Here's our summary of key economic events overnight that affect New Zealand, with news of leaking economic signals everywhere we look today. And the NZD is in retreat as the mood sours on commodity currencies, and Wall Street follows.
First, the overnight full dairy auction brought lower prices yet again, down -2.4% in USD terms this time, down -1.0% in NZD terms. Butter (-4.3%) and cheddar cheese (-6.6%) were the big decliners this time, but the key WMP also fell -2.7%. If it wasn't for China buying, the situation could have been worse as a bearish tone was very evident and markets for milk fats (butter, cheese) are now oversupplied. This was the sixth consecutive drop, taking the fall since early August to more than -10%. So the softness is mounting up now and analysts will be dusting off their new season $10/kgMS payout forecasts for a serious review.
In the US there was a large retreat in optimism as reported by the RCM/TIPP sentiment survey. It fell a sharp -9.1% in November to the lowest since June 2024, a shift that was not expected and certainly the size of the shift wasn't anticipated. Confidence among investors slipped -3.1% but for non-investors it plunged -10.4%.
The US Logistics Managers Index shows that freight costs are rising and at an increasing rate, but that inventory levels are contracting. This monitoring also reports that warehousing costs and utilisation are now rising at a much softer pace. This metric seems to suggest more momentum is leaking from the heart of the giant US economy, but it isn't in retreat yet.
And staying in the US, the Americans had said China would return as a big buyer of their soybean crop after the Trump/Xi meeting. But as we noted at the time, the Chinese were silent on that commitment. And so far they have not placed any orders in the US (while continuing to buy in Brazil). It makes sense - why would you buy from a supplier who uses trade as a pawn? The uncertainty and unreliability would make anyone shy away from such commitments.
All this American negativity is seeing Wall Street in retreat today. At the same time, there are some signature elections being held in parts of the US today and all eyes are on the retribution the US president may apply if results don't go his way. Withholding food aid to the poor is already underway. More will surely follow.
In Australia, their central bank held its cash rate target at 3.6% again in yesterday's review but it is admitting to worries about inflation pressures. However, they are hoping those pressure are transitory. Still, remarks yesterday will have financial markets removing any chance of any rate cuts in the foreseeable future.
The UST 10yr yield is now at 4.08%, down -3 bps from yesterday at this time. The key 2-10 yield curve is still at +51 bps. Their 1-5 curve is still +2 bps positive and the 3 mth-10yr curve is now +14 bps positive. The China 10 year bond rate is unchanged at 1.74%. The Australian 10 year bond yield starts today at 4.31%, down -4 bps from yesterday. The NZ Government 10 year bond rate starts today at just on 4.14%, up +1 bp from yesterday.
Wall Street has started its Tuesday with the S&P500 down -1.1% as the froth seems overdone and risk aversion sets in. Overnight, European markets were mixed between London's +0.1% hold and Frankfurt's -0.8% fall back. Tokyo was down a sharpish -1.7% yesterday. Hong Kong fell -0.8% and Shanghai was down -0.4%. Singapore ended its Tuesday session down -0.5%. The ASX200 ended down -0.9%, but the NZX50 rose -0.4$ and was the best of the markets we follow.
The price of gold will start today at US$3968/oz, down -US$39 from this time yesterday.
American oil prices are -US$1 lower from yesterday at just over US$60.50/bbl, with the international Brent price now just under US$64.50/bbl.
The Kiwi dollar is now at just under 56.7 USc, and down -40 bps from yesterday. Against the Aussie we are down than -10 bps at 87.2 AUc. Against the euro we are down -20 bps at 49.3 euro cents. That all means our TWI-5 starts today at just over 61.3 and down -40 bps from yesterday.
The bitcoin price starts today at US$102,729 and down another -3.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.3%.
Join us at 1pm this afternoon for the live press conference presenting the latest RBNZ update of their Financial Stability Report.
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30 Comments
Risk off as investors realize they may have overdone it
There's such a fervour in the market to try and latch on to the most promising forward bet, in the face of so much future uncertainty. This likely a short pause for breath. Until the next big headlines and sharp moves, and new shiny thing to follow, or cast away.
They may still be dancing but the music is getting decidedly discordant
Change the channel then. These very tomes have had rafts of people hopping from one news cycle imminent doom to the next.
The most profound changes are occuring over much longer timeframes, todays news is often decades or centuries in the making.
Difficult to 'change the channel' when the world is the channel....mind you Elon has a plan to do so.
The world's pretty awesome in aggregate. If you want to concentrate your view into some narrow apocalyptic narrative, I'm sure it'd seem just dreadful.
I guess theres a bit of life left in the bubble yet then
A few billions years, by some estimates.
Aggregate is not infinite.
Apocalypse therefore fits the total.
As has been said many times, this is the first - and only possible - time we're run the experiment at global scale. There won't be enough planet left - not enough good-quality, close-at-hand resources - to effect a re-boot.
Shame on you PDK...dont you know optimism can overcome all?
Help! My algorithm won't stop telling me how bad it is.
Aggregate is not infinite.
Apocalypse therefore fits the total.
You will lose everything you love and care about.
Living in that every day, is a questionable use of that time, detracting even from those things you love.
It's almost like you worked out that because you can't really fit in with wider society, you need to permanently decry it.
Bollocks.
Don't comment on that of which you know nothing.
And shooting the messenger doesn't invalidate the message.
Same negative message every day for years, everyone's blind and are in for a shock.
If not a misanthrope, then extremely misanthrope adjacent. And yet, also seemingly surprised no one wants to share your prison with you.
An impartial messenger wouldn't feel the constant need to compare themselves.
Oh dear, oh dear, what shall we do.
We have all this proxy - Warren Buffet stated it like this: "t]he way I see it is that my money represents an enormous number of claim checks on society. It is like I have these little pieces of paper that I can turn into consumption”.
But the collection of claim checks far exceeds the number of coats left in the cloak-room. It works until the people in the hall, want to go home.
Surplus Energy Economics | The home of the SEEDS economic model – Tim Morgan Anyone who hasn't bothered with that link, please do - one post will be enough to make you think.
Anyone with a basic knowledge of human history should realize that foundations like laws, contracts and money of complex societies is paper thin.
You're not faced with many options though, assimilate, leave, or bang your head against it. Today is usually the same as yesterday though, so you're best served rolling with it, and any punches that show up. The fact it'll all end should be an inflection point for how someone should spend it.
Way back Socrates was on to it “to find yourself, think for yourself.” The way things are now and increasingly so, if you can’t do that you are a goner because the saturating crap and misinformation provided by far too much of the modern media, especially the electronic versions, will not only mislead but likely cost you, well-being wise.
Last weekend I spent a few minutes talking to a young kid of 7 or 8
Couldn't tell me if they had any friends
Couldn't name a subject they liked at school
Couldn't even tell me their own birthday
Could talk at length about characters they watch in YouTube
That's very sad
The bigger picture of cause and effects and consequences are things that the vast majority of people actively avoid, wilfully ignore or simply don't understand. Politics has driven people to short term horizons, forcing them to ignore longer term effects. Even if they were unwilling recipients of the current set of politics, as Pa1inter indicates, there's bugger all they can do about it individually. And politicians can never be held to account for the consequences of their policies. And people do tend to have short term memories.
It's going to be an interesting ride!
Politics has driven people to short term horizons, forcing them to ignore longer term effects.
i wouldn't necessarily say politics did this. Many years ago people though what was best for the collective e.g large infrastructure projects and high taxation. Over the decades, and with technological advancement, the community sense has diluted further and further with more thinkin for themselves than those around them. Now we have some with much and many with little, with all seeking to attain what the few have in vast quantities previously unthinkable, yet having little chance of ever achieving this due to the few.
This increases polarisation of society, and along with social media algorithms feeding different information to different people, pushes people more and more to act in self interest vs for the betterment of the majority. We have had no major wars significantly impacting NZ culture since WWII, and historically it is the horror or war and peace post conflict, that breed community thinking and selflessness.
In essence, we have gone from having to work together to survive, to being fed that individualism is the greatest achievement one can attain by marketing, technology, until our very attention is harvested for profit. There is hope, but it is a sad state of affairs as a species.
In bigger news Michael Burry is back and I'd never bet against him... The Big Short is still one of my favorite movies.
https://www.stuff.co.nz/world-news/360875884/big-short-trader-makes-bet…
Michael Burry has an efficacy rate of less than 50%, like most experts. So slightly worse than a coin toss.
We confuse spotting that something doesn't stack up, with it being discovered by the market in short order.
Oh well I still love the movie....
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There are a lot of humans
who think (?)
in suboptimal
ways
Can I hook my irony meter into your solar array?
Sorry, I'm too busy living to bother helping those who need to avoid.
I look after my own circles. first.
Well, that's not very sharing and caring.
Hard to disagree with such a philosophy nowadays. In itself, out of necessity, it has become a duty.
It's partially why our societies are in the spot they're in; co-operation and collaboration has diminished, as the self gets given a higher and higher level of importance. Then the state gets promoted as the backstop, for which it can never adequately compensate.
Cultures more in tune to this will be more likely to endure.
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