Here's our summary of key economic events overnight that affect New Zealand, with news the 'surprise' rise in the official Australian interest rate benchmark comes as the Chinese yuan weakens sharply past 4.1 to the USD. A weaker Chinese economy and higher regional interest rates will cause inevitable ripples in New Zealand.
But first today, there was another dairy auction this morning and another weakish one. For a second consecutive time, prices fell -0.9% in USD terms, but this time that was more than made up by a weakening NZD. In local currency, prices rose +1.7%. The main weakness was the WMP price, down -3.0% from the last event three weeks ago, and a reflection of weak Chinese demand. At the other end of the scale, cheddar cheese rose +7.4%. Today's overall fall just adds to the downward direction we have had almost continuously for the last 15 months now. And it justifies the conservative, falling farm gate payout price indications from both Fonterra and the wider analyst community.
The American retail impulse continues to weaken, up a meager +0.6% last week from the same week a year ago on a same store basis, far less than is needed just to keep up with inflation. (This isn't measuring all retail sales of course, only those in traditional store premises.)
The US Logistics Manager's Index has reached a new all-time low and for the first time in its 6.5-year history it has moved into contraction territory. This is the third consecutive month of record lows.
Canada reported grim residential building consent data overnight, sharply lower in April than March. And their widely-watched local PMI wasn't too flash either, falling to a modest expansion when a rise to a good expansion was anticipated.
In China, most large state-owned banks are now sharply cutting deposit rates for customers. Not only is loan demand anemic, but Beijing is concerned about very high savings rates as households worry about their future prospects. Lower savings rates may induce some to spend rather than save. The Chinese financial institutions’ deposit-loan gap grew to a staggering US$6.8 tln at the end of April.
In Europe, the destruction of the giant Ukrainian dam on the Dnipro River is causing widespread havoc downstream. It is likely to cause wheat prices to rise globally too as a key part of that trade is now shut down.
In a surprise to analysts, the RBA raised its cash rate target by +25 bps yesterday to 4.10%. It was their 12th rate rise in a row. It was a surprise because it was different to what those analysts had interpreted the RBA guidance, not from what many thought they should do. With strong labour markets, the RBA's focus is now clearly on the inflationary threats from rising labour costs and inflation expectations.
Globally, the World Bank says the world economy is expected to grow by +2.1% in 2023, up from a +1.7% expansion they projected in January. This is due to greater-than-expected resilience in major economies, including the US they said. However, the 2023 expansion will be much less than the 2022 +3.1% global expansion, and at the new +2.1% it is still weak.
The UST 10yr yield will start today at 3.70% and little-changed from yesterday. Their key 2-10 yield curve is more inverted however at -85 bps. Their 1-5 curve is little-changed at a -137 bps inversion. And their 3 mth-10yr curve is at -143 bps and less inverted. The Australian 10 year bond yield is now at 3.80% and only up +1 bp. The China 10 year bond rate is little-changed at 2.72%. And the NZ Government 10 year bond rate is at 4.50% and up +11 bps from this time yesterday.
Wall Street is in its Tuesday session unchanged on the S&P500. Overnight, European markets were all up on average by +0.3%. Yesterday, Tokyo hit yet another new record high, powering up another +0.9% on the day. Hong Kong slipped a minor -0.1%. Shanghai however took a heavy hit, down -1.2% in a sharp late fall. The ASX200 ended its Tuesday session down a similar sharp -1.2%, but the NZX50 ended unchanged - however of course trading here closed before the RBA decision.
The price of gold will start today at US$1965/oz and up +US$4 from yesterday.
And oil prices have slipped -50 USc today from yesterday at just under US$72/bbl in the US. The international Brent price is now just over US$76/bbl. The Saudi-announced production cuts have had little impact to date.
The Kiwi dollar starts today little-changed at 60.7 USc. Against the Aussie we are sharply lower, down -¾c at 91 AUc. Against the euro we are little-changed at 56.8 euro cents. That means the TWI-5 is down another -20 bps at 69.1 from where we left it yesterday.
The bitcoin price has bounced back a bit today, recovering some of yesterday's large SEC-Binance induced fall. It is now at US$26,699 which is a partial recovery of +3.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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59 Comments
Brace for Impact
We've been bracing for the last few years. Dead cat bounce, here we go, wheeee, dropping like a stone. Still waiting.
From the tsunami od debt stupidity that has been building for years, or something else...?
China wants its people to spend rather than save. So too, in a complete reversal of decades of the opposite, did the NZ government during and around the the pandemic. There is, in old fashioned thinking, centuries of it in fact, something perverse in such policy of today. Hard to trust any government that would promote it.
There is little safety net in China, most medical procedures are paid for if you want prompt quality treatment. They are a Nation of savers... and gamblers.
Gotta spend money to make money.. buy buy buy!
The bottom has been reached!!!
Yip, Nikki at One Goof, and her band of merry spin REAs, has seen a few mansions have multiple offers. Soooo... the market is booming
WHat a dead set feck wit!
https://www.oneroof.co.nz/news/competition-creeps-back-in-up-to-nine-of…
One Roof is full of crap spin by failed economists!
Up by 10 - 30% according to burnhard Huckey
https://thekaka.substack.com/p/house-prices-primed-to-surge-10-20#detai…
An the comb...
https://www.oneroof.co.nz/news/43676
Hard landing or the crash of the everything bubble?
Has anyone read the book: The Price of Time - The Real Story of Interest?
I have heard Stanley Druckenmiller mention it a couple of times lately as a must read:
I (recently) read Edward Chancellor's The Price of Time. As you know, I've been saying for years that my observation was the worst economic outcomes tended to follow asset bubbles. I was only looking at the past 100 years or so. Chancellor's book is a real tour-de-force, and it describes how this has been going on for over 500 years. Basically, every time we've had interest rates below 2% going back 500 years, it's been followed with a difficult economic time.
https://www.firstlinks.com.au/druckenmiller-biggest-mistake-history-fed
A review/overview here:
https://medium.com/@edsetiadi/book-review-the-price-of-time-the-real-st…
The book argues that the crisis from 2008 is far from over, only delayed and prolonged, and that we’re in the prospect of having a colossal meltdown as an effect of the policies implemented since the downfall of Lehman Brothers: the cause and effects link between low interest rates and inflation, the problems arise in the easy credit environment, the “zombification” of corporations from Japan to Europe to the US, and the many spillover effects ever since, like the Arab Spring 2011, the collapse of Brazil in 2013, Greece in 2015, the crash of Turkish Lira and Argentinian Peso, the political chaos in Italy, the boom and bust of China, and indeed the global inflation since 2022.
And along the spectacular example stories, Chancellor inserts the intellectual debates behind the decision makings by those in charge, including the citations of original thinking from past legendary economists – from Bastiat and Smith, to Marx, from Keynes and Hayek, to Schumpeter – combined with the zeitgeist of each example’s era, which filled the book with a front row seat in witnessing the battle of ideas that have shaped today’s global financial environment.
Survival of the fittest? Yeah Nah, be kind
Coinbase sued by sec today.
USA is pushing out innovation. Pretty clear that the SEC is not interested in regulation and communication. Coinbase met with the SEC 30 times in 2022 and not once was any progress made by the SEC.
It would be like if the USA stamped out internet-built companies in the late 90s. Only a matter of time before most large crypto businesses bar their services from the US, and the industry progresses without the states.
Must be weird, they no longer have the end all say on an industry.
You have to give it some perspective. The traditional finance industry is at threat. This is where the U.S.' power sits. This is a huge change and also very political and the Democs are basically in the pocket of the likes of JP Morgan. Pocahontas Warren is leading the charge on the political front and in cahoots with puppet Gary Gensler at the SEC - who doesn't give a rats about protecting investors.
Market Sanity
Please, warn people before you link to that sort of nonsense.
Indeed, where is the report button?
Ironic Name, Market SANITY? Not when they are off their meds like those guys.
China is screwed. No one can say it hasn’t been coming for years.
Wise countries and companies started to pivot years ago. Obviously it’s easier said than done when you have become so reliant on it.
Forestry: Dive in log prices making harvesting uneconomic
https://www.nzherald.co.nz/the-country/news/forestry-dive-in-log-prices…
Hearing this from many in the industry
factor in the coming new restrictions (whatever they might be) on harvesting and perhaps the odd Court case for damages and.......
Classic NZ stuff up.
These guys got too clever and didn’t support smaller regional sawmills….and larger ones either.
I knew a young chap up north who put his everything into starting up a sawmill supplying the Auckland market from Waipapa. He closed because the Chinese came and bought the wood lots. The trucks drove right past his gate. Hard to invest when you can’t get logs.
There are many other examples too.
What with Nats and ACT wanting to steal the value of the carbon I have stored on my property and transfer that asset to polluters, might as well just burn the trees and run beef. Timber worth nothing. Carbon worth nothing. Might as well live it up until the heat induced biosphere meltdown planned by the suit and tie cult.
Burn it slowly - as firewood.
I planted carbon, but not to 'make money' out of. And don't worry; there isn't the above-ground acreage to steal - their approach is not just morally bankrupt, it's physically bankrupt. And it hasn't long to run.
Get to know your neighbours. Get to know who has what skills? Who can grow what best? When it disintegrates, the current system won't be there to support you, indeed it's already failing...
That's a lot of firewood :-) My trees weren't planted with carbon in mind either. Many are pruned to 6+ metres. Too good for firewood. Milled some that blew over, the timber was beautiful, although just pine of course. Makes one realise much of the timber offered the public is rubbish.
Haven't planted a pine in 10 years. Kind of anticipated this moment when its value would be zero. Gone for eucs, cypress and natives since then. What really p's me off is that carbon storage has enormous value in keeping the planet liveable, I have sacrificed land and time that has a value and these right wing dicks take it for granted they can nationalise it and merrily pollute their way to economic growthist Utopia. Not that the left are better, just more science savvy and hypocritical.
So when does the price for timber for housing go down? Same question with dairy in the supermarket as the milk payout reduces?
They will go up in price to cover the losses they are making internationally.
Thank you for your query re: people creaming it
We have logged your comment and sent it to our branch office for a fine-grain appraisal which may get to the root cause.
We'll get back to you in 2-4 business years.
When will the price of timber go down? That's a question you need to ask all the ticket clippers between growers who give it away (some actually get a bill) and what you pay at the timber yard.
Why are we paying north of $1000 per cm for timber when the raw product goes for less than $50?
China is screwed. No one can say it hasn’t been coming for years.
Who profited from China’s prosperity and got richer and richer? Is it the Chinese people and the government, or the bankers and real estate developers? This is the biggest political issue in China this year. Link
Still bullish on China, Audaxes?
Note to NZ Politicians and others, apologies to Warren Buffett, saw this below the comments section. and made a few alterations.
Should New Zealand find itself in a chronically leaking political boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
~ Warren Buffett
Man gold has been stagnant for years. Good luck to the gold bugs that still think younger gens have any interest in gold shiny rocks
Maybe gold as an NFT would work?
Man gold has been stagnant for years. Good luck to the gold bugs that still think younger gens have any interest in gold shiny rocks
What is gold supposed to do? Tap dance 3x per day?
+270% in Kiwi pesos since 2007. What more do you want?
+74% in past 4 years. Only beaten by JPY where the price is +92%.
Yuan, past 7.1 to the US$?
comparing dirt to dirt? lol
Everything is compared to dirt. Even humble cryptocurrency. (My comment was on that in paragraph 1 above)
In Europe, the destruction of the giant Ukrainian dam on the Dnipro River is causing widespread havoc downstream. It is likely to cause wheat prices to rise globally too as a key part of that trade is now shut down.
In the food war, Guterres is the war criminal. Read how he and his UN HQ collaborators have run a false-flag fake-front humanitarian mission to do everything except feed the starving countries of Africa, Asia. https://johnhelmer.net/the-food-war-the-grain-deal-and-the-real-deal/ Link
It's a major move (bet nobody tapped out 'nigger' this time around) but whodunnit?
Tit-for-tat Russia because of the US taking out that pipeline? Ukraine out of frustration?
Murray86 will say Russia because Putin, but I reckon it's one of the above two.
WaPo quoting Ukraine Maj. Gen Kovalchuk, commander of Kherson counteroffensive, last Dec.: "The Ukrainians, he said, even conducted a test strike with a HIMARS launcher on one of the floodgates at the Nova Kakhovka dam, making three holes in the metal..."
Good that it’s archived in case they try to delete it.
https://www.washingtonpost.com/world/2022/12/29/ukraine-offensive-khark…
Vlad appreciates your trolling on behalf of his fascist gangster state. Lets get the quote from your post in full shall we?
"Kovalchuk considered flooding the river. The Ukrainians, he said, even conducted a test strike with a HIMARS launcher on one of the floodgates at the Nova Kakhovka dam, making three holes in the metal to see if the Dnieper’s water could be raised enough to stymie Russian crossings but not flood nearby villages.The test was a success, Kovalchuk said, but the step remained a last resort. He held off."
Russia has deliberately created a humanitarian and ecological disaster with its mindless violence! The dam was under Russian control and demolished with placed explosives. The turbines were destroyed at the same time. How stupid does one have to be to believe Ukraine would destroy its own essential infrastructure, kill its own civilians and make retaking its own land more difficult?
https://www.youtube.com/watch?v=xxHLImMbnAw&ab_channel=NBCNews
P08. Yes, destruction of dams etc to cause flooding nearly always a move by the side on the defensive and awaiting invasion, as Russia presently is. The destruction of dykes by the retreating Germans in Holland during WW2 a good example. It would be very difficult for a raiding party to clandestinely transport and place the large quantity of explosives needed to breach a wide concrete dam like this. That RU was known to already have mines placed on the dam points a very obvious finger at them. But UKR infiltrating and detonating those same mines cannot be excluded either, they've shown themselves very able at such black ops. The Mohne dam bombing in WW2 Germany killed 1600 by downstream flooding but unlike Nova Kakhovka it was a high dam, thus creating a more violent wall of water.
Except Ukrainian forces had already cleared much of the low lying islands and marshes of the Dnipro. Ukraine flooding their own forces out seems a little counter productive?
"In Sunday's report, the Institute for the Study of War (ISW) said "geolocated footage published on 23 April indicates that Ukrainian forces are operating in areas north-west of Oleshky on the east" bank of Dnipro."
https://www.bbc.com/news/world-europe-65379229
https://twitter.com/GoncharenkoUa/status/1666060311336550403?s=20
Indeed. The UKR presence on the Dnipro true left is Russia's prime motivation for blowing the dam. The RUA had pulled back to more defensive positions farther east, abandoning this marshy area some months ago but with the UKR offensive underway this UKR presence now created a beachhead potential. Blowing the dam is an acknowledgement by Russia that they are vulnerable despite the formidable obstacle this huge river presents.
Turns out Russia has form blowing up dams on the Dnipro. Last time 20000+ Ukrainians were sacrificed for the glory of the Kremlin.
https://www.theguardian.com/world/2022/nov/02/second-world-war-dnieper-…
Yep, but to be objective millions of soldiers and civilians were being sacrificed in similar actions all across Russia during the great patriotic war, under Stalins ultimately successful scorched earth policy. A fascinating UKR sidebar on this was the explosives laid under surviving administration buildings in Kiev which were remotely detonated by stay behind soviet soldiers from an island in the river. A large number of Germans in these buildings were killed including high ranking nazi commanders. Hitler was deeply affected by this loss and thereafter became over cautious about occupying conquered soviet cities.
Vlad appreciates your trolling on behalf of his fascist gangster state. Lets get the quote from your post in full shall we?
Why don't you vent at your beloved WaPo? It's their 'reckon'. Not mine.
Why would I do that? You cherry picked what you hoped would support your argument. It doesn't!
WaPo didn't check their reckon with yours? I'm simply quoting their reporting.
Jesus
To put the "Magnificent 7" into perspective: 7 Stocks in the S&P 500 (AAPL, MSFT, GOOGL, AMZN, NVDA, TSLA, META) have returned 53% YTD. The other 493 stocks have been flat. Link
https://www.rnz.co.nz/news/business/491474/infratil-to-take-full-owners…
Bought in 2019 for $3.4B, sold their cell towers last year for $1.7B (future's now satellite coverage ?), valued today at $5.9B...whats not to like?
From stuff this morning: "Foodstuffs grocers see 'extremely concerning' 38% increase in retail crime "
Foolishly I expected an article on grocery price increases..
If you see somebody stealing food in a supermarket, you didn't.
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