year-on-year. The average price is now NZ$7,750/sq m. On that basis, a 100m2 home would cost NZ$775,000.
In Australia, they are in the last few days of their election campaign and the incumbent government looks likely to retain power, according to the latest polls.
In New York, the benchmark UST 10yr yield has fallen further and is now at just 1.46% in late trading. Locally, swap rates were stable yesterday, but they did flatten especially the 1-5 curve which is now down to just +11 bps. Expect local rates to soften today following Wall Street's lead. We could find our wholesale rates at record lows across the whole curve. Risk premiums don't seem to be counteracting these falls (despite what banks may be telling you).
The US benchmark oil price is down another US$1 and now just over US$46/barrel and the Brent benchmark is just over US$47/barrel.
The gold price is only up +$5 today and seems to be settling at US$1,320/oz. Given the turmoil, gold has not really been much of a counter cyclical hedge in this event. Copper prices are actually higher today.
And finally, the NZ dollar starts a little lower, now at 69.9 US¢, at 95.3 AU¢, and at 63.5 euro cents. The TWI-5 index is at 73.9. Our currency continues to rise against the British pound. And the Chinese yuan fell to its weakest level against the American dollar since late 2010, after China’s central bank cut its daily-fix value for the currency by the biggest margin since its surprise devaluation in August 2015. Today's drop reveals the Chinese aren't acting as a stabilising force, more of an opportunist, and this may raise trade tensions with the Americans.
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 ».
Daily exchange rates
Select chart tabs
12 Comments
Here is how China replaces a massive motorway bridge in 43 hours - note in the video the massive amount of buses in use! Will the bridge collapse in the near future - who knows.
http://hooning.wtf/trucks/chinese-super-speed-construction-the-whole-re…
http://www.businessinsider.com.au/china-bridge-collapses-2012-8?r=US&IR…
Let's get China to build a City at Bombay or Whenuapai - they could house 100,000 people within 24 months - here is an example of a Chinese mini city being built in Angola
http://www.businessinsider.com.au/chinese-built-ghost-town-kilamba-ango…
At the current rate of immigration (70,000 a year) even that would not be enough. And under the current insane policies you'd need a new city every year.....forever....squandering rapidly diminishing energy supplies on infrastructure that has no long-term future and generating ever greater amounts of pollution.
It is abundantly clear we are in 'the last days' (possibly literally) of the insane, globalised consumer society system.
http://crudeoilpeak.info/peak-oil-in-asia-and-oil-import-trends-part-2
And as well as the ever-worsening energy predicament there is the 'small matter' of ever-faster melting the planet:
https://ads.nipr.ac.jp/vishop/vishop-extent.html
with all the medium-term to long-term repercussions of that.
Absolutely right about the embodied energy. And of course there is carbon dioxide debt, which almost nobody ever mentions.
How do we get a handle on all this? I don't know! People just continue to ignore reality in the pursuit of money. much of which takes the form of digits in computer systems..
We DO know that it is government policy to totally IGNORE energy factors and environmental factors in the short-term pursuit of money, and that the consequences of decades of ignoring such fundamental factors will be utterly catastrophic quite soon.
The tiz about "freedom camping" (Gosh, It is so unhygienic and should be banned!) is Mr Market (he has lots of other names, such as the Evil One) solving our housing crisis for us. Makeshift slums and tent camps are already sprouting up around our clean, green nation. Open your eyes. If people cannot afford to buy or rent a house, they will find somewhere else to live. The homeless do not just vanish, Just get on a plane and look around the world. National and Labour are bringing slums and shanty towns to NZ. Only Winston Peters addresses this. Only NZ First has a credible plan, IMO.
China has always said "Just business. No politics." Business is about Opportunity.....
It's worth reading Spengler over at Asia Times http://atimes.com/2016/06/britain-embraces-risk-once-again/ re Brexit, the Brits, and the importance of risk-taking...the money shot:
It appears that we cannot have it both ways: cultures that produce large numbers of individuals ready to embrace uninsurable risk also manifest risk-friendliness in all areas of life. The same kind of people who start innovative businesses also go to war, raise families, and endeavour to create art that evinces a sense of existential risk. The Jewish sages of antiquity spoke of the “evil impulse,” or yetzer ha-ra, a term that refers to ambition, assertiveness and sexual desire. A parable in the Talmud says that the rabbis once captured this evil impulse and confined it to a large pot. The next morning no one went to work and not a single egg was laid in all of Israel. The rabbis had to let it go.
It is also worth perusing the Sino-Russian reaction to Brexit, from commentators from the region. Some of the local reactions (and certainly, the comments thereon) are simply woefully iggerint.... Here's some food for thought:
http://atimes.com/2016/06/brexit-russias-comfort-level-rises-us-loses-e…
In the face of mounting pressure from the West, Moscow lately began focusing on expanding its influence and consolidating its leadership in Eurasia. At the St. Petersburg International Economic Forum a week ago, Putin unveiled a Greater Eurasia project. All indications are that this also was a key agenda item for discussions with the Chinese leadership during his visit to Beijing in the weekend.
Putin visualizes a grand partnership within the ambit of the Greater Eurasia plan, involving Russia-led Eurasian Economic Union (EEU), China and, possibly, India and Iran – effectively expanding the ‘post-Soviet space’ toward East, West and South Asian directions.
The S&P and Moody's downgrades of the UK should be seen for what they are - shameless and politically influenced moves that are pathetic. From the same ratings agencies that rated garbage mortgage securities AAA...sorry, you have no credibility. EU continental banks are in far worse shape than UK banks, but not a word on their ratings. S&P and Moody's, you are both a joke at best...
Agree. I have zero skin in the game so can happily pontificate from the sidelines, but I do watch people with aforesaid skin: Chiefio is one. IT guy in the US, exposed to the markets, a skeptical chart-watcher. And as he says, in troubled times, the chart is your friend. https://chiefio.wordpress.com/2016/06/27/europe-and-the-united-kingdom-…
The money shot:
That whole “Pack” is various cuts of the EU. Mostly just the big boys (Germany, France, UK). The EZU is a basket of the entire Eurozone, but is dominated by Germany and France, so no surprise that they run together.
The key point here? Being in the Eurozone has not been a big winner. “From upper left to lower right” is losing. Now these things are being measured in $US, that has been rising. But just selling out of the EU and putting that money in $US assets would have won as compared to sitting in € assets. That’s sort of the point.
As a member of the EU, the UK wanted to match the € on average (that’s the usual goal for major trade partners). As an independent UK, it can now go its own way. IMHO, it is leaving a dropping trend and can now gain strength.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.