Here's our summary of key economic events overnight that affect New Zealand, with news the next risk to global supply chains may come from drought in China.
But first up today, there was another dairy auction this morning and prices were lower again, for the fifth consecutive time, and the 10th time in the past eleven events. That means from its recent peak in early March, overall prices are now down by more than a quarter, a bear market for dairy products. They were down -2.9% this time from the prior event, but worse, down more than -4% in NZD terms. If there are any positives, they come from the "at least it wasn't as weak as markets expected" variety. Analysts will be less committed to their early 2022/23 farm gate milk payout forecasts now. Then again, there were some below-the-line positives in SMP and cheese especially, so perhaps they will see this as the bottom of the current market.
Elsewhere, global data on offer was also less than positive.
Perhaps bucking the trend was the recovery in the weekly US retail pulse monitoring by the Redbook survey, with good same-store year-on-year growth above inflation and putting behind it the prior week's dip.
But American housing starts sagged badly, down almost -10% in July from June to be -8.1% lower than year-ago levels. This was much weaker than expected. Building consent levels were weaker too. It may not be much consolation, but the Americans don't have this trend on its own - it has shifted to a global trend where housing is sagging on all fronts now, and may well do for a while yet.
But picking up some of the pace, and perhaps more than expected, was American industrial production in July. June's data was revised up too. This is now +3.9% above year-ago levels (real), and puts behind it two weakish months.
Their CASS freight index of trucking activity softened in July, although still within the elevated range it has been in since early 2021. Their rail traffic data is suggesting a softening as well. Some observers see these softening trends spreading out ahead into Q4-2022. One reason is that supply chains are now 'full' and inventory holders are nervous they have the right goods in stock. If these expectations come to pass, the rise in industrial production might falter.
Canada reported its July CPI data today, at 7.6% which was as expected and lower than the June 8.1% rise. It is another inflation data point that suggests the peak is passed for inflation. But this is not expected to slow their central bank's push to raise their policy rate.
And Canada reported better than expected housing starts for July, so that is a positive for them.
The German ZEW sentiment index isn't improving however, coming it at its lowest since the GFC.
In the UK, down-market supermarket chain Iceland is selling groceries on a buy-now-pay-later basis, one of the world's first supermarkets to offer the 'service' as households there wrestle with rising food bills.
In China, normally at this time of year we note excessive flooding along the big river basins like the Yangtze. But this year it is the opposite with very low flows and very high temperatures. This does not bode well for farming, nor the industry relying on hydro-electric power from their river systems. There is now talk of factories closing due to electricity shortages. Brands like Apple and Toyota are having supply issues.
There are no updates on yesterday's reports China is about to block Australian and New Zealand beef imports.
In Australia, an unsurprising RBA set of minutes from the last meeting has most observers convinced they will raise their policy rate another +50 bps again in early September to 2.35%. Some sections of these minutes reflected concerns of downside risks, but the overall tone was hawkish, especially relating to their strong labour markets.
The UST 10yr yield starts today at 2.82% and up +3 bps from this time yesterday. The UST 2-10 rate curve is more marginally inverted today, now at -43 bps and their 1-5 curve is also fractionally less inverted at -30 bps. Their 30 day-10yr curve is now at +63 bps and a little steeper from this time yesterday. The Australian ten year bond is down -1 bp at 3.28%. The China Govt ten year bond is down -3 bps at 2.65%. And the New Zealand Govt ten year will start today up at 3.39% and down -8 bps from yesterday's levels. Don't forget we have a full RBNZ MPS at 2pom today, certain to deliver another +50 bps rise.
Wall Street is higher today, with the S&P500 gaining +0.5% in later Tuesday trade. Overnight European gained about +0.5%. Yesterday, Tokyo ended unchanged. Hong Kong fell -1.1% with a sharpish selloff, and Shanghai closed with another minor slip. The ASX200 ended its Tuesday session up another +0.6% and that was almost matched by the NZX50's +0.5% rise.
The price of gold will open today at US$1776/oz which is down -US$2/oz from this time yesterday.
And oil prices start today down another -US$2.50 at just over US$86/bbl in the US, while the international Brent price is now just over US$92/bbl. These prices are now near six-month lows.
The Kiwi dollar will open today at 63.4 USc which is -¼c lower than this time yesterday. Against the Australian dollar we are a bit lower at 90.3 AUc. Against the euro we have also slipped to 62.3 euro cents. That all means our TWI-5 starts today at 71.9, and down -20 bps.
The bitcoin price is down -0.9% from this time yesterday at US$23,894. Volatility over the past 24 hours has been modest at just over +/-1.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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49 Comments
I mean he kind of tried to control lots of important arms of the government all at once, often without any prior knowledge of others in his party. It's like a crazy power grab from someone who wanted to push some stuff through without opposition. A cabinet party of 1? It's pretty shocking, the first thing he should be doing is resigning, but Dutton etc are trying to deflect as much as possible, which is sad. I guess ScoMo knows where they buried the bodies...
Muz from my amateur study of Russian history, it is easy to reach the conclusion that no one Russian has ever felt particularly safe and that status has been as such before, during and after the reign of Peter the Great. A population ridden by fear thus becomes subjugated, manipulatable in so much expectations out of life are modest including longevity. Nothing much to lose if you’ve got nothing to lose in other words and efficient in furnishing soldiers en masse, in any shape & form, to command to any fate.
Yes, but resistance still builds. I would think that such an environment would actually promote the breeding of psychopaths as the power needs bodies to enforce their draconian rule. So psychopaths would be preferable and rise to the top, and be wealthier as they reaped the rewards of being their society's 'policemen'. The KGB and newer FSB would it seems, prefer that type of character to essentially wage war against their own people. People not born psychopaths can of course learn the behaviour, but many don't and many try to escape the environment.
I read an article this morning of a young couple who escaped Russia because they had a private TV channel which was reporting on the war and other things, but was attracting unwanted attention from their authorities, so they packed their bags and escaped. Now they've set up their channel again, but outside Russia. I'd suggest they would still need to be very security conscious as Russia has demonstrated no qualms about reaching out to other countries and silencing its critics.
I watched this video on the China, US & Taiwan this morning. It was quite insightful and left me thinking Taiwan is a bigger prize than Hong Kong.
Theoretically it's a bigger prize if you think of it's industry or economic structure. But that is the result of it's style of Government - democracy which essentially enshrines personal freedoms which encourages and allows people to fully develop their talents, which may include challenging their rulers at times. The CCP cannot handle the second part, so the end result of them imposing their autocracy on HK will be a dismantling of the economic benefits that HK used to have, and the same will result if they take over Taiwan. Indeed many of the free thinkers who bring the strength to those economies have likely chosen to leave HK, and would do so from Taiwan as well. Basically a state driven brain drain. Personally I think China would have been a whole lot better off if they'd left HK as a British protectorate and leave Taiwan alone, but I don't think the CCP's egos will allow that. For all we are told that the Chinese have a different view which we in the west don't understand, their basic lust for power and control is the same as any where else.
'Buy now pay later' .... for food of all things. Has the elite 1% finally lost the plot and is pushing the poor over the edge again? What do they think happens when the buyer cant afford repayments.. one word : 'crime' against the wealthy until a revolution.
Surely our greed doesnt preclude the elite from giving a tiny fraction of their wealth to help those that are struggling to buy food without indebting the already indebted.
Reminds me of the old saying ' let them eat cake'. Chop.
It’s more than trickling down in Auckland today, so at least we should have water, if you can afford to drink it. It too is a buy now pay later system.
kids should be made to repeat this basic life lesson every day at school: if you can’t afford something, don’t buy it - unless it is residential property of course.
The water is free to drink when it's raining - just open up and say "Ahhhh..."
...oh wait. https://www.popularmechanics.com/science/a40859859/rainwater-not-safe-t…
Rainwater is now unsafe to drink worldwide because of 'forever chemicals,' study suggests
In the study, published Aug. 2 in the peer-reviewed journal Environmental Science & Technology, researchers point to the dangers of per- and polyfluoroalkyl substances, or PFAS.
https://www.usatoday.com/story/news/world/2022/08/13/rainwater-unsafe-d…
The Rhine is another encroaching bottleneck. This is what happens when issues cross-impact; you get feed-back loops which reverse. Addressing any one of the issues (bypassing the Rhine, using road/rail say) alone, has knock-on effects. There too many issues irrupting simultaneously, too much concentrating on single-issue fixes.
Also, we must bear in mind that the Brics are in the process of taking over as the global hegemony - and we in the west are headed third-world-wards. Some of this will be using useful levers.....
Spoke to my father in law on Sunday. He lives in the south of the Netherlands. He told me the rivers and canals are so low, the barges and freight boats cannot be fully laden or they will ground out. They live within spitting distance of the Meuse (no pun intended as that river is in desperate need of moisture).
Amusing language convention - there, they live in a small village called Beers, and it is just down the road from a town called Cuijk (pronounced Coke). When I first heard these I thought I was being wound up, but it is true, I've been there!
Can BRICS De-dollarize the Global Financial System?
China’s new oil futures are priced in renminbi, and renminbi is also convertible into gold on the Shanghai Gold Exchange and Hong Kong Gold Exchange.Footnote13 This process has led to China, the world’s largest oil importer, having an entirely domestic infrastructure for trading oil using gold, and that China’s oil suppliers can receive payment in renminbi and immediately convert it into gold. This shift marks the beginning of a nondollar financial instrument and nondollar price discovering mechanism for a major global commodity.
Can BRICS De-dollarize the Global Financial System? (cambridge.org)
Buy gold.
We could fly more :)
https://www.popularmechanics.com/science/green-tech/a40795722/solar-ref…
no OCR cuts till mid 2024?
Westpac forecast suggests no OCR reductions until mid 2024 (msn.com)
Whenever you think Fletchers are a money making monopolistic machine, take a look back at their long term share price performance. We're back at 2004 levels now, and the recent peak was still ~40% lower than the 2007 peak.
Then the argument is are they a company struggling in a competitive environment, or are they a monopoly after all and just horribly mismanaged?
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