Here's our summary of key economic events overnight that affect New Zealand, with news we need to brace for an end to the US Fed's independence. It may not be at risk right now, but the signs aren't promising. And politicians everywhere will seize on the mood to pull that level, to ease their own policies that don't deliver. The juice of monetary stimulus is just too enticing, the risks be damned.
First in the US, investors are expecting Nvidia’s earnings to be reported after the NYSE closing at 8am NZT, seen as a key test for the AI boom driving markets. The S&P 500 and Nasdaq are marginally higher in advance of that, while Nvidia shares are little-changed. But the derivatives market in the stock is set for a -6% swing and if that happens, that will be a -US$270 bln fall - probably the biggest movement of any economic metric today anywhere in the world. We will know soon enough.
Some think we should also watch the share price in Costco and Walmart. They both have lofty valuations that raise the risk of serious correction. These three are all enormous companies - Nvidia has a market cap of an eye-watering US$4.4 tln, Costco US$420 bln, and WalMart is US$770 bln. In each case that is way more than New Zealand's GDP. WalMart plus Costco is approaching Australia's GDP.
Staying in the US there was little data out overnight. The volume of mortgage applications softened by -0.5% last week from the previous week, extending the -1.4% trim from the prior month. Applications to refinance an existing mortgage fell by -3.5% offsetting the +2.2% increase in applications for a mortgage to buy a new home.
Separately, American officials are decrying the intelligence efforts by the Chinese Ministry of State Security and their 'Salt Typhoon' operation. But they have been caught running covert operations in Greenland. The Danes are unimpressed. Trump's America is no-one's friend. Even at home, his militarisation of local policing, grabbing shares in companies without paying, are worrying developments. His efforts to subvert the Fed are just part of an effective quiet rolling coup with a much broader agenda. These are stand-over tactics that will undermine the US reputation for generations. If you can read this (subscriber), it is a sobering change of view by Bill Dudley, previously the head of the New York Fed.
In Taiwan, their industry may be going at full tilt, but consumer sentiment is actually weakening. An August survey there shows it at its weakest level since April 2023, as five of six key indicators deteriorated.
Chinese industrial profits fell again in July, down -1.7% from a year ago in July. They fell -7.5% for SOE's but were up +1.8% for private businesses.
Yesterday, there was a big surprise in data released in Australia on inflation. Their monthly indicator had fallen consistently to 1.9% in June. The RBA was relieved. But the July level came in at 2.8%, an unexpectedly large jump. There will be head-scratching. Higher electricity prices (+13.1%) are getting the blame.
The UST 10yr yield is now at 4.24%, down -1 bp from yesterday at this time. Long bond yields, especially the 30 year, are rising more quickly now. The key 2-10 yield curve is now steeper at +61 bps. Their 1-5 curve is still inverted and still by -13 bps. And their 3 mth-10yr curve is inverted -8 bps. The Australian 10 year bond yield starts today at 4.32% and unchanged from yesterday. The China 10 year bond rate is up +1 bp at 1.77%. The NZ Government 10 year bond rate starts today at just over 4.40% and little-changed from yesterday.
Wall Street is again little-changed, with the S&P500 up less than +0.2% in Wednesday trade before the Nvidia result. Overnight, European markets mixed between Frankfurt's -0.4% and Paris's +0.4%. Yesterday Tokyo ended up +0.3%. Hong King was down -1.3% and Shanghai fell a greater -1.8%. Singapore ended little-changed. The ASX200 rose +0.3%. But NZX50 fell -0.7% in its Wednesday trade with another sharpish fall away at the end of trading.
The price of gold will start today at US$3,395/oz, up +US$14 from yesterday.
American oil prices have risen +50 USc to US$64/bbl with the international Brent price now just under US$68/bbl.
The Kiwi dollar is at just on 58.6 USc and little-changed from yesterday at this time. Against the Aussie we are down -30 bps at 90.3 AUc. Against the euro we are up +10 bps at 50.4 euro cents. That all means our TWI-5 starts today at just under 66.3, and little-changed from yesterday.
The bitcoin price starts today at US$112,400 and up +2.4% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.2%.
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19 Comments
The US is doing what it always has - covertly undermining other nations for its own gain.
Just this time, it happens to be a nation with western-voiced media. So it gets heard, rather than the usual propaganda (axis of evil, weapons of mass destruction, terrorist, communist).
Funny as a fight.
Oops...
I would disagree PDK.
The only similarity is that the US thinks it is the world leader and the world has to jump to its beat. In the past most if not all of it's leaders realised they needed the cooperation of other nations, and western democracies of reasonable size could at best be influenced, but not necessarily screwed with. They did fiddle in the politics of smaller, less stable countries (Chile for instance) though. But on the whole they recognised that their position was one based on trust. They built themselves as a world leader on the basis they were a democracy (Not true, they're a constitutional republic. The states are the democracies) that enshrined personal freedoms as the bedrock of the nation, and the largest economy in the world. The assumed mantle of leadership of the western world was based on trust and that is why they dominated organisations like NATO, and how they got away with the vetos in the UN. But Trump has single handedly destroyed that trust. The US has destroyed it's ability to undermine the larger nations. The European leaders are playing his own game back at him. They're sucking up to him, stroking his ego while still getting the US made weapons and systems while they build up their own capacities to manufacture their own weapons for their own defence without having to rely on the US for supplies. But that takes time. Trump is like a child. Too stupid to realise what is happening. He probably also believes that Europe will never be able to be fully independent of the US arms industry, but 'never' is an extreme word, and while it will take time, the Europeans have seen and realised just how politically fragile the US really is and is moving the secure itself. The US is no longer leading. It is being tolerated while others are working to become less dependent on it.
Yep...just starting all over again
German cabinet backs voluntary military service, opening door to conscription
Murray - yeah, nah.
Rose-coloured specs in the middle bit - who said those countries were 'less stable'? By whose reckoning?
And most of the time, the destabilisation was US driven.
When Allende was elected Chile was under going increasingly polarised politics, which would have been common for all the countries the US and CIA fiddled with. that would have been how the extreme right or left wings got traction and then abused their power. Are you saying they were stable?
I think the politics post WW2 are reasonably clear and straight forward. the US saw themselves as the defender of democracy and freedom and promoted themselves as such. To hold influence over the rest of the western world they had to give them something and the "defender' bit was where it lay. Remember communism was the great 'evil'? To some extent, it still is, but that is what the US stood itself up to fight, and that meant using it's industrial might (the MIC) to arm their allies. It earned export $ for them, but also gave the US a political dominance over most. France doesn't fall into this because they have their own very capable arms industry with little if any reliance on the US, and a history of going their own way when it suits them.
That's a fantastic post Murray !
I really must watch the movie Idiocracy and see whether it predicted this one :-);
https://www.thelondoneconomic.com/politics/donald-trump-president-of-eu…
Speaking of art and premonition - this clip of Stephen King speaking about his classic, "The Dead Zone" is worth the watch - truly spooky;
https://www.youtube.com/watch?v=UXfklsKGwBU
Try watching The Purge series Kate. Scary because it is so very much possible.
Trump: “They call me the president of Europe, which is an honour. I like Europe and I like those people.”
It's unbelievable how dumb he is and how easily he can be played
Trump's America is no-one's friend. Even at home, his militarisation of local policing, grabbing shares in companies without paying, are worrying developments. His efforts to subvert the Fed are just part of an effective quiet rolling coup with a much broader agenda. These are stand-over tactics that will undermine the US reputation for generations.
It's easy to see why the Austrian artist got as far as he did when looking at what the crook running the US is getting away with. They all just stand there and watch, question nothing.
Indeed....it certainly answers the question for those of us unborn at that time how such a thing could possibly happen, hopefully the undoing is less deadly this time around...though I fear not.
It just feels like the wheels are going to fall off next year
Which makes it difficult to decide what to do for an investment strategy - especially so given how mediocre our home market looks
I know how you feel.
But what seems mediocre to me is our leadership at such a time. Absolutely no indication they are anything other than an ostrich with their head in the sand.
Politicians need votes. If voters are peddled a falsehood - and economic growth forever on a finite planet was a falsehood - then politicians will inevitably reflect that falsehood.
Plus which, folk who perceive themselves as 'winners' in a System, never vote for chang of said System.
The lever-points for narrative change were the media, and academia. Both failed - ironically because they too, jointly and severally, wished to maintain their status within the narrative.
Political change seldom comes from enlightened leadership, it tends to come after a narrative has proven false, there's a messy churn and then something else takes its place. The French Revolution is a classic example. We are entering the messy period at a global scale. It can only happen once... Beyond the churn (which will be a collapse, or a series of conflicts over 'what's left), we will be down to much smaller, much more local leadership. No existing 'pollie will survive the morph. They never do.
“All those men have their price.” So said Robert Walpole, politically speaking, right at the beginning. And so it has stayed.
Not sure why you think "it can only happen once" given there are so many examples of such messy periods happening many times in the past from which societal recovery (for a period) came to pass;
https://en.wikipedia.org/wiki/New_Deal
You mention the French Revolution - yes, doesn't that defeat your point - a new society emerged.
And on a planetary perspective - life survived the Ice Age, of course.
Absolutely Grattaway ! I'm in the same boat, where do you invest when everything seems overpriced ? More gold perhaps ?
Ditto. David 'contrarian' Hunter is one who has called it over last we while. It he continues to be correct, we have more 'melt up' to come followed by major collapse.
So yeah...where to hide?
Ill be putting more into my lifestyle block (fencing/water) and likely solar. Stuff that can't melt away.
Bummer, sounds like my plan to invest in ice cream won't be "solid" then.
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