Here's our summary of key economic events overnight that affect New Zealand, with news the rise and rise of global bond yields has investors fretting that the chances of a global recession are rising.
But first, China's scorched southwestern regions extended curbs on power consumption as they deal with dwindling hydropower output and surging household electricity demand during the current long drought and heatwave. Wildfires are a problem there too. There have been power cuts even in Shanghai although at this stage they seem only to be symbolic and in sympathy with central regions doing it tough.
The People's Bank of China cut their one-year loan prime rate by -5 basis points to 3.65% from 3.7%, while the five-year rate was cut by -15 basis points to 4.3% from 4.45%. A cut was expected, but -10 bps for each. Most new and outstanding loans in China are based on the one-year loan prime rate, which is now loosely pegged to the central bank's medium-term lending facility rate, while the five-year rate influences the pricing of mortgages.
It is this housing signal that is getting the most attention, showing Beijing is still struggling to stop the sector's sharp retreat. Their housing sector crisis just won't go away.
We should also note that the Chinese yuan has fallen to a two year low against the US dollar. But it isn't the only currency sinking; the British pound is also at a 2-year low, and the Euro is back at parity with the USD and at a 20 year low.
Taiwanese export orders fell in July from June, and the impetus is going out of this banner feature of the Taiwanese economy.
In the US, the Chicago Fed's national activity index rose, a rebound that wasn't really expected and putting two monthly declines behind it. All four broad categories made positive contributions in July; production, orders, employment and personal consumption. Investors ignored this data.
But there are new signs that the US housing market is entering a downturn that is bringing sharply lower prices. This a special problem in regions that saw sharp rises during the pandemic when there was a shift away from major urban centers.
The tone of the upcoming speech from the Fed boss at the end of this week is taking on huge implications. Markets will be super-sensitive to any perceived 'new' signals. We are less than two weeks away from the US Labor Day long weekend, signaling the end of their summer holiday season and the start of a more serious assessment of the prospects of the giant US economy. Sentiment is everything at this stage, and Powell will have an influence on that.
The UST 10yr yield starts today at 3.04% and up +7 bps from this time yesterday. The UST 2-10 rate curve is still inverted at -31 bps. Their 1-5 curve is slightly less inverted at -14 bps. Their 30 day-10yr curve is now at +82 bps and a little steeper than this time yesterday. The Australian ten year bond is up +12 bps at 3.60%. The China Govt ten year bond is staying lower at 2.64%. And the New Zealand Govt ten year will start today up +15 bps at 3.72%.
Wall Street is in a sell-off mood with the S&P500 down -2.2% in Monday trade. Overnight, European markets were all lower by a similar amount, except London which only fell -0.2%. Yesterday, Tokyo ended down -0.5%. Hong Kong ended -0.6% lower. But Shanghai ended its Monday session +0.6% higher. The ASX200 ended down a full -1.0%. But the NZX50 starred, up +0.7%.
The price of gold will open today at US$1737/oz which is down -US$11/oz from this time yesterday.
And oil prices start today at just over US$89.50/bbl in the US which is very little-changed, while the international Brent price is still just on US$95.50/bbl.
The Kiwi dollar will open today at 61.6 USc and only marginally softer than this time yesterday. Against the Australian dollar we are unchanged at 89.8 AUc. Against the euro we have risen about +½c to just over 62 euro cents. That all means our TWI-5 starts today at 70.9 and a minor firming.
The bitcoin price is now at US$21,226 and a -1.0% fall from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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58 Comments
PM of Finland took a drug test after partying.
Let this be a lesson to any politician who thinks they can live a normal life.
The people have spoken - we expect our politicians to be bland and lifeless.
She openly admitted to using one of the most risky and unpleasant drugs out there - alcohol.
So the news story here is a politician took a legal drug? The horror!
It really is a nothing story, political own-goals being scored at a furious pace as the embarrassing call-outs look like cries for relevance.
no its that their prime minister is still young enough to go out partying and not look like a complete Dork --aka many others who do it for the photo op !
Very Very sad though -- people are so Jealous !
Akvavit! Nothing quite like it. Dawn breaker for centuries on centuries. More violent versions were used by the great Russian WW2 winter soldiers to thin the oil and thus keep their weaponry & transport operational. A basic native trick the wily Wehrmacht opposing, never cottoned onto.
Wasn't it just ridiculous that it kicked off into a big thing? So happy it's turned into an own goal for her opposition. She should also double down on it, start posting videos herself post partying, young people will love it.
Ukraine's stand on borders with Russia have changed, they'll like to have Crimea back.
'Half a league, half a league,
Half a league onward,'
History maybe doesn't repeat, but it sure as hell rhymes.
At cost to others:
OOPS! German benchmark electricity price jumped >25% on Monday to pass €700 per megawatt-hour for the first time. The level is about 14 times the seasonal average over the past five years. Link
For the third consecutive year, unexpectedly dry conditions affected most of Europe. Central and northwestern European countries faced a robust dry spell during April and May (Germany, Belgium, the Netherlands, Ireland and most of the UK, the latter two recovered by August). Earlier in the spring, drier than usual conditions were observed across central and eastern Europe as well (Austria, Croatia, Slovenia, Hungary, Serbia, Bosnia), but mostly recovered by mid-July. However, increasing soil moisture deficits appeared around the western Black Sea coast since. July was much drier than usual in France, Belgium and southern Germany. Since August, central Scandinavia and Iceland showed dry conditions too. Impacts were mild overall, with slightly reduced crop yields in central and eastern Europe, while several local authorities ordered preventive measures. River flows were lower than normal at different times in several water basins (e.g., lower Danube, Warta and tributaries of Elbe, Seine and Meuse). Water supply issues were reported for both consumption and industrial cooling In France. Groundwater levels remained lower than normal across most of the continent for the whole summer 2020.
https://publications.jrc.ec.europa.eu/repository/handle/JRC125320
Definitely a pattern, this is the third year in a row. The authorities really should be looking at adaption strategies post haste, cooling ponds would only take 6 mths to build surely.
This is just the start, as winter approaches the pressure is going to rise from Europe for Ukraine to negotiate peace.
The East and a lot of the south is lost and they wont be getting Crimea back.
The US and Europe should have supported peace from the beginning instead of using ukrainians as cannon fodder for a proxy war.
It will be interesting, certainly there will be pressure via political back-channels but I think overt abandonment would be a tough, tough ask I think. The US and UK are very, very unlikely to abandon Ukraine as this war is just and happens to suit their macro-agenda.
It's allowed the US and UK to test their weapons against Russian weapons with no loss of life on their side, so it's likely mission accomplished from the Wests point of view. Would not be at all surprised if they sue for peace now. Oh you think they care about poor Ukranians caught in the middle? Like they care about Vietnames/Iraqis/Afghans/Taiwanese? Think again. Opening theatres of war to test your might against large powers is exactly what the US led West wants, which is why they keep poking the bears and will continue to do so under the guise of "freedom" or "security" or "stability" or something else.
Interesting point but
The Europeans aided Ukraine out of fear Russia wold move further into other European countries if left unchecked and
The USA aided Ukraine because they don't want their enemies Russia/China to challenge USA's dominant world position
"The Europeans aided Ukraine out of fear Russia would move further into other European countries if left unchecked "
That was the excuse, they knew that was never a realistic eventuality
"All the peoples who once lived in the great and mighty Soviet Union will once again live together in friendship and mutual understanding. We will spare no effort and no means to achieve that. We have already begun to move along this road"
Dmitry Medvedev, earlier this month.
Yes, and Putin new that NATO invading Russia was never a realistic eventuality.
Yet here we are.
Invasion is a rather a mixed bag these days. Last real full on full country invasion was Bush juniors inexplicable foray into Iraq. The major powers with major military, as well as nukes, USA, China, Russia are likely never to need to withstand a boots on the ground invasion, say as per Barbarossa WW2. That leaves aerial considerations which in turn could precipitate catastrophic reactions. Interesting though when you have in China a very large army all dressed up with nowhere to go. Generations of soldiers will have served in there without firing a shot in anger.
>Last real full on full country invasion was Bush juniors inexplicable foray into Iraq
How is America invading Iraq 'real', but Russia invading Ukraine not? It's not like America put the country on a war footing and started up conscription.
Unlike Russias invasion of Ukraine, America didn't annex parts of Iraq.
Fair enough. I should have qualified by saying last real “successful”
Fairly cynical view Blobbles. I think Yvil would be closer. But I also think there is an element of truth to what you say.
I would suggest it is more about the US trying to create an environment for it's companies to be the dominant players in 'any' market, which is where the 'truth' you might be hitting comes in to play. Their military industrial complex (MIC) is less getting to test it's products (because the technology is too new, and they don't want to share it - yet) but it does mean their older products get consumed at a faster rate, meaning they also have to be replaced sooner in US stocks, which also makes room, and the need, for newer, more capable systems.
On the companies being dominant, consider that they did that to us effectively as the latest version the TPP had a clause in it that prevents us from blocking US products and possibly even developing our own version of them. (I might have this somewhat wrong, but the intent was clear - US companies would have power over our national sovereignty).
Agree, probably overly cynical. Yet looking back on history of US foreign policy, it's hard not to be. Agree with your assessment of the MIC and domination of markets being the end goal. Also US companies will be the first to run in and "rebuild Ukraine" in the aftermath, supported with a mass printing of EU/US $$ that will funnel into the pockets of shareholders.
Yes blobbles --- my Uncle was a senior advisor in the british Navy during the falklands --- said they were very interested in the ship to air defences against the exocet missiles -- and then for the Paras they discovered their SA 82 rifle had so much muzzle velocity that unless they hit a bone the bullet could pass straight through an opponent and not even slow them down -- The russians are really celebrating this hypersonic misssile -- now tested in conflict --
This will lead to even more advances -- adn more importantly - huge arms sales .... to those that fund political parties especially in the USA !
US and Europe should have supported peace from the beginning
How do you support peace with a neighbour who is happy to start a war, other than complete capitulation? Ukrainians could have gained peace but lost Ukraine.
The Ukrainians should have negotiated peace from the start, instead they were bull headed thinking they could beat Russia. Eventually the rest of the world will ignore their conflict and move on while they continue to suffer for years.
Yes and including a piece of Ukraine. US has got the EU/Europe where the US want them. Allows for the US to pick up the manufacturing etc where Germany and others commence the decline.
The peace would have required the sacrifice of the Eastern parts of Ukraine and no NATO or EU membership. Too late for that now. The first Russian demand will be lift sanctions.
So now they see how silly it was to shut down their nuclear power stations - what an own goal that was
Maybe they could step up and build new ones as well as keeping the existing operating
They will get it back to - their guerilla war will see to the Russians who dont leave
Did wonder about that migration in the USA from major city to smaller town during the height of covid. Those major cities didn’t get to be so without reason and the covid impact, it’s history, is being either accommodated or downplayed in the minds of the population generally.
So we burn more fossil fuels, causing the earth to heat, causing us to use more energy to cool ourselves, which burns more fossil fuel.
Honestly I don't see how we will ever get on top of Climate change until oil actually runs out.
Bit of an oxymoron - by the time we run the oil out, the Climate will have got on top of us.
:)
Don't worry PDK when the oil's run out the climate will look after itself!
In Soviet Russia the climate changes you.
Historically we seem to be a very resilient species. I think there will be no serious disruption to ‘business as usual’ until food production is impacted significantly for several years. While yields from the food bowls of USA, Canada, Australia, Ukraine and Russia remain reasonable we can kick that severely damaged can down the road. Another reason for me to be pleased to live in Aotearoa. Small population and the ability to feed ourselves if necessary.
Just don't live on the coast, by a cliff, or near a river...sweet as!
And those that do don't ask me to pay for it should something that affects these specific areas happen.
You could add don't be the house below one on a steep hill.
Food production is overall improving not deteriorating and increasing CO2 levels actually assist with that - as does a warmer world. Funny that
Also we have hundreds of years of coal available so when we do run out of oil life will carry on despite the chicken little messages from Greenpeace, UNCCC and other self interested groups who want to control everyone's life
At MOTAT they used to have a coke-powered car. My grandfather said it had amazing torque.
History would indeed rhyme if that came back.
Again Peter Zeihan on the Geo politics of agriculture https://www.youtube.com/watch?v=CQPn1arIpNc
Thought from the UK this morning.
Europe’s population to halve as house prices force couples to have fewer children. If you have accurate census, and so far Europe does, you know exactly how many children are born any given year. The science of actuary table is also quite advanced, and its accuracy is astounding in its precision. If you know how many children were born this year, you know exactly how many people there will be in fifty years. Europe stopped having babies about forty years ago. As the Baby Boomers go into retirement, there are no net replacements for them in the work force. From here on pension and medical expenses skyrocket while government revenue plunges. When you count the number of child bearing age females there is no longer even a possibility of recovery of population. There won't be Germans, or Ukrainians, or Bulgarians, or Rumanians in thirty years. There won't be Italians, or Greeks, or Spanish. Europe hasn't run out of children. That happened decades ago. Europe has run out of child bearing adults.
The same for places like China. So we are all going to be competition for what immigrant there are I guess.
Who wrote this? It's very short sighted looking only at birth rates for population forecasts, what about the masses of African people fleeing their countries to settle in Europe, these represent astronomical numbers.
most likely quantity over quality for now
New Zealands strategy to stack the deck with immigration is looking increasingly flawed as we have to keep dropping the bar on skills and wages, we have built a huge deficit in infrastructure, we aren't building housing at a high enough rate and there is insufficient incentive for businesses to improve labour productivity.
Everyone is choosing different approaches, none of them are very good.
Europe hasn't run out of children. That happened decades ago. Europe has run out of child bearing adults.
That author is a bit of a drama queen. Halving of population does not equal no population. I know plenty of child bearing adults in Europe, so they certainly haven't 'run out'.
Google what Peter Zeihan has to say on the Geo political demographics. Taken in context, they have 'run out,' as have the Chinese.
"Another reason for me to be pleased to live in Aotearoa. Small population and the ability to feed ourselves if necessary"
Especially now that RSE workers can return to NZ in greater numbers, so that we don't have to waste whole fields or perfectly good fruit and veggies because we don't have the local manpower to harvest the crop.
Yes modern day salvery has returned..hope everyone is enjoying their Sav Blanc..
Ridiculous comment. Check your privilege at the airport, fly to Vanuatu and spend a few months in the villages. Then you will see why RSE is so helpful. Slaves? Good grief.
You obviously didn't watch Sunday investigation..RSE worker been here since May and earned...zip...,
Let me guess your about 60...drink lots of red/white wine and holiday often in the pacific Islands were you grumble at the slow service
Lost in the end Baywatch. I'm 65, don't drink wine and the treatment of the RSE workers offends me more than I can civilly express! Indeed the entire pathway our current form of democracy is trending towards and the treatment of ordinary Kiwis bothers me big time. But there is not one political party which would highlight and address these issues to the benefit of the country.
Sorry Murray - comment was only directed at Rex. Staggers me that the wine industry allow this to happen..throw their hands up every time with "we just did not know this was happening"?.
If you really want to see poor living conditions and wages go and look at the hop/cherry/apple workers.
Those food bowls are all reliant on the Haber process and a stable climate though. Both of which are under significant threat, the former as it relies on natural gas and is quite polluting which brings us to the latter as it gets worse and worse. And the mitigations for the latter cause more of the latter in their construction...
What's interesting to me is how few zombie corps. have fallen victim to rising rates. Rise of the zombies?
After a long, painful bureaucratic journey I've finally got my Australian super transferred to my Kiwisaver account :) At a favorable exchange rate
The process wasn't helped by change in ownership of the Aussie super company
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