Here's our summary of key economic events overnight that affect New Zealand, with news long bond yields are rising sharply again.
But first, US factory orders rose in May by the same rate as in April, but that disappointed analysts who were expecting a better improvement. But at least it was a rise, countering the PMI signals. Orders for aircraft and electronic goods underpinned this result. Construction spending rose as well with another solid result even if it too was marginally less than expected.
And new vehicle sales rose in the June quarter on improving supply and strong demand, signaling that rising interest rates have not yet had a meaningful impact on purchases.
The US logistics PMI fell again and for a fifth straight month. Primarily it was a shedding of inventories that drove this fall, suggesting that American businesses are carefully managing stocks and not weighed down by excesses. When a solid upturn in new orders arrives, it could be turbocharged by lower-than normal stock levels.
But there are no signs an upturn is about to be driven by rising retail sales. The weekly Redbook survey of same-store sales has it still bouncing along at minor gains and not enough to account for inflation.
The Fed FOMC minutes of their June 15 meeting were released overnight revealing that all officials agreed that, with inflation still well above their 2% goal and the labour market remaining very tight, maintaining a restrictive stance for monetary policy is still the right course and almost all thought they should raise their benchmark rate further this year. There was disagreement about when the next rise should come however. The release of these minutes brought a yawn from equity and currency markets but set US bond yields noticeably higher, especially at the long end. That will no doubt echo in our markets later today.
In China, the extreme temperatures in the north are continuing, and the floods in the south are as well.
But China's yuan slide seems to have ended for now, although it is yet to gain back any of its recent devaluation. Maybe it is bravado, but their central bank has approved some commentary saying they have plenty of tools to stem any further backsliding.
Shanghai is skiting about its minimum wage rise, the highest in China. That will take the Shanghai minimum to NZ$138.50 per week (NZ$3.46/hour). Yes, China has its billionaires but most are not.
There were a set of key services PMIs released overnight. But the important US services PMI will not be released until tonight. And in that sector we should note that major freight company UPS is facing the threat of a very rare strike. In China, their Caixin survey confirmed a slowdown in their expansion to a level matching their lower official version as well.
In Japan their services sector expanded faster running with good solid gains.
In India their services sector is expanding faster too and at an impressive rate.
In the EU the expansion of their services sector continues but at a much more modest rate and slipping to a 5 month low.
Meanwhile, producer prices fell in the EU in May. It was their first month of decline since December 2020, driven by a significant -13% retreat in energy costs. The cap on Russian oil and gas imports seems to be working well for Europe, not well for Russia.
Air cargo demand, a key indicator of global trade, remained weak in May. In the Asia/Pacific region was as weak as anywhere else.
The UST 10yr yield will start today at 3.94% and up a sharp +8 bps from yesterday. That is its highest since early March. Their key 2-10 yield curve inversion is lower at -100 bps. Their 1-5 curve is unchanged at -124 bps. And their 3 mth-10yr curve is lower at -126 bps. The Australian 10 year bond yield is now at 4.04% and up another +3 bps. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate is up another +4 bps at 4.73% and touching its early March highs.
Wall Street is back trading today and heading for a minor -0.2% slip. Overnight, European markets were sharply lower with London down the most at -1.0%, and Frankfurt down the least at -0.6%. Yesterday, Tokyo ended its Wednesday session down -0.3%. But Hong Kong fell a sharp -1.6%, while Shanghai was down -0.7. The ASX200 ended its Wednesday session down -0.4% while the NZX50 rose +0.2% after a very late rally.
The price of gold will start today at US$1919/oz and down -US$6 from yesterday.
But oil prices are up +US$1 at just over US$72/bbl in the US. The international Brent price is firmer too at just under US$77/bbl.
The Kiwi dollar starts today just under 61.9 USc and little-changed from this time yesterday. Against the Aussie we are up another +¼c at 92.8 AUc. Against the euro we are marginally higher at 57 euro cents. That means the TWI-5 is now just under 70.5, our highest since late May and no net change on the day.
The bitcoin price has fallen marginally from this time yesterday and now is at US$30,520 which is a -1.2% fall. Volatility over the past 24 hours has been modest too at just under +/- 1.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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Low numbers of FHBers? https://www.nzherald.co.nz/nz/politics/first-home-buyers-at-lowest-leve… and main street pain in MSM https://www.stuff.co.nz/business/property/132483897/mortgage-rate-pain-…
Government announcement forthcoming? Tend to forget that this government has been really good at announcements especially announcements about announcements and announcements announcing what has already happened. In times past we used to have identities known as radio announcers. Vocation taken over by the government.
To buy a home you need a deposit. A deposit is formed by savings. Savings come from an accumulation of discretionary income over time. Discretionary income being income you have after tax & after necessities.
The "cost of living crisis" is more of a "collapse of discretionary income" crisis. In that wage rises have been significantly below rises in the costs of key necessities such as food, rent & utilities for the last few years. This is making it increasingly difficult for some to accumulate the deposit required to buy a home. So first home buyers are disappearing.
To buy a home you need $XXXX and you can save that amount from descretionary savings. Alternatively you can go to your bank and ask for $XXXX - 20% deposit and promise to pay back double that over 30 years relying on inflation to help you out.
The second option is the 100% norm but really that means banks control the price of housing. What do you think the price of housing would be with no loans allowed. 20% of current?
Not that I don't have sympathy for people who were duped by the "low interest rates are here to stay, go out and spend as much as you can on a house, it's your civic duty", but this comment from the Stuff article annoyed me
"What I want to know is why it is not possible to fix mortgages for longer periods of time in New Zealand", from someone who fixed for two years, who goes on to use the US as an example where borrowers can fix their mortgage for the entire term.
Generally speaking, longer terms command an illiquidity premium, hence why long-term rates are typically higher than short-term rates (outside of scenarios where markets are pricing in interest rate cuts in the foreseeable future).
This person did have the option of fixing for five years, but considered this premium to be too much for them, opting for a shorter-term fix to save themselves a few bucks. Why should we believe that they would then opt for paying such a premium on a 30-year term?
People should calculate what is better for them over the next 2-3 years - to cut their immediate loss or pay more in interest.
Its the hopium of rate cuts provided by experts/media and future paper gains that are making many to suffer their current predicament.
Buying emotionally and under pressure at auctions can lead buyers to pay above and beyond their means.
Of the two voices whispering in buyers head, one emotional and other logical - which one to listen to is up to them.
Plebs need to have the mind set that property is a money printing machine beaten out of them before any easing. The return to massive immigration works counter to this. The artificial price cap on oil is keeping inflation artificially low. When the oil market returns to being priced based on demand, all bets are off where inflation will head.
And yet Tony Alexander is breathlessly spralling all over OneSpoof just now.......soothing the masses fear of higher interest rates. They have really peaked now........he scribes.
(He cries into his property portfolio yearly losses .....topmop gets more bedraggled, as no one thinks he is the Oracle of property any longer)
USA Debt price marches much higher - we will absolutely spike and by bigger magnitudes!!!
This guy is just soo bad in his supposed "Mastermind topic" advice!
His REA paymasters must be very disillusioned with his bad calls, being wrong every time he speaks and inability to levitate the now failing and flailing Ponzi housing market?
To be fair, it links through to the NZHerald main site and gets prime placing in pop up 'news'.
I loved this guy as an actor and singer, he seems like a decent RA, but I don't think they should be quoting him on market conditions and mixing it up with the news sections. They need Twitter style health warnings .
https://www.oneroof.co.nz/news/hi-honey-ive-bought-a-house-impulse-buy-…
You don't need to check their websites. If you scroll through the herald app home page a very high proportion of the articles are about property usually with some positive spin, you can't escape it (except if you avoid the paper altogether which isn't a bad idea).
BREAKING: The CEO of BlackRock, the worlds largest asset manager (>$10T under management) said #Bitcoin is “digital gold” that provides a “hedge from inflation”, and is “hope” for a better tomorrow.
Nothing to see here, carry on.
https://twitter.com/saylor/status/1676687611379826688?t=PtOqZ3vpJklRugL…
Could be. But let's recall what happened when real gold was let loose in the 1970s. Its price soared. Then, Inflation grabbed the enthusiastic markets by the throat and asset prices halved. Whoever had what, stored wherever, had to try to sell it - if they could find a buyer at any price - to combat +20% interest rates. So is this the precursor? I hope not. But there's a spooky similarity about all of this.
(NB: I've recounted before that the Chief Dealer of a London dealing room called "If gold ever gets back to $800, buy it until you drop!" He did, and somewhere before $325 years later, I'm sure he also did. "On January 21, 1980, gold closes at $850 an ounce")
Could be. But let's recall what happened when real gold was let loose in the 1970s
The creation of gold securities (for ex, ETFs) has enabled the ruling elite to dictate and manipulate the price of gold to a large extent.
And that is potentially the cunning plan in relation to the ol' rat poison through an ETF. Time will tell.
That is where the similarities between gold and BTC start become more clear. The purists don't want 'claims' on the assets. They want possession of the assets. Remove the counterparty risk.
Bitcoin spruikers make property spruikers look like total amateurs. Get on you phone on the endless scroll and there is an article daily on the price of Bitcoin going to the moon. Its good that Blackrock is getting into it, when the top 10 own all the Bitcoin the penny will finally drop that they have all been left holding the baby.
Bitcoin spruikers make property spruikers look like total amateurs. Get on you phone on the endless scroll and there is an article daily on the price of Bitcoin going to the moon.
The fact that the supply of BTC is so low and much of it is not for sale, it makes sense for the fiat price to moon dramatically when demand is high. I recommend reading about Metcalfe's Law - the value of networks grows exponentially with the number of people using that specific network. Every time a new user is added to a network, the number of connections increases proportionally to the square of the number of users.
Do you know how many people globally have some exposure to Bitcoin, or crypto in general?
Only about 100,000,000.
Of a global population of 8,000,000,000
And they will all be wanting their piece of the 21,000,000 pie.
I think there is a few more people yet who have not experienced the benefits of holding a self sovereign asset that can be sent anywhere in the world for free instantly.
Fiat is guaranteed to loose purchasing power. I will store my savings in something that can not be altered or debased thanks!
Haha thats where you dont understand how Bitcoin works.
They will never get their hands on my Bitcoin because I will never sell it to them.
They are a spot Bitcoin ETF so they HAVE to BUY BITCOIN to back it. Over 70% of coins have not moved in the last year, and balances on exchanges is falling rapidly. (you can see the chart in the background)
Also the Bitcoin halving is less than a year away, so the number of new coins being created each day will drop to 450. I do not see the buying pressure easing up any time soon...Small wallets alone are buying 33.8k Bitcoin a month compared to 27k that is being issued, or 1.25x.
Basic supply and demand mate, and we all know that big money has been wanting to buy for years, but there has never been a regulated product that has allowed easy access to it.
And also, no one wants to be the first mover. Once the Blackrock ETF is approved, that is a massive tick of approval for the Bitcoin ecosystem and will allow investment firms to justify investing in it.
The cool thing is, I have done my research, am confident in my decisions and I put my money where my mouth is :)
Also Bitcoin is humanities last change at digital freedom, if it fails we will never have sound money again and will subsequently be stuck with Orwellian CBDC's.
They are a spot Bitcoin ETF so they HAVE to BUY BITCOIN to back it.
Fundamentally this is correct. But I think you're aware of the 'conspiracy' that there is not enough physical gold to back the claims on gold. I don't believe it is a conspiracy. It's simply rehypothecation. These are obvious concerns around any BTC ETF.
100% for sure! Lawrence Lepard estimates there is about 100x as much paper gold as they have backing the current ETF's
I mean look at FTX, they literally had 1 BTC backing 80,000 or something. So much paper corn.
Not your Keys Not your Cheese right :D
Thats where Bitcoins transparency and ease of self storage comes in, Im sure their addresses will be easily trackable.
The big issue is the wording in their proposal which says they can determine which Bitcoin is the real Bitcoin and give those to people trying to redeem it, while holding onto the actual Bitcoin. Sounds dodgy af.
"Bitcoin is humanities last change at digital freedom, if it fails we will never have sound money again"
https://www.merriam-webster.com/dictionary/sound%20money
'The meaning of SOUND MONEY is money not liable to sudden appreciation or depreciation in value.'
By that definition it has already failed then?
'The meaning of SOUND MONEY is money not liable to sudden appreciation or depreciation in value.'
By that definition it has already failed then?
If the price of 1 BTC appreciates 100% relative to USD, Kiwi pesos, etc in a calendar year, that might be more reflective that fiat is not 'sound money'.
Saw a post from Nicola Willis on LinkedIn claiming that a National-led government will balance the books faster, while also delivering tax cuts, a stronger economy and better frontline public services.
Clearly, it was wrong choice of platform and got completely butchered in the comment section by people who see through such BS promises unbacked by clear policy positions.
Unfortunately this is a big problem with both the current lot and wannabes in our political world. Talk is cheap, words flow like warm honey. Substance is hardly in the same room. The last government to really get on their bike and do something innovative was that of Lange & Douglas & Co although Bolger’s labour market reforms are mentionable.Some though would say they did too much.
That was I suggest the final straw, an unwelcome reality check. A minister in defiance of the PM & cabinet resorts to clandestine legislation that usurps recognised democratic process. That was a middle finger to the PM forcing admission that a faction in her government didn’t rate her, had never been under her control and never would be.
More Than 105 Million Working-Age Americans Do Not Have A Job Right Now
Jobless people are classified into one of two categories by the Bureau of Labor Statistics (BLS)—either unemployed or not in the labor force. To be classified as unemployed in the month they are surveyed, people must be actively looking for work. If they are not actively looking, they are classified as not in the labor force.
Over time, the definition of “officially unemployed” has gotten more restrictive, and today only 6.097 million working age Americans are considered to be in that category.
Meanwhile, a staggering 99.800 million working age Americans are considered to be “not in the labor force”.
When you add both categories together, you get a total of 105.897 million working age Americans that do not have a job right now.
Nearly half of those not in labour force in the US are 65+ and are likely retired.
NZ by contrast had one of the highest labour force participation rates among those over 65 at 24% in 2019, compared to 10% in the UK and 12% in Australia. Financial consideration was touted as the most common reason to remain in the workforce, which is never a good sign.
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