Here's our summary of key economic events overnight that affect New Zealand, with news bond prices are taking a hammering today, with losses mounting quickly now.
But first, the latest dairy auction has delivered higher prices. Overall they were up +4.9% in USD terms, and with our currency weakening, the rise in NZD was a stellar +10.2%. These rises were led by WMP which delivered a bit of a surprise. WMP was up +5.1% from the last auction. But in between there was a GDT Pulse event for WMP a week ago and that did not signal such a big rise today. Today's WMP result is +5.7% higher than the GDP Pulse event. Buyers are realising that future supply is going to be lower than they were planning so demand is returning to shore up that supply shortfall.
This the US, they have returned from their long Labor Day weekend to face sharply rising yields as bond losses pile up. The USD is surging too especially against commodity currencies which are in full retreat.
However, the US service sector is firing on all cylinders (if that is a valid phrase these days as the car industry turns electric?). The ISM services PMI expanded at a faster pace from its already healthy level. It was led by activity and new orders. Labour markets remained tight, they said.
The ISM services PMI is the widely-watched services survey in the US, but it isn't the only one. The internationally benchmarked Markit one told a quite different story. Usually these surveys see quite similar conditions, but not this month. The Markit services PMI is in contraction and reporting its sharpest fall since May 2020 with new orders retreating. One of them is wrong, its just not clear which one at this time.
Separately the US logistics LMI reports a fifth month of easing in August, the lowest expansion since May 2020. Mostly it is falling demand. Although the index shows the overall logistics industry continues to expand, the rate of growth is now well below the all-time high/tightness in March. Warehousing Capacity is down again, transportation prices fell for a second month while transportation capacity continued to increase and inventory levels grew. This logistics LMI suggests the Markit PMI might be closer to the mark rather than the ISM one.
Despite these risks, the bond market is back to pricing in another full +75 bps rate hike at the next US Fed review on Thursday, September 22 (NZT). Bond prices are taking a hammering.
In China, economic news has gone very quiet. It is neither fashionable not wise to report news that their economy is struggling, especially ahead of the upcoming Party Congress. But it is clear that house prices in their resale markets are falling across a broad range of cities now. And the Chengdu lockdown is shaping up to be a make-or-break situation for their zero-Covid policies.
In Japan, their currency is weakening fast. The Bank of Japan is holding on to its aggressive easing program to finally get inflation rising, and it might succeed. But the cost is a sharply falling yen as those easing policies are now in sharp contrast to the rest of the word. The very much wider yield gap between US Treasuries and Japanese government bonds has encouraged investors to dump the yen for the dollar.
In Europe, almost countries are well into formulating extensive support programs for energy supply and household budgets as the winter season looms, one where there will be no Russian energy to cover the cold snap. The size of these programs in total could be epic, and the EU is stepping up itself with overarching support.
In Australia late yesterday, their central bank raised its cash rate target by +50 bps to 2.35%. This was as expected. They said they aren't seeing any reason to expect CPI inflation lower than 7¾% in 2022, so the pressure remains to get it back to 3% and within their policy range. In turn that means more outsized hikes can be expected, although they are clearly trying to avoid tipping them into a consumer-led spending recession.
The UST 10yr yield starts today at 3.33% and up +13 bps after Wall Street's long weekend. The UST 2-10 rate curve is less inverted at -16 bps. Their 1-5 curve is also less inverted at just -8 bps. Their 30 day-10yr curve has steepened a lot, now at +95 bps. The Australian ten year bond is +2 bps higher at 3.72%. The China Govt ten year bond is little-changed at 2.64%. And the New Zealand Govt ten year will start today at 4.03%, and up +1 bp although it is sure to rise when trading opens today.
Wall Street has opened its Tuesday trading with a minor -0.2% retreat in the S&P500, less than you might assume but what the futures market suggested. But the tech-heavy indexes are down more. Overnight, European markets were generally positive, most up +0.2% except Frankfurt which was up +0.9%. Yesterday Tokyo ended flat, Hong Kong dipped -0.1%. But Shanghai rose a strong +1.4%. The ASX200 ended down -0.4% and the NZX50 ended down -0.2%.
The price of gold will open today at US$1702/oz and down -US$9 from this time yesterday.
And oil prices start today -US$2 softer at just under US$86.50/bbl in the US while the international Brent price is now just under US$92.50/bbl.
The Kiwi dollar will open today just under 60.5 USc and more than -½c lower on a surging greenback. Against the Australian dollar we are unchanged at 89.7 AUc. Against the euro we are a bit less than -½c softer at 61 euro cents. That all means our TWI-5 starts today at 70.3 and -30 bps lower this time yesterday.
The bitcoin price is now at US$19,110 and a sharpish -3.6% lower than this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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83 Comments
Firing on all cylinders is a very old phrase because that dates back to having points and unreliable spark plugs and leads. Unheard of these days with electronic ignition and better ignition parts...
This brings back memories of adjusting the points gap with a feeler gauge....
Not really its quite common to have a complete coil over fail still but yes much more reliable than points. The main advantage is no adjustment in gap and the biggest these days no adjustment in timing.
Buy a Mini Cooper. Tell me that again after a couple of years.
it was a lot easier to keep cars running back then than it is now. I got quite good at tuning my cars. Couldn't afford to replace my Mk3 Cortina so overhauled the motor myself at about 240,000 km. It went on to do another 240,000 + for me and the lady who bought it off me before rust killed it. Lot of fun doing that.
Utter nonsense. Keeping most Japanese ICE running is a case of change the oil and filter, and spark plugs every 100k. And replace the coil packs when they fail.
Compared to adjusting points and timing, giving the carb a clean out and rebalancing if you had more than one, spark plugs every 5/10k, leads every few years.
Old fuddy duddies romantising the past again.
I've had a few issues with modern computer controlled cars and when they start playing up you have to take them to a mechanic with the right diagnostic equipment to test the systems. Those systems used to be brand specific but I expect them to be more universal today. It is more expensive to replace the bits too today.
Theres a boomer meme I liked, went a bit like:
"In the past, you got a manual with your car advising you how to change oil, adjust points, etc. Nowdays there's just a sticker telling you not to drink the battery acid"
It's a bob each way, if you're not inclined towards doing anything mechanical at all, newer cars are now less work. But from a serviceability perspective, they're way more complex and beyond what most people could do in their own rapidly vanishing personal garage.
Sounds to me like Murray drives a European car. Anything other than Japanese will disappoint you.
No, currently a Ranger from new (2015) but it was Japas that gave me the computer problems.
Granted the computer systems are more reliable today, and i have had no issue other than a ruptured sense line (cheap to fix). But talking to mechanic mates when the computer systems start playing up they can be difficult and expensive to repair. The older cars need more frequent tuning, but were easier and cheaper to keep running.
Complexity is a major issue, some have the engine ecu, transmission control module and a body control module (all the whizz bang gadgets in the car). Generally speaking they all communicate with each other, stuff like cruise control uses the BCM and then feeds through to the engine, which in turn has its torque monitored by the transmission module... oh the joy of it. I have been trying for 6 months to get cruise control to work without a BCM, no joy .... yet
Im with you, I have built numerous engines in my lifetime, mostly twin carburetted, I did cheat and install points replacement modules in some, which were very reliable. Recently I put an injected coil on plug engine into a car, along with a modern 6 speed slushbox, the learning curve on wiring and ecu and transmission tuning has been torturous. For the record it does run.
I'm no fuddy duddy but agree. I had an otherwise perfectly operating Toyota sports car which had some capacitors in the ECU delaminate at 165,000k causing sputtering and misfiring. $1100 (in 2006) to rebuild the computer and it was back to being a fun and excellent car.
ICE cars these days are excellent, but beyond the ability of the average home mechanic to repair.
"but beyond the ability of the average home mechanic to repair"
actually ive been able to do almost all mechanical repairs myself just by following instructional youtube videos
A useful tip if your modern car is doing strange things. Disconnect the negative battery lead and leave it off for 20 minutes minimum. Reconnect and wait 20 seconds at each step of restarting engine. i.e. 20 secs from battery connect to accessory position. Then a further 20 secs before full ignition mode and a further 20 secs before attempting to start. It corrects many ecu faults.
I moved to getting a cheap generic Bluetooth OBDII reader from E-Bay a few years ago and some software for the laptop. The fault codes the ECU can put out is very useful these days. Reliability is highly brand dependent, my Toyota was beyond believable with the ECU still going after 30 years.
While I tend to agree, I've got a Peugeot 307 with a failed ECU. Looks like it might go to the scrap heap despite only 160km on the clock as I can't find a second hand one. I've looked online for one anywhere in the world. A new one is more than the cost of the car. I'll go back to Toyota, although I think even they peaked in reliability in the 90's. Too much complexity now.
Yeah the approach went from a tool you use for a lifetime, to something more like fast fashion where you use it till enough things stop working and then you throw it away and get a better new one.
You must have missed the tip that the French are Chiefs and not Engineers.I would never buy a French car, in fact I'm really trying to avoid anything Euro if possible.
Only way I'd ever go back to European is with an EV. And even then, it would have to be mostly outsourced to the other bits of the world who know better. The E208, 2008 and other Stellantis EVs we can buy here atm are all running a NIDEC unit, so functionally a Japanese motor, inverter and charger.
The real question is how do you rate the French at writing software?
If you can't afford a new Euro car, then you certainly can't afford a second hand one.
Peugeot haha. Had one of those, lesson learnt.
Got a triton, 5years 5x $400 service, that is all. No way I'd got that 30 odd years ago.
"...... Humming along nicely....." "whirring happily...."
Another reason to get an EV :)
Scotland's FM announced a rent freeze for both private and public rentals. Called for an energy price freeze from Truss.
Ignoring basic economics never ends well, unfortunately it will give some NZ politicians ideas that there is a free lunch.
https://www.bbc.com/news/live/uk-scotland-62800746
https://www.bbc.co.uk/news/uk-scotland-scotland-politics-62807578
That just nails it!
The west has become so arrogant and delusional, its hard to know if our leaders are actually on our side.
Have we reached peak stupid yet?
It's not ' ignoring basic economics' that is the problem.
The problem is that economic ignored basic physics.
My circles used to joke that you could put twenty economists in a room, close the door and ask them to come up with a ham sandwich. Politicians - neither left or right - are any further along today (at least, not in public); you cannot conjure up heat, by keystroking digits.
Technically, based on the laws of physics, you can create heat by keystroke digits.
Oh wise one. Do tell us another funny joke about economists, from your ivory tower.
And your knowledge of physics is based on ...?
About the same as his understanding of economics.
So, nothing formal like a university degree or anything.
What got you out of the swamp? All you can to is conduct an ad hominem attack, so I'll do my own.
Only takes an average IQ of 130 to get a PhD, so you are off to a bad start correlating education to intelligence. That would be the start point to get an engineering degree. But you are not smart enough to understand IQ.
I will never forget the time you were throwing the mathematical term "differentiation" to sound impressive when you were actually talking nonsense.
I guess you impress yourself with your own education. Maybe that is all that matters.
An IQ of 130 is the 95th percentile - i.e. you are more 'intelligent' than 95% of the population. So ya do have to be pretty intelligent if that's what it takes to get a PhD.
Same point that holds with PDK - just because you don't understand a concept (e.g. calculus), it doesn't mean that the other person is talking nonsense.
A better approximation would be to say an IQ of 130 makes you more intelligent than 97.5% of the population. Not exact but a much better approximation.
Just because you have an IQ of 130 or better doesn't mean you don't have your blind spots. There are one or two contributors to these pages who seem to believe that because they (claim) to have a high IQ then they must be right in all things. Even self proclaimed 'thinkers' fall into these traps. I sometimes wonder if they are so smart why do they contribute to the comment streams rather than write the articles? I'm here to learn, and really enjoy the debates, especially with people who disagree totally with me, because i want to learn what they believe and why. Those 'smart' and 'thinkers' must be here just to educate us dummies?
To sum up. One doesn't need a PhD to know that friction causes heat. Hence the keyboard reference. But there is a fair bit of heat being given off by the friction of your keyboard playground insults. Probably better to attack the argument rather than the person.
We should be honored to walk amongst the gods of the interest.co.nz comments section whose all seeing all knowing minds make us mere mortals but a cool breeze in their shadows.
Couple of things Nymad. Yes I understand calculus, I've got papers, and caught you out misusing it to mislead people here that you know what you are talking about. You are a charlatan. Your memory clearly not so good about that incident either, wish I'd kept the link.
I've been called a polymath 3x in the last ten years, by people smarter than you too. 1:10,000 in the population. I'm so far ahead of you that you have no ability to gauge the depth and breadth of that chasm. Others might not know how full of it you are, but you can't hide anything from me.
Western world 'education' or perhaps a better word is Indoctrination.
The best and brightest of us (sarc), seem to think physics will have its way, even while BAU is being marketed to us 24/7.
Hi Powerdownkiwi, I'm a bit confused why you would think that rent controls and energy price freezes aren't ignoring basic economics, particularly with your strong focus on energy.
If you attempt to hold energy prices below the market clearing rate (i.e a binding energy price freeze) not only do you push the quantity of energy demanded up but you ensure there's a shortage. Either that or you force govt owned entities (not 100% on the exact structure of Scotland's energy markets) to sell energy at a negative economic profit.
Enabling energy prices to reflect supply and demand in this case would push energy prices higher, ensuring people pay closer to the true price of their consumption... I am puzzled why you would have an issue with this...
...or is it perhaps just that the opportunity to take a dig at economics was too good to resist? :D
Interesting article from the BBC.
Grant "afterpay" Robertson has always known there is a free lunch.
"afterpay"...heh heh
Any sort of price freeze and/or subsidy is what you have when you're not prepared to properly regulate a dis-functional market;
We have to get out of the neoliberal mindset.
Yeah, but of course if government intervention in the market, and poor provision of infrastructure (a key government responsibility) is causing the market to be inefficient, then I would prefer to remove the current sources of inefficiency, rather than add another source of inefficiency, that deals with some of the current symptoms.
Consider it like putting a poisoned band-aid on a wound. It may help stop the bleeding in the short term, but in the long term you've made things worse. Better to fix it properly once, then poorly once and properly twice*
twice = fixing the initial problem + fixing the problem your initial solution caused.
Yes, I definitely accept the infrastructure provision argument. I have a great visualization of this for my students - two graphs side-by-side: one being population growth, the other being infrastructure build/provision. It stunningly highlights our infrastructure investment deficit.
We let too many people in via immigration over the last 20 or so years.
Thing is - they're here now and you can't build Rome in a day. And taking resource and energy scarcity into account, it's questionable whether we'll ever catch up. Hence, we're in a pickle - our options are: re-purpose; re-build new or abandon. Re-build everything new is not an option.
I suspect that is what 3 Waters is partly about.
There is skill scarcity as well - the majority of recent migrants never had the skills to build the infrastructure required to accommodate themselves.
So immigration has aggravated the very infrastructure crisis it was promised to solve in the first place.
What scares me is that there is still no policy in place to solve this issue. If low-wage employers once again end up dominating the visa application numbers, this critical skill gap will only widen further.
Much if not all that 'skill scarcity' will be driven by successive Government's adherence to the 'free market' economic model and overall neglect of infrastructure. Any engineer worth their salt will have gone elsewhere to get the pay and the opportunities to use their skills.
Good grief. Does nobody here know that the politicans know exactly the right thing to do, except that if they did the right thing, they would never get reelected?
Real easy to turn the population growth thing off looking forward.
I also made a comment above re Scotlands current move today to public & private rent control which you may have missed - not that I agree with your perspective but to reassure you that you're not alone in your thinking :).
We've had this topic & discussion a few times before on interest.co.nz. Far from any "neoliberal mindset", NZs most socialist PM in recent history Rob Muldoon attempted the last rent freeze (along with prices & wages etc) in a King Canute like attempt to hold back the inflationary waters of 40 years ago. It didn't work then & it won't work now. Those who don't learn the lessons of history are doomed to repeat it.
I think Piggy would roll over in his grave if he knew you thought he was a socialist! That's funny!
But rent controls in isolation will never work. That is why they have failed in all instances internationally. Check it out. Rent controls have always been put in place on their own to cover social housing. That is the equivalent of saying there can just be one rule to govern our roads. It may be speed, condition of the vehicle, which side you drive on or what ever but there can only be ONE rule. It cannot and won't work. Rent control is the same. There must be a whole raft of rules and regulation governing social housing, but no government has the understanding or the political will to enact them.
Yep, as thy say, the cure for high prices is high prices. How else does one expect an increase in supply? Price controls have the opposite effect.
US Services Sector Weakest Since 'Peak COVID Lockdown' (Or Strongest Since April)
After a mixed picture from the manufacturing side of the US economy (ISM stable, PMI weak), US services surveys were expected to both show more weakness in August.
S&P Global's US Services PMI did indeed fall and disappoint, printing 43.7 vs 44.1 expected (and below its flash print) and well below its 47.1 print for July - that is the lowest since May 2020.
Of course, in keeping with the utter insanity of the 'baffle em with bullshit' data we are seeing, US ISM Services unexpectedly rose in August - extending July's unexpected rise - at 56.9 (above 55.4 expected) and its highest since April.
Take your pick - either US Services are contracting at the fastest pace with the lockdowns or are expanding at their fastest pace in 5 months... and the picture was the same mixed view in Manufacturing...
OUCH! German factory orders fell for 6th month as inflation & uncertainty about energy supplies lead to creeping #deindustrialization of the country. Demand slipped 1.1% from June, driven by slump in consumer goods, particularly pharmaceutical products, worse than -0.7% expected. Link
"Misinformation is OK when we do it":
https://www.nzherald.co.nz/nz/politics/covid-19-outbreak-blunder-in-wel…
Planks of wood...
Who gets held accountable for the loss of business, education and the slander of this persons name/reputation, just to name a few?
I might vote for the Nats if they promised to totally reform and cut the godawful Wellington bureaucracy.
https://www.scoop.co.nz/stories/PA2202/S00032/time-to-zero-base-the-pub…
How about the ACT party ?
Sure, that’s great.
It’s just I am less than convinced on some of their other policies.
The reason the public service grows (and thereby draws from an ever shrinking talent pool) is because governments want them to "do" more. Vote for a government that does less and you'll see numbers drop off.
Doesn't have to be a choice between more or less - the reason we are witnessing a drop in service quality and outcomes is because accountability is nowhere to be found in the system.
Bureaucrats, much like their portfolio ministers, are allowed to walk away after failing to deliver by putting a PR spin on everything.
Nothing to do with a monopoly service without permitted competition then.
A civil service 20% of the size, but with ability, would give is twice as much.
The current lot are all busy, true, but not producing anything much.
Yes exactly.
And put the savings into getting many more of the front line people we need in healthcare and education.
That's where a libertarian government (with safety belts so the worst depredations on worker rights are curtailed) would be useful. They'd "do" less, requiring fewer bureaucrats.
It was my contention at the start of Covid, and I've said so on these pages many times, that one very good reason that lockdowns won't work is that people make mistakes.
If you really want to know about misinformation then try Chris Martensen. Articles from Peak Prosperity used to frequent these pages, not so much anymore as it turns out Chris is a pathologist and quite well qualified to understand public health. He has always questioned the main stream narrative, but his questioning not so welcome anymore as it goes against too much bias. Look up one of his latest videos "When Push Comes to Nudge". Very very interesting.
I followed Chris closely in the early days of the pandemic, he made good science-led hypothesises and interviewed leading medical experts. His commentary was even more important when those leading experts were silenced by the authorities in mid-20'.
Towards the middle of 21' however his commentary became more and more opinion based so I gave up, if I need conspiracy theories I can just mention Covid on this site and get a helping.
Take it easy media. Don't you like the public interest journalism fund? Don't you want the business class travel to New York and access to the Prime Minister when she makes her jolly jaunt to the UN next week?
Maybe the PIJF funds are starting to run a bit low?
Time to dole out a few more million to ensure positive coverage.
Bitcoin with a sharp fall this morning, now at $18,867 having finally let go of that $20k handle. Will be interesting to see where the next psychological support is. Nice round figures have been trendy so far, but $10k would be a big drop from current levels. Prime numbers, perhaps? Palindromes?
Lowest daily close since December, 2020.
US 10 Yr yield spiking and JPY to USD 142.80 - BOJ is selling U.S treasuries to defend the ¥
Contagion has arrived in the Bond market, the day of global reckoning has almost arrived. We are 1 minute to midnight on the Financial dooms day clock.
Take a step back from the precipice. Back in the early eighties I traded 30 yr Treasury bonds with ~15.0% yield handles, today its at 3.49%
The problem with that is that there's so much more debt and contagion baked in now than there was then.
State debt has gone so far that only a mutual jubilee or war reparations will ever see it repaid.
The electorate simply cannot be taxed enough to service the debt. Something has to give.
No point looking at history for this event. Unsustainable sovereign debt and 1.4 quadrillion in credit derivatives could go up in smoke by 2023. Position yourself accordingly I suggest.
What do you see ahead? You imply a financial crisis.
Yes, driven by an appreciating USD and a rampaging tightening Fed. Countries will defend their currency and a global currency war is underway. U.S treasuries being dumped to fund the defense of the YEN is exhibit A.
I came here thinking this was the thinking persons brain food site, but no, its more like Top Gear, Whangamata Beach Hop or smoko in a 1980's Service Station smoko room type thing. Nice to know there's some mechanically minded economic buffs out there.
On the winter chill in Europe, time for kiwis to offer our spare bedrooms to those from the northern hemisphere to migrate down here late November into Feb March and April to escape the heating bills for both home, the shopping malls even shops if they still exist. Do people remember the heater above the shop doors blasting riidiculously hot air as entered and exited?.
Could be good for tourism.
No they remember the lockdowns, hideous MIQ camps, mandated experimental gene therapy, compliant mask wearers, police brutality in Wellington but hey they might come if you could promise them a free lunch!
There's plenty of brain food here for the discerning. But we're all people too with experience and opinions. It is very clear that multiple generations read and contribute to the comment streams as well. So if you really are a thinker, then you won't disrespect others experience, or supported opinions. So enjoy!
It used to be. Best minds have died, left, or been kicked off. Go back through to posts from ten years ago and you'll see what I mean.
I miss Cowboy. Mad as a hatter but he was a crazy smart with that. Sadly Kunst and Iconoclast are no longer with us, and I suspect Christov also.
Wolly was the smartest one. Figured out what he needed to know then went and got on with his life.
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