Here's our summary of key economic events overnight that affect New Zealand, with news in search of short-term riches, the Cook Islands is establishing itself as a haven base for deep sea mining, it be used by both great powers.
But first, American mortgage applications rose last week with a modest +3.1% gain from the prior week attributed to a small fall in benchmark mortgage interest rates. It was the stronger +5% refinance activity that drove the modest gain rather than new home purchases.
Those benchmark rates may keep falling. There was slightly softer demand for the latest overnight US Treasury 10yr Note auction, but the resulting median yield came in at 4.20%, down from 4.31% at the prior equivalent event a month ago. However the yield is up on more recent levels.
Separately, the NY Fed monitoring of global supply chain pressure eased again in July.
In Canada, they are seeing residential real estate markets operating like we see here. For example Toronto sales transactions are rising (+13% in July from a year ago), but prices falling (-5.4% on the same basis).
The Reserve Bank of India kept its key policy rate at 5.50% during its August meeting, now holding a neutral stance, following a larger-than-expected -50 bps decrease in June. There were no surprises here and the rate remains at its lowest level since August 2022. Easing inflation and the recent US tariff challenges were key considerations.
Meanwhile, the US has doubled its tariffs on India to 50% as 'punishment' for buying Russian oil. Interestingly it has boosted Modi's standing at home in India and brought bi-partisan support for him in resisting the US.
In China, they have brought in a ¥3,600 (NZ$845) per year child care subsidy for under threes, designed to boost household consumption and ease pressure on family budgets. Encouraging childbirth is probably the core motivation for this subsidy. It is just another is a broadening range of consumer subsidies China is rolling out to support its economy and build domestic demand.
EU retail sales volumes impressed in an overnight data release for June. They were up +3.1% on a volume basis, the best increase since September 2024. German gains were particularly strong, up +4.8% on the same volume basis.
But new German factory orders again disappointed in June, down -1.0% in volume terms. Although this was twisted by some lumpy 'large' orders. Excluding those, the change is a gain of +0.5% in volume terms. (Large-scale items include aircraft, ships, trains, military vehicles).
Australia said living costs rose for all type of households in June. Over the past year, all LCIs rose between +1.7% and +3.1%, slowing from annual rises of between +2.4% and +3.5% to the March 2025 quarter. Housing, Food and Beverages were the main contributors to annual living cost increases across the household types. Smaller annual rises in living costs came with a continued slowing in growth for Insurance and financial services and a larger annual fall in Transport compared to the March quarter. The interest rate cut by the RBA was a key reason the "financial services" category retreated in the quarter.
In the South Pacific, the Cook Islands is becoming a renegade state. Its deal with China allows the Chinese to use it as a base for deepsea mining. Now the US is keen to use it in the same way. These great powers see “one of the most promising regions for deep-sea mineral deposits.” These nations are keen to plunder as far away from themselves as possible.
The UST 10yr yield is now at 4.22%, up +2 bps from yesterday. The key 2-10 yield curve is a little steeper at +52 bps. Their 1-5 curve is flatter at -13 bps. And their 3 mth-10yr curve is much less inverted at -12 bps. The Australian 10 year bond yield starts today at 4.26% and up +5 bps from yesterday. The China 10 year bond rate is firm at 1.72%. The NZ Government 10 year bond rate starts today at just over 4.47% and up +3 bps.
Wall Street is firm today, up +0.7% from yesterday and reversing the Tuesday dip. Overnight, European markets were up about +0.2% again. Tokyo ended its Wednesday session up +0.6%. Hong Kong was essentially unchanged, Shanghai was up +0.5% and Singapore was also up +0.5%. The ASX200 closed its Wednesday session up another good +0.8%. But the NZX50 ended essentially unchanged.
The price of gold will start today at US$3,374/oz, down -US$5 from yesterday.
American oil prices have slipped back again, down another -50 USc to just under US$65/bbl with the international Brent price holding at just over US$67.50/bbl.
The Kiwi dollar is at 59.4 USc and up +40 bps from yesterday. Against the Aussie we are unchanged at 91.3 AUc. Against the euro we are also unchanged at 51 euro cents. That all means our TWI-5 starts today at just on 67.1, up +20 bps.
The bitcoin price started today at US$115,465 and up +1.6% from this time yesterday. Volatility over the past 24 hours has been low at just under +/-0.9%.
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34 Comments
'Nobody has seen anything like this; they've done it twice before'
Quote of the day
Re sea-bed mining; I have long pointed out the best-worst trend when we hoe into crustal resources. There is an amount of cross best-worst fudging (light sweet crude still coming out while fracking increases) but the trend is inexorable - it is taking us more and more energy, to get at the remaining resources (including energy).
And yet
The cost to sell the crude is less than the cost of extraction, and fuel prices haven't moved.
That's what happens when you go 1 quadrillion into debt - numbers tend not to reflect reality...
https://www.thegreatsimplification.com/episode/188-lyn-alden
And yet
The price of many other items hasn't remained low, like fossil fuels. The debt has made most of them more expensive.
Of course.
Pretty rare for prices to lower when you have more money chasing less goods.
The other items are not the basis of the system....marginal pricing on those is not systemically critical.
Part of the reason fuel is still so cheap is the Saudis are trying to keep prices low. As if they increase too much, it'll trigger production of competing wells elsewhere.
As the price goes up, so will the available supply.
As the price goes up demand will decline.
It's a basis of the system though, innit?
I'd put pay more money on the flow of the oil being interrupted causing us big headaches way before the actual physical availability of it in the ground running out.
But then again, there's a good half dozen or more catalysts sitting there, good luck picking which ones going to get us first. Not sure if you'll enjoy the prize.
You appear to miss the point....the ever increasingly difficult and expensive stuff is more and more required to maintain the level of output required for the system not to collapse....the Saudis are as trapped by that fact as much as anyone else no matter their own cost of production.
The last drop of oil will never be extracted but then peak oil was never about that
No, I've well and truly got the point. It's on repeat every day.
The issue is the observation of it, doesn't match. If oil followed most other things in price, it should be significantly more by now. But it's not, because as the extraction gets more complex, it opens up significantly more oil for extraction.
So we get to say $120 (which is still cheap), that opens up a whole new bunch of supply, well in excess of what's needed. And then it'll hover there for a bunch of time, and then move up, unlocking more.
Ultimately, it'll go downhill. If just might be a fair while.
Your reply demonstrates that the point continues to be missed despite claim to the contrary
Well, you and I differ immensely even over the most seemingly basic concepts, so this shouldn't surprise either of us.
The system relies on many inputs, and fossil fuels are sadly one of the more stable.
"And yet
The cost to sell the crude is less than the cost of extraction, and fuel prices haven't moved."
and then
"So we get to say $120 (which is still cheap), that opens up a whole new bunch of supply, well in excess of what's needed. And then it'll hover there for a bunch of time, and then move up, unlocking more."
So oil is being produced at a loss and all the producers need to do is increase the price to unlock more oil and yet the price is "sadly one of the more stable"....basic concepts.
Typo. The cost to sell it is more than the cost of extraction.
Actually it probably should be the price to sell it is more. Lucky I'm not paid for my spelling aye.
If you're looking around at the state of the world and the cost of things you buy every day, fuel barely registers. So you should know when a block of butter is *insert current butter price*, it's gotten that high independent of energy.
The system is having issues outside of this constantly repeated topic. Like someone warning of a drowning risk while you're in the middle of a forest fire.
Most of the other 'issues' had substitution options....oil not so.
Also claiming little role for oil in say the price of butter is like claiming oxygen has a limited role in the air we breath.
As stated originally the marginal price of oil is constrained by the economies ability to maintain the minimum production level required to maintain itself...and as PDK has pointed out that is now being maintained by credit creation (debt) as we can "no longer afford ourselves"....that 'promise' is going to be increasingly called upon...and found wanting.
And that is all without even considering EROEI.
Also claiming little role for oil in say the price of butter is like claiming oxygen has a limited role in the air we breath.
It has little role in the current escalating cost of butter. And pretty much everything else you see increasing in price. It's all the other inputs.
As stated originally the marginal price of oil is constrained by the economies ability to maintain the minimum production level required to maintain itself...and as PDK has pointed out that is now being maintained by credit creation (debt) as we can "no longer afford ourselves"....that 'promise' is going to be increasingly called upon...and found wanting.
That issue is not exclusive to oil.
" It's all the other inputs."
Sooner or later you will understand that 'all those other inputs' are energy (in the form of oil)....or perhaps you will not, it dosnt matter as it will occur anyway.
And they call the mine Moria? There’s likely a song somewhere in that.
Barely High - your special island...
There too.
Too dwarfed too? That just a throwaway line.
How long until their fisheries are completely shot from this and they are begging for assistance when protein isn't readily available on their doorstep.
No. no. Economics tells us everything is fungible.
:)
Interesting what China is doing. They want more population. Putting aside the seemingly obvious - why? Military forces down the track or just straight consumers? Countering India's growth? Maybe some or all? It is a short term strategy.
And is Samoa about to become the richest island state in the Pacific by being used as a base for sea bed exploitation, or are they just going to be used and abused? I well recall a senior Chinese government person talking about people protesting what their government was doing some years ago, and his reference was to miscreant children. If they have this attitude towards Samoans, and the Samoans don't stand up to it, they'll just be trashed. The US will operate out of American Samoa. TMC (The Metals Company) are probably already there, even though it is a Canadian company?
Too short-term to count. Global collapse (probably financially-initiated - current debt is apparently 1 quadrillion in USD) comes before that progeny get to adulthood.
They'll be trashed. And/or corrupted.
Hang on, is it debt that's taking us out, or resource depletion.
I like my apocalypses to be definitive and non wavering.
yes their strategy is a double edged sword. The politics that's driving it will be interesting, but we'll likely never know.
"In the South Pacific, the Cook Islands is becoming a renegade state. Its deal with China allows the Chinese to use it as a base for deepsea mining."
The Cook Islands is not the only nation with NZ ties to enter into agreement with China for deep sea mining.
NZ along with Australia, have until now been the principal aid donors to Kiribati. The country may be small in area but due to its scattered nature of its atolls it has an EEZ of 3.5million Km2 and has been looking to a similar agreement with China.
https://www.rnz.co.nz/news/pacific/545172/kiribati-explores-deep-sea-mi…
China is having a considerable increase in presence in the Pacific, and with the Cook Islands this is at the expense of New Zealand.
Kiribati raised a spectre less of deep sea mining but more of China building a significant harbour and then naval base there. that got everyone's attention! Significantly extends their reach across the South Pacific. Three blue water aircraft carriers now, they will have a large naval presence everywhere in the Pacific as their carrier task groups project their dictatorial power.
NZ better spends large to buy some muskets to defend ourselves...
Didn't some chap from the Cook Islands live stream his way into a climate conference while standing knee deep in water saying climate change was sinking them and calling on nations to cut emissions? But happy to have the $ from mining when it's on their own patch?
I'd hazzard a guess that the guy standing in the water wasnt the same guy that made the decision.
Don't bet on it.
We have academics here, who do cognitive dissonance to at least that stretch - why not other folk?
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