Here's our summary of key economic events overnight that affect New Zealand, with news it is consumers and not factories that are holding the economy from tipping into recession. That is what strong labour markets can do.
In the US the first of their PMIs for June has become available and it tells the tale of slowing growth, but a continuing expansion nonetheless. The factory sector is still contracting however and at a faster clip than in May. But their service sector is still expanding although that too is at a slower pace than for May even if it is still a good moderate expansion. New order growth eased, but was still the second-fastest in just over a year, while the pace of job creation retreated to the slowest since January.
The US Fed is back shrinking its balance sheet. You will recall it paused that effort to contain the regional banking crisis, and then the financial market stress surrounding the debt-limit negotiations. But the promised temporary build has been that and the renewed sell-off of bonds bought to support their economy during the pandemic has resumed and they are back to where they were before they were rudely interrupted in March. It has ended up being just a 100 day interruption.
Internationally, there does seem to be a thaw in US-Chinese relations. Blinken broke the ice, and now Janet Yellen is meeting senior Chinese leaders. Both are announcing broader cooperation deals. It is a good time for the NZ Prime Minister to visit. China's economic stumbles are making them more open to trying to build back trade with Western nations. It is very early days and it may only be tactical rather than strategic, but it seems both parties are willing to see what they can make of a thaw.
China needs a thaw. Overnight yet another large real estate developer, Central China Real Estate Limited, told the stock exchange that it could not pay interest on a bond even after the grace period. They are not the only one this week, also CIFI Holdings. It has been estimated that total Chinese developer debt is 12% of Chinese GDP which is a huge burden. The yuan sank. And this type of news is driving down their whole equity markets. Only a big redirection can weight against such drags.
And around the world, China is having to face up to its aggressive funding of third-world infrastructure projects gone-wrong with a growing list of debt writeoffs.
China might be on the long Dragon Boat Festival break, but in northern China is is no fun at present. A temperature of over 41oC was recorded in Beijing yesterday, its second highest on record (the highest was in July 1999). And it is not just Beijing being hit. The same heatwave is sweeping across vast areas of northern China.
In Japan, the June PMI story is similar to the US except perhaps things are still running higher/better there.
Japanese inflation ran at 3.2% in May, now the 14th straight month it has been over the Bank of Japan's 2% target. But there was no change in May from April, leading to suggestions it might be topping out. But the yen slid anyway.
Singapore's CPI inflation rate dipped to 5.1% in May from 5.7% in April. The April-to-May pace was running lower than the annual levels. Food and energy prices are keeping it up, services are lower than the average.
In Europe, their flash PMIs also record a contracting factory sector and an expanding services sector, but they are underperforming both the US and Japan.
The Australian factory sector is still contracting. But the retreat was less so in June than in the prior two months amid improvements in supply conditions. However, new orders are still retreating which isn't a good sign. And their services sector is no longer expanding, even if it is yet to contract.
Local observers are starting to see more cracks opening up in the Australian economy. Apparently AirBNB reservations are sliding, the number of home builders going bust is rising, and about half of small businesses are concerned about their financial future, according to a survey there by Xero. It isn't helping that the RBA's official cash rate at 4.1% is lagging most other central banks by at least 100 bps and that is keeping the Aussie dollar weak and importing inflation. (And for many people, this won't be helping either.)
There is much talk that RBA Governor Lowe is about to be replaced in July. It is hard to know if that will turn confidence around or push more instability. Certainly, Lowe's defenders are now out saying now would be a bad time to make a change.
The UST 10yr yield will start today rising at 3.74% and down -5 bps from yesterday but unchanged for the week. Their key 2-10 yield curve inversion is slightly wider at -102 bps. Their 1-5 curve is also slightly more inverted at -128 bps. And their 3 mth-10yr curve is more inverted at -137 bps. The Australian 10 year bond yield is now at 3.94% and back down -7 bps. The China 10 year bond rate unchanged at 2.72%. But the NZ Government 10 year bond rate is up another +3 bps at 4.60%.
Wall Street is lower today with the S&P500 Friday session down -0.8% to push out the weekly retreat to -2.1%. Overnight, European markets closed lower across the board again by about -0.5%, except Frankfurt which was down double that. Yesterday, Tokyo ended its Friday session down -1.5% for a weekly dump of -2.9%. Hong Kong fell -1.7% yesterday for a weekly rout of -5.2%. Shanghai was closed for a public holiday and no doubt pleased it has missed the global selloff. The ASX200 ended its Friday session down another -1.3% to be -2.1% lower for the week. And the NZX50 ended its session unchanged on the day for a weekly retreat of -0.5% which was 'very good' in the context of global results.
The price of gold will start today up +US$4 at US$1920/oz but down -US$37/oz or -1.9% for the week.
And oil prices are staying low and little-changed from yesterday to now be just over US$69/bbl in the US. The international Brent price is now just on US$74/bbl. That is a -US$3 drop for the week.
The Kiwi dollar starts today at 61.4 USc and down a bit more than -¼c from yesterday. That is a full -1c lower than this time last week. Against the Aussie we are +½cfirmer at 92 AUc and up more than +1c in a week. Against the euro we are little-changed at 56.4 euro cents. That means the TWI-5 is now just on 69.8, also little-changed, but down a minor -20 bps for the week
The bitcoin price has firmed again from this time yesterday and now is at US$30,973 with rise rise of +2.7%. That takes it over NZ$50,000 for the first time since May 2022. Volatility over the past 24 hours has been moderate at just over +/- 2.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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54 Comments
A friend of a friend just came back from a trip to China. He lived there for more than 15 years up until about 2017, and is married to a Chinese woman.
Apparently the place is becoming ‘a basket case’. Those were his words.
Went back for a family funeral. Said they won’t go back again.
In what way , dysfunctional? or like the soviet union just before it collapsed ?
For the Chinese Government the need is growing for a timely distraction away from their failings - (Invade Taiwan)
Evergrande near to US$130 billion basket case and that outfit is hardly an isolated example. That massive investment into third world countries has the appearance of cooking themselves a stew to choke on. Sri Lanka will be very interesting to watch in this regard. Columbo is strategically, a vital port in the region.
Excellent point
You've said it, the genie is out of the bottle now. History must take its course. Taiwan prepare
Lots of closed up shops, more bureaucratic overreach ( including him getting hassled in an overt way by bureaucrats, airport officers etc), his wife’s family telling him about governmental overreach in their fields of business etc etc.
Fund manager Amundi shifts assets from US to China
Paris-based firm attracted by valuations and says investors have priced in ‘too much risk’
This Wagner Group thing is very weird:
Weird ? If there is a story to be most sceptical about it's that one.
Indeed - this story is of more interest: Dissecting West Point Think-tank's New Analysis of Russia's Military Evolution
No it's completely expected.
Ukraine's strategy involves holding and trying to get a major strategic win, something like blowing up Putin's bridge and laying siege to Crimea (not invading and reclaiming just laying siege) They hope this will be enough for Putin to be overthrown.
Russia needs an exit strategy as they're losing badly, it's not feasible to stay fighting indefinitely.
This is part of the internal power-struggle of factions vying to replace him when the time comes. It is an attempt to blame the Ministry of Defense faction in anticipation of a ceasefire and peace negotiation that would allow whoever is in charge in Russia to withdraw an have an excuse to stay in power.
Or then again it could be a Russian misdirection and all staged but dangerous game to play
Nah, this looks to be a full blown civil war.
My pick, Putin is dead/fled, and this is the fight to be top dog.
Hahaha I just realized that I've not been following news for a while, Ukraine has already blown the bridge.
Would recommend anyone wanting to know a bit more about the recent Ukraine offensive should listen to this 30 min episode of the warfare podcast.
https://open.spotify.com/episode/70ct2hTSpeSmUrqbeWiO3P?si=g9sVV1vyQNSA…
coup d'etat is imminent.
Possibly but a megalomaniac is decidedly complex. Adolf on his final realisation that WW2 was lost, would have been more than content to be able to take all that remained of Germany down with him. Some, supposedly including Speer, were able to prevent much of that. This situation in Russia is miles and miles more threatening in that regard. There are nukes on hand and Putin has around him too, a die hard faction, of which losing power would be worse than death.
Yes, there will be massive ramifications from this.
I can only think that given the control Putin had over all of Russia, he must no longer be in the picture.
Certainly if Putin hasn’t been able to stamp out this dispute by now, his power and position cannot be anywhere near as strong or authoritative as the world is led to believe.
Never realised so many interest.co common taters have been listening in the back of the Kremlin meeting rooms, and are able to provide us with such accurate information. Thanks common taters
Not Kremlin back rooms just analysis of Russian politics, international relations and warfare.
Putin could be dead already. Or he could be waiting to see how it plays out. Or it might just be a head-fuck to mess with the Ukrainian counter-offensive.
I doubt the latter, you don't have much to gain by promoting your own political instability.
Divided loyalties within any armed forces are counterproductive and dangerously so. Similarly, and ironically in this very same territory, and elsewhere amply, the Wehrmacht & Waffen SS. It is hardly united or quiet on Russia’s western front at the moment is it. This is when a leader needs to fast get a grip on control of all the military and do it emphatically, publicly. In the same severe manner, despite his pretty obvious shortcoming, as Stalin aptly demonstrated. What is really curious here is that Putin the omnipotent is appearing to be impotent
Putin relies on having absolute power. A chink in the armour and those below him will absolutely notice and start positioning themselves. Putin isn't stupid so will be running around ensuring absolute loyalty. But things could change very quickly if a faction decides to move against him and side with Prigozhin, it could easily result in a change of leadership. If the US etc show support and make a deal with Prigozhin the whole shebang could be over very, very quickly. And possibly the best way possible with the least loss of life.
He looks very jaded / wary / possibly ill
"debt write-off". Maybe a bit misleading to use those words.
As far as I can tell from the article Zambia is still left twisting in the wind, it's just for longer.
Some lowlights in today's mainstream press:
https://www.nzherald.co.nz/nz/podular-director-charles-innes-the-inside…
https://www.stuff.co.nz/business/132383509/employers-holding-on-to-1-bi…
You would almost come to the conclusion that some SME owners in New Zealand are only interested in to obtain income through falsehoods, scams and deceit in stead off earning a honest way of living.
'SME goes about it's business and does right by clients and legal requirements' wouldn't make an interesting story.
I had some involvement in the tiny home industry for a few years (when employed by a business that was supplying materials to both 'normal' home builders and tiny home companies).
There was definitely a disproportionate number of dodgy players in the tiny home space in my experience, even back then.
Yep. And some of them with a phoney ‘green’ hubris adding to the mix.
It's playing at the low rent end of the market, so it'll attract dregs.
Mutterings in the UK similar to ones here of:
Voices are beginning to question whether the Bank of England’s commitment to heroic rises in interest rates may not only be the wrong strategy to tame inflation in the current crisis, but may actually be making it worse.
And the same response applies:
Of course, this inflation is caused by excess demand. They expanded the money supply by 30%. Oil prices are lower than before the war and acting to actually restrain inflation.
It's 'where the money went' that matters, and into Productive Enterprise isn't the answer to that. It went into Speculative Endeavours, and from there it will be retaken.
From there it should be retaken. Whether that happens depends on political and monetary decisions.
But the promised temporary build has been that and the renewed sell-off of bonds bought to support their economy during the pandemic has resumed and they are back to where they were before they were rudely interrupted in March. It has ended up being just a 100 day interruption.
Traders Can’t Get Enough of Treasuries Even With Hawkish Fed
This trade just keeps on giving - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
For all those worried (again) who was going to buy Treasury's deluge of debt as govt builds back up its cash and borrowing, feds sold huge allotment of bills at substantially better prices than three weeks ago when auctions were almost half the volume. Link
US 2-10y T gap widening to over 1% 😳
Horror moment for the Mowbrays and Zuru. Well at least you hope they see it that way.
Zuru Baby Shark toy recall: 7.5 million bath toys recalled after they cut or stabbed children
Twelve injuries have already been reported with Zuru’s full-sized Robo Alive Junior Baby Shark Sing & Swim Bath Toys — after children sat or fell on the now-recalled products. Nine of these cases required stitches or medical attention, according to a Thursday release from the US Consumer Product Safety Commission.
In a company announcement, Zuru noted that the recall only impacts the versions of the baby shark toys with a hard plastic fin. The newest toys, which have a silicone fin, are not part of the recall, Zuru said.
https://www.nzherald.co.nz/business/zuru-baby-shark-toy-recall-75-milli…
They wouldn't even blink at that news a they head to Waiheke in the chopper for a chardonnay lunch.
They wouldn't even blink at that news a they head to Waiheke in the chopper for a chardonnay lunch.
I hear you. Personally I like much of what Nick Mowbray says. He's a straight shooter. The Mowbrays are perfect targets for the tall poppy syndrome brigade. But I do admit that they position themselves as potential targets (not that they're likely to care).
Interesting that their associated products and brands have not made a splash in Asia. I'm not talking about the war toys, but the affordable luxury shampoo brand (Monday) and diapers. I've always been suspicious of Monday. Companies like Unilever and P&G have spent billions on R&D for shampoo. No way that this kind of budget can be allocated for Monday. I've read some reviews that suggest that it's a terrible product so you wouldn't expect many repeat purchases. But there doesn't seem to be any data publicly available as to how well they're doing.
Prime example of a company that deserves to go bust. Nothing to do with tall poppy.
Selling cheap plastic Chinese shit to kids and using selling techniques which should be outlawed.
Scum.
Prime example of a company that deserves to go bust. Nothing to do with tall poppy.
Selling cheap plastic Chinese shit to kids and using selling techniques which should be outlawed.
Scum.
I see. You've never touched plastic or anything made in China in your life?
How many toothpaste tubes have you gone through over your lifetime? Or do you not brush your teeth using conventional methods?
Of course I have used plastic, it's almost impossible not to.
Doesn't change the fact that what this company does is prey on small children to sell them cheap plastic shit from China. I hope they go bust.
Doesn't change the fact that what this company does is prey on small children to sell them cheap plastic shit from China. I hope they go bust.
Lego's OK right?
Meanwhile somewhere on a Boomer "memories" Facebook group, they're mocking this announcement while sharing photos of old metal slides, garden hoses and children riding in the bed of a 1960s pick up truck
Nick tweets:
"I can’t understand these polls. N.Z gone backwards on EVERY single metric badly. Despite huge increases in spending and bureaucracy mountains of debt, backwards on every productivity metric - woeful management - zero talent or accountability. How can any one vote labour ? Personal responsibility becoming a thing of the past. Might be on track to become Venezuela at this rate - and we can all enjoy shared misery. Puzzling."
Another day, another profit warning in Germany. Siemens Energy shares crash 37%, the worst single-day drop ever, after the company issued a profit warning & withdrew earnings guidance, citing issues at its Gamesa wind-turbine division. Link
EU winning again: France and German food consumption has fallen 12.5% in the last 2 years. No doubt Brussels will say it is because people are trying to live healthier lives. Link
Pain at the pump returns: Fuelling up will cost 29c more a litre from July - pushing the price past $3 for some
I paid $3.70/L when I filled up my 75L tank 20 mins before the subsidy was announced. I was not a happy camper that day.
I see Progozhin has turned around, and his employees are going back to base. I wonder why? Has he made it clears to Putin that he's tired of Wagner men doing all the dirty work." When are your guys going to roll their sleeves up, Vlad?" and maybe Putin's answer was "Ok, Yevgeniy. Get your men to go back to barracks, and we'll flatten Kiev next Tuesday" - or the like.
Be careful what you wish for and what everything might mean.
Be careful what you wish for and what everything might mean.
Even if it's a new puppy?
Especially the puppy, if it's a Belarus Ridgeback with a brand-new set of coded buttons to play with.
Warlord Prigozhin to leave Russia as part of deal to end insurrection
Surely the FT have used the wrong word to describe patriotic freedom fighters?
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