Here's our summary of key economic events overnight that affect New Zealand, with news the NZD has leaped and an aggressive risk appetite is back in favour on equity markets as the perception grows that the global inflation surge is past its peak and will ease from here. But so far, the bond market isn't so sure and seems to be sitting this one out.
Triggering the sudden mood change was an unexpected easing in the American CPI inflation rate.
Analysts had expected the American headline inflation rate to ease from 9.7% in June to 8.7% in July. But it actually came in under that, at 8.5%. This was largely because petrol prices have retreated more than expected. But food prices haven't shown the same retreat. So their 'core' inflation rate (headline, less food and energy) is unchanged at 5.9% year-on-year.
Equity markets like this news because it might mean the US Fed will take its foot off the rate-rising accelerator sooner. That does seem unlikely any time soon, however.
But in a building worry, American wholesale inventories keep on rising, up by +US$182 bln in the year to June, which is a +25% surge. But to be fair, sales have risen sharply too on a nominal basis (+20%), so the inventory-to-sales ratio, while higher, isn't yet out of range.
US mortgage applications rose marginally last week because there was a +3.5% jump in refinancing, offset by a -1.4% fall in those wanting to buy a home. Meanwhile, the average rate on a 30-year fixed-rate mortgage increased 4 bps to 5.47%.
We have noted it before, but the spectacular budget repair by the US Government has extended into July, although slowing somewhat. In July 2021 they had a -US$302 bln deficit. This July it was -US$211 bln, a 30% improvement.
Also helping the mood in financial markets was a short statement from the Chinese military saying they have completed their exercises around Taiwan.
China's annual inflation rate rose to 2.7% in July from 2.5% in June, but this was below market forecasts of 2.9% for July. Even so, this was the fastest rise in consumer prices there since July 2020, mainly due to a surge in food prices with cost of pork bouncing back sharply. Beef prices held, but sheep meat prices fell sharply. Milk prices are stable.
Meanwhile, China's producer price inflation eased to a 17-month low of 4.2% in July, an easing from 6.1% in June and less than market consensus of 4.8% for July. The latest figure represented the 19th straight month of slowing producer price rises, from a drop in raw material costs as construction activity slowed.
And staying in China, their National Audit Office is now investigating loans by their shadow-banking Trust industry to property developers. These loans are now in jeopardy, and that risks the US$3 tln trust industry and overall financial stability in China. It might be a background reason the Taiwan issue has been raised, as a diverting crisis that can't be blamed on Beijing's economic management.
Germany confirmed its July CPI inflation rate and it held at 7.5%, 8.5% on an EU harmonised basis. Given the Russian energy threats, this is actually a very creditable outcome for them.
The EU’s ban on Russian coal that begins very soon will boost their demand for imports from other countries like Indonesia and Australia. Coal prices are at historic highs.
And shipping costs for mid-size oil tankers from the US Gulf to Europe are near the highest levels since early in the pandemic as energy flows change rapidly.
In Australia, they are preparing for a record winter grain harvest. This comes at a lucky time for them as international demand is rising just as international supply is constrained because of war and drought.
The UST 10yr yield starts today at 2.78% and -2 bps lower than this time yesterday. The UST 2-10 rate curve is less inverted today, now at -40 bps and their 1-5 curve is marginally more inverted at -33 bps. Their 30 day-10yr curve is now at +59 bps and little-changed from this time yesterday. The Australian ten year bond is up +5 bps at 3.27%. The China Govt ten year bond is unchanged at 2.76%. And the New Zealand Govt ten year will start today down at 3.35% and up +7 bps from this time yesterday.
Wall Street is up in its late Wednesday trade with the S&P500 up a strong +2.0% from this time yesterday. Overnight, European markets were mostly higher by up to +1% but London was little-changed again. Yesterday, Tokyo finished up its Wednesday trade down -0.7%, Hong Kong was down 2.0% with a big sell-off, and Shanghai was down -0.5%. The ASX200 ended its trade yesterday down -0.5% while the NZX50 ended unchanged.
The price of gold will open today at US$1796/oz which is up another +US$2/oz from this time yesterday.
And oil prices start up +US$1.50bbl from this time yesterday at just over US$91.50/bbl in the US, while the international Brent price is now just under US$97.50/bbl.
The Kiwi dollar will open today at 64.3 USc which is an overnight jump of +1½c from this time yesterday. Against the Australian dollar we are up +¼c at 90.6 AUc. Against the euro we are +¾c higher at 62.3 euro cents. That all means our TWI-5 starts today at just on 72.3, up +110 bps and now well above the tight range we have been in for the past month - in fact, our highest in more than three months.
The bitcoin price has moved up from this time yesterday, up +3.9% to US$23,929. Volatility over the past 24 hours has been high at just over +/-3.3%.
Join us at 9am for the release of the July REINZ property results.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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122 Comments
Has the time come for house price to fall off the cliff instead of rolling down
https://www.nzherald.co.nz/business/rising-interest-rates-bite-bank-won…
Keep the Faith. Swap rates are like kids in an Elevator jumping up and down, the OCR is the Elevator that keeps going up and up and up and.....
7% interest rates coming soon.
https://www.interest.co.nz/personal-finance/117091/bnz-economists-say-o…
I am not going to pay to read it, but is it seriously an article about one person having to sell their house? One person is not a news story, maybe 10,000 people would be!
Our media is so crap. Heard on the radio today a story about how that Tauranga MP lived in a crap student flat 22 years ago. So what, how is that news? Meanwhile there is a war going on...
Me too. I left NZ in 1977 after a career in industrial engineering in private enterprise and intelligence, defence and energy for the gummint. NZ was so boring for those not into rugby, racing and beer that people were dropping dead on the streets. Ended up in Japan ex Hong Kong hospitals as a university prof, business consultant, mainly to the high tech industry, aerospace and airlines, heavy engineering and weapons at top companies and research institutes and working with some very smart people doing cutting edge stuff. Also trained Japanese diplomats and security forces officers for 10years. And oh the sex life. Japanese woman were paying for the love hotels and actually REALLY liked white Kiwi males - a lot.
On coming back to NZ I was basically told to FXck off by overwhelmingly young female HR types, so these days when working part time as an UBER driver I tell young male passengers to LEAVE asap.
https://www.stuff.co.nz/national/explained/129530294/the-story-behind-t…
The story behind the story of 1 million Kiwis set to leave New Zealand
Russian denials are farcical as pictures of destroyed attack aircraft appear in media. I had to smile at one comment on ways to block the bridge built to Crimea from Russia - panic'd civilians fleeing what they suddenly realised was a war zone. The Russian crack down will be extreme, but they have committed themselves to what is essentially an asymmetric war which they cannot win. They are looking to criminals and north Koreans, as well as Syrians to fight for them now. But as the death toll tells, those sources will dry up too. Russia will be a pariah nation for many years to come as war crimes come home to roost. There is no easy out for them now. The only question is how deep are they prepared to dig, in the hole they have created for themselves?
Russia have claimed this wasn't done by Ukraine. Apparently it's less embarrassing for people to think their own carelessness blew up some ammo than to admit they can't defend their territory against Ukraine's new weapons.
"only a violation of fire safety requirements is considered as the main reason for the explosion of several ammunition stores at the Saky airfield."
https://www.reuters.com/world/europe/one-killed-blasts-rock-russian-air…
Tick if you understand there are two independent republics involved here. Donetsk and Luhansk. And that Ukraine has been shelling them since 2014, which they claim as their own.
This is not a big geo political war from the Russian bear. It's just another nasty ethnic conflict. Unsolvable and murderous.
KH your understanding of the issue is complete bollocks - less RT watching and more indepth reading required. I assume you do understand that the Russian people in the Donetsk and Luhansk regions were largely put there by Soviet Russia and that the earlier inhabitants - Ukrainian were either shipped out or starved out by Lenin and the following leaders
Actually Crimea was the same - the Tartars were persecuted and driven out by the Russians amongst others
So no its not an ethnic conflict and it most certainly is Putin's hubris driving the death and destruction
Perhaps more of you should have watched the Aljazeera investigations into the Ukraine. Turns out it was no different from Russia with the local Oligarchs there ripping the country off to the tune of Billions. Serious levels of money laundering going on through UK Barclays bank, dodgy property investments in London and back street offices setting up business fronts for like 15 pounds. Just as corrupt as the Russians, leave them both to it if you ask me.
Australia really is the lucky country at the moment - boom in exports, massive trade surplus, bumper grain harvest.
Meanwhile in NZ, we are investing time, effort & dollars (which we don't have) into centralisation of three waters, polytechs & health departments, repealing 3-strikes & giving extra NCEA credits to students because it's all too hard.
Oh, and going after some bloke because he got a bit lippy to to a flatmate after having too much booze, and bullied a kid when he was 16, versus ram raiding which seems to be the favoured activity of 16 year old youth at present.
I wouldn't be surprised if National is right about a looming exodus to Australia - we are stalling and focusing in all the wrong areas, while the rest of the world is getting on with it.
Like I said,not exactly comparing apples with apples....sure we could flatten the Coromandel Ranges and dig for gold but not sure it would be worth the effort or damage.My point is we aren't 'lucky',our geography and limited land mass and the fact that we don't have unlimited mineral resources make your argument a moot point...
Our Agricultural 'boom' is purely down to imported fertilizer from African war states, the fact our Grandfathers cut all the forests down and that we don't mind turning our waterways into sewers.
As long as the beer is cheap and we can watch the AB's win at the bach in Whanga's it's all good.
And it doesn't necessarily need to be minerals. If we could even get A into G on tourism that would be great. Feels like we were the last airline to pull our planes out of the desert...and cruise ships yet to return. I took my first walk down Queen Street yesterday in about 6 months...depressing.
NZIER research showed cruise ships generated only 3% of tourism revenue, while comprising 9% of total numbers. Not to mention they're incredibly polluting, all registered in offshore tax havens and are incubation chambers for whatever's next on the pandemic front.
Ban them I say.
As an insider,I can guarantee you there are deserts still full of aircraft yet to be put back in service,it is not a straight forward task...as for tourism,given ours towards the end of the boom was based on busloads of Chinese tourists being booked,managed,housed and bussed around by Chinese owned businesses,this is unlikely to go back to those heady days...especially as China is currently a very large "Hermit Kingdom"..(JK's description of a nation with border controls)
His point is that the Government is focused on what is largely irrelevant trivia instead of working to build national resilience and a sound economic base that creates jobs, decent living standards and opportunities for "everyone every where" (as GR stated in an early speech around the beginning of their first term). In other words they don't have a clue and are twiddling their thumbs pandering to fringe groups. My concern is would National be doing much different?
All well and good to say,but exactly what are either ACT,National or any other party proposing to build this growth and resilience into our economy...and exactly what is it we should be doing? Lots of knockers,not so many answers...forgetting politicians hollow words about wanting a NZ where hard working kiwis get ahead,a NZ that is aspirational, punches above their weight,all emotive clap trap that is unmeasureable...most parties appear to want short term easy gains by importing cheap labour and essentially importing GDP growth...we've done that before,it didn't work then,repeating it won't change the outcomes...
"we've done that before,it didn't work then,repeating it won't change the outcomes..." Talking to a Psychiatrist friend at the gym last night and that was pretty much his definition of insanity. We keep doing the same things we've always done, hoping that somehow the outcomes will miraculously change to some thing different.
Bringing more migrants to participate in inward-looking industries will only expedite our economic decline with worsening trade/CA deficits already at unsustainable levels.
Luxon has reserved his comments on the government's tougher stance on temporary migration and instead focused on calling for more holidaymakers who predominantly participate in export sectors (primary, tourism, etc.).
Lucky country is lucky.
Stupid country gets comeuppance and pays more to import the most eco-unfriendly coal to power electricity for subsidised EV's.
Recidivist offending in the headlines the day after rolling back three strikes.
The children in the market get clappy-handed over moon-shot hopes of central bank restraint, the adults in the bond market simply look on shaking their heads.
NZD hitting 64.5 comes at a good time to take steam out of imported inflation.
lol fact check this.
We are now paying more for coal that is shipped here from Indonesia on polluting ships.
We used to have coal mines in NZ that could have supplied that coal (and did) that would avoid that additional pollution.
The 7% electricity generated by this coal will indeed be used by EV's.
Those EV's that are consuming the polluting electricity are subsidised.
Fact check...duh again
The domestic coal market is complex for its small size, dominated by steel making and milk processing, with a declining quantity being used for electricity generation. Coal is also used for cement making, and to provide process heat for the meat and timber industries.
Fat Cheque : we're now buying in 2 million tonnes of dirty mined Indonesian coal to burn at Huntly , annually ... yet we have a known reserve of 16 billion tonnes of our own , much of it at Huntly ... and , our mines are operated to high environmental standards , the opposite of Indonesia's ...
Go easy there - https://www.youtube.com/watch?v=C71Kv9gWDX4
I was not aware that coal generation was turned off at night.
You are kidding right?
While it was not turned completely off overnight last week even when spot prices were $0.01/MWh but it was certainly ramped right down.
Here's the chart from yesterday. You can clearly see thermal (coal and gas) close to turned off overnight.
https://www1.electricityinfo.co.nz/download/new_attachments?id=11680
Even more interesting the charts from last Friday when the price was 0.01, showing thermal still operating overnight. I guess it's easier for them to ramp the plant down overnight rather than shut it down completely. I read during the last grid emergency that it takes them 6 hours of startup to get meaningful supply out of huntlys units. So that would mean starting up at midnight in time for the 6am peak.
https://www1.electricityinfo.co.nz/download/new_attachments?id=11642
Yeah like 2% of the overnight electrons will be from polluting thermal, the remaining 98% renewable. However that co2 will be emmited regardless if you charge your EV or not if it's being kept on soley for an easy ramp to the morning peak.
What's your point, we shoudl keep using 100% polluting petrol vehicles instead because EVs aren't 100% perfect?
Commonwealth Bank CEO Matt Comyn is hoping for a “short, sharp contraction” in the (Australian) economy and says consumer spending must fall to prevent the Reserve Bank increasing the official cash rate beyond 3 per cent and triggering a recession.
Sounds about right, and might go someway towards explaining the rise in ASB Home Loan Affordability Calculations rising? CBA are expecting consumer stress; and so debt serving problems, and regardless of the length of time that it might play out, those who have to pay bills, and nowhere else to service that debt from, will sell whatever they have to do so.
So whatever it is, the price will fall.
Chris Luxon doesn't just look a little bit like Sgt Shultz from " Hogans Heroes " , he's starting to sound like him too ...
... hey Chris , your brand spanky new MP for Tauranga once beat up a smaller kid in an unprovoked attack ... he trashed a student flat , and terrorized a female occupant ... any comment ?
... " I know nothing , I see nothing , hear nothing ... Nothing ! "
Am I the only one that suspects Luxon probably was told about about Uffindells skeleton? First they claimed that info wasn't shared with Luxon, despite their no surprises policy and Nats history of selecting lemons. But that claim quickly came unstuck as the selection panel flung that ball of crap back. Now it's a "member of my team didn't tell me". Tui.
Beanie,I'd say there is a fair chance of that,Luxon isn't the sort to stand back and say "you pick someone,I trust your judgement,it's been spot on in the past..."
Now the fan has been hit by the brown stuff,his office staff have been called in and offered the 'opportunuty' to take one for the team,like a disciple from the good book...
Given the problems they have had trying to find the right clean living no skeletons candidates before it surely would have been important to get interested in it. I hope he will be right in the mix (or even further clear degrees of separation) next time.
These sorts of mistakes are clearly a gift to Labour, why it is not more important is a mystery.
Labour knew there was a skeleton on 9 June and didn't use it.
Crikey ! ... I'd thought that it was Kirsty Johnston from STUFF who first uncovered Uffindell's unsavoury past ...
... clearly , it's not a " hatchet job " as the Hosk & others are claiming ... Sammy's been a very naughty boy ....a toxic individual during his student days ...
... I really think that it's a political strategy by underlings to not inform their overlord ... so he's not accountable , he genuinely knows nothing ...
As barkingly mad as that seems , it is the Gnats after all ... and Uffindell gives the impression of being just the latest in a long line of privileged , arrogant , private schooled prats ... and really , he seems to be about as interesting as a fence post , seriously lacking charisma or personality ...
Tauranga is the bluest of blue ribbon seats .... if Uffindell was the best candidate that the Gnats could find , how appallingly bad were the other contenders ... or , is it really a case of selecting a white chap from a privileged upbringing ... " one of us " ... ... he seems to me to be a right drip ...
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