Here's our summary of key economic events overnight that affect New Zealand with news of growth downgrades amid bond yields that continue to march higher.
First and as anticipated, today's dairy auction was a negative one, with prices falling -3.6% on average in USD terms. That is on top of falls at the two prior events, so they are down -4.1% since early March. But today's event wasn't as dire as analysts had feared. WMP fell less than the futures market had indicated. SMP fell marginally more. But more importantly, the currency has come to the rescue, falling -3.2% since the last auction so in NZ dollar terms today's overall result was a decline of only -0.2% in local currency.
Given the currency effect, today's results are unlikely on their own to alter any farm gate payout forecast, but it will certainly now push downgrade thoughts to front-of-mind if the trend continues. Fortunately, the current season is in the bag. Any softness will all be about the upcoming season.
In the US, the data released overnight continued its strong run. American housing starts came in above estimates for March and above the prior month which was revised up. The same is true for residential building permits. Both are at historically high levels.
American retail sales for last week were also strong, improving to be +15.2% higher than the same week a year ago, so the strength is much more than 'just inflation'.
Canada housing starts also came in high, but although it was not quite as high as expected, the miss was minor.
But the Canadian housing market is showing signs it has topped out now.
Japan chimed in with an unexpected rise in industrial production, up year on year to February, but more importantly the rise from the prior month was much more than expected.
The IMF has released its lower global growth forecasts, and both the US and China have had chunky lower revisions. The US was cut from 4.0% to 3.7% and for China from 4.8% to 4.4%, and in their case amid intense efforts by state media to play down concerns about the country’s slowing growth outlook. These lower estimates had an immediate effect on the oil price.
For Australia, they now see 2022 growth at 4.2% and in 2023 at 2.5%, down from 4.7% in 2021. For New Zealand their estimate is that we sink from +5.8% in 2021 to 2.7% in 2022 and 2.6% in 2023.
Meanwhile, China has announced it has actually signed a security deal with the Solomon Islands.
The UST 10yr yield starts today up another +5 bps to 2.91%. That is its highest since December 2018. The UST 2-10 rate curve is a little flatter at +36 bps. Their 1-5 curve is steeper at +105 bps. Their 30 day-10yr curve is a steeper at +259 bps. A fully positive rate curve has been restored across all maturities. The Australian ten year bond is now at 3.09% and up +6 bps. The China Govt ten year bond is up +1 bp at 2.87%. And the New Zealand Govt ten year up +5 bps at 3.48%.
On Wall Street, the S&P500 has started its Tuesday session up +1.3%. This rise is because the latest earnings reports show companies are weathering the higher rate environment well so far. Overnight, European markets were all down -0.4% on average. Yesterday Tokyo ended its Tuesday session up +0.7%. Hong Kong was down a sharp -2.3%. Shanghai ended flat. The ASX200 ended up +0.6% but the NZX50 closed down -0.5%.
The price of gold starts today down -US$22 since this time yesterday at US$1956/oz.
And oil prices are -US$5.50 lower at just under US$103/bbl in the US while the international Brent price is now just on US$107.50/bbl.
The Kiwi dollar will open today little-changed at 67.3 USc. But against the Australian dollar we are softer at 91.2 AUc. Against the euro we are marginally softer at 62.3 euro cents. That all means our TWI-5 starts today at 73.6 and a little firmer, mainly on the fall of the Japanese yen.
The bitcoin price is up +2.3% from this time yesterday at US$41,346. Volatility over the past 24 hours has been modest at just over +/- 1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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43 Comments
Excellent ...blame entire world but themselves :
https://www.newshub.co.nz/home/politics/2022/04/grant-robertson-doesn-t…
How thick skin can they be - with power comes arrogance - living in make believe of what they want to see and hear.
The tax thresholds should have always been linked to inflation. The irony is that in the early 2000s Michael Cullen was mocked as a miser for proposing this so he said stuff it and pulled the plug.
The tax threshold need to be thoroughly reworked but that isn’t what national is proposing to do.
Most of Nationals tax cuts are benefiting people with investment properties and people earning over $180,000 and even if you are lucky enough to be earning over $180,000 you only get a cut on each dollar above so someone earning the $500k gets significantly more than someone on $190k.
It does nothing to help with cost of living and makes inflation worse and people need to call Luxon on this BS. It’s fine to be for tax cuts but be honest about who is benefiting and what the impacts will be.
Wait, weren’t the Wellington protesters screaming for some sort of structural change to the system that has continually failed us and kept us in this constant state of powerlessness? Perhaps it is time to discuss the options for governance that would return us to power and them to servitude !
Another response from Robertson
https://www.stuff.co.nz/business/128392830/couple-finds-its-cheaper-to-…
Just because media does not counter question them and allow them to get away with their response, they feel, how brilliant they are and have managed to fool, not realizing, how exposed they stand.
Worse than that - when you put stuff under even the lesser-of-intellect-but-sincere media folk, they ignore it. Then continue peddling mantra. And even those of better intellect - Kim Hill until a while back, Laidlaw, Fallow - mostly accept false 'facts' upon which they begin their constructs. The classic is 'poverty'- child or general. Wealth is really 'access to resources and energy', at it's most basic that means 'access to sunlit soil'. Yet conflict is always discussed in 'dratted personality' terms, and history is used to back-cast forward.
Others laud the exponential increase i consumption, based entirely on the exponential draw-down of a finite planet. And they do it regardless of information offered, polite castigation........ I call these folk reporters, no journalists. It's an important difference; the former regurgitate, the latter question. We have few, to no, questioners. And no questioners asking the real questions; none. Hill has gone demonstrably MIA (maybe she was never really 'there') and nobody else is within a bull's roar.
There was a good analysis a while back of the way journalists - nay, reporters - report roading projects versus other transport projects. Roads with far worse BCRs reported with breathless enthusiasm, alternative transport projects with better BCRs reported (in comparison) with grudging disapproval. Really just looking at our innate biases vis-a-vis transport, not even politics (though of course there is overlap).
Quote: ""Too few houses had been built during the 15 years or so when the population grew from 4 million to 5 million, Robertson said."" The govt and Auckland council were working to a different population plan. They allowed INZ to increase the immigrant quotas without thinking of the consequences. These quotas are decided behind closed doors and never ever debated in parliament.
John Cascoigne has a good piece in the herald about this. I tend to agree with his view.
https://www.nzherald.co.nz/nz/john-gascoigne-paradise-lost-nzs-tragic-s…
https://www.google.com/search?q=John+Gascoigne%3A+Paradise+lost&oq=John…
To use the household analogy... to run a family with 2 children requires a lot less resources than a family with 8 children. Most families would "plan" the process, in regards to how many kids they might have vs constraints of income, housing, workloads...etc.
Most likely the "quotas behind closed doors" was due to lobbying of special interest groups and also the easy "claytons" growth formulae that John Key articulated in 2017 which is, GDP growth = Immigration + Credit growth. ( which Labour also seems to embrace )
The lobbying probably was from business/industry/employers wanting/needing their "perfect world" of a completely elastic workforce.... and beyond that they could not care less about unintended consequences..
It's a bit derp right? It's economics 101 that an increase in government spending (which they are proposing) will all else equal have an inflationary impact.
Like, yes of course global factors are there but they are trying their best for there to be domestic ones too.
Not to mention, increasing minimum wage in line with inflation seems to be the best way to encourage a wage-price spiral in an environment where we don't have high unionisation doing it automatically...
Could get interesting with opposing bases so close together
Gee Foxglove, you actually know there was a"battle" that "was historic to the U.S. Marines in Guadalcanal". Wow ! Well, let me educate you a little more.
If you click on my ID you will se a picture of a New Zealand infantry officer. It is of my father. Lieutenant Ivan Thomas Francis, Intelligence Officer of the First North Auckland Regiment, Third New Zealand Infantry Division, Solomon Island Campaign. He was invalided back to New Zealand nearly dead from the Solomon Island Campaign after a run in with the IJA (Imperial Japanese Army).
For the most of you who do not read history and/or are knee jerk anti Americans, (yes you Audaxes), might I refresh your memory. By late February 1942, Imperial Japanese forces had swept all before them and, to put it mildly, there was nothing between them and the wide open beaches of the Northland Peninsular, my home, as NZ had been stripped bare to commit our forces to support The Second New Zealand Division in the Western Desert, and RNZN and RNZAF units there and in Europe. In desperation, men like my father, at the age of 42 and with a very young family voluntered or were conscripted and the Third Division thrown together in haste and committed to the Solomon Islands in support of our American and Australian allies.
However, by the time they got there the sort term threat of Japanese invasion of these islands had been thwarted by the U.S. Navy'y victory in the Battle of the Coral Sea. Had they not won, Japanese soldiers would have been eating pipis on 90 Mile Beach, New Zealand females committed to a life of Comfort Women and all NZ males castrated and eventually worked to death in service of the Japanese Empire.
If you do actually reflect on ANZAC Day on the good fortune to be living here in freedom today, spare a thought for the very young men of the USN and USMC who gave their tomorrows so that we can enjoy our todays.
My father:
I was asked on FACEBOOK why I had sympathies for Russia and pointed out that when I was a "politically well aware" lad , I listened with my widower father to Churchill's speeches ( my father disliked him -- for various political reasons ,but he was PM in charge of our part of the war). Here is the link to the speech ( the latter third abouts) telling us that once Hitler had quickly disposed of Russia , he would turn to the UK and Churchill's words were not encouraging ( https://www.jewishvirtuallibrary.org/churchill-broadcast-on-the-soviet-german-war-june-1941)
The Yanks offered the UK debt, which has only been paid back in the last decade and a half:
The third turning point was when the President and Congress of the United States passed the lease and lend enactment, devoting nearly 2,000,000,000 sterling of the wealth of the New World to help us defend our liberties and their own.
Britain pays off final instalment of US loan - after 61 years Link
The Soviet Union Defeated Germany in World War II – Not the Western Forces
Audaxes,
My take was that Roosevelt promised "no war" in his election campaign. As a way to get around this the lend lease enactment happened.
As far as I know ... it was a good thing ?
Also...Russia had alot of help from USA ( see comments of Nikita Khrushchev in below link )
https://en.wikipedia.org/wiki/Lend-Lease
The end of war loan was fair enuf, thou maybe could have been more generous... in my view.... https://history.blog.gov.uk/2020/12/07/whats-the-context-signing-the-an…
Mannering my father served there too. Firstly flying Catalina’s out of Havalo Bay, secondly attached to the intelligence section General Maxwell Murray. I have read Frank’s book and also other accounts of Tarawa, Iwo Jima, Saipan. I have studied the Battle of the Coral Sea thar saved New Guinea and the near catastrophe of Midway, where one pilot’s hunch turned the battle. I have also read the semi fiction accounts of Uris, Jones & Mailer. And I recall with shame that the Marines were forced to load their own transport vessels to Guadalcanal because NZ wharfies refused to do so. I am fully aware of mistakes by the USA military, mainly because there is a free press to report it. But may I respectfully suggest that before you load up on unjustified sarcasm, think first, as much might lie behind a brief comment, before pouncing on it.
Thanks. Understood & appreciated. It does get a bit frustrating at times. As said I have read a lot and sometimes now think it may have been too much. But if I may recommend firstly Richard B Franks “Guadalcanal” and secondly for an unmatched overview of all of WW2 V D Hanson’s “The Second World Wars.” :>)
“Their economic purpose was to seize raw materials, markets and labour power; their political purpose was to free the Pacific of all British and American domination and to establish an Asiatic spree of ‘co-prosperity’ ; and their military purpose was to use every resource of the Japanese nation to sweep away the territorial armies of Britain and America in the Pacific.” Thus wrote Jack Belden in 1943 on completion of the retreat through Burma with US General Stilwell (Vinegar Joe.) Today would not be far fetched to substitute China for Japan would it.
The UST 10yr yield starts today up another +5 bps to 2.91%. That is its highest since December 2018.
The biggest bond bubble in 800yrs continues to deflate after rising US #inflation data (CPI & PPI) shake up the bond markets. The value of global bonds has dropped by another $400bn this week, bringing total loss from ATH to $6.4tn. Link
Market capitalization isn’t “wealth.” It’s the latest price, times shares outstanding. Blotches of ink on paper. Flashing pixels on a screen. If a dentist in Poughkeepsie buys a single share of Apple at a price that’s 10 cents higher than the previous trade, $1.6 billion in market capitalization emerges from thin air. If a single share trades 10 cents lower, $1.6 billion evaporates just as quickly. Whatever happens, every security in existence has to be held by someone until it is retired. Ultimately, the wealth inherent in a security is the future stream of cash flows it will deliver to its holder(s) over time. Price fluctuations don’t change those underlying cash flows. They just provide opportunities for the transfer of savings between investors. High valuations favor the sellers. Low valuations favor the buyers. Investors have never paid higher prices for those future cash flows, or accepted prospective returns so low.
Put simply, the bubble hasn’t changed the wealth, and a collapse won’t change the wealth. What will change is the market cap. I suspect that the erasure of market cap in the coming years, and possibly the coming quarters, may be brutal. Still, no forecasts are required, and our own attention will remain on observable valuations, market internals, and other factors. Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag. Link
Linklater,
Why did u have to write that..? Trying to put the knife in ?? I find it kinda ugly.
I appreciate Audaxes views, some of which are expressed thru the links and quotes he posts.
I dont necessarily agree with many of his views ( especially Sniders stuff ) ..... which is great , as it makes me think.
He never writes shit like u just have.....
Thanks Big Green.
"That nine per cent of global GDP, which represents about $8.5 trillion, could have been spent on education, health, infrastructure, housing or other important measures. Instead, it has been siphoned off into spiralling energy costs created not from a lack of energy resources, but from climate policies that intentionally reduced their supply by limiting investment and rejecting new exploration, infrastructure and production.
And there is no environmental silver lining here. In fact, global energy-related carbon dioxide emissions rose by six per cent in 2021 to 36.3 billion tonnes — the highest level ever. That’s in large part due to growing global demand for coal, which will also reach a new high in 2022 following years of decline, as countries scramble to meet energy demand by any means necessary.
Neither is this energy crisis limited to fossil fuels. Because over 80 per cent of global primary energy demand is met by coal, oil and natural gas, the costs of developing low-carbon sources — the labour, raw materials, manufacturing and transportation costs needed to implement a transition — have also risen.
Solar power costs have started to rise after a decade of decline, as have the price of electric vehicle batteries. The cost of a Tesla Model 3 is almost a third higher than it was a year ago. The energy transition will now cost more and therefore take longer. We are getting all of the pain of soaring costs and none of the climate benefit. It is a policy disaster of the worst kind."
https://nationalpost.com/opinion/heather-exner-pirot-the-green-transiti…
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