Here's our summary of key economic events overnight that affect New Zealand with news dairy prices are still rising.
We got an increase in dairy prices at the overnight GlobalDairyTrade auction from the prior event, but it was a small pullback from prices at last week's Pulse event. Overall prices were up +1.9% in USD terms, up +3.6% in NZD terms, so a good result. WMP let the rises with a +3.2% gain, but the main pullbacks were in the cheeses with cheddar down -3.1% and mozzarella down -6.6%. SMP rose +0.9% from the prior full event but was down -1.1% from last week's Pulse event.
This is still a good result and will probably encourage some analysts to update their new season payout forecasts, just as BNZ analysts did last week. The possibility of a $10/kgMS payout is still in play after these results.
Holding the WMP prices up is the unexpectedly sticky fall in Chinese milk production (due to low profitability) and a rather steep and unexpected fall in their WMP inventories. This will underpin WMP demand for a while and rising New Zealand production will bring a virtuous tone to the party as well.
In the US, although the average American voter may have voted 'negative', they are acting 'positive' in their spending with the Redbook retail sales growth up +5.1% last week from the same week a year ago. And those sort of gains are what giant Walmart is racking up. (Presently, these gains are essentially volume gains. But of course, if the US gets aggressive tariffs, price rises will drive these numbers higher with inflation.)
US housing starts hit a bump in the road in October, down -3.1% to just over a +1.3 mln starts (annualised rate), but the fall was because construction activity fell sharply in the South due to their hurricanes. Obviously that will recover soon for the same reason. But in the background it is generally challenging for house builders because mortgage interest rates are remaining high. Still, sales at a 1.3 mln is about average for 2024.
A big question hangs over the US housing markets, both for new and used houses. The incoming Administration seems committed to quitting the two big institutions that make the market for 30 year fixed mortgages, Fannie Mae and Freddie Mac. They tried in the last Trump Administration and were thwarted by Congress, but they seem more determined this time. If that happens it will be an earthquake for housing finance in the US, and probably be the demise of their unique long-term fixed rates.
September data released yesterday by the US Treasury shows a huge inflow of foreign funds into the US. There was +US$341 bln of private net flows in the month, plus another +US$57 bln by "official" (government) transactions. This is easily the largest single monthly inflow ever. (For reference, the US Federal Government deficit averaged -US$153 bln monthly in the year to September.)
Canadian CPI inflation was up +2.0% in October, a blip up from September's +1.9%. Their food prices were up +2.7% within that, rents up +7.3%. But these were offset by much lower energy costs.
After growing rather well in the April to August months, Malaysian export growth as pulled back in September and October with only modest changes. Malaysian import growth is pulling back too, but it this is still expanding at twice the export growth rate.
In Hong Kong, the clampdowns on freedoms of expression are getting fiercer. And it is no longer 'legal' to mention Jimmy Lai, let along the umbrella freedom protests.
And China is moving to make it an offense to operating in financial markets unless pricing is "rational".
In India, they are again battling seasonal air pollution, and it is particularly bad this year, especially in the north.
The UST 10yr yield is now at just on 4.39% and down -6 bps from yesterday at this time. The key 2-10 yield curve is now positive by +11 bps. Their 1-5 curve inversion is now more inverted, by -9 bps. And their 3 mth-10yr curve inversion is also more inverted, now by -19 bps. The Australian 10 year bond yield starts today at 4.59% and down -9 bps. The China 10 year bond rate is down -1 bp at 2.09%. The NZ Government 10 year bond rate is down -5 bps from this time yesterday at 4.69%.
Wall Street has started its Tuesday up +0.2% on the S&P500. European markets were down about -0.8% except London which was down only -0.1%. Tokyo ended its Tuesday session up +0.5%. Hong Kong ended up +0.4% while Shanghai was up +0.7%. Singapore was also up +0.7%. The ASX200 gained +0.9% and the NZX50 ended up +0.4%.
The price of gold will start today at US$2623/oz and up another +US$13 from this time yesterday.
Oil prices are little-changed, still at US$69/bbl in the US while the international Brent price is still just on US$73/bbl.
The Kiwi dollar starts today at 59 USc and up +30 bps from this time yesterday. Against the Aussie we are unchanged at 90.5 AUc. Against the euro we up +20 bps at 55.8 euro cents. That all means our TWI-5 starts today at just over 68.6, and up another +10 bps from yesterday.
The bitcoin price starts today at US$92,318 and up +0.3% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.7%.
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40 Comments
It seems like a key headline might be missing here: the New Zealand Dollar has hit all-time lows when measured against Bitcoin. Meanwhile, our largest security and trading partner, the United States, is reportedly adding Bitcoin to its strategic reserves. These developments could have significant implications for New Zealand's economic position.
The US isn't our largest trading partner and where is the article saying the Fed is buying Bitcoin because that has serious implications for monetary policy?
The US are our largest "Security & Trading" partner. I'm referring to the primary source, the President himself said it and now he's making pro-bitcoin appointments to the Treasury to do it. For a glimpse into the future of bitcoin policy direction of the US, check out Robert F Kennedy Jr's speech here.
All the crypto adherents will be rubbing their hands in glee. $200k per bitcoin coming?
The US Fed already has Bitcoin and Trump signalled to the Fed and Treasury not to divest of the holding but to add to it. What is significant is the appointment of an individual to oversee the crypto market and to exclude capital gains taxes etc as also signalled. Compare that stance to EU and elsewhere!
"adding Bitcoin to its strategic reserves" or not selling the bitcoin it has seized?
Great news for cow sap farmers
Yesterday, Mr. Chaston wrote: ‘They supplied no accounting for the mental gymnastics of how or why they would fall from 6% now to 3% in one year. People are amazingly bad with numbers, and amazingly unaware of the data around them.’
This is, in a nutshell, why the MSM is losing credibility.
The failure is simple; they (the MSM) back-cast-to-project-forwards – the original version of mental gymnastics, vis-à-vis reality.
A growing echelon know something is ‘wrong’ with the ‘growth is forever, and growth is good’ message. They know this because they are not ‘going forward’ themselves. They know humanity is pushing the limits of the planet. They know we’re about to fight over what’s left of it, probably globally. I hear that from ‘the ordinary person in the street’ now, not just my echelon.
They overlay that with what they get from the MSM, which studiously avoids addressing the Limits to Growth and fiercely virtue-signals re Climate only (well, you have to have one laid-off bet).
The mental failure, is to address flows (past, current but not future) but not stocks (depletion and degradation thereof). Stock depletion/degradation – and resultant competition - is being built into most people’s understanding of the future; hence inflation expectations. Only by looking backwards, can hopium be taken as ‘truth’.
Great comment and remember Luxon's slogan is "Back on track" tells you everything about the man's mental capacity and those that support him.
Make America Great Again is similar, looking backwards, always backwards.
looking backwards, always backwards.
You could just as easily argue the pickle we're in is from being largely oblivious to millennia of observed cause and effect.
Maybe if we keep pushing forward enough, we'll be able to make reality operate how we want it to, and not the other way round.
Because that's worked soooo well until now. The "maybe" tooth fairy will turn up with that critical tech for utopia any day now.
What makes your life so miserable that a new version of reality is a requirement for a "better" future? Seems you need a break from the advertising and media swamp you're immersed in? Once you've detoxed, maybe you'll realise you already have everything you really need? The whole "pushing forward" thing is a sort of mental illness!
‘The reasonable man adapts himself to the world; the unreasonable man persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.’ GB Shaw
We've been in the panem et circenses phase for quite a while now. Long enough that a significant cohort have turned into disbelievers. From their POV, Biden and the pretty face are the military-industrial complex, upping the ante (missiles) in their last minutes. They know the real cost of living is 'going up', more than the figures suggest (I went to buy a small car battery and a wheelbarrow-tyre yesterday; the battery was twice the price I expected, and the tyre was about right price-wise but only 2-ply, not 4. It's everywhere, and some of the places I buy stuff, are struggling in their margin-space too.
Folk struggling to maintain and knowing they're worse off than last year (given Smithfield, say, that's going to be most of Timaru) vote the incumbents OUT. With increasing scepticism, and valid scepticism, given the blatant rotating snouts-in-the-trough. Into that space - if society remains coherent rather than polarised - will step someone with a new vision, like FDR and his fireside chats. Until then, the rump MSM will keep on chanting the mantra - more accurately, they will read flows murkily via forward bets laid (money) but fiercely avoid stock depletion/degradation (except for their token CC - which they don't understand cannot be 'offset').
I thought the comment perfectly encapsulated why we have seen the right conditions created for the rise of populist leaders. Thinking divorced from the lives of everyday low and middle income households.
(UK) Thousands of farmers protest against inheritance tax changes
the reality of brexit for farmers that they voted for.
Not only Brexit, the reality of a bloated welfare state, porous borders and collapsing productivity. The big GDP gains from Fin Services are over for the UK and they squandered the benefits. It's a failed state.
'Financial services' are not a real contribution, to anything.
They were yet-another parasitic activity, able to be added in a brief period of surplus energy.
Always seek the cause, not the repercussive manifestation.
:)
What's the link you see between the two?
Voting for isolationist policies, particularly against your largest and closest trading partner, puts a nasty dent in economic growth. This eventually creates a tax gap which is finally being filled from various directions. The UK has to be careful after being put on notice by the bond market during the Truss embarrassment
Time to move that thinking, on.
Economic growth is hitting the Limits. The PHYSICAL limits.
Those folk are the first to feel the effects - they are a result and a symptom, NOT a cause. Don't blame them (or Trump, or the greenies, or or or...)
A lot of pre-held narratives are collapsing as the spotlight turns on them...
Cheers mfd, I'm not so sure of the direct cause and effect relationship here. I guess brexit might have made a bad situation worse from a finance or trade perspective but I'd struggle for it being the sole cause as claimed for taxation reform.
"Inheritance tax rules mean the amount people are liable to pay may vary.
- Under the new rules farms would be affected by the 20% inheritance tax on any value above £1m (not on the whole value)
- There is no inheritance tax to be paid on the value of property up to £325,000, bringing the untaxed total to £1.325m
- If a farmer is married, their spouse would be able to pass on another £1.325m tax free, taking the total untaxed amount to £2.65m
- In addition, there is an £175,000 tax-free allowance on a main residence when it's being passed on to children or grandchildren. This brings the total untaxed amount for a farming couple to up to £3m"
Seems reasonably fair. Maybe up £3m to £5m and a lot less people would be complaining
"Seems reasonably fair" Next you'll be telling people what they should be doing with their own money...oh, wait...
If you die, then it ceases to be your own money anymore
Jeremy Clarkson getting outsmarted...(not hard) https://www.youtube.com/watch?v=qUrTf0DGpyA
Edit - He brought a farm to give to his daughter (not to save tax..) lol
US Oil shifts to contango.
https://financialpost.com/pmn/business-pmn/us-crude-market-signals-over…
Lol, make America great again, by exposing mortgagors to the medieval medicine dished out by the Fed? Remember, while the US and NZ were hiking rates, the average mortgage rate on all US mortgages stayed at around 3%, while ours hit a high of 6.38% (last month). This is primary reason the US didn't collapse into recession when rates were hiked - the Fed were neutered. You might also note that our inflation tracks are broadly the same - although the US CPI came down more quickly..
So, how come the Fed managed to reduce inflation faster than us without making mortgagors cut back their spending? Must have been those mythical inflation expectations working their mysterious magic.
This is what America voted for. As Churchill said
"The best argument against democracy is a five-minute conversation with the average voter."
My view of America has declined over the decades and dropped off a cliff over the past year. While they have some useful stuff and some of their country is beautiful they seem intent on destroying it for themselves and future generations (both physically and financially).
The average voter responds to the dominant message, which in the west and particularly the US is buy now and if you can't afford to buy, borrow, then buy. Any concept of existence beyond consumerism has been beaten out of citizenry.
Unfortunately I agree. - the people wanting their next dopamine hit.
Exactly. The only reason US growth is leading the world right now is that the bulk of their population was insulated from the high interest rates for existing mortgage debt. Only those wanting to take on new debt have to face reality. Hence US new vehicle sales are in the toilet. Existing US home sales are in the toilet and new home builders/developers have to buy down the interest rate for new purchasers for an introductory period and then those buyers have to pray they will have enough equity and rates will go lower so they can refinance in a couple of years. What could possibly go wrong? Don't mention all of the commercial real estate debt that needs to be refinanced soon.
Finance Minister Nicola Willis: A First Year Economic Report Card
"National was elected on the promise of fixing the economy. Not talking about it; but to deliver the goods. Not to do a public relations and marketing job, since we tired of the spin doctors & comms teams under the previous Labour government. National was elected to deliver tangible improvements in our daily lives. How is Finance Minister Willis doing? She has not yet proved herself. She has little over one more year to do so. How come?"
Finance Minister Nicola Willis: A First Year Economic Report Card
'Third, Willis is missing in action when it comes to breaking local monopoly powers, which are the main cause of our high cost of living.'
No, they are just standing out like rocks in a receding tide.
But the bigger irony is that the last sentence - which is absolutely true - renders most of the content above it, a waste of text.
We do agree on that last sentence: from different perspectives & for different reasons. Perhaps both will prove valid.
Trimming out the public service is too hard. None of the turkeys will lend a hand with preparing Christmas dinner. There are 19500 core public servants currently earning over 120k. That costs us just over 3 billion per year. Keep them all for now. Just do Volkswagen and give them all a 10% pay cut.
That will save 300 million a year.
I want to see her report card on the ferries...at least e minus so far
She’s useless, and I called that well before she was in government. Just really mediocre
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