Here's our summary of key economic events overnight that affect New Zealand, with news that today we are in the quiet period before some big news coming up in the rest of the week, starting with our own labour market data out tomorrow, and the US Fed rate review on Thursday (NZT).
In the meantime in the US, the pressure from rising petrol prices seems to have completely evaporated. Pump prices reported are just +1.2% higher today than a year ago, and virtually unchanged from a month ago. But we shouldn't overstate the importance of this. Retail fuel prices account for just 4% of their CPI basket. "Shelter" (rent) accounts for more than 30%, and rent inflation is running at 5.6% pa (even though it is far below its recent 8.2% peak a year ago). House insurance has risen by +8.6% in the past year. CPI pressures are shifting.
Previously we have pointed out Tesla's share price slide in 2024, down more than -40%. But in the past few days there has been a sudden recovery, up +35% on the news that the under-fire company has apparently won approval for its "full self-driving" technology in China. It has struggled to get those approvals in the US due to the perceived poor safety record of those systems. But China made a political decision to approve after a visit to Beijing from Musk, sidelining regulators.
In Europe, energy ministers from the Group of Seven (G7) major democracies reached a deal to shut down their coal-fired power plants in the first half of the 2030s, in a significant step towards the transition away from fossil fuels.
Germany's consumer price inflation came in at 2.2% in April. This retains its lowest level since May 2021 and was slightly below analyst forecasts of 2.3%. A slowdown in services inflation was offset by a small rise in food prices. A year ago, German inflation was running at 7.2% so this is significant progress since then, all while the separation from Russian energy source reliance was achieved. In hindsight it is an impressive achievement.
EU sentiment was largely unchanged in April, but it is still running at a low level. But at least it has recovered from the sag in the middle of 2023 and held that improvement.
Yesterday's sudden yen devaluation past 160 to the USD has been reversed today just as quickly, now back to 155 yen to the USD. That has some wondering whether Tokyo authorities intervened although there is nothing more than suspicion at this point. But the Bank of Japan has a reputation of being unyielding in the face of market and trader pressure so perhaps some of those reversed themselves unable to hold their short positions. It is unclear at this point what drove the pullback.
The UST 10yr yield is now at 4.62% and down -4 bps from yesterday. The key 2-10 yield curve inversion is now at -36 bps and a little deeper. And their 1-5 curve inversion is also marginally deeper at -56 bps. Their 3 mth-10yr curve inversion is now at -77 bps following the same shift. The Australian 10 year bond yield is now at 4.52% and down -2 bps. The China 10 year bond rate is up +2 bps at 2.36%. The NZ Government 10 year bond rate is now at 5.03% and down -3 bps..
Wall Street has opened its week with the S&P500 unchanged in its Monday trade. Overnight European markets fell -0.3% except for London. Yesterday Tokyo did not trade due to a public holiday. Hong Kong was up +0.5% and Shanghai was up +0.8%. Singapore ended little-changed. The ASX200 ended its Monday session up +0.8% and the NZX50 ended up +0.9%.
The price of gold will start today a little firmer, back up +US$3 from this time yesterday at US$2340/oz.
Oil prices are down -US$1 from yesterday at just under US$82.50/bbl in the US while the international Brent price is now just on US$87/bbl. Gaza ceasefire hopes might be behind this shift.
The Kiwi dollar starts today up nearly +½c at just over 59.8 USc. Against the Aussie we are firmish at 91 AUc. Against the euro we are firm at 55.8 euro cents. That all means our TWI-5 starts today just over 69.3 and up a minor +10 bps from yesterday.
The bitcoin price starts today at US$63,031 and down -1.1% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.1%.
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53 Comments
It is unclear at this point what drove the pullback in Yen?
The Bank of Japan reaffirmed complete authority over currency and yields. As it has repeatedly for the last 20+ years. How many people have published 'this time it's different' stories on Japan in that time?
Yes, Japan are able to build a huge reserve of US Treasuries and USD because they have a big trade surplus with the US. They use this warchest to intervene in currency markets (selling dollars to buy yen) when they don't like what's going on.
Note also that Japan has bought $1.2 trillion of USD / Euro since 2000 and they have racked up huge trading profits as a result.
I am not commenting on Japan's economic strategy, just that their central bank is in charge of currency and yields.
The Plaza Accord was a joint agreement signed on September 22, 1985, at the Plaza Hotel in New York City, between France, West Germany, Japan, the United Kingdom, and the United States, to depreciate the U.S. dollar in relation to the French franc, the German Deutsche Mark, the Japanese yen and the British pound sterling by intervening in currency markets. The U.S. dollar depreciated significantly from the time of the agreement until it was replaced by the Louvre Accord in 1987.[1][2][3] Some commentators believe the Plaza Accord contributed to the Japanese asset price bubble of the late 1980s.[4][5][6] Link
What we must still learn about the great inflation disaster
Past and present policymakers should ask more searching questions about the causes and impact of the price surge
German inflation was running at 7.2% so this is significant progress since then, all while the separation from Russian energy source reliance was achieved. In hindsight it is an impressive achievement.
Before the destruction of Nord Stream, the German economy was the big kid on the block, not only in Europe, but globally.
In 2022, Germany’s gross domestic product (GDP) amounted to 3,867.05 billion euros. Germany is thus among the leading five countries in the world GDP ranking.
Germany’s economy is not only one of the largest worldwide, it is also the largest in Europe and predicted to be among the countries with the largest GDP by the year 2030. Additionally, Germany is among the 20 countries with the largest gross domestic product per capita, and it is one of the leading exporters and importers, only surpassed by China and the United States in both cases. Subsequently, it also reports one of the highest trade surpluses worldwide.
Things are no longer so rosy for Germany.
A group of leading economic think tanks released their six-monthly “collective diagnosis” of the German economy for early 2024 on Wednesday.
Titled “German economy ailing — reforming the debt brake is no cure-all,” the report revised 2024 growth forecast down from 1.2% to near-stagnation, at 0.1% for the year.
“Germany’s economy is struggling. A phase of economic weakness that has persisted until recently is accompanied by dwindling growth forces. Both economic and structural factors are therefore overlapping in the sluggish overall economic development,” the report’s summary said.
Current data on GDP as measured by Purchasing Power Parity shows that Russia is growing while Germany and France are treading water, racked by inflation and a shrinking economic output. Link
To say inflation is under control but the German economy isn't performing surely goes hand in hand once you look at energy prices. Sure Germany can obtain enough energy but at what price? I suspect the German politicians are hiding or glossing over the fact that the Germans need to contribute heavily towards the Russo-Ukraine war. Better than going to war yourself. Never mind it suits the US if German industry is hobbled.
Pink Hydrogen for Japan.
"The Japan Atomic Energy Agency (JAEA), last week passed a safety test on its novel High Temperature Gas Cooled Reactor (HTGR), and is now planning hydrogen production field trials using waste heat from the plant as soon as 2028, Japanese daily Nikkei reported.
The HTGR is a type of low-efficiency but ultra-safe nuclear reactor developed by JAEA, in which the core will not melt down even if control rods (made of materials that slow the nuclear reaction) are not deployed or if the gas-cooling system fails"
https://www.hydrogeninsight.com/production/japan-plans-hydrogen-product…
Some interesting projects out there.
"Four Danish companies – Topsoe, Copenhagen Atomics, Alfa Laval and Aalborg CSP – and two state-owned Indonesian companies – Pupuk Kaltim and Pertamina New & Renewable Energy – have signed an MoU for the development of a 1 million tonnes per year, nuclear-powered ammonia project for fertiliser production in Bontang, Indonesia.
The proposed project will have a 1 GW electrolysis capacity, powered by Copenhagen Atomics’ thorium molten salt reactors (twenty-five small modular units). Topsoe’s solid oxide electrolysis cell (SOEC) technology and its ammonia synthesis technology will both be used in the project."
"The HTGR is a type of low-efficiency but ultra-safe nuclear reactor developed by JAEA, in which the core will not melt down even if control rods (made of materials that slow the nuclear reaction) are not deployed or if the gas-cooling system fails""
Oh good. So a damaged reactor won't melt down. Nice to know. Still leaves the question of how they clean up all the radioactive mess though if things go wrong.
For example, almost all nuclear power plant disasters haven't been from meltdowns - but from fires and explosions often created by human error when shutdown procedures haven't been followed correctly and/or maintenance and training have been lacking.
Edited: https://en.wikipedia.org/wiki/High-temperature_gas-cooled_reactor ... Ah! They use helium as the gas coolant. Helium is limited in supply and expensive to collect and can not be 'manufactured'. Is there enough to go around? Time to take a long position? (I jest.)
The fear of radiation has driven us towards much worse outcomes with coal power production killing hundreds of thousands through the mining and particulate emissions - not to mention the CO2.
Nuclear power causes fewer deaths than any generation method other than Solar - 0.03 deaths per TWh generated vs 24.6 for coal. Solar is 0.02, wind 0.04.
This is my source - hydro is significantly more dangerous than solar, wind or nuclear but safer than the various 'burn stuff' options.
https://ourworldindata.org/safest-sources-of-energy
Edit: a little snippet from that page, "we would expect that 1.1 million to 2.55 million people die from fossil fuels used for electricity production each year"
Thanks mfd. Much appreciated.
I expected hydro deaths to be quite low. They would be too ... were it not for the Banqiao Dam failure in 1975. The article quotes 171k died but estimates are all over the place for this incident, from less than 50k to up to $250k. Cause? Those damn Russians. (I jest.)
Not sure that basing the ratio on annual output is such a good measure. Using total lifetime energy output would present a better picture but that gets complex for wind and solar but would work for Hydro vs. Nukes.
I really don't have much of a problem with the latest generation of nukes. But I really don't want them on fault lines, and certainly not when other renewables can be used. (And we can manage what we have far better!)
Humans are a funny lot aren't we, we are terrible at making statistically backed judgements.
A rats foot in a Garlic Bread that wouldn't have killed anyone is national news, yet hundreds dying on the roads each year and god knows how many dying due to lack of GPs / hospitals / mouldy homes / etc is just accepted. We would worry about walking down the street at night as a stranger may harm us, yet we drive our car towards hundreds of strangers every day at 100km/hr and trust that they won't accidentally or deliberately change lanes into us.
Those heroic farmers fighting every day on the front lines of climate change.
"The research [uses eddy flux towers to directly measure GHGs in the atmosphere and evaluate carbon capture by the soil] has shown that carbon-negative beef production at Archbold’s Buck Island Ranch is possible — and that same potential may extend to other beef ranching operations around the world.
“Every year, we sequester 1,201 tons of CO2 equivalent,” said Dr. Betsey Boughton, director of agroecology at Archbold. “And all of this work is scalable to other parts of the world.”
This information surprises many people who think of agriculture solely as a source of emissions.
“The narrative people have heard is that cows are bad for the environment,” she said. “So, we’re like, ‘Well, hang on, it’s not so simple.’ Grazing animals can actually change the function of grasslands. Cows are eating the grass and not allowing as much decomposition to happen on the ground. Without cows, we actually see more carbon emitted.”
“We’re trying to let people know that it is not just this black-and-white answer,” she added. “It is complicated, and we need to think about the whole story.”
https://www.alltech.com/planet-of-plenty/stories/video/can-cattle-comba…
"-Adaptive multi-paddock grazing can sequester large amounts of soil C.
-Emissions from the grazing system were offset completely by soil C sequestration.
After including soil carbon in the GHG footprint estimates, finishing emissions from the AMP system were reduced from 9.62 to −6.65 kg CO2-e kg carcass weight (CW)−1"
https://www.sciencedirect.com/science/article/pii/S0308521X17310338
Bless, when agnostium is presented with published, peer reviewed fieldwork and data that doesn't match his world view he makes stuff up about the fellow commenter. Classy.
by powerdownkiwi | 25th Apr 24, 10:37am
The first sign of a weak argument, is when it castigates by label.
ah yes "scientific consensus"
No amount of experimentation can ever prove me right; a single experiment can prove me wrong. - Eistein
even if not from Einstein
''When asked to comment on this denunciation of relativity by so many scientists, Einstein replied that to defeat relativity one did not need the word of 100 scientists, just one fact.''
Pretty much sums up the climate alarmist scientists and consensus.
I'll also throw in those who believe "the science is settled" on climate change
Spare me days ChrisOfNoFame - methane is discussed in the first sentence. Fortunately, they have some videos and diagrams for people who want better science but lack reading skills.
Pro tip: when they use terms like "CO2 equivalent" it includes other GHG's (like methane). You're welcome.
Profile unfortunately you are providing advice to the religiously converted - which is difficult as they know all the answers -some even believe in life after death how weird is that.
Earlier posts highlight the work being done in the nuclear space and new powers sources are coming -which is positive and will see a continue decline in fossil fuel use - even as the religiously converted will continue to resist - they need to have a cause to believe in after all
Does the link actually prove what you think it does, profile? Not really.
It simply compares different finishing systems prior to harvesting (or slaughter if you prefer). And in a fairly important section - 2.1. System boundaries - they open with this statement.
"Because most management differences and much of the variability among beef production systems are concentrated within the finishing phase, system boundaries were limited to this phase only, thus excluding cow-calf and backgrounding stages." By excluding these stages, which involves roughly one and half cows, a hole chunk of emissions are left out.
About the only conclusion I could make from the study is that one finishing system is marginally better than the one other they compared it to and may (their words) - in the small area they tested in, with grasses they have, and the off farm feed they used - results in a net sequestration of carbon.
So yeah. An earth shattering revelation it is not.
What a humble chap you are.
Given this morning you didn't know what CO2 equivalent meant are you in a position to reach any conclusions?
What magic is at work that finishing stock are net CO2e sequesters but breeding stock would be emitters?
"Adaptive multi-paddock grazing can sequester large amounts of soil C." is not marginal.
For anybody interested in loosely tracking TM listings, a high was hit a couple of weeks ago at around 45,500, and listings have been hovering between 45,200 and 45,500 since. The big increase in listings has finally stalled, I do wonder how this will play out over winter.
What's selling at this time tends to be 'move in ready places' and developable/land bwanking sites. There will be many that are not in either category already listed and sellers thinking of listing are likely to be put off by their low chances of a sale. Hence, listings stagnate. This had to happen. Listings couldn't keep rising forever. The big question remains - with so many listings: What will happen now.
As I said yesterday: while the Brightline profit & tax is accrued & levied on the current tax year income, capital losses can only be offset against other ringfenced property gains. So, some people may need to rebalance their portfolios.
IRD are having their cake while eating it.
The UST 10yr yield is now at 4.62% and down -4 bps from yesterday
QT was announced in 2022 and it was supposed to remove excess reserves from the system. Yet, the amount of liquidity removal so far has been ZERO and the Fed might announce a QT tapering next week! Thread 1/ Link
Oh dear. ANZ Business Outlook survey continues its downwards trajectory. While 'reckons' are still positive, but falling, the 'actual' being the "Activity vs. 1 year ago" is well and truly negative ... and still falling.
See: https://www.anz.co.nz/about-us/economic-markets-research/business-outlo…
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