Here's our summary of key economic events overnight that affect New Zealand, with news bond yields are rising sharply today as fears for a hot response in Taiwan seem to recede.
Overshadowed this morning by that Pelosi trip to Taiwan, the dairy auction delivered another weak result, down another -5% from the prior event. That means overall prices are now down -27% from the peak in March. The WMP price fell -6.1% and more than the fall expected. The SMP price fell -5.3% and also more than expected. Butter also fell -6.1%. Despite global reductions in milk supply, this auction didn't bring a respite from falling demand. Farm gate payout forecasts will now need to be pared back as this run of price declines is now well embedded and prospects for a turn higher seem to have faded. Expect analysts to start this trimming adjustment later this week. Today's decline was the fourth in a row, and the ninth of the past ten.
Meanwhile, American retail sales climbed last week to record one of their best gains of the year.
But the number of job openings in the US fell in June by -605,000 from a month earlier to 10.7 mln, the lowest in nine months and below market expectations of 11 mln. To put that in perspective, the US is expected to have 5.9 mln people unemployed in July, of which 1.4 mln are on jobless benefits. So roughly, there are two job openings for every unemployed worker. The June fall in job openings was the third consecutive drop after a record level in March. Ironically, retail was where some of the larger pullbacks happened in June.
In China, after a three month stand-down period to supposedly allow their in-shore fish stocks to recover, thousands of fishing vessels have been launched into these oceans for a renewed plunder. China doesn't show the same [minimal] restraint for the wider oceans.
And staying on the seas, global shipping giant Maersk has raised its earnings guidance again, a third rise. They say shipping freight costs will stay high for longer. The supply-chain congestion has been a river of gold for them, and they are essentially saying they want it to continue.
In Australia, their central bank raised their cash rate target by +50 bps to 1.85% as expected. Most analysts see another +50 bps coming in September, but then the increases will slow to +25 bps. They have raised their inflation forecasts and lowered their growth forecasts. There wasn't any indication in this announcement that they are about to drain their huge monetary reserves by starting quantitative tightening.
All eyes now turn to the New Zealand jobless rate and it is expected to be near historic-best levels, dropping from the March 3.4% to 3.1% (consensus), or possibly even below 3% (ANZ).
The UST 10yr yield starts today at 2.73% and surging +12 bps from this time yesterday. The UST 2-10 rate curve is more inverted today, now at -34 bps but their 1-5 curve is less inverted, at -26 bps. Their 30 day-10yr curve is now at +55 bps and much steeper than this time yesterday. The Australian ten year bond is up +5 bps at 3.14%. The China Govt ten year bond is unchanged at 2.75% and still near is low for the year. And the New Zealand Govt ten year will start today down -10 bps at 3.32%.
Wall Street is in its Tuesday session with the S&P500 trading a minor -0.2% lower. Overnight, European markets closed down a similar minor amount. Yesterday Tokyo ended with a -1.4% loss, Hong Kong with a -2.4% dump. And Shanghai ended with a -2.3% retreat. The ASX200 ended up +0.1% and the NZX50 also ended up +0.1%.
The price of gold opens today at US$1769/oz in New York which is unchanged from this time yesterday.
And oil prices start up +US$1.50 at just over US$94/bbl in the US, while the international Brent price is now just over US$100.50/bbl.
The Kiwi dollar opened today falling more than -½c from this time yesterday to 62.7 USc. Against the Australian dollar we are marginally firmer at 90.4 AUc. Against the euro we are little-changed at 61.6 euro cents. That all means our TWI-5 starts today at 71.1.
The bitcoin price has moved up from this time yesterday, up +1% to US$23,188. Volatility over the past 24 hours has been modest at just over +/-1.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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77 Comments
Offshoring has been going on for many many years. So any pullback will have a very limited effect in the short-medium term. Plus, all Intellectual Property has been given up and handed over. Which has given them a huge leg up.
All incredibly short sighted. Unbelievably short sighted.
Agreed, the world's largest market, the IP has been lost and even the factories are still there waiting for a local managment team to turn the lights back on.
I suspect that there will be something more to this, probably even some steerage from US authorities, having a business built on markets in the enemy of your tax jurisdiction seems a risk-play anyway.
Pelosi has nothing to lose, good on her for sticking to her guns.
It's pretty provocative from a US foreign policy standpoint. They recognise that Taiwan is part of China, kind of, when it suits them. So is it a country or isn't it a country US? The US is clearly spoiling for war, just continuing to ratchet up tension until China have had enough. Then it's all on.
“It is essential that America and our allies make clear that we never give in to autocrats,” she says. They will freely trade with any country that are autocrats and even supply them with weapons they know are going to be used on civilians (Saudi Arabia), but apparently if your autocrat friend has oil and is supplying them with oil, you love them and will support their murder of thousands of others without any sort of reprimand.
Frankly American foreign policy appears to be run by corporations, if it benefits big US corporates, then that's what they will do.
No doubt that a lot of IP has been transferred and made China a super-power.
However, if you think they are leading the pack, think again. When it comes to bleeding edge innovations the Chinese are still behind which can be seen with things like their covid vaccine programme, the lack of privatisation of space flights, chip manufacturing, IT development (AI, Robotics, etc).
China is still suffering from dogmatism which will always hold them back. Their autocratic economy, working culture (e.g. 996) and a locked down & fully surveilled society where deviation of the norm will result in punishment does not provide the psychological safety needed for true innovation. Amen.
There is also this thought, by Cynthia Chung, which might become relevant:
In October 2019, Jake Sullivan, who became U.S. National Security Advisor in 2021, stated in an interview that the U.S. needed a clear threat to rally the world and play the role of saviour of mankind and that China could be that organizing principle for U.S. foreign policy. In the 2019 interview, he acknowledges that the problem was that people were not going to believe that China is a global threat, that their view of China is too positive and that the United States would need a “Pearl Harbour moment,” a real focusing event to change their minds, something he calmly stated that “would scare the hell out of the American people.”
She correctly traces such 'Pearl Harbour moment' thinking back to neo-conservative movement. Chung closes with this:
Thus, when Jake Sullivan observes that there is not enough anti-China sentiment to bolster an image of the United States as a “saviour of mankind” against China and that America is in need of a “Pearl Harbour moment” I would be very wary. Link
So are you suggesting that the US has engineered China's aggression towards Taiwan, and it's attempts to claim all the South China Sea, not to mention its efforts to succour influence through out the Pacific and Asia? Sound a lot like those who say the US engineered Putin's invasion of Ukraine. It's amazing just how powerful they think US politicians are!
There is an old adage about being careful what you wish for, you might actually get it! I think you're being too shallow in your thinking. The author of this article was failing, in that the blinkers were on the US politicians, not the public. The politicians who suggested China and Russia were threats have been shouted down and dismissed as scaremongers. There were plenty criticising Pelosi before she left saying she shouldn't go because of the effect.
OOPS! Pelosi's Taiwan trip spurs Chinese battery giant CATL to pause multi-billion dollar US plant debut. CATL now plans to wait until Sep or Oct to make the announcement. CATL’s headquarters are in Fujian, across the Taiwan Strait from the island. https://bloomberg.com/news/articles/2022-08-02/pelosi-trip-spurs-china-battery-giant-to-pause-plant-unveiling?sref=R17xFhjo
Murray - if you start from a false premise (and you know I think you do), much of what you tack atop that, will also be false.
The fact is that there isn't enough planet, in a mineral, energy and spatial sense. Heck, Europeans were expanding because of crowding/competition, 200 years ago. They saw the places they arrived at, as empty. the incumbents saw them as full. Now, it's global. Nowhere else to go. But more pressing, not enough mineral, energy and sunlit space to go around.
So we will fight. Maybe a series of Iraq-type repressions, maybe one big all-in. Globalism has peaked, and the only question is the steepness of the downward trajectory. I thin the Neocons in the US (Nuland & Co) are well aware of this. They will be well aware that the later the US leaves it, the relatively weaker it will be. There's only one strategic move...
Lol..... or as our man in Tibet wisely puts it..
“The Dalai Lama, when asked what surprised him most about humanity, answered "Man! Because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future; he lives as if he is never going to die, and then dies having never really lived.”
Better financial advice in there - even than Warren.
The common idea is the Pearl Harbour happened without prior USA/Japan strife But actually there were lots of sanctions etc going on.
Does this sound familiar to what is happening now?
From Wiki.
"........... In 1940 Japan invaded French Indochina in an effort to embargo all imports into China, including war supplies purchased from the U.S. This move prompted the United States to embargo all oil exports, leading the .... "
The United States purposefully moved the Japanese to have no choice but to attack the United States. The ABCD sanctions, the purposeful removal of oil and steel exports to the Japanese. The US was the major aggressor of WW2, who used its power to strip Britain of its empire, ground Germany and Japan into Dust, to rob the Dutch and French of their colonial empires and it did so using diplomatic/economic incentives.
It was a battle of great powers vying on the world stage for power to secure their resources for their industrial economies, and only the United States and Soviet Union won.
However the US was at that point, the biggest manufacturing power in the world with an enormous reserve of farm boys and factory workers who could be trained to fight a global war while manufacturing in unbelievable quantities. A Jeep every 5 minutes, a cargo ship every single day, a strategic bomber every two hours, for years straight. The United States is no longer capable of that since the financial elite deindustrialised the American Empire for its own benefits.
The United States is no longer capable of that since the financial elite deindustrialised the American Empire for its own benefits.
They're more than capable of that. They still make over 10 million vehicles a year, and there's always Mexico.
The US is in almost a perfect position, large industrial base, large agricultural base, and it's not surrounded by potential rivals. Anyone else has to spread out significantly to compete.
She is unelectable.Her husband has been charged with DUI and she is against politicians being unable to buy shares in companies and this is because her husband and family have made some purchases before news broke from the Govt regarding certain policies.
When asked by police to show ID he handed over a California Hiway Patrol Charity Foundation Card that supports officers and their children.
Good Morning from Germany where financial repression is intensifying. While #inflation remains high, at 7.5% in July, 10y German yields have fallen <1% again. Real yields (10y Bunds-inflation) dropped to -6.8%, near All Time Low. Real yields now NEGATIVE for 75 consecutive months Link
How deep will be the Burst will depend on how long does it last and for now it seems that still a long way to go....
https://www.macrobusiness.com.au/2022/08/new-zealand-house-prices-conti…
I don't think the US has an immigration policy, whether at the state or federal level. In any event they have "refugees" aka illegal immigrants flooding into their country. Texas and Arizona state sending them to New York free of charge by bus where the Democrat mayor is squealing. Easy to shout the odds at a distance from New York about letting them in when you are not the state suffering.
Sleepy Joe completing part of Trumps wall on a safety pretext. I don't think too many were to concerned about those that drowned crossing the Rio Grande.
At least NZ has the ability to come up with a decent immigration policy but doesn't.
Earthrace Conservation, of which I am a director, are in the Galapagos right now monitoring the 500 strong fishing fleet. The overall fleet is said to be 1000 ships, but they are split for the moment between the Atlantic and chasing squid in the Galapagos.
Rumour is they Argies got sick of them poaching in their waters and sunk one.
Hoovering up the oceans, but probably nothing to see here.
Yes the Argies did take umbrage
https://www.seafoodsource.com/news/environment-sustainability/argentina…
Another resource to be plundered without any consideration.
A friend of mine just sailed to Fiji with his family, one of his daily updates included the following: "spending a great deal of time avoiding Chinese fishing boats, four of which belligerently refused to avoid a collision, had to deviate 30 degrees to get around them"
The big news is the dairy GDT auction.
For the last 2 years the dairy prices have been fueling our economy at unprecedented levels.
The ongoing declines since March are really starting to hurt export-income projections.
And eventually that has to flow through into the exchange rate.
KeithW
What a great idea, maybe they could team up with the live cattle exports, cattle out, tourists, and long-term immigrants in, on the same ship. Now that is true cattle class.
Unfortunately, that bovine disease, like Covid, has jumped species, with 'foot in mouth' already in the country and has badly infected our politicians. The only cure is to put them down at the next election.
The industry milking international students is about to restart soon too. More of a consortium with hospitality, agriculture, government, universities, etc. milking those poor sods at different stages of their journey.
The brilliant minds that came up with the "education exports" euphemism for this s*itshow deserve to be knighted - oh yes Sirs Key and English already did!
This is what I always struggle with. NZ barely has the capacity for a small handful of industrial ponies.
We can't be a freight and transport hub because we're the end of the line.
The "knowledge economy" has largely failed, because billions of others can and want to do the same.
Scale doesn't exist to make manufacturing viable.
If there was something else we could be doing that was lucrative and competitive, we'd already be doing it.
Scale is also an issue with investment. The banks won't touch small or new businesses unless it is really just a second mortgage. VC's are small time and want/need significant stakes to invest.
We have had a very few good start ups but a lot of initiatives (thinking solar roofs out of Vic https://www.newshub.co.nz/home/new-zealand/2020/09/new-zealand-research…) just don't get the backing they would in Cali.
Overshadowed this morning by that Pelosi trip to Taiwan, the dairy auction ...
lol, the dairy auction is so consequential that only global geopolitical headlines can overshadow it. This is New Zealand.
And oil prices start up +US$1.50 at just over US$94/bbl in the US, while the international Brent price is now just over US$100.50/bbl.
West eases efforts to restrict Russian oil trading as inflation and energy risks mount
Plan to shut Moscow out of maritime insurance market delayed
It certainly did and now its painted itself into a corner and is delicately trying to tip toe its way out.
NZ has been at the forefront of screwing itself with the ETS while the EU is back pedalling on net zero and other CC goals with the current alarmists there (Der Groenen) having to swallow a few dead rats.
Perhaps the sleepy NZ govt needs to check what's happening in Europe with regard to oil and gas sanctions, or lack thereof (Hungary. Spain and Italy) and allow some discount rate fertiliser, diesel and petrol to be imported.
The US of course doesn't care two hoots if the German or EU economy suffers. Hell they'll sell a few more Cadillacs if there are no Mercs or BMWs available.
David’s use of the word ‘plundering’ is very evocative and most likely accurate. Especially with regard to the open seas, and in particular the mid and south Pacific. Where will they fish when these stocks plummet to where they are no longer sustainable. The CCP is probably wealthy enough and social unrest risk averse enough to continue until complete collapse. A frightening scenario for those of us who love the sea and all the critters who make their home there.
Hopefully the latest epidemiology report on the source of COVID can ease the mind of many conspiracy theorists that infest the comments section of any news site (this one included).
/s
Ok, so the reports authors studied data provided by the CCP (after years of scrubbing and withholding data) and found evidence supporting Zoonotic transmission. Quelle surprise!
That's all cool, all we need to do is go to the location where these Raccoon Dogs came from and test them to find the source pool of the Virus.
Oh wait a minute, the Chinese have done that in thousands of locations and failed to find a source. So where is the source, oh great scientific minds of Interest?
If you know how China scrubs data when it wants to, then you would know that they are pretty useless at it. Almost to the point where they know others will know it's bulldust. Yes they used Chinese data (who else is going to give them it??) but if the data was highly modified by the Chinese government, the epicentre would have been virtually on the counter top of the place where the Chinese government had said it was from. But it isn't even in the market, but it is nearby. They also compare multiple data sources and find the results to be pretty well (but not exactly) correlated, that's not what someone would do who is scrubbing the data would do, particularly not the Chinese. They would make it exactly correlated thinking that would remove all doubt. But it's not, some is even contradictory, which causes doubt, which is why the authors still recommend further analysis.
Regarding "Oh wait a minute, the Chinese have done that in thousands of locations and failed to find a source. So where is the source, oh great scientific minds of Interest?" - you don't find yourself contradicting yourself much? In the first piece you say would shouldn't trust any Chinese data, then jump into trusting Chinese data?
We know humans have been getting diseases from other animals for millions of years, reckoning that this is different because no evidence, puts you firmly in the conspiracy theory camp. I have been in these wild animal markets in China, they are exactly as bad as people think they are, lots of species huddled together all sharing similar spaces.
Nice made up story blobbles.
You are right blobbles, I "don't find myself contradicting myself much." If the Chinese had found the animal source it would have been broadcast from the rooftops. It was in their interest to find it and present to the world
Wanting to see evidence of where the virus came from is not a conspiracy theory, it is good science.
SARS source found.
MERS source found.
I have lived in China, so regaling me with a visit to a market doesn't impress much.
You sound really angry and paranoid. Maybe you should get more sun?
You completely contradict yourself in the same post, first not believing Chinese data cos it's all fake, then believing Chinese data and using it as evidence for a conspiracy.
You are literally repeating a conspiracy theory that has no evidence other than circumstantial. It doesn't get any more conspiracy theory than repeating a rumour with no evidence in a hope to get others to discount the actual evidence. But I guess conspiracy theorists never actually know they are...
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