Here's our summary of key economic events overnight that affect New Zealand with news its election day in Australia, and most think it is too close to call there, even if polls suggest a winner. But the result may have already been decided, despite late swings, because more than half their electorate has already cast their ballots in "early voting". The key in this election seems to be winning the votes of "white collar women in cities".
Elsewhere, the S&P500 is sharply lower again today, and that means from its recent high in March is is down +-16% and for all of 2022 it is down -19% (the start of 2022 was its all-time peak). A -20% decline is when we can call this a bear market, so we are not quite there yet, but the trend is enough to unnerve investors. These are investors who had counted on the Fed to underpin their easy-money gains, so their anger and disappointment should probably be more directed at themselves.
But the recent inflation surge, war induced, along with the return to more normal monetary policy settings, will hurt company profits as investors transition back to more sensible price/earnings benchmarks. Many will be caught out as the cleanout begins. It could get messy, but it is undoubtedly necessary that we have a proper correction.
Japan is in the news again with another rare data item - they got inflation in April of +2.5%. It wasn't unexpected and the actual level came in at about the forecasted level. They haven't had price inflation at this level in more than seven years. In the prior seven months they have also recorded CPI inflation, but usually at tiny year-on-year levels. Now is its significant from a policy perspective. Food prices rose +4.0%. It could be worth watching how the Bank of Japan reacts now.
The Chinese central bank held steady its key rates for corporate and household loans at its May fixing, but cut the mortgage reference rate for the second time this year, amid a slowdown in the Chinese economy due to the resurgent pandemic outbreak, a property crisis, and weak loan demand. The one-year LPR was kept unchanged at 3.70% after cuts of 5 and 10 bps in December and January, while the five-year LPR was trimmed by -15 bps, the most since a revamp of the rate in 2019, to 4.45%.
The sharply rising risk of default by many Chinese companies has forced their authorities to offer 'default insurance' to investors to induce them to supply funding. Bond investors have become increasingly wary of buying corporate debt amid slowing economic growth, disruption caused by Covid-19 lockdowns, and those rising default risks. Even in China, they privatise the benefits, and socialise the risks.
Taiwanese export orders have taken a very sudden and unexpected dive. After being hugely positive for more than two years, these export orders slumped by -5.5% from a year earlier to just US$52 bln in April. That follows a +17% jump in March and smashes market forecasts of an +8.3% rise. Particularly hard hit were ICT product orders. Among key trade partners, orders decreased from China (-16.9%), Europe (-17%), the US (-0.2%) and Japan (-11.3%), but increased from ASEAN countries (+22.7%).
The early report of the May sentiment readings for EU consumers shows they remain very weak, but little-changed from April.
German factories are being hit very hard with cost increases as a consequence of Russia's invasion of Ukraine. Producer prices are up more than +33% in the year to April, most of it energy related. But non-energy prices are up more than +16% so the downstream impacts are huge for them.
A footnote on the Aussie election: even the Murdoch press, a cheerleader for the right, seems to have conceded early. Their main criticism is that the Government hasn't been right-wing enough, not prosecuted the culture wars enough (not Fox-News-American enough), to grab victory.
The UST 10yr yield will start today another -5 bps lower at 2.79%. The UST 2-10 rate curve is flatter at +20 bps but their 1-5 curve is unchanged at +73 bps. Their 30 day-10yr curve is also flatter at +214 bps. Some other less relevant rate curves are starting to look inverted. The Australian ten year bond is now at 3.23% and down -6 bps. The China Govt ten year bond is little-changed at 2.83%. But the New Zealand Govt ten year seems to have dived -13 bps to 3.49%.
On Wall Street, the S&P500 is down -1.8% in Friday afternoon trade and heading for a -4.5% weekly dump. That would make it seven straight weekly losses - the Dow is about to record losses in eight straight weeks. But overnight, European markets all rose. Paris was up the least at +0.2% while London the most, rising +1.2%. None of this has influenced Wall Street. Yesterday, Tokyo ended up +1.3%, Hong Kong ended up +3.0% and Shanghai rose +1.6% on lockdown easing expectations. For the week, Tokyo was flat, Hong Kong up +2.9%, and Shanghai up +1.5%. The ASX200 ended its Friday session up +1.2% for a weekly rise of +1.0% and the NZX50 ended up +0.5% for a weekly rise of +0.9%.
The price of gold is a little firmer today, up +US$2 since this time yesterday at US$1843/oz. A week ago it was at US$1810/oz.
And oil prices are marginally higher today and now just on US$110/bbl in the US, while the international Brent price is now just under US$111/bbl. The convergence of the two benchmarks is quite unusual. The momentum for bringing in 'new' oil rigs into production in North America is picking up faster now.
The Kiwi dollar will open today down almost -¼c against the US dollar, now at 63.7 USc. Against the Australian dollar we are firm at 90.9 AUc. Against the euro we are little-changed at 60.5 euro cents. That all means our TWI-5 starts today still at 71 which is up +70 bps from this time a week ago.
The bitcoin price has fallen -3.7% from this time yesterday and is now at US$28,839. Volatility over the past 24 hours has been high at +/- 3.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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69 Comments
Their main criticism is that the Government hasn't been right-wing enough, not prosecuted the culture wars enough (not Fox-News-American enough), to grab victory.
It's interesting how much Fox News culture is in Aussie. NZ has Mike Hosking, they have an entire network called "Sky News Australia".
Aye today there is Murdoch of Fox, Sky and lots more. About 100 years ago there was Randolph Hearst. He nearly got the Democratic nomination for President to run against McKinlay in 1904. Prior to that he was able through his vast media empire of that time, to pressure McKinlay to declare war on Spain over a bogus claim that the Spaniards had blown up USS Maine while visiting Cuba. That resulted in the US laying claim to other territory including The Philippines. American imperialism was thus underway in earnest. Said all that to say there are certain parallels today to all of that too.
Murdoch has been a key player in most of the shit things that have gone on in the world for 40 years.
He's interfered in UK, US, Aus politics directly (and in other places indirectly) and his papers and TV networks have been responsible for misinformation and using morally repugnant tactics.
He is a cancer on society.
Although interesting that they are calling for a push to the right. The middle is where elections are almost always won (except Trump). I think National are getting votes back by Luxon moving more to the middle than Crusher or Bridges, the results are quite significant. Their recent backing of emissions reductions (and even claiming it doesn’t go far enough) is good politics IMO. If they do lose right wing voters it can only be to their coalition partner Act.
You know what, right now I feel for those brave soldiers in that steel mill in Mariupol. I hope that in the face of what they had to endure people realize that this can happen anywhere. Left or right if you have the right to vote and the result happens you should be thankful. If you read history, the right to vote for who you want to govern is very rare.
Didn’t listen to much did they. Rest homes not isolated at the outset leaving the owners to do it themselves. Not testing border staff, even though directed to do so, but saying that they were. Refusal to consider saliva testing and ditto for RATs until forced to. Not ordering RATs themselves so resorting to pinching stocks of private industry. Yet this government wants to install and centralise all power to these same bureaucrats in Wellington. Go figure.
My favourite was when him and Kate sold their house and then wrote articles about how bad renting was and how nobody cared about them as people.
Mike’s shtick is to pretend you just need to be positive when there is a national government and just drool over them. Then when it’s labour that positivity disappears.
ZB is just a DGM network full of yesterday's men & women, although some have recently left the building. I used to like listening to Kerre, then during covid her voice changed into someone who sounds like they have been given a week to live.
I have lent an ear to TodayFM and it's quickly hitting its straps. And it's so much more 'Up' plus it's seems to be designed to be an inclusive conversation - I hope they get an audience that makes them viable.
What's wrong with Sky News Australia; if it wasn't for them we wouldn't have known that Australian scientists have discovered remedies for all the diseases that afflict mankind from cancer cures to heart disease cures: NZ media should be severely reprimanded for not following up these miraculous achievements.
Despite What You're Told, This Has Never Been Inflation
Both Target and Walmart showed why it never once was. For one, while consumers are being beaten down by prices, so are these retailers! In other words, contrary to inflation “psychology”, their bottom lines have been grossly harmed by input costs they are not able to pass along to their customers.
Correct!! Countries with their own currency should, when they are dealing with inflation, look at the domestic part only. Domestic inflation is a reflection of how the markets work in a certain country. Countries like Switzerland, South Korea, Taiwan have their own currencies but have also a much lower (domestic) inflation due to the fact they have very efficient markets and their economies produce goods the rest of the world clearly wants. Hence they have the pricing power! In return their economies is much more developed than the most the world. New Zealand does not have efficient markets. Look at the RMA; Look at our electricity market; Look at our supermarket duopoly. So our domestic inflation has always been between 2 and 4% over tha last decade. Importing the cheap stuff from Asia and therefore importing a lower non domestic inflation of -2% to achieve a overall inflation of 2% made us blind for our own failings. See the work done by Mary Jo Vergara of Kiwibank.
New Zealand should never burn their fingers on QE if you have your domestic markets so inefficient. If we kept our interest rates allways related to our domestic inflation we should not have ended up with that housing bubble!
These are investors who had counted on the Fed to underpin their easy-money gains, so their anger and disappointment should probably be more directed at themselves.
Everyone need to invest their money somewhere and given that every asset was pumped by central banks it seems reasonable to direct anger and disapointment their way.
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
Tee,
It depends. I hold 28 stocks, all of which(bar one) are dividend payers. While the share prices have fallen, none of the dividends have been reduced and most have declared increased dividends-the latest being infratil.
As prices fall, so the yield increases and at some point, they will be sufficiently attractive for me to increase some of my holdings, very selectively.
I've just started dipping my toes into stocks. While I do look at share price history before buying, it's the dividends that I'm looking for. I figured you can buy more shares with dividends, but takes a little more effort to increase your shareholdings if your share price increases. If stock A in my portfolio goes up while stock B drops, then I can sell down a portion of A and buy B's, but I don't really have the time for that.
I still have a lot to learn though!
Nzdan,
Go to a site like Investopedia and start slowly. For example, what does the P/E ratio mean? How relevant is it?
Get a company's annual report-it looks pretty daunting-but you can gradually begin to understand some key ratios-like debt/equity. pay attention to the cashflow. Talk to others, ask questions, perhaps join a share group, join the Shareholders Assoc and go to a few meetings.
Good luck.
But the recent inflation surge, war induced, along with the return to more normal monetary policy settings, will hurt company profits as investors transition back to more sensible price/earnings benchmarks. Many will be caught out as the cleanout begins. It could get messy, but it is undoubtedly necessary that we have a proper correction.[my bold]
You may wish to consider sanctions.
US considers offer to Belarus – media
The US is considering granting Belarus a six-month waiver from sanctions imposed on its potash industry last year, in exchange for opening up the railroads to start shipping grain from Ukraine to Lithuania, the Wall Street Journal has reported, citing unnamed US officials.
The President's Working Group on Financial Markets, known colloquially as the Plunge Protection Team, or "(PPT)" was created by Executive Order 12631,[1] signed on March 18, 1988, by United States President Ronald Reagan. Link
Fake news.
The significance of the FBI’s lies was accentuated this week at Sussmann’s trial when Scott Hellman, an FBI cyber analyst, testified that he knew right away in September 2016 that Sussmann’s data did not suggest any covert communications between Trump and Russia. Hellman added that he wondered if the person who put together the data was suffering from a mental disability.
Hellman’s testimony is the clearest evidence yet that the FBI knew from the start that one of the two major components of the Trump Russia collusion narrative – the Alfa Bank data – was false. As the March 6 notes show, they concealed this fact from their DOJ superiors.
The other major component of the investigation was the Steele dossier. The FBI knew from a January 2017 interview of Igor Danchenko, Christopher Steele’s “Primary Sub-Source” through whom all the allegations in the Steele dossier were originated or channeled, that the dossier too was false.
https://thefederalist.com/2022/05/19/handwritten-notes-from-2017-show-f…
I wouldn't call it a commentary, just personal opinion.
Are you saying you think Murdoch has been a positive influence in the world? Raised journalistic standards? Strived to portray the truth?
Of course, there are plenty of other dodgy characters who try and infuence world events but he is right up there in terms of reach
Well it is playing out in court right now. The MSM ran the Russian collusion hoax for years. Another example is the censorship of the Hunter Biden laptop revelations prior to the election only now is the NYT admitting it is the real deal and not "Russian Disinformation". Chomsky sums it up well in this short clip with Andrew Marr.
"If you believed something different you wouldn't be sitting here today."
The Federalist has issues with facts. Be careful with this as a source.
King,
The fact that profile is indeed a CC denier should Not bar him from posting on this site. Though wrong, his views are entitled to be heard. Free speech means nothing if it's only what you and I agree with. I am a member of the Free Speech Union and regularly support them financially. It's a cornerstone of democracy.
So sorry to offend your sensibilities - if your want the lefty version here is Noam Chomsky explaining in an interview why accusations of Russian meddling and Trump-Russia collusion were "a joke.".
https://www.youtube.com/watch?v=TtqWezfIhMY
Or the BBC report on the court case.
"Also on Tuesday, prosecutors revealed what led the FBI to conclude that the evidence provided by Mr Sussmann did not prove any Russian collusion.
The server at the Trump Organization uncovered by Mr Sussmann "was merely a spam email server used for sending out marketing emails", Ms Shaw told the jury.
"The server did not reflect a crime, nor was it a threat to national security," she added.
Two other people have been charged with crimes as part of Mr Durham's probe. One pleaded guilty in 2020 to altering evidence that was used to secure an FBI wiretap on Trump aide Carter Page.
In the other case, a Russia analyst has been charged with lying to the FBI about his sources."
https://www.bbc.com/news/world-us-canada-61488556
Dow down almost 20% this calendar year. It needs to be. Prices are/were way over the top. This takes the pressure off but yes, I know, all the big boys are minus 20% as well. They can handle it. There will be casualties however, & it may not just be the big funds, I'm picking some banks to get into trouble over the next 9-12 months as well. Choose your friends carefully out there.
It is getting messy now.
maybe it just hasn’t effected you yet
but imagine being one the people who have a half finished house due to the half a dozen developers that have gone broke in your area
Imagine finding out your not a homeowner but an unsecured creditor
think saving a deposit is hard…try saving for the second when you lost the first
imagine being one of the thousands of people who risk ending up in a similar risky position
New Zealand is being very casual about this
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