Here's our summary of key economic events overnight that affect New Zealand, with news those unlisted Aussie funds are going to get a hurry-up on proper valuations from their prudential regulator via their superannuation system.
But first, in the US, the New York State manufacturing survey dipped in July from June but the shift was in fact minor and much less than was expected. Activity held steady in July and minorly positive. New order levels are still positive.
Meanwhile, applications by consumers for 'credit' (debt) are falling and are now at their lowest level since October 2020. And that means that those who are applying are increasingly likely to get turned down. In fact the rejection rate jumped to almost 22% in the year to June 2023.
China's economy expanded by +6.3% in the second quarter from a year earlier, fueled by recoveries in retail sales and the service sector, and partly thanks to a low base effect. This was lower than the expected +7.3% but was higher than the +4.5% rise in Q1-2023. Between Q1 and Q2, up just +0.8% (annualised at +3.2%) and emphasising the size of their challenge to regain momentum.
Electricity production however only grew +2.8% from a year ago in June. Some use this metric as a more insightful indicator of actual economic activity in China. It rose +5.6% in May, and this June result is the lowest since February.
Retail sales were another weak point in yesterday's data releases from China; they were up +3.2% from a year ago in June with the re-opening surge seemingly having passed through their economy now.
Separately, their central bank did not change its 1-year Medium-term Lending facility rate at 2.65%.
In Singapore, their graft scandal isn't the only issue rocking the ruling Peoples Action Party. Now two more senior MPs have had to resign over a secret affair, and one the Government has been trying to resolve in secret. One was being groomed for the PM role. Recently there have been accusations levels at their Foreign Affairs minister and their Home Affairs & Law minister, but the ruling party managed to deflect those.
The Russia/Ukraine grain deal that allowed exports though the Black Sea has collapsed with Russia refusing to renew it. Prices for wheat rose on the news, but good supply in the rest of the world has kept the rises relatively minor and nowhere near the levels even in June.
In Australia, prudential regulator APRA has been pushed into a crackdown on their superannuation funds, and how they value unlisted assets. The suspicion is that many of these assets are being carried a values that can't be achieved in a high yield market. And that is even after many funds wrote as much as 15% off their extensive unlisted office property investments in their end-of-financial-year valuations. There is more to come it seems, and it will hurt.
The UST 10yr yield will start today at 3.80% and down -3 bps from this time yesterday. Their key 2-10 yield curve inversion is also little-changed at -93 bps. Their 1-5 curve is slightly more inverted at -131 bps. And their 3 mth-10yr curve is little-changed at -150 bps. The Australian 10 year bond yield is now at 3.98% and down -2 bps from yesterday. The China 10 year bond rate is softish at 2.68%. The NZ Government 10 year bond rate is down -6 bps from yesterday to 4.56%.
Wall Street has opened its week with the S&P500 up +0.4%. Q2 earnings reports are not causing waves, yet anyway. Overnight European markets all closed lower with Frankfurt down -0.2% and Paris down -1.1% to bookend their activity. Yesterday Tokyo ended its Monday session very little-changed. Hong Kong was shuttered early for a typhoon (Talim). Shanghai ended down -0.9%. The ASX200 ended down -0.1% and the NZX50 ended down -0.6%.
The price of gold will start today at US$1955/oz and up just +US$1 from yesterday.
And oil prices are -US$1 from this time yesterday at just on US$74/bbl in the US. The international Brent price is now at just under US$78.50/bbl.
The Kiwi dollar starts today down -¼c from yesterday at just over 63.4 USc. Against the Aussie we are down similarly to 92.9 AUc. Against the euro we are down a bit more to 56.4 euro cents. That all means the TWI-5 is now down at 70.7 and -30 bps lower from yesterday.
The bitcoin price has fallen in its recent yoyo pattern and now is at US$30,050 and down -1.1% from this time yesterday. Volatility over the past 24 hours has stayed low at just on +/- 0.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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41 Comments
All this news of growth slowing is good for the long term stability.
I see asset values which were artificially pumped up in the last decade to keep the downward trend for next couple of years and then just stay there for few more years
The way up is long way away. The ones who borrowed too much in crazyness of last two years will remain slaves of debt for a very long time, probably their life time.
Want to bet?
I'm not saying I want this to happen, but all of that inflation is banked in as devalued currency and won't reverse. Nobody's salaries are going down. The cost of construction is going down only over Fletchers dead body.
Once lending rates stabilise and this cycles round of bad debt is digested one way or another, people in a couple of years will be earning 20-40% more in raw dollar numbers than they had been pre-inflation, but with the same sized mortgages and we will be back to more dollars chasing limited assets.
Yeah I agree, in fact the banks are effectively paying you to take out debt - the interest rate you pay is less than the amount your debt is being eroded by inflation (although that will probably change in the next CPI). If you have 500k of debt today it will feel like nothing in 5 years time assuming inflation stays at a similar level.
Just for those wondering, the IRD are still making retrospective Cost of Living payments. Received an email this morning (everything seems legitimate) saying my partner will receive the payment over the next two days as FY22 income was below the threshold. Yes, we're that far behind with our returns.
Of course, that $350 is worth about 7% less this year. Oh well.
You'll be charging ird late payment penalties i assume?
- 1% penalty on the day after payment due date
- 4% penalty for remaining tax including penalties on 7th day after payment due date
- 1% penalty every month the remaining tax including penalties is unpaid.
https://www.ird.govt.nz/managing-my-tax/penalties-and-interest/penaltie…
Nothing to see here folks. It's all good.
https://www.theguardian.com/environment/live/2023/jul/17/europe-heatwav…
Could get a lot worse if the last 65 milion years are anything to go by.
The planet probably will be, not sure about humans. The dinosaurs did ok at higher temperatures until the meteor hit.
There are people on here that think that 50C is fine, just stay in your shorts and a singlet while sipping a Pina colada. Then same climate change deniers probably think a meteor strike will actually solve the problem, you know chuck up a bit of dust to block the sun and cool things down just a little.
"those unlisted Aussie funds are going to get a hurry-up on proper valuations..."
The lesson the status quo took from the Great Depression is to cover up private-sector over-valuations and bad debts with vast expansions of credit....The conventional account claims that the Depression was the result of a "Federal Reserve policy error"; the Fed tightened credit when it should have loosened it. This is nonsense. What actually happened was credit expanded rapidly in the Roaring 1920s, which is why they were Roaring....what happened was a gigantic credit bubble inflated that pushed assets to unsustainable heights of over-valuation..The real policy error was protecting the wealthy who owned the debt from a debt-clearing write-down. The wealthy own debt, the non-wealthy owe debt. When the debt is defaulted on, the lender / owner of the debt has to absorb the loss. The debtor is freed of the burden. In a debt-clearing event driven by defaults, insolvencies and bankruptcies, the wealthy are the losers and the debtors are freed of the burden of debt. Various programs were implemented to stave off the consequences of default, as if pushing losses into the future would somehow enable the credit bubble to reinflate. That's not how it works...
https://www.oftwominds.com/blogjuly23/coming-depression7-23.html
Will be interesting to see if Labour loses 5% of the party vote to the Green's over the next few months on account of their refusal to consider a wealth tax or CGT. A lot of those on the left want changes to the taxation system to address the systemic unfairess. Pandering to the latest woke social issue is becoming a bit tiresome to these people. Guess we will have to wait and see.
Agreed. Don't forget that, for all the talks of good governance, NZ elections are nothing but popularity contests among party leaders. There's no doubt that a few minutes into the pre-election debates Hipkins will wipe the floor with Luxon and steal some last-minute votes back.
Expectations that corp America will massively grow its profits – which are already historically giant – are not what's lifting stocks. Multiple expansion is name of the game as share prices outpacing puny expectations for profit growth. S&P 500 P/E multiple has risen from <17 to 19.5 YTD. https://axios.com/newsletters/ax Link
I can't get over the idiocy of the Nats KiwiSaver brainfizz.
Better if they took a fifty year view. KiwiSaver that is universal, contributions at a level that actually supports retirement and which eventually replaces national super.
We have to live as owners, not perpetually owing.
Long term vision please.
I think Luxon is so deeply tucked in bed with property investors that he can't think up a single policy that doesn't benefit that cohort in some manner.
~65% of respondents in the most recent poll believed the current government is taking the country in the wrong direction and yet it's a close call on the party polling between Nats and Labour.
Luxon's inability to market himself as a credible PM who can represent all Kiwis and not just the wealthy bunch is making many voters nervous.
Students normally pool the bond… so it’s only one week each if four flatmates.
Hardly worth opening up KiwiSaver. I would love to know the balance of your typical 20yr old student.
I think National are showing us they have a list of things to do for the banks which involves throwing everything including the kitchen sink at the housing market.
gonna be a humdinger of a show watching this all unfold
It could have a huge effect on people's retirement, money put in while you're young has far more time to compound than money put in later. And saying it's only a temporary removal of funds is wrong, property managers know every trick in the book to avoid having to repay bonds.
The outcome will be the old and rich stealing the retirement savings of the young and poor.
For anyone that doesn't think duopolies are inefficient, Countdown are blowing $400 million on a rebrand. If they had to compete I doubt they would do that. The duopoly are costing us more than just their excessive profit.
https://www.nzherald.co.nz/nz/final-countdown-supermarket-giant-spendin…
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