Here's our summary of key economic events overnight that affect New Zealand, with news there are signs of weaker economic activity everywhere.
But today we start with tough local news. The overnight dairy auction saw prices fall -4.7% in USD terms, down -6.6% in NZD terms as the value of our currency rose. The key WMP price was down -5.2%, although the foodservice ingredients fared a bit better mainly with lower reductions. After the recent Fonterra cut to farmgate milk prices, analysts will be wondering whether another trimming will be in the works - and it will throw into question next season's payout level.
In the US, retail sales inched up +3.7% last week from year-ago levels on a same-store basis, but that is still far from covering inflation. So they fell in real terms, just not as much as they have done in recent weeks.
The number of job openings in the US in February slipped below 10 mln and that was far weaker than what markets were expecting. This is near a two-year low. It is being taken as a sign that their labour market slowdown is arriving. We will get the March non-farm payrolls data on Saturday (NZT) and that is still expected to deliver a +240,000 jobs gain, but perhaps some analysts will be rethinking this after the JOLTS miss.
February factory orders in the US stayed in negative territory, slipping -0.7% from January after the -2.1% slip the month before. That puts them only +1.7% higher than year-ago levels and far less than accounts for inflation.
Meanwhile the US Logistics Manager’s Index (LMI) fell to a record low of 51.1 in March, pointing to the weakest growth in the logistics sector since records began in 2016.
Bucking the negative trends, Canadian building consents rose sharply and unexpectedly in February, up +8.6% from January. But as welcome as that is, it is still -17% lower than year-ago levels.
Things are not better in China. The end of their pandemic restrictions in January has made only a small dent in the country's tough job market, a quarterly survey by the People's Bank of China suggests. And conditions are much tougher for young workers, for whom the unemployment rate jumped 2.8 points to 18.1% in February. Overall households are prioritising saving over spending, although travel is an exception.
European producer prices fell at a sharp rate in February, down at an annualised -6%. That dragged their year-on-year change to +13.2% with most of that happening late last year.
As expected, the RBA kept its cash rate target unchanged at 3.60% rate. They see the US and Swiss banking problems will lead to tighter financial conditions, which would be an additional headwind for the global economy. But they are also battling very high local inflation, especially services inflation and the risks of cost-plus inflation remain high there. So they say they expect that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.
International air cargo volumes fell in February from a year ago, even if they remained slightly higher than pre-pandemic levels. The fall was more evidence the global trade in goods is weakening, down -8.3% globally and down -7.4% in the Asia/Pacific region.
But international 'revenge' travel is up sharply from a year ago, up +90% with the surge largely accounted for by the Chinese. Still, overall this industry is nowhere near back to pre-pandemic levels, still lagging on that basis by -23%.
The UST 10yr yield starts today at 3.34%, and down another -9 bps from yesterday. The UST 2-10 rate curve is less inverted at -51 bps. Their 1-5 curve inversion is unchanged at -109 bps. And their 30 day-10yr curve is still inverted at -124 bps. The Australian ten year bond is still up +7 bps at 3.32%. The China Govt ten year bond is little-changed at 2.88%. And the New Zealand Govt ten year is starting today down another -4 bps at 4.12%.
Wall Street nearing its Tuesday close with the S&P500 up down -0.7% from yesterday. Overnight, European markets closed mixed with London down -0.5% and Frankfurt up +0.2%. Yesterday Tokyo ended its Tuesday session up another +0.4%. Hong Kong ended down -0.5%. Shanghai rose another +0.5%. The ASX200 ended up +0.2% and the NZX50 ended up +0.5%.
The price of gold will open today at US$2021 and up +US$37 from yesterday or +1.9%. This is its highest since February 2022.
And oil prices up +50 USc at just over US$80.50/bbl in the US. The international Brent price is now just under US$85/bbl. It remains surprising that these prices have not kicked on higher given the supply moves by OPEC.
The Kiwi dollar is a little firmer against the USD and now at 63 USc. Against the Aussie we are +¾c higher at 93.4 AUc. Against the euro we are softish at 57.5 euro cents. That means the TWI-5 is now at 70.6 and only +10 bps firmer than this time yesterday.
The bitcoin price is little-changed again today, now at US$28,176 and up a minor +0.7% from yesterday. Volatility over the past 24 hours has been moderate at +/-2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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This comment helps:
Robert F. Kennedy Jr @RobertKennedyJr
The collapse of U.S. influence over Saudi Arabia and the Kingdom’s new alliances with China and Iran are painful emblems of the abject failure of the Neocon strategy of maintaining U.S. global hegemony with aggressive projections of military power. China has displaced the American Empire by deftly projecting, instead, economic power. Over the past decade, our country has spent trillions bombing roads, ports, bridges, and airports. China spent the equivalent building the same across the developing world. The Ukraine war is the final collapse of the Neocon's short-lived “American Century.” The Neocon projects in Iraq and Ukraine have cost $8.1 trillion, hollowed out our middle class, made a laughingstock of U.S. military power and moral authority, pushed China and Russia into an invincible alliance, destroyed the dollar as the global currency, cost millions of lives and done nothing to advance democracy or win friendships or influence. https://reuters.com/business/energ
Pretty much says it all doesn't it. Fighting wars on foreign soils only (with rare exceptions) creates enemies, and the US has proven that time and time again. Build economic capability though and that opens the door to many more possibilities.
I read a comment from a retired CIA employee a few years back referring to US actions in Afghanistan. He alluded that the Taliban didn't have to recruit fighters to it's cause because the US was doing that for them.
Richard Prebble had an opinion piece in the NZ Herald yesterday about NZ sleep walking into a conflict with China. I guess he wouldn't agree with your point. But I do. When you pick your allies, you need to understand exactly who they are and how they operate. China would be a much worse fit for NZ than the US.
Yes, Ziehan's take on things makes a lot of sense.
It would be great to hear his view on NZ's geopolitical position in the world.
He does say our demographics are still pretty good, and as long as we stay aligned with the right partners, we will be some of the least affected going forward, although everyone will be affected, just to different degrees.
The one main caveat I would add is never to underestimate NZ politicians' ability to stuff up a good thing. Their ability to underperform in everything from housing, education, health, etc. will be our downfall, irrespective of any outside influences.
“The Neocon projects in Iraq and Ukraine have cost $8.1 trillion, hollowed out our middle class, made a laughingstock of U.S. military power and moral authority, pushed China and Russia into an invincible alliance, destroyed the dollar as the global currency, cost millions of lives and done nothing to advance democracy or win friendships or influence”
I’m sorry - but it has to be said: the above quoted sentence is abject nonsense, at odds with reality.
Actually it's 100% correct.
Whether he goes down a rabbit-hole on other topics is irrelevant; guilt-by-association mud being thrown.
The neocons know they need the US hegemony to be intact; it's the arena they know they win in. Israel is well aware too; without the US it's a gone-burger. When you're strong but fading, you go to war first. When you're weaker but strengthening, you go as late as you can. And everyone uses others as sacrificial pawns if possible... The US has been on the front war-foot for 50 years, and just like the Romans it's running our of puff.
Start of the new Chinese century
https://maritime-executive.com/editorials/china-is-preparing-merchant-r…
Attention Kiwirail??
https://gcaptain.com/china-intensifies-nuclear-submarine-patrols/
Pretty flash looking subs, scary
Do not expect the gold ‘price’ to provide an effective hedge against inflation.
There is way too much at stake to have gold trade freely, particularly when there were some bank runs in the US and with Credit Suisse recently. Central banks around the world can’t have a gold price increasing dramatically when they are creating emergency bailout programs and buying assets (securities that the banks don’t dare mark to market) from banks that are in trouble.
The gold ‘price’ listed above is from futures markets where the vast majority of trades are settled in paper/digitally and relatively little metal is transferred.
Regarding the Fed and gold watch this video from an insider, they don't care about gold
Thanks for the link, always review a range of opinions on the subject.
This is what the central banks say they have bought.
Global central banks purchased 1,136 tons of gold in 2022, driving the demand for the yellow metal to the highest mark since 2011. The figure, which represents the most central banks bought in 55 years, is 152% higher than the 450 tons they bought in 2021.
Yep, Just a farmer, the level of expenditure to maintain farm productivity is almost killing the job. Talking to a mate who is farming in the Devon- Cornwall area in UK, just yesterday. He has exactly the same issues there as we have here.
Also the pricing of produce is very similar. The big difference is subsidies. 30% of their income is still in the form of subsidies.
Average morgage farm rates are around 6%. Ours at the moment floating 9%
One thing I have noticed over the years is NZ always has higher interest rates than comparable economies.
Maybe that has something to do with our limited income stream, as in exports?
Aussie inflation will now accelerate, as the RBA is too chicken to do the right thing.
The foreign owned dairy factories will be having a real squeeze put on them. They will be sold cheap in the next year or two. The foreign owned corporates cannot compete with a local co-op on a level playing field.
Good point. The Saudi timing sucks as the world plunges into a post pandemic financial crash, demand will fall off if the price is held too high. More over they will only strengthen the resolve to develop better alternatives. Worse; they may actually make the crash worse than it might have been.
There aren't 'better alternatives' (and I live more efficiently on renewable energy, than anyone I know).
There was, therefore, ALWAYS going to be a financial crash; too many forward bets on too much future energy, not enough of the latter to underwrite. The Saudis (and Norwegians) are caught in the same trap on the same sinking ship; oil is potential energy is wealth; money is?
They are headed away from the US hegemony; hence the Iran talks. The joke is that they're talking of getting into the aviation field, to 'get themselves off reliance on oil revenue'. So they're talking to Boeing about building a fleet of.....
Nuts. Just nuts. Ignorant in the primary sense of the word.
Shouldn't have used the word 'better'. But many will view the alternatives as 'better'. Who knows maybe some mad inventor is actually working on turning Iron Man's chest mounted energy pack into reality somewhere in the world?
Dreams of those solutions have abounded for years. So have the conspiracy theories of the big oil corporations trying to suppress them.
By the way Ed. I'm loving the quotes that randomly appear at the bottom of every page.
E.g.
It is a popular delusion that the government wastes vast amounts of money through inefficiency and sloth. Enormous effort and elaborate planning are required to waste this much money.
~ P. J. O'Rourke
Major curve reshaping today - 6m bill yield now well below 3m flipping the rate cut schedule forward by a lot. Euro$ futures bid many contracts by 20 bps for same reasons, fast and furious rate cuts on the way. It's not what the Fed wants to do, but what it will be forced to do. Link
UST 10s the lowest yield since early September. Transitory disinflation? Not a chance. Bad steepening continues. Economy bigger mess and we're not done with the monetary system. Link
Central banks have no controls on what is happening.
"Central Bankers know, even if they are unwilling to publicly acknowledge it, that their tools are inadequate or exhausted, now possessing the potency of shamanic rain dances"
from: A Banquet of Consequences (Reloaded), Satyajitn Das 2015 p286.
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