Here's our summary of key economic events overnight that affect New Zealand, with news investors are heading for the exits in China.
But first we should note that central bankers will again be gathering at Jackson Hole, WO, for their annual talkfest. It runs from Friday to Sunday (NZT) next weekend.
North of the border, Canadian producer prices rose +0.4% in July from June, a big shift from the -0.6% decline in the previous month. This was their first rise of producer prices since October 2022. Year-on-year Canadian PPI is down -2.7%.
Across the Pacific, the Japanese CPI inflation rate was unchanged at +3.3% in July but this was notably higher than market expectations of +2.5%. Core inflation stayed above 3% too. Prices continued to rise for food which was up +8.8% in July from a year ago, compared with +8.4% in June. The latest figures are well above the Bank of Japan's 2% target, and for the 16th consecutive month.
Foreign direct investment in China slumped in July; in fact it turned to a net outflow in the month, something that hasn't occurred in more than the 25 years they have been releasing this data. It is a stunning manifestation of the decoupling, 'de-risking' and overall pullback from the Middle Kingdom. On a net basis, it fell -US$30 mln in July from June. But that won't be the full story because they are still attracting investment from their 'friends'. That means Western companies are now rushing for the exits. And their central bank moves to keep the yuan value elevated for wider stability reasons means those leaving now are not getting hurt by the exchange rate
Meanwhile, China's Evergrande Group, once the country's second-largest property developer (Country Garden is now the largest), filed for bankruptcy in New York earlier yesterday. It was a Chapter 15 bankruptcy filing meaning its actually a Chinese (Hong Kong) bankruptcy, a move that protects its US assets from creditors while it works on a restructuring deal elsewhere. Rival Country Garden is going down the same 'restructuring' path.
In Australia, their pipeline of investment projects has climbed to a new record high in 2023. The value of projects in the investment pipeline was worth AU$946 bln in the June quarter 2023, a +AU$180 bln (+22%) increase on the level prior to the pandemic.
Meanwhile, the AFR is reporting that a TikTok-fuelled fraud wave that started in late 2020 has overwhelmed their tax authorities. The ATO has blocked AU$2.7 bln of fraudulent claims but paid out AU$1.6 bln in the scam. It has added AU$300 mln in penalties and interest for the cases identified so far, but unpaid GST debt, which went from AU$20 bln to more than $27 bln as at June 30, 2022, is expected to rise to more than AU$30 bln in yet to be released ATO accounts.
Since October 2022, the price of cocoa for chocolate-making has risen +40%, which may explain why your guilty pleasure is more costly these days.
The UST 10yr yield will start today at 4.25% and down -6 bps from yesterday. But they are +9 bps higher than week-ago levels. Their key 2-10 yield curve inversion is less, now at -68 bps. Their 1-5 curve is has moved a bit more inverted, now -97 bps. Their 3 mth-10yr curve is more inverted as well at -113 bps. The Australian 10 year bond yield is now at 4.23% and back down -8 bps from yesterday. The China 10 year bond rate is holding at 2.58% and its lowest since the temporary drop at the start of the pandemic in early 2020. Apart from that it is a 20 year low. And the NZ Government 10 year bond rate is down -3 bps, now at 5.09%. A week ago it was 4.90%.
Wall Street is little-changed on the S&P500 and ends its week down -2.0%. Overnight, European equity markets were all down about -0.6%. Yesterday, Tokyo ended its Friday session down -0.6% for a -3.1% weekly drop. Hong Kong ended with a very sharp -2.1% drop on the day for a weekly -4.0% rout. Shanghai fell -1.0% even with 'home team' support. For the week it was down -0.9%. The ASX200 ended unchanged on Friday for a weekly drop of -2.6%. The NZX50 fell -0.4% on Friday for a weekly retreat of -1.9%.
The Fear & Greed Index has shifted over just into the 'fear' range from the mid-greed range a week ago.
The price of gold will start today at US$1889/oz and up +US$4 from yesterday. But it is down -US$13 from a week ago.
And oil prices are +50 USc firmer at just over US$80.50/bbl in the US. The international Brent price is just under US$84.50/bbl. But these levels are a net -US$2 lower than week ago levels.
The Kiwi dollar starts today slightly firmish at just on 59.4 USc, up +10 bps but for the week it is a net -40 bps lower. Against the Aussie we are a little firmer at 92.6 AUc. Against the euro we are marginally firmer at 54.6 euro cents. That all means the TWI-5 is still at 68.5 and little-changed from this time yesterday and little-changed from a week ago.
The bitcoin price is very much lower again today and now at US$26,268 and down another big -5.9%. For the week it is down -10.4%. Small events in this very illiquid market can have large price impacts and more positions are being liquidated at present. But to be fair, this is really just part of the overall market pullback from risk assets. Volatility over the past 24 hours has been extreme at just on +/- 5.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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13 Comments
Probably, the currency has devalued a lot and people have received chunky pay increases, also immigration high. I only buy in a slump so long live bad news, I guess? It's tough on home buyers for the most part.
I'm more talking about the wider global economy, which I think has surfed 20 years of a growing Chinese middle class taking out mortgages.
Exactly - same happening in China - offshore eurodollar credit is extinguished on redemption date and G-SIB banks are not in the mood to take new risks.in the current situation.
Foreign direct investment in China slumped in July; in fact it turned to a net outflow in the month, something that hasn't occurred in more than the 25 years they have been releasing this data.
A good example of why China is struggling and not just its own real estate bubble. Global trade recession means less demand for Chinese products, a lot of which end up in Japan to be assembled and shipped on elsewhere. Getting worse. https://buff.ly/3QEtNiN Link
Well they still have Russia in camp, and to a degree a connection with most of the ex members of the Soviet Union that lie in between. China also has a huge sphere of influence, Myanmar, Pakistan, Afghanistan, Iran, Syria and in their sights Iraq & Libya. Vast swathes of territories from the sub continent to the Mediterranean. What is worrying though is that history tells us that powerhouse nations often have resorted to creating trouble abroad to distract from trouble at home.
One of China's problems is that they don't have any real allies, just temporary alliances that they've paid for. Bribing governments either directly or with development projects only works for a little while, until the project goes awry or someone else takes office.
China in decline? New US narrative is geared towards 2024 election
- The White House and American news media are wringing their hands over China’s economic slowdown, which is construed as posing a threat
- The argument that China should focus on consumption instead of investment is as fallacious now as it was 30 years ago, and serves to bolster a Western sense of superiority
Biden warned, “When bad folks have problems, they do bad things”
Next time you hear the US blabbering about the "rules based order" you might want to refer to this report just issued by China's Ministry of Commerce. For the first time they've compiled the myriads of ways in which the US violated international trade law, whether it was by "undermining the multilateral trading rules, imposing unilateral sanctions, manipulating double standards in industrial policies, and disturbing global industrial and supply chains" or in general "taking unilateral measures against other members under the guise of so-called 'national security,' 'human rights' and 'forced technology transfer'" and "coercing others into abiding by its diplomatic policies and illegitimate demands". The report is available here: https://news.cgtn.com/news/files/202 Link
Yes Audaxes,
"Geopolitical Economy Report" on YouTube covers that report, and a bit more
Debt costs now a major world wide problem and will get worse and more dangerous unless write offs are agreed widely. Gov too need these but that will be v slow. Growth rates when delivery and money retirement being done will be hard to obtain too. This was bound to happen and the period of lame rates since 2008 has been a deluded mistake distorting the yield curve and risk profiles for what? To avoid a recession? Why does capital fear recession?
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