Here's our summary of key economic events overnight that affect New Zealand, with news the northern summer data is full of variety today, some positive, others not so much.
The early look at the American PMIs shows a small slip in August with their services sector expanding slower, and the contraction in their factory sector easing slightly. Both measures seem to be heading to a steady state in this PMI review. (We won't get the widely-watched ISM PMI results until Saturday, September 2 (NZT). That one will more likely move markets.)
But new US mortgage applications fell hard last week as mortgage interest rates rose. In fact, applications dropped to their lowest level since April 1995. Benchmark rates rose to 7.31% plus points which was their highest since December 2000. The existing home market seems to be closing up shop.
So it was somewhat unexpected that new home building starts came in strong in July, up to a +714,000 annual rate of build from a +684,000 rate in June and a surge way above what was expected. And the latest rate is more than +30% higher than the year-ago rate. Perhaps this corner of the American residential housing market is on the move again. All this is happening despite those much higher mortgage rates and correlates well with the positive home builder sentiment survey.
In China, the failure of one of their largest non-bank 'trust' companies to pay interest on its investment products has hit the books of at least six listed companies, in a sign that the turmoil in the nation's property market is spreading to the wider economy.
Meanwhile, the US Administration has removed 33 firms from their trade "Entity List", 27 of them Chinese. One criteria for removal is agreeing to adhere to international sanctions. This should help trade resumption, and it is interesting that the Chinese companies, at least, have [seemed to] fallen into line with what the Americans want.
Things are looking up in Japan. Their factory PMI erased the July contraction, almost. And their services expansion gathered pace. In Australia, declining new order levels saw both their factory and services PMIs contract in August.
The early look at EU consumer confidence found it hesitated in August, interrupting the long recovery from September 2022.
And that is mirrored by the slip in the EU services PMI. The EU factory PMI was already very low and its small improvement isn't particularly impressive. Essentially their downturn became a little steeper, and the inflation signs aren't really improving.
Although crash landings seem to be a "thing" in Russia, India has managed to land a spacecraft on the moon. The contrasts say a lot.
The UST 10yr yield will start today at 4.20%, down -13 bps from this time yesterday in a sharp correction. Their key 2-10 yield curve inversion is a bit deeper at -75 bps. Their 1-5 curve is inverted more too at -100 bps. Their 3 mth-10yr curve is also more inverted at -117 bps. The Australian 10 year bond yield is now at 4.11% and down -14 bps from yesterday. The China 10 year bond rate is up +2 bps at 2.57%. And the NZ Government 10 year bond rate is back down -8 bps, now at 5.14%.
Wall Street is feeling good today with the S&P500 up +1.1%. Overnight European markets were less enthusiastic with London up +0.7% and Paris only up +0.1%. Yesterday, Tokyo ended its Wednesday session up +0.5%, and Hong Kong ended up +0.3%. But Shanghai was in a dour mood, down -1.3%. The ASX200 ended its Wednesday session up +0.4% and the NZX50 ended up +0.8%.
The price of gold will start today at US$1917/oz and up +US$20 from this time yesterday.
And oil prices are down another -50 USc at just over US$79/bbl in the US. The international Brent price is now just over US$83/bbl.
The Kiwi dollar starts today another +¼c firmer at just under 59.8 USc. Against the Aussie we are softer at 92.4 AUc. Against the euro we are +¼c higher at 55.1 euro cents and a two week high. That all means the TWI-5 is at 68.8 and up +20 bps from yesterday.
The bitcoin price is higher today and now at US$26,514 and up by +2.6% from yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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91 Comments
Prigozhin's Embraer Legacy is an upmarket modern jet which essentially makes it unlikely this is a failure of some kind in the jet, and the video seems to indicate this too. So it seems this is a slight variation of the Russian senior military officer retirement plan. Putin's reach must be pretty good, especially as he (Prigozhin) would/should have been somewhat paranoid after his little march on Moscow which really demonstrated just how vulnerable Putin could have been. Putin is not one who would be likely to forget.
What happens now? Will Wagner implode? Will the Russian invasion of Ukraine collapse without the backing of Wagner? I suspect there will be a diversion of resources for a little while while Wagner is cleaned up, however that may look.
Believeable. The West's self serving hypocrisy will ensure there are no consequences for state sponsored murders.
https://www.bbc.com/news/uk-politics-66531007
Is it self serving though or just realpolitik? Saudi is too much a leveler in ME politics and calling the Prince to account for a murder would achieve what? More likely push them further away from the ideals we try to set. That he chose to order the murder of khashoggi rather than just ignore him probably put more weight on what Khashoggi had written. The world is full of dissident journalists, but things have to get very, very bad before most pay them any attention. I would suggest the Prince did more harm to Saudi than good, by doing this. The hypocrisy is rife where ever you look. What to do about it is the real question.
What to do about it Murray? Do what should be done with all murderers. Hold them to account.
I don't care if Bin Salman is Geo-Important.
I was in Istanbul that week. Bin Salman (and others) should be handed over to Turkey by the UK to get justice for that murder, which was particularly foul.
I believe Turkey still hangs people.
Don't disagree. But what would it achieve? In Islam the commandment "Thou shalt not Kill" is followed by "...without just cause". By their measures, how ever they wrap them, they may consider he had just cause, it may not have been murder. Realpolitik on the other hand, establishes a pragmatism around politics, and to that end we should be asking what it would achieve other than deepening the rift between Islamic countries and the west?
Assassination of Russia (aka Blowing up Russia))
https://www.youtube.com/watch?v=qxTL3BTCIZQ&t=4s
Excellent documentary re Putins rise to power
Indeed. Did you see that impressive wig collection when the fsb raided his mansion?
https://www.google.com/search?client=tablet-android-lenovo-rev2&sca_esv…
As ruthless as to be expected. The other deceased were obviously, nonentities, expendables. As far as can recall no Russian leader since Lenin has had an assassination attempt, at least while still in office. Putin obviously can refer to this history to protect himself just as much as others in the hierarchy cannot protect themselves from him. Nobody from the West has much hope of predicting what happens next.
True there must be present a real degree of structure & discipline for the operation to exist globally.That then raises an interesting prospect in that it is highly unlikely that Prigozhin didn’t foresee his assassination and leave instructions as how to act in that event. If so, how will said structure and discipline translate into action especially if retaliation, vengeance was forefront.
Is Prigozhin dead though? Could he be that naive? He has observed Putin close up for a long time.
You have to admire, in a morbid way, how the Kremlin mafia operate. A fitting execution for a guy whose forces dispatched a number of airforce assets, including an aerial command plane.
I can't see BRICS agreeing on much except resentment that the USD continues to be the reserve currency. They don't trust each other, and they shouldn't, because they've all made it abundantly clear that any agreements they make are strictly provisional and self-interested.
BRICS currency will never happen. The likes of Xi, Putin, Modi are control freaks - losing control of monetary policy will never be acceptable to them, and that would be the implication, much as the central banks of European countries have found themselves hamstrung during crises by being in the Euro. Imagine that situation but with a bunch of violent egomaniacs in charge instead of the dull bureaucrats of Western Europe... it'd be over by lunchtime.
Vying? It's a " lay down misère" Robertson, Orr, Ardern, Hipkins, Little, Parker, jackson, and Mahuta should hang their heads in shame.
Never has so Much money been spent to achieve so little while making out everything is OK.
The brain drain and importation of spurious workers will bite us in the bum.
Bring back Hawkes bay dude.
If National said they were bringing back interest deductibility but also allowing owner occupiers to deduct their mortgage interest from PAYE, then I'd vote for them.
Might make Governments think twice about allowing debt fueled property bubbles to form, if ensuing interest rate hikes result in a loss of tax revenue.
Hipkins is still in denial about the ongoing brain drain in NZ, calling it pent-up demand for OE. I don't think it was standard for young families in their 30s to head overseas for OE pre-Covid.
Also, doesn't explain how just a 2-year lockdown could create so much pent-up demand for OE in NZ to justify a 12x bump in the number of Kiwis leaving compared to pre-Covid.
Also, doesn't explain how just a 2-year lockdown could create so much pent-up demand for OE in NZ to justify a 12x bump in the number of Kiwis leaving compared to pre-Covid.
Something to do with being locked up for a couple of years has people re-prioritising their lives. So demand to travel is now higher than when people took it for granted.
Maybe. From experience in my form, the young people leaving are going because of the housing situation here and the lack of any commitment from either party to address it properly (they appreciated Labour's policies but can see that these are going to be undone by Luxon).
Why don't the CCP just put cheques in the mail to the Chinese population? As we showed during the pandemic it's a strategy that actually does boost inflation and quickly. Adjusting rates is slow and quantitative easing ineffective at combating deflation as many OECD Reserve Banks showed post-financial crisis (and BoJ for decades.)
And oil prices are down another -50 USc at just over US$79/bbl in the US. The international Brent price is now just over US$83/bbl.
Lovely, just keep it going downward.
Such a relief to see the government has plenty of our money left money to spend on climate porn posing as news. My Big Oil cheques can't compete with this!
"So the five 1news articles, the five interviews on TVNZ’s Breakfast, an interview on Seven Sharp, as well as a full hour “Climate Change Special” on prime time TV were all part of an advertising campaign paid for by the government with the full knowledge of a Crown Minister but not disclosed as such to the public."
https://twitter.com/CranmerWrites/status/1693779536570400833
Chicken Little "journalism".
NEW YORK (AP) — The Associated Press said Tuesday that it is assigning more than two dozen journalists across the world to cover climate issues, in the news organization’s largest single expansion paid for through philanthropic grants.
The announcement illustrates how philanthropy has swiftly become an important new funding source for journalism — at the AP and elsewhere — at a time when the industry’s financial outlook has been otherwise bleak.
https://apnews.com/article/science-business-arts-and-entertainment-jour…
They should do what the NZ government does instead and spend 35% (~45 billion in 23/24) of its total budget on social security, housing and welfare. Only about a measly 10 million a year out of the Crown budget is spent on the space sector, much of which anyways goes towards the salaries of some bureaucrats at MBIE.
Yet we have one of the highest homelessness rates in the OECD.
Your rant has nothing to do with our argument. The point was whether NZ is faring any better on poverty and homelessness simply by spending large sums of money on public welfare - clearly not.
11.7% of NZ's working-age population being on a "main" benefit (excluding superannuation) in the middle of the recent jobs boom paints a troubling picture of both our demographics and welfare system.
Give a man a fish...!
That's your argument, not "ours". The bottom line of them all is the same, watch Advisor try to use stats to declare NZ as being the most poo-poo doodie-head country, ever.
In this case your view rests on an assumption that social welfare is supposed to put people in houses and jobs.
That's right. India has been desperately trying to attract more foreign capital and retain more homegrown skills in their country.
The best way for the government to achieve both is to create an ecosystem of science and innovation to put India on the map. Some of the best and brightest space researchers, scientists and engineers have gone into the broader tech economy and achieved wonders for the US.
Meanwhile, the US Administration has removed 33 firms from their trade "Entity List", 27 of them Chinese. One criteria for removal is agreeing to adhere to international sanctions. This should help trade resumption, and it is interesting that the Chinese companies, at least, have [seemed to] fallen into line with what the Americans want.
Should we acknowledge the difference between UN sponsored international sanctions and illegal US unilateral versions? Furthermore, it might help to review Churchill's view in respect of China's future.
Churchill thoughts still guides the US policy towards China today
I think the argument regarding legitimacy is mute, the effect is the same. The US does not care so much for the administrative musings of that largely non-functional group of diplomats and nor should it as they are not representative of the views of US citizens (or at least half of them).
Fascinating study published by Cambridge University Press on the opposition between international law and the "rules based order" and how the latter undermines the former. Link
Did you actually read the Cambridge University article? Not the China propaganda nonsense you posted.
The context of the quote is that the US by focusing on Rules Based Order rather than International Law makes it easier for countries like Russia and China to excuse their own actions. It is highly critical of Russia's illegal war and of China's behaviour in the South China sea.
Zollner ANZ:
After another 3% fall in July, the Heavy Traffic Index is starting to signal a downturn, but it’s tentative so far.
https://twitter.com/sharon_zollner/status/1694470179865120971?s=20
Great chart here showing how the policies of the last 30-40 years (of falling interest rates) have allowed governments to continue to run budget deficits (using US data but applicable to many other nations).
But now that rates are rising significantly, with a large debt load, that practise (of running such high deficits) looks completely unsustainable. Something is going to break - either rates need to drop and drop significantly and relatively soon, or government deficit spending is going to have to reduce.
https://pbs.twimg.com/media/F4NkceUWsAIeOhW?format=jpg&name=medium
Robert Kennedy Jr:
"President Biden just offered a $700 payment per household to Maui residents. He’s also asking for $25 billion for Ukraine. Let’s do a little math…
There are about 50,000 households in Maui. $25 billion adds up to $500,000 per household. That gives you some idea of what this nation is sacrificing to fund the war machine"
https://twitter.com/RobertKennedyJr/status/1694451208340058432?s=20
Our views differ on this unfortunately - the US should be ending the war immediately not escalating it by funding more weapons that will result in even more deaths of young Russians and Ukrainians.
Your views perhaps along with the Neocon type - but then again I thought you might have been left leaning in your views?
What is happening in Ukraine is more like WW1 than WW2. It’s a stalemate that is pointless and the sooner it is deescalated the better - more weapons/funding by the US will be match by more killing of and by the Russians.
The west started this war via poor communication and management of the global strategic picture (and ignoring Putins threats) - and they have in their power the ability to end it but unlikely they will because it would be a loss of face - but as a result more people will die than is necessary.
I strongly disagree with the statement that 'The West started this war'.
The West - specifically a more western-facing Ukraine - posed zero threat to Russia.
If a psychopath insists he must kill you because you pose a completely imaginary threat, are you obliged to offer your throat?
Putin thinks that the whole of Eastern Europe should be his fiefdom, whether they want to be or not (they really don't). It's a violent, neo-colonial project. I absolutely understand not wanting to be on the same side of any argument as the US neo-cons; but this isn't actually about the USA, it's about Eastern Europeans who don't want to be invaded by a foreign army.
Have you read much about the history of Russia there Sam B and the devastating consequences that border invasions from the west have caused the people of that country?
Here's a quick summary - but think about the millions of Russians that have been killed by these external threats to Russian borders
https://en.wikipedia.org/wiki/Invasion_of_Russia
The important thing here is to put yourself in Putin's shoes and understand world history from their perspective. If you do that, his actions appear far less crazy.
On top of that is the financial situation where the USA are doing exactly what Putin wanted them to do - to take on massive amounts of debt and accelerate the pace at which the USD is devalued to try and monetize all of the government debt they are spending to fund the war effort.
So doing what the USA is currently doing, is destabalising the world, by accelerating the pace at which they may default on their goverment debt - and if that happens, the world as we know it won't be the same (have a read about what happened to the Dutch and British who used to be the same position as the USA is now - but overextended their overseas commitments and bankrupted themselves, then lost their reserve currency status, and with it their global power - the US currently risks doing the same - just to prove Putin he is wrong).
"The US should be ending the war immediately"
That is not within the US's power unfortunately. Not unless they escalate further and get involved directly. This is a war between Ukraine and Russia.
Ukraine at this stage cannot end the war either unless they give up their land to a foreign invader and just let it be that their children and population are being abducted from their homes and taken to Russia. Not sure why they would.
The only state that can end this war is Russia, and Putin doesn't give a shit about your liberal views of what should happen. He doesn't give a shit about Russian soldiers and he gives even less shit about Ukrainians.
The reason he choose to invade was because the west had sent signals that they were not united and would not do anything about his transgressions just like Chechnya, Georgia, Syria, Libya and Crimea.
Ukraine was a step too far.
Have it your way then and hundreds of thousands of young Ukranians and Russian men will die in a WW1 type stalemate - using weapons funded by the USA which they cannot afford to supply as they are running government deficits that are crippling both their own economy and the global economy.
But yes my nasty liberal views are terrible! Yours appear to be pro death and pro debt so that the west can prove to the world that they are more powerful/super to Putin and his view of the world. Sounds great.
My view is to try and minimise the death and destruction this risk causes (both in terms of human life and in the economy/financial harm).
"That is not within the US's power unfortunately. Not unless they escalate further and get involved directly. This is a war between Ukraine and Russia"
If the war was between Ukraine and Russia, it would have been over in a few weeks or months (it has only been the weapons/funding from the west that have held the lines, that and I don't think Putin intends to take all of Ukraine - just enough to try and bait the west into being involved in a conflict). So its not between Ukraine and Russia, it is the west vs Russia and we are currently funding weapons so that young Ukranian men continue to die.
About as cowardly as it gets.
And if you think the US can finish the war, if they chose this path by direct involvement, then it risks ending the world (via nuclear war).
We are being played by Putin, but our egos are too big to admit this (i.e. we have a superiority complex towards other nations like Russian and China).
Correct on all points IO, the West should have never offered to get involved and then Vlad would have been forced to negotiate his way out of it. Its only a matter of time before the USA pulls out of funding it and they sure as hell will not be paying for the rebuild. Totally pointless war, Ukraine should have just be left to it. If the Republicans win the next election its game over.
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