Here's our summary of key economic events overnight that affect New Zealand, with news of a global economy finding momentum hard to regenerate.
In there US there were two competing second-tier sentiment surveys out overnight. The The IBD/TIPP Economic Optimism Index of consumer sentiment fell more than expected, whereas the Small Business Optimism Index rose to a 7 month high.
But not helping is that last week retail sales are now lower than a year ago levels (on a same-store basis) and that really means a volume loss due to inflation's impact.
Meanwhile, regulator action against "junk" bank fees has forced Bank of America to refund IS$100 mln to its customers and fined it $150 mln.
In parts of the US, milk production is rising and so fast that farmers can't sell it.
In China, they are seeing 'progress' getting loans out the door. They need the stimulation. China's banks provided ¥3.05 trillion in new yuan loans in June, a substantial increase from ¥1.36 trillion in the previous month and well above market expectations of ¥2.34 trillion. It was also the largest amount of new bank loans for a June month since at least 2004, as demand for credit increased after the People's Bank of China reduced its key lending rates on June 20th for the first time since August.
Beijing seems very conflicted. After passing a draconian and opaque national security law that suddenly undermined investor appetites for investing there, top officials are now going on a charm campaign to woo some of it back.
In Japan, speculation is mounting that the Bank of Japan will adjust its ultraloose monetary policy as soon as this month in response to recent economic data, driving the yen to its strongest against the US dollar in about a month.
In Australia, the Westpac-Melbourne Institute Consumer Sentiment index rose by +2.7% in July from June to a 3-month high. That matched matched the market consensus for this marker. The latest result followed a +0.2% gain in June as inflation eased and the RBA skipped further monetary tightening. But it was a minor gain and overall sentiment remains very low.
Household spending was up just +3.3% in May in Australia compared to the same month a year ago. That is way less than inflation. And discretionary spending is now going backwards, falling for a second month in a row. It hasn't done that since the start of the pandemic.
On the business side, The widely-respected NAB business sentiment survey "improved" from a negative reading to "zero", neither positive nor negative.
In the aftermath of the EU-NZ trade deal signing, the Australians have rejected their EU offer. "More work needs to be done" (which really means the EU needs to climb down from its high horse and make sensible compromises) before they can get a deal over the line. New Zealand had to swallow EU rats for their deal, something Australia doesn't need to do. It already has an amazingly healthy trade situation so it is in a good position in these negotiations.
The UST 10yr yield will start today at 3.97% and down -2 bps from this time yesterday. Their key 2-10 yield curve inversion is slightly deeper at -91 bps. Their 1-5 curve is also slightly much more inverted at -119 bps. And their 3 mth-10yr curve is more inverted at -130 bps. The Australian 10 year bond yield is now at 4.17% and down another -5 bps from yesterday. The China 10 year bond rate is holding lower at 2.69%. The NZ Government 10 year bond rate has fallen sharply, down -12 bps from yesterday to 4.83%.
On Wall Street, the S&P500 is up +0.3%. Overnight, European markets all rose but in a wide range. London was up only +0.1% through to Paris that was up +1.1%. Yesterday, Tokyo ended it Tuesday session unchanged while Hong Kong was up +1.0%. Shanghai ended up +0.6%. The ASX200 finished with a very good +1.5% gain while the NZX50 ended essentially unchanged.
The price of gold will start today at US$1932/oz and up +US$6 from yesterday.
And oil prices are +US$1.50 higher at just over US$74.50/bbl in the US. The international Brent price is now at just over US$79/bbl.
The Kiwi dollar starts today a little softer at just over 61.9 USc. Against the Aussie we are slightly firmer at just under 92.8 AUc. Against the euro we are lower at 56.3 euro cents. That means the TWI-5 is now just under 70 and down -30 bps from yesterday.
The bitcoin price has risen from this time yesterday and now is at US$30,615 which is a +1.5% move higher. Volatility over the past 24 hours has been modest at just under +/- 1.2%.
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61 Comments
It's almost as though the climate scientists have known what they have been talking about for all these years - hottest ever week recorded:
https://www.theguardian.com/environment/2023/jul/11/uncharted-territory…
The hottest week ever recorded is totally different from the hottest week that has ever occurred. Every time I see a phrase like that, especially printed in the Guardian, my bullshit detectors go to full alert. Then the article talks about Europe only. Then it says that records began in 1940, when Europe was locked in WW2. Then it has a posed photo from China. It would need a lot more than that article to convince me of anything. But then their market is the sort of people who read the Guardian. Preaching to the already converted.
And it’s going to get hotter…western countries are hell bent on increasing their populations (their economic model requires it) and with the carbon footprint of each westerner the size of an elephant we can expect global warmer to continue its almost vertical trajectory.
They have high immigration because their birth rate is reducing, their birth rate is reducing because immigration is pushing up prices...
"During the first three months of this year, the number of births in public maternity wards in New South Wales was the lowest since records began”.
"In response, the federal government has ramped immigration to record levels, which has made housing even more expensive and supressed wages."
https://www.macrobusiness.com.au/2023/07/australians-afford-children/
from www.oneroof.co.nz https://www.oneroof.co.nz/news/43914
Man I love this girl, this is exactly my experience, but have chosen to rent for a while until the market picks up.
In a confessional video posted a day later, she told her TikTok fans: “I’m about to spend a million dollars in the next couple of days. We currently have an offer in, which has pretty much been accepted and we've got five days of DD until we go unconditional, but I want to be real for a second.
“I am pretty emotional about this whole process, and I guess achievement, milestone, getting this first home. I am 33 and I never thought I would get to this point and be able to put in an offer on such a house.”
Tearful and choking up, she said: “To this day I’ve never truly felt like I've had a home. I’ve couch-surfed and I’ve slept in my car ... standing here today, I am emotional about this.”
“I shouldn’t discount myself because I know how hard I’ve worked. I’m going to be homeowner. I don’t want 10 investment properties and a bach and a boat or anything. I just want one home. I want to feel safe.”
Redcows: As a farm manager you're making it. I guess you dont like having to pay rent and tax on your farm house
Isn't it weird that you pay tax on the 500 or so you pay to the farm owner. Then the farm owner declares it as income and pays more tax. I wonder what the govt does with all that money
https://www.theautomaticearth.com/2023/07/debt-rattle-july-11-2023/
Interesting list this morning; usual filters on...
In Japan, speculation is mounting that the Bank of Japan will adjust its ultraloose monetary policy as soon as this month in response to recent economic data, driving the yen to its strongest against the US dollar in about a month
Nominal incomes in Japan plunged. Real HH incomes down 9% just since Jan. At same level as March '18! And Japan was supposed to be booming according to Nikkei and how everyone interprets high CPI rates. Nope. Same recession as everywhere else. Look out. https://buff.ly/3rlyt2v Link
Mrs Watanabe reversing Yen carry trades or:
Gold Rush: Sanctions Fears Push Investors to Dump Western Holdings
I’m wondering if we’ll get a surprise 0.25. Thinking out loud, there are another two Fed reviews before the election, and they’re looking to continue the bump up. Unless we’re confident that the fed will stall, we can’t risk falling behind. A 0.25 would give a little more buffer for the inevitable pause at the next RBNZ election-time review.
Markets see it
Interesting view! The US 2/10 is still deeply inverted and is behaving more like the stagflationary recession of the 1980's, than any of the deflationary recessions that have occured after that point.
It may take years for the US curves to get back to a positive spread if we see something similar to the early 1980's. They were a bit of a mess (at least between 2 years and 10 year terms) for about 4 years - including short periods where they returned to a positive spread, but then only to be inverted once more.
In Bitcoin News, the narrative has most definitely shifted now that the big players have thrown their hat into the ring.
Forbes alone had 5 positive articles over the last few weeks.
We all know how the narrative in the Big Short changed once the banks had managed to accumulate a net short position, then they finally started marking their prices to market.....
The smart get in early, the stupid get in late. Rinse and repeat. The only question is how long until the pool of stupid have lost everything and no longer buy. The world is a big place I guess
Correct. It's not just about getting in early, but time in the game. Let's have a look at the ''potential" % gain in each cycle.
2011 cycle - Crashed 83% and increased 13,200%
2014 cycle - Crashed 85% and increased 56,900%
2018 cycle - Crashed 84% and 11,470%
2022 cycle - Crashed 77%, and increased 2,084%
You forgot the only reason to buy it, the speculative gains.
Would you buy propadee if its perceived value didn't increase? This discussion is suitable for the water cooler debates.
And maybe propadee and the ol' rat poison have a common element relative to a depreciating Kiwi peso. Same same but different.
"they have a long time horizon" - are you sure? I personally think Bitcoin has no long term future, I certainly wouldn't be in it long term, but I am quite tempted to ride the wave and make a quick buck. I was very tempted to buy @ 16k and I obviously should have. Surely people like me make up a big percentage of investors, if everyone was in for the long term the price wouldn't fluctuate so much.
"protection against a debasing FIAT dollar" - wouldn't gold be a much safer protection? I guess Bitcoin could be one of many investments to spread the risk if you had some serious money to preserve, but I doubt that is the main use case at the moment.
"they have a long time horizon" - are you sure?
I don't think anyone can be sure. But best to look at what we do know. Approx 70% of BTC hasn't moved in the past 12 months, despite the crash and bear market. 12 months is not a 'long time'. What it does tell you is that there is not much for sale relative to total supply.
While the supply of Bitcoin is limited, the supply of Crypto in general is pretty much unlimited (I could invent a new currency tomorrow). So isn't it pretty much as scarce as a vintage stamp, or USD printed in January 1998, etc. The scarcity is only a definition rather than physical scarcity, much like the number of hairs on my head is becoming more and more scarce yet the number of hairs in the world in the world is not.
In AirBNB news, it appears the local economy in the US is falling away with many main centres seeing massive declines in revenue in part due to less local travel. Backed by influencer socials who claim this is a great time to “snap up those properties and do… uhh… something with them 🤷🏻♂️”
Maybe they are simply switching to motel/hotels as those "cleaning" fees become more ridiculous?
Hotels all the way’: Readers share why they’re shying away from Airbnb
"If the options are there, I will always pick a hotel."
@J.C. @Audaxes, I think you two are familiar with Jeff Snider's explanation of the monetary system.
I am having a difficult time reconciling his view with others with similar views. Fox example, Raoul Pal's view of the present being currency debasement.
If reserves/QE are not money printing, then its not currency debasement.
Currency debasement only comes with monetary inflation i.e. private sector borrowing.
Audaxes understands the Eurodollar far better than I do. And your point about currency debasement resonates with me. Excuse me if this is overly simplistic, but the question surrounding currency debasement is that you still need credit creation to service existing debt. I like the simple example of global debt to GDP being 3-4x. Assuming debt servicing at 3% pa, then GDP must be growing at 9-12%.
Currency debasement depicted by Werner.
Reality in NZ:
Banks have migrated away from lending to productive business enterprises because the risk weights can be as high as 150%. Thus around 60% of NZ bank lending is dedicated to residential property mortgages owed by one third of already wealthy households, with risk weights as low as 35%.
“Ultimately there’s no natural income streams to be able to service and repay loans. What you have is capital gains which are contingent on the game continuing. So it’s a Ponzi scheme. says Werner. - https://wire.insiderfinance.io/richard-werner-qe-infinity-707e2c627e03
It is worth looking at the affects of the MDRS & NPS-UD (plus others in the next 20 years) on all that residential mortgage debt. A dramatic increase in housing supply has a number both very satisfying and very scary outcomes. May you live in interesting times....
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