Here's our summary of key economic events overnight that affect New Zealand with news China's drive for zero Covid is forcing a mounting economic toll, one that will be felt worldwide soon.
But first, American household debt rose to a record US$15.8 tln in the first quarter driven almost entirely by a +US$250 bln increase in home loan balances, but the rise was the smallest in a year and new mortgage and car loan originations declined for a third straight quarter. Home loans now account for 71% of all household debt, the highest share in roughly a decade. Total household debt only stands at 66% of annual economic activity (GDP). In New Zealand, that same level is 75%.
There was another well-supported US Treasury bond auction earlier today, and the median yield rose from 2.68% a month ago to 2.74% today.
In China, their pandemic lockdown controls are sharply undermining economic activity. One indicator - the sale of cars - is down by more than a third in April, the steepest retreat ever. The overall economic impact of China's pandemic response is massive.
Others have noted that the economic stresses are showing up in mixed messages from the Beijing leadership - a truly unusual sign of diverging policy tensions at the top.
The iron ore price took a tumble yesterday on low Chinese demand. Oil prices did too.
Meanwhile, China is making progress in finding alternative sources of iron ore than importing from Australia or Brazil. It's not a game-changer yet, but the efforts are growing.
In Japan, the Russian invasion seems to have snuffed out household spending plans. Household spending dropped by -2.3% in March in real terms from the prior year, although that was less than market forecasts of a -2.8% fall. The latest figure marked the first decline in personal consumption since last December, as consumers were wary of rising living costs and despite some easing of pandemic restrictions.
In Germany, economic sentiment as measured by the ZEW survey got a little less glum in May, but they are still weighed down by the implications of the Russian invasion on their doorstep.
There are reports that Germany is getting ready for a retaliatory shutoff of Russian gas, a move that would hurt the world's fourth largest economy.
Aussie business confidence fell in April from March, perhaps due to their election campaign uncertainties. But business conditions improved as surveyed by the NAB Monthly Business Survey.
Australian retail volumes rose despite very strong inflation and falling consumer confidence in the March quarter. While large household savings buffers, low unemployment and growing wage pressure should hide negative impacts on spending of both inflation and rate hikes in the short term, analysts there will be watching consumption closely in the coming months for signs of headwinds.
The UST 10yr yield starts today down another -7 bps since this time yesterday at 2.99%. The UST 2-10 rate curve is flatter at +36 bps and their 1-5 curve is also flatter at +97 bps. Their 30 day-10yr curve is also flatter at +244 bps. The Australian ten year bond is now at 3.47% and down -6 bps. The China Govt ten year bond is little-changed at 2.83%. And the New Zealand Govt ten year is down a marginal -1 bps at 3.81%.
Wall Street is staging a small recovery after the deep recent sell-off, up +1.2% in afternoon trade today. But that still means it is down a net -2.2% since the start of this week. Overnight, European markets closed up +0.7% on average. Yesterday, Tokyo ended down -0.6%, Hong Kong was down -1.5%, and Shanghai actually rose +1.1%. The ASX200 ended down -1.0% and the NZX50 was down -1.3%.
The price of gold starts today down another -US$13 since this time yesterday at US$1845/oz.
And oil prices are sharply lower again today by -US$2.50 at just under US$99.50/bbl in the US, while the international Brent price is now just over US$102.50/bbl.
The Kiwi dollar will open today another -40 bps weaker again at 62.9 USc and another near two-year low. The devaluation since the start of April is now up to -9.8%. Against the Australian dollar we are slightly weaker at 90.7 AUc. And against the euro we are also sharply lower at 59.7 euro cents. That all means our TWI-5 starts today at 70.4 and its lowest since mid February. On a TWI-5 basis the devaluation since the start of April is now up to -5.8%.
The bitcoin price is +1.4% higher than this time yesterday at US$31,684. Volatility over the past 24 hours has been very high again at just over +/- 4.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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52 Comments
The world is cresting the Limits to Growth; the systemic compounding graphs well heralded. So no, neither has 'potential'; I have long pointed out that there isn't the global high-EROEI energy remaining, for another Empire of US proportion to get established (nor can the US maintain).
Every country has future potential, but with the caveat: in the (reducing) circumstances.
Yet there is always appetite for more energy-intensive economic sectors that produce minimum wage jobs for NZers.
https://www.stuff.co.nz/business/128593928/auckland-airport-starts-work…
Recession is inevitable when we have artfifically manipulated inflated economy - Thanks to central banks and government.
In NZ, inflation is 6.9% despite government subsidizing fuel and transport, how long and what what can government subsidize is to be seen.
Manipulation in guise of support will continue in one form or the other, forgetting that economy will now run its own course to fundamental conclusion.
Put the fuel tax back on and leave the public transport subsidy in place - increase it if anything.
The savings in road building/maintenance, new cars, oil imports and so forth will more than compensate - done years ago would have eliminated the need for that tunnel and end the new harbour crossing debate.
Beholden to the motor and road construction interest industry perhaps?
Yup. Not only does petrol go up, but when we dip against the yen, a prime source of used EVs gets more expensive too.
If you can afford a Polestar then no drama, but if a Leaf is your only chance of escaping petrol then you've got a spanking coming no matter what.
GV27,
What's wrong with a Leaf? We bought a 2017 Leaf one year ago for $22,000 to do almost all our local driving and i have just done some figures. The total running costs were around $410; a full service at $109 and additional electricity of $300.
We did 9000ks, all urban driving and taking an average petrol(91) price of $2.15 and a generous 12ks/L,( a 9 year old Jazz)the saving was some $1600. For the coming year the saving will be significantly greater.
I think it was a great buy.
"You see a housing crisis, we see an opportunity for portfolio expansion..."
Bit of a laugh...
https://i.stuff.co.nz/business/300584752/head-of-real-estate-agency-spo…
Oh it's totally not a crash! Just a dip before it goes to the moooooon! Be quick!
People say "I wish I had bought BTC in 2011. I'd be so rich."
Now, this is probably not true. Just because you bought BTC at a low price means nothing. To become rich from BTC, you need the mental fortitude to sit out multiple 80%+ crashes. Most people are not emotionally equipped for this and pull out of the market at times just like now.
You also need to be "emotionally equipped" not to sell when it goes from $1 to $2. Or to $10. Or to $100. $1000. $10000... etc.
How many wouldn't sell at 1000% gains? You need an exit strategy to actually make money, and "HODL!!!!" isn't one.
Hindsight makes it seem obvious that BTC was a very good investment 10 years ago. But so was playing Powerball. You just need to know the winning numbers... ie when to enter and exit the market.
How many wouldn't sell at 1000% gains? You need an exit strategy to actually make money, and "HODL!!!!" isn't one.
Some people perceive BTC differently to a pokies machine. For ex, some people believe in it as a store of value relative to fiat money.
So if one converts fiat to BTC at different values (say from $68k or $4k), it's all relative.
From where I'm sitting, $4k to $30k is a moon shot Gally. But people lose all kinds of perspective when they see the price fall from $60k+ to $30k.
I was called out for being condescending when I said "people don't understand these markets" when referring to BTC. But I stand by that call and I think the only predictable thing is the behavioral responses. The volatility is too much unless you're trained or coniditioned for it.
I think the only predictable thing is the behavioral responses
And behavioural responses are chaotic by nature. So what exactly does "understanding the market" mean for you? Do you know where it's going next week or next month or next year? Or do you just understand that it's unpredictable? Is "understanding the market" useful if you can't predict anything?
A gambler understands the rules of the game. A smart one might actually know the odds too. And a good one knows when to quit.
Oh for sure. Probability is important for understanding markets. But that is the whole point. Not knowng the price point of BTC tomorrow or next week. It's unpredictable. On a longer time frame, the pattern has been clearly obvious.
A gambler understands the rules of the game. A smart one might actually know the odds too. And a good one knows when to quit.
This sounds clever and it is partly true, which is why people who understand the rules of the game of central banking have made out like bandits in recent times. Some of them have a vote for BTC. People like Stanley Drucknmiller and Pual Tudor Jones. Doesn't mean they can predict its price.
In China, their pandemic lockdown controls are sharply undermining economic activity. One indicator - the sale of cars - is down by more than a third in April, the steepest retreat ever. The overall economic impact of China's pandemic response is massive.
What about a shortage of Euro$ credit?
But first, American household debt rose to a record US$15.8 tln in the first quarter driven almost entirely by a +US$250 bln increase in home loan balances, but the rise was the smallest in a year and new mortgage and car loan originations declined for a third straight quarter.
Shortage of jobs for the not so rich debt restricted households?
Neither Confusing Nor Surprising: Q1’s Worst Productivity Ever, April Decline In Employed
That’s not the worst part, either. Instead, it is how, very clearly, productivity in the US economy in the post-2008 world (those darn GFC thing-ies) only ever rises when businesses lay off millions upon millions. In case you’re wondering, this isn’t how healthy economies operate.
4 week and 8 week US Treasury Bill yields still bid below the Fed's RRP O/N 0.80% rate floor.
More QEs, More Liquidity, and More Economic Downturn
“The Firm receives collateral in the form of securities in connection with securities purchased under agreements to resell, securities borrowed, securities-for-securities transactions, derivative transactions, customer margin loans and securities-based lending. In many cases, the Firm is permitted to sell or repledge these securities held as collateral and use the securities to secure securities sold under agreements to repurchase, to enter into securities lending and derivative transactions or for delivery to counterparties to cover short positions.”
Bitcoin is just bouncing around $30,000 again currently.
UST on the other hand, after dropping to 0.60c on the $ yesterday, then recovering to a stable 0.90c over night, has resumed its dump!
Got down to 0.67 and is back up at 0.75c on the $. https://www.tradingview.com/x/ZNrO91gX/
Either way its an interesting situation and could really add a lot of leverage to the market as the Luna foundation tries to sure up reserves by borrowing assets.
As we all know, BItcoin realy likes to punish those who leverage themselves in this market, so more shenanigans ahead is my prediciton :)
It is fascinating indeed and is drawing attention from the crypto and non-crypto worlds. Lyn Alden summed it up nicely before this even happened:
https://twitter.com/TuurDemeester/status/1523792818313248769/photo/1
This is pretty big in the scheme of things:
The hedge fund Tiger Global has lost roughly two-thirds of the cumulative gains it has made for investors since its inception in 2001, according to data from an investor that tracks the industry.
LCH Investments estimates Tiger Global has lost about $17 billion this year. Heading into the year, Tiger Global had made net gains of $25 billion, according to LCH, which operates a fund of hedge funds and tracks the top 20 hedge fund managers annually.
https://www.marketwatch.com/story/hedge-fund-tiger-global-loses-17-bill…
Got to love our South Paciic peso. Not sure why everyone is in a panic tho, years ago when I was in sales it dropped to USD$0.54 to the NZD$1.00 for quite a while and nobody said a thing. I guess we are in a different position now but I should image all hell would break loose if it dropped to that now.
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