Here's our summary of key economic events overnight that affect New Zealand with news financial markets are looking for excuses to be negative, and they found one - sort of.
But first up today there was another full dairy auction and that brought a somewhat disappointing result. Overall prices fell a minor -0.4% in USD, down -1.1% in NZD. This event failed to maintain the upward demand for WMP, which fell -2.5% hurting the overall result. That contrasted with most other components, especially SMP which was up +4.5%. China and "North Asia" were the dominant buyers today but there was notably less demand for WMP from other regions. Although it was an unexpectedly soft result overall, at least it basically confirmed most of the prior months gains.
In the US, the two August factory PMIs each show a contracting manufacturing sector. The ISM one improved from July's deeper contraction, but the S&P/Markit one slipped back but to a similar level to the ISM one. Slower new order growth was a shared feature, especially for export orders. Although the variance in both from market expectations was very minor, it has had an outsized impact on the mood of financial markets today, post the US-holiday. Equities fell, benchmark yields retreated, and the USD softened.
Market ignored the rise of economic optimism in the RCM/TIPP survey, now at a 17 month high.
They also ignored the rise of US retail sales last week at physical stores, up +5.0% above the same week a year ago on a same-store basis.
Also ignored by markets was the 'good' logistics managers index for August that showed firms are gearing up positively for Q4-2024 activity.
The Canadian factory PMI continues to be marginally disappointing, although it is broadly stable.
China said it will likely impose tit-for-tat tariffs on Canadian canola imports as a retaliation for Canada's duty level on them dumping EVs into Canada.
In Australia and despite strong mineral exports, they are now back running balance of payments deficits. Australia’s current account balance fell by AU$4.4 billion to a deficit of -AU$10.7 bln in the June quarter. This was the largest since June 2018, double what was expected, reflecting continued falls in bulk commodity prices and higher income paid to non-residents. They ran a -AU$6.3 bln current account deficit in Q1. For the year to June, they now have a -AU$18.8 current account deficit, the largest annual level since March 2018.
The UST 10yr yield is now at just on 3.84% and down -9 bps from yesterday. The key 2-10 yield curve inversion is back at -4 bps. Their 1-5 curve inversion is deeper at -74 bps. And their 3 mth-10yr curve inversion is now inverted by -141 bps. The Australian 10 year bond yield starts today at 3.98% and back down -9 bps. The China 10 year bond rate is at 2.15% and down -1 bp. The NZ Government 10 year bond rate is now just on 4.34% and unchanged from this time yesterday.
Wall Street has opened after the holiday down -2.0% on the ISM result trigger. The NASDAQ is down -3.1%. Overnight, European markets were all down about half that. Tokyo ended its Tuesday trade basically unchanged. But Hong Kong dipped -0.2% and Shanghai fell -0.3%. Singapore rose +0.5% however. The ASX200 was down a minor -0.1% in its Tuesday trade. And the NZX50 slipped its own -0.2%.
The price of gold will start today down -US$8 from yesterday at US$2491/oz.
Oil prices have dropped -US$3.50 from yesterday to just under US$70/bbl in the US while the international Brent price is now just on US$73.50/bbl. That makes it the lowest since the brief dip at the end of 2023, and prior to that, at 2021 levels. The restoration of Libyan oil supply after the apparent end of political and security issues there was a key trigger to today's drop.
The Kiwi dollar starts today down -40 bps from yesterday at 61.9 USc and a two week low. Against the Aussie we are +40 bps higher at 92.1 AUc. Against the euro we are -20 bps lower at 56.1 euro cents. That all means our TWI-5 starts today at 70 and down -20 bps from yesterday.
The bitcoin price starts today at US$57,914 and down almost -1.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.9%.
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23 Comments
Oil…wow, the “basket of goods” might look different in a few months maybe
https://www.macrotrends.net/1369/crude-oil-price-history-chart#:~:text=…
Trend is one way; inevitable, really.
We're where we were at 50 years ago, yet demand is up 400%.....
Petrol was 10c/litre 50 years ago
I'm talking the price of oil. You have to adjust the pump price for 50 years of inflation and all the additional taxes.
Since 1946 demand has increased 12x and price has increased 3.6x. Imagine what could have been achieved if governments didn't dominate oil supply.
https://ourworldindata.org/grapher/oil-production-by-country?country=~O…
If you think NZ party political deals are a bit shady, spare a thought for our Oz cousins
https://www.abc.net.au/news/2024-09-04/annabel-crabb-on-western-austral…
Hawkish language from the BOJ overnight for a further interest rate hike.
Ueda Reiterates That BOJ Will Lift Rates If Outlook Realized
When will we start see Chinese ev's being dumped on the NZ market?
If they're BYDs, I wouldn't call it 'dumped'.
They're fine pieces of machinery, as machinery goes.
In the bigger picture, EVs are the right answer to the wrong question - but in car-vs-car terms, BYDs are well up there.
Yes, not meaning dumped as in rubbish, dumped as in getting locked out of markets.
The starting price of Tesla’s cheapest model is $31,900 in China. The sticker price of BYD’s lowest-priced model the Seagull, starts at $9,900.
That's in American dollars. The Seagull at $NZ16,341 is called the Dolphin in New Zealand. Starting at $43,990.
China is dumping EVs on their market (and others) at big losses.
NZ is a minnow.
You can get a new Leaf under $30k.
We don't have any local manufacturing from them to try and crush.
As Bernard Hickey keeps saying, it would be great if we could get as many of those 'dumped' EVs and Solar Panels here in NZ, seeing as the rest of the world keeps slapping tarrifs on them.
Plenty of industrious Chinese here, must be a matter of time before they start undermining the established brands? From $2 shop to car shop.
sooner the better.what do we care?
I'm a bit of a BoP nerd.... Australia is generally going to have a current account deficit, it's just whether BoGS is a surplus or not.
Also, the Balance of Payments can never be in deficit as the article states as, by it's very definition, it is always balanced.
Yes, you can watch overseas ownership of Govt bonds (mostly) moving in beautiful tandem with our current account deficit. When there is a deficit - we export some bonds to fill it.
'...Mack and the boys haggled with him for three days, and finally gave him an IOU for $1.98 - which he presumably still has'.
Steinbeck/Cannery Row, near as I remember it...
There is no Balance of Payments deficit Jfoe, only current and capital.
Time for a bit of trivia. Nvidia’s drop overnight was the biggest market cap wipeout ever - approximately $278.9 billion.
Numbers changed on a screen and peoples emotions and behaviours go outside the norm over something that never existed. Otherwise that is a pretty solid number.
Like losing 25-30% of the Aotearoa housing market value overnight.
Imagine the squealing if that happened.
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