Here's our summary of key economic events overnight that affect New Zealand, with news China's inward turn is gathering pace as it fears foreign influence.
But first, US mortgage applications rose strongly last week from the week before, up more than +6%. and that was because mortgage interest rates fell rather sharply, down nearly -20 bps in a week to go under 7% for the benchmark 30 year home loan rate for the first time in a month. Still, mortgage applications are running -11% lower than year-ago levels - and they were very weak then too.
Today's US Treasury 30yr bond auction was well supported and delivered slightly lower yields than the equivalent auction a month ago, but only fractionally lower. Today's event delivered a median yield of 4.28% whereas the month-ago result was 4.31%.
In China, a Beijing-directed rescue of property giant China Vanke is apparently underway. We should all hope it works. But even if it does it will take a tough toll on the Chinese economy, Shenzhen in particular.
And more developers there are falling.
The downstream impacts are also pretty significant. Excavator sales are down -40% from year ago levels, as an example.
China's Ministry of State Security (MSS) is now increasingly focused on "food security". They are banning foreigners travelling the countryside. The MSS says “In recent years, national security agencies have cracked down various espionage activities related to food security, cutting off the "black hands" of foreign espionage targeting China's germplasm resources, preventing and addressing the risks of food security leaks, and ensuring the smooth implementation of the national food security strategy”. That will put paid to the normal global method of sending analysts into the field to assess upcoming grain and crop harvest (something necessary because satellite photos can't yet assess yield prospects - you need to be in the field.) Without that sort of crop intelligence from a major producer (China), global seasonal food planning is going to be far less accurate.
EU industrial production plunged -2.1% in January from December, marking a stark reversal from the downwardly revised -1.6% retreat recorded in December and faring much worse than market projections of a -1.5% decline. It was the sharpest contraction in activity since March 2023. Worse, it is now down -5.7% in a year. Anywhere that would be a lot. In an economic bloc as large as the EU, that is enormous. In fact, Ireland recorded an eye-popping -34% decline.
Media reports say that PwC Australia is cutting another 5% of its staff and partners, a culling of more than -300 jobs as a result of the tax scandal that engulfed the firm in early 2023. The job cuts come on top of 338 announced in November. And after they hived off its advisory business. About 1,400 PwC Australia staff moved over to the new firm which was renamed Scyne Advisory.
And staying in Australia, prudential regulator APRA has cleared NAB (BNZ's parent) of having to hold extra capital due to inadequate governance issues. But is is strangely silent on both Westpac and ANZ who are also facing this capital penalty. CBA (ASB's parent) was never on the APRA radar.
China has proposed easing the punitive tariffs on Australian wine, imposed as part of their displeasure at the Morrison government's foreign policies. But that pullback does not apply to Australian beef - not yet anyway.
The UST 10yr yield starts today at 4.19% and up +3 bps from this time yesterday. The key 2-10 yield curve inversion is unchanged at -43 bps. But their 1-5 curve inversion is also unchanged at -86 bps. And their 3 mth-10yr curve inversion is still at -121 bps. The Australian 10 year bond yield is now at 4.06% and up +6 bps from yesterday. The China 10 year bond rate is -1 bp lower at 2.35%. The NZ Government 10 year bond rate is up +6 bps at 4.71%.
Wall Street has started its Wednesday session with the S&P500 shrugging off earlier losses to move into positive territory. Overnight European markets closed between Paris's +0.6% rise and Frankfurt's no-change. Yesterday Tokyo ended its Wednesday session down -0.3%. Hong Kong slipped a minor -0.1% on the day. Shanghai shed another -0.4%. Singapore ended up +0.6%. The ASX200 ended up +0.2% but the NZX50 was down another -0.2%.
The price of gold will start today +US$8 firmer than yesterday at US$2173/oz.
Oil prices have risen +US$1.50 to just under US$79.50/bbl in the US while the international Brent price is now just over US$83.50/bbl.
The Kiwi dollar starts today at just on 61.6 USc and marginally firmer than this time yesterday. Against the Aussie we are soft at 93 AUc. Against the euro we are holding at 56.3 euro cents. That all means our TWI-5 starts today at just on 70.3 and unchanged from yesterday.
The bitcoin price starts today at US$73,189 and up +3.7% from this time yesterday. Volatility over the past 24 hours has been high at just under +/- 3.5%.
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48 Comments
We should all keep an eye on China, it's the external shock that could cause RBNZ to cut while inflation is still out of band.
It will directly impact milk price and depress red meat even further, tourism growth will turn to shrinkage.
Construction in China is around 20% of their GDP and its Munted, but the inter-ownership of companies and cross guarantees of debt could smash other industries, add in current sanctions and lack of high end chip imports..... Its going to force them into the deepest recession we have ever seen. They do not have the rule of law to clean up the mess, and this will slow recovery, once bitten twice shy.
Trump is coming and will be willing to twist the knife of sanctions.
In positive news, Whakapapa is going to limp through another year on tax payer handouts.
I believe a major problem is the life passes. Sold to raise cash over the years, the ski field can be busy but a big % don't bring any revenue, just costs.
I know a guy who worked their in marketing some years back. When they got low on cash then it was raised via selling life passes (similar to how the country is run).
There is something very dodgy with the RAL funding - especially given the profitable season last year. And the dodgy looks a lot like civil servants with their own agenda. They have consistently refused to engage with a large skiers association who do have the smarts (and likely the resources) to provide a solution
And having read the cabinet papers there is much mumbo included such that any minister would have difficulty understanding what the position is and actual options are - its YES Minister confusion at its best
The Crown also had a big hand in the failure given the Covid shut downs of a ski season -12 weeks closed is a long time when your annual operation is about that long - on top of which they originally advanced funding for development that experts said was high risk with a high risk of failure - and so it came to pass
We should all keep an eye on China, it's the external shock that could cause RBNZ to cut while inflation is still out of band.
So many people always dismiss brewing economic/financial trouble in China. Who cares? It's China's problem. No, globally synchronized. Chinese macro weakness isn't strictly Made in China. Deflation in Chinese producer prices is as much America as China. Link
'We should all hope it works.'
No, David - the sooner a ponzi collapses, the less damage/fallout. Indeed, from my perspective, the more resources remain un-entropic.
We should hope it all fails rapidly.
And remember GROWTH is a temporary thing within a Bounded System...
Hope? Never overrode physics.
Yeah its Dencun.
Not to mention the usual thing which is that its under heavy load and the gas fee transactions (which are EXPENSIVE) on the main layer are burning ETH at a huge rate.
ETH is literally deflationary in a big way
On the other hand the ETH-ETF approval is very much a gray area - unlikely for this year
Logic as follows
Investment funds guru is daydreamin at his screen and he/she/they has a epiphany ... those bitcoin thingmies have gone higher, i'll get me some of those ... gee that was easy ... maybe i might as well grab some of those Ethy-wotyamits ...
gees
i need a coffee
The media is finally waking up. Govt and RB still asleep at the wheel.
https://www.rnz.co.nz/news/national/511630/unprecedented-demand-for-ins…
I’ve certainly closed my wallet retail-wise. Having said that my main retail spend is clothing, and I really stocked up on that in 2022-2023. Another shirt is a ‘nice to have’ rather than essential.
Also I buy books less, and try my best to get through libraries.
I haven’t really pulled back on my beloved coffee, though.
I'm still spending, although only on infrastructure like culverts, fencing materials and gates. Planning on building another shed shortly too, but the high street shops are a foreign concept to me these days. Some bargains to be had out there if you're shopping in the right sector (read: nowhere most of the urban population would go.)
I don't spend much
I have noticed though that the cost of eating out - or even just fish and chips, has skyrocketed.
Had lunch with old friends in the CBD the other day. A very basic lunch is $30. I didn't even have a drink or sides or it would be $40. For some workers, that is the equivalent of 2 hours of actual after tax wages, just to eat lunch.
I remember the days when $40 was a full dinner at a fancy restaurant
Also, the ones gaming the visa system are doing it fine. Plenty out there offering pathway to residence for migrants making cash deposits into the sponsor's overseas bank accounts.
A family running an Indian takeaway in my neighbourhood recently shut shop and fled the country because the migrant working for them went to the authorities with hard evidence.
The dairy down the street has been cycling a new "retail manager" every 6-12 months ever since I can remember.
A few years ago, when we were still in NZ, my wife worked for a company which was doing something similar. It was certainly illegal. I informed immigration and they were, a) totally disinterested, and b) did absolutely nothing. It continued unabated.
They must be aware this is happening on a large scale. Do they care? Or are the perceived benefits from the governments perspective worth turning a blind eye to this sort of behaviour.
".... conversion to sale is really difficult. And when people do buy, they're spending significantly less," Young said.
"That's a big change and a big shift and it feels like it's going to be a really long 2024."
Man
They should wait till they see 2025
There is no lone ranger on the horizon.... Michael Saylor aside
the chain reaction without viable consumers ... Merino wool
..." trading conditions had deteriorated in recent months as the global slowdown in consumer demand meant retailers were holding high inventories of finished products.
That — coupled with aggressive brand-partner growth targets that were not now coming to life due to the macroeconomic environment — was directly affecting brand-partner demand for wool, resulting in lower bale volumes and deferrals on deliveries planned for the second half of the financial year and into the 2025 financial year.
NZMC said it was working with those brands on various solutions including pushing out deliveries into future years, selling off excess volumes and adjusting future contract volumes..."
https://www.odt.co.nz/rural-life/red-meat/lower-lamb-prices-behind-prof…
A record number of Americans are taking hardship withdrawals from their 401k. The figure has nearly doubled over the last four years. 40% of these hardship withdrawals are to avoid foreclosure. People are running out of money. Link
EU industrial production plunged -2.1% in January from December, marking a stark reversal from the downwardly revised -1.6% retreat recorded in December and faring much worse than market projections of a -1.5% decline.
Little Vlad the invader might have to sell off gold toilets at his Black Sea mansion to buy old DPRK artillery rounds?
https://www.businessinsider.com/russia-economy-bleeding-money-liquid-re…
https://www.rnz.co.nz/news/world/511678/chocolate-prices-expected-to-ri…
Stock up on chocolate
Pretty soon it will be a Micheal Saylor only delicacy
""We need massive demand destruction to catch up with the supply destruction," Tropical Research Services' Steve Wateridge, a world expert on cocoa, said.
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