Here's our summary of key economic events overnight that affect New Zealand with news Hezbollah has rejected being part of a US-Iran accommodation, and Israel is continuing to attack it in Beirut and southern Lebanon. Despite this, markets still hope that a ceasefire can be agreed and the Strait of Hormuz opened. They are pricing it will, but it is shut still today.
Elsewhere and in the US, there were 97,000 announced job cuts in May, the most since January and the highest May since 2020 and the pandemic effect - and prior to that the highest since this tracking began in 1999. Most of the current layoffs are in the tech industry, and due to AI displacement.
Markets await the May non-farm payrolls report tomorrow and the expectation is for a modest +85,000 net jobs gain. This is despite the private ADP report indicating a higher level.
US initial jobless claims were little-changed last week at 188,000 although seasonal factors would have expected a solid -10,000 fall from that level. There are now 1.64 mln people on these benefits. lower than year ago levels.
And staying in the US, they have found the flesh-eating screwworm in their Texas cattle herd, another reason their beef industry is unlikely to be able to sustain its output.
The EU said its retail sales volume growth was weak in April, up +0.9%, up +1.0% in the euro area from a year ago. From the prior month, these volumes dipped. But this dip actually doesn't interrupt the rising trend in place since late 2023.
We are ending the week with the price of some key commodities like copper, tin and aluminium holding just off their recent peaks.
China is facing broad pushback at the level of subsidising it gives its steel industry. The OECD singled them out for criticism urging coordinated action against them to save capability around the world. A new round of defensive trade barriers will likely follow. Chinese over-capacity is enabled by these subsidies and it drives down prices everywhere as Chinese companies rush to quit stocks they can't sell at home.
The geopolitical toll on the logistics industry is starting to bite. Global container freight rates surged +23% this week from the prior week to be up basically level with year-ago levels (which were unusually high due to the Houthi attacks in the Red Sea). Most of this is due to the hikes in rates for the outbound China trade routes. Meanwhile bulk cargo freight rates eased back a minor -3% after their recent peak last week.
In Australia, AI is being put to use driving legal claims by amateurs. Courts are being flooded with AI written plaintiff claims, especially for personal injury, unfair dismissal, rent disputes, and 'pain & suffering' claims. New powers are being rushed through the Canberra parliament to try and stem the flood.
The UST 10yr yield is now just on 4.47%, down -2 bps from this time yesterday. The key 2-10 yield curve is now at +42 bps (+1 bp). Their 1-5 curve is now at +39 bps (unchanged) and the 3 mth-10yr curve is at +80 bps (-2 bps). The China 10 year bond rate is holding at just over 1.71%. The Japanese 10 year bond yield is up +3 bps at 2.67%. The Australian 10 year bond yield starts today at 4.91%, down -3 bps from yesterday. And the NZ Government 10 year bond rate is down -1 bp at 4.58%.
Wall Street is firmer today with the S&P500 up +0.5% from yesterday but still below its record high. The Nasdaq is up only +0.1% despite the IPO frenzy. European markets were firmer too between Paris's +1.2% and London's +0.3%. Yesterday Tokyo ended down -1.4%. Hong Kong fell back -1.4%. Shanghai ended down -0.6%, while Singapore fell -1.4%. The ASX200 ended down -1.1%. But the NZX50 was only down -0.1% at its close.
The price of gold will start today up +US$41 at US$4478/oz. Silver is up +50 USc at just under US$74/oz.
Oil prices are down -US$4 just over US$92/bbl in the US, while the international Brent price is now just over US$94.50/bbl and down -US$3.50. Hormuz remains shut however despite the pricing optimism.
The Kiwi dollar is firmer from yesterday at this time at 58.8 USc, up +20 bps. Against the Aussie we are up +10 bps at 82.3 AUc. Against the euro we are unchanged at just under 50.6 euro cents. That all means our TWI-5 starts today at just under 62.3 which is up +10 bps from yesterday.
The bitcoin price starts today at just on US$63,013 and down another -4.3% from this time yesterday and still falling. Volatility over the past 24 hours has been high at just under +/- 3.9%.
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51 Comments
A-Hajji's main argument reveals that the much-discussed decline in inventories is merely an optical illusion. According to the data, 98% of the drop in global stockpiles comes from draws from government strategic reserves, not from commercial inventories. Moreover, nearly all of these draws are limited to just two countries: the United States and Japan. While Japan is drawing oil due to local constraints, the United States is releasing oil from a position of abundance and increasing its exports. The world's regular commercial inventories remain completely stable, and thus the free market is not experiencing a physical shortage of crude oil. Al-Hajji's most important distinction is the separation between crude oil and refined products such as gasoline, diesel, and jet fuel. The real pressure in the market lies solely on the products side, not on the raw material side.
https://x.com/YanivWeissman/status/2062580872696463632
https://x.com/anasalhajji/status/2062403126884229617/photo/1
It keeps getting cheaper at the pump. $2.99 today. Thats about $0.50 higher than where it would be without the war, approx 20%. 20% won’t cause much damage to headline inflation figures.
I think Trump should wait it out. This must be doing much more damage to Iran than the US.
Perhaps but would suggest the most damage is being inflicted on the other Gulf States whose exports depend on the Strait and who happen to be too, within easy range of Iranian offensive material.
Isn’t that their problem? They should have considered this and had an offensive or defensive capability in place. Most of those places are loaded.
Their problem undeniably but your question is pretty one dimensional given the historical and present complexities of the region. Iran, as Saddam discovered, is no easy territory to invade and as President Trump is discovering now, has sufficient fire power to maintain offence as a defence.
I can't see military crafts lasting in an arid desert getting to 50C regularly over the hotter months, then freezing at night in the cooler ones, with sand blowing around, sea spray too for that sprinkle of corrosion always chipping away.
interesting 1234
”Can’t see military craft lasting in an arid desert” with daily extremes in temperature.
You forgetting the Sahara 1942 - New Zealanders in particular did very well at El Alamein as did the Kiwis in the LRDG.
My comment was relative to the gulf states having a prospect for a larger military longer term. Your comment doesn't seem to have relevence in terms of time scale.
my comment below, was replying to his, above.
The Gulf States are indeed the linchpin of the change - by the time the dust has settled they will withdraw from US 'protection'. It turned out that the hegemon which tried to maintain 7-800 bases around the planet (excusing blatant colonialism as some sort of fight-for-right) is collapsing under the load. Inevitable though that was, it seems to have escaped the notice of almost everyone. Everyone benefiting by hanging on its coattails, that is...
Those who were getting conned, were led by puppets. But the masses always have their limits - and alliance with Israel is a step too far for the GS populations.
Atop this, of course and as always - is the elite-to-elite cooperation and also competition. Alle same industrialists/monarchies circa WW2; they transcend and blur the simplistic idea that nations are coherencies.
I'm hoping the technofascist oligarchy has met it's Waterloo. Time will tell.
pdk,
Different topic, but I would be interested in your thoughts. https://needsofthemany98.substack.com/p/the-energy-cost-of-energy
Good piece - faultless. I've been saying just that, albeit in a more down-home manner, for 20 years - most of them here.
The Surplus Energy Economics site covers it well too. It came from this: Perfect-Storm-LR.pdf many years ago.
Dams, of course, need FF to build them (would take a lot of slaves to build the Aswan high dam!). And they have a design life - which I think we'll overlook under stress. And they need transmission infrastructure - all needing maintenance. I have no engineering qualm with nuclear - but I do have a conscience one in that the 'now' generation gets the energy and many future generations get to carry the environmental cost of the wastes.
Ironically, I'm writing this running on micro-hydro (not much sun recently...). I think we will do local solar (not necessarily PV; but food-production and low-grade heat and bio-fuels like firewood) and local wind (probably some of it old-school direct). I also think we'll do micro-hydro. The reason is that all those are do-able low-tech and locally, using cannibilised materials (my micro-hydro rotor could be made using teaspoons, at a pinch (centre-creased and twisted 90deg. Almost any old-school washing-machine motor or car alternator, can be made to generate). Nuclear is highly specialised and supply-chain-dependent; big dams have too long a lead-time to be relevant now.
You have a creek? Lucky you. I have two that flow like the Huka falls after rain, then dry up after two weeks, except for holes that become mosquito habitat. Wind is the same. Barely a zephyr for months on end, then a NW buster for a day that rips trees out by the roots. Seems I'm stuck with solar, but that's ok. Got on the roof and gave the panels a scrub the other day. Got a few more watts out of them. :-)
Possibly the Gulf States are reviewing their relationship with the USA. Quietly.
Keeping those USA bases and deals with Israel bring trouble.
Oman thought some independent thoughts. And Trump mentioned bombing them, an ally. Who needs such friends.
Petrol has less influence to everyday costs than diesel.
How much diesel price has increased? A lot more than 20%. I can escape petrol with my EV. Nothing I can do with Diesel as everything (food, freight, etc) is impacted by it.
And we know the decrease is just temporary. Medium term FFs prices are only going up..
I’m not following diesel prices, but if 91 hasn’t gone up anywhere near what was expected, then I suspect diesel hasn’t either. At one stage we were talking about 91 at $4 a litre or more (up $1.50), that’s quite a bit different to being up $0.50.
As for future prices, well so far everyone has been wrong, pretty sure they were predicting much higher prices now.
- The Surge: Prior to the outbreak of the conflict in late February, diesel was around $1.87 per litre . By mid-April, pump prices spiked to an average peak of about $3.90 per litre .
- Current Rates:
Diesel is now averaging around $3.10 per litre , which is still about $1.23 per litre higher than before the war.
Seems your 20% assumption is just that JJ.
I didn't say diesel was up 20%, it will always be more affected as it doesn't have a fixed excise tax. But it is still much lower than predictions.
no need to suspect mate, just look it up it's basic objective data.
I can't find what people's diesel price predictions were when all this started. I can find petrol price predictions, and at the moment they are well off.
Meanwhile in china...
> Heavy-Duty Trucks (HDVs):
Diesel's market share for newly registered heavy trucks dropped as low as 52%, from 57% the previous year, with zero-emission and LNG alternatives cannibalizing market share.
"I think Trump should wait it out. This must be doing much more damage to Iran than the US."
This is precisely the type of parroted imperialistic narrative that could drag humanity into a full-on WW3, and an irreversible escalation into an existential nuclear apocalypse - which in turn is exactly what the Evangelical Rapturist movement, embedded within the Israeli/US regimes, salivate over.
When you bat for this "strategy" you are, in essence, supporting the potential deployment of the Sampson Option.
Please, be very careful what you wish for, JJ.
The poster is an interesting case
:)
Likewise some kind of deal where they get to keep building nuclear weapons could lead to nuclear apocalypse too. They don’t seem prepared to give that up - yet.
One of our biggest cognitive problems
is the inability to say: 'I got that wrong'.
Back in 2007, I predicted $200 oil. I was wrong - but instead of continuing to predict it, I investigated why it hadn't happened. And learned that it never can - for the same reason growth doesn't go on forever.
But most folk seem to need to stick to the story they started out with.
I remember the discussions back in "The Oil Drum" days. Looking back , it was kind of siloed thinking. Lots of strong minded individuals determined to argue for oil prices going stratospheric off the back of physical shortages. No one was arguing for the effects of behavioral changes to unaffordable liquid fuels. Some people around the world have already been priced out of the oil economy.
This allows the "profiles" of this world to claim there are no shortages. There aren't shortages, to the people that can still afford fossil fuels. For the rest cut out of the market, it's back to cooking with cow dung.
https://acleddata.com/report/economic-shockwaves-iran-war-fuel-protests…
Wouldn't be surprised if the Trump/Hormuz situation ultimately results in another huge wave of impoverished migrants to the wealthy north, off the back of poverty and physical food shortages.
I'd give that two ticks if I could
:)
'Price Wars' is a good take on this cycle, albeit from the instability caused by distant commodity traders
The first reality is that Israel is nuclear armed.The second reality is that Iran wants to be too. The third reality is that Iran, a couple of its Presidents, has made overt threats to use them to annihilate Israel & people. Not a reality, but nevertheless a possibility, Iran could acquire a nuclear strike capability from such as Nth Korea. If Iran, either way, is so armed, at that point of course Armageddon would beckon. So weighing up all that hypothetical thinking it may then arrive at the age old stand off factor of deterrence in similar vein to how that plays out with entrenched enemies India & Pakistan. My apologies for the doomster conjecture but the reality is that the wheels continue to move in a very unhappy direction.
Only one nation has been reckless enough to use a nuclear weapon, and they've still got heaps.
If such weapons exist anywhere there is a possibility they'll be used again.
On the bright side, demand destruction is great for the climate and therefore the biosphere we live in.
US Strategic reserve has been drained by 12% since March to keep the global economy from imploding, although the draw is physically greater than that % because the SPR can't be drained to zero. Estimates of it's minimum storage are around150 million barrels. Sooo that means about 25% of the original capacity of the SPR has been drained ex last weeks drawdown, all going through the refining process now. Around 26 weeks before the gurgling starts.
Australia might need some AI judges to hear those AI claims.
Is AI the problem, or is it a solution to an overly complex legal system that only privileged people can use.
"is it a solution to an overly complex legal system that only privileged people can use" That's a really good question to ask, but still too broad. AI will give answers based on how the question is posed.
From your question, the answer could be how to simplify it without opening up access. The rationale would be to open up access would require some level of complexity.
AI is just a tool and any AI response must be closely examined and understood.
Your posit is incorrect, because you - studiously - keep 'valuing' in $$$$$
In strategic terms, the US was already a failing (in parts already-failed) State. The biggest hegemon emerging out of WW2 (which was a global stoush over access to resources, as always - albeit re-written as a righteous crusade - as always) is declining, succumbing to entropy.
In that context, it has lost, vis-a-vis the rising contenders.
And DC's 'amateur' description fails the journalistic question of: Why? As he consistently has, thus far. The latter-day rulers of Rome were equally idiosyncratic; the lesson there for anyone caring to learn. The US was based on a combined lie - that it was democratic, and that growth was possible forever, lifting all boats on a finite planet. That lie covered up a re-formatting of colonisation; IMF, World Bank; CIA, puppets, coups, wars, and it worked for a (very) few decades.
But some folk seem to need to believe that $$$$ at the pump in a first-world adherent, measures relative hegemony. And others seem to need to believe that the removal of Trump et al, will put the good ship right back on track.
Go figure
"The latter-day rulers of Rome were equally idiosyncratic" Really? ALL of Rome's rulers were like that. While the senate played their games it was regularly acknowledged that the power behind the senate lay in the strength of the legions gathered by various individuals. Yes they looked for senate endorsement and support,as armies consume large sums of money, but the politics were toxic across the board. Rome's fate was written from it's earliest days. Rome's growth and influence came from the power of it's legions and thus the leaders of those legions had to be treated carefully. On more than one occasion Rome effectively went to war with itself.
The whole world values in $$. Get over it. That's why the US is in trouble - the endemic corruption of it's politicians, being too greedy and influencing internal regulation to favour themselves and their cronies.
You're doing it again - putting the commenter down, to reject the message.
Why should I 'get over' the fact that there isn't enough remaining planet to underwrite the already-issued fiat debt? And that by inference, there is going to be great rationalising of same, to the point of pointlessness (the whole shootin' match is predicated on growth - banks particularly).
No, the US is in trouble because it is a 'plane built in the 1920's/30's. It needs more and more maintenance, getting closer and closer to requiring a new airframe. The insightful crew have been rejected by a passenger delegation who were peddled the myth that they could stay aloft forever. Only the cranially constrained volunteered to take over the flying - the smart ones were sewing up parachutes.
And it is rapidly losing altitude.
You already know I agree on the resource question. Where I don't agree is your refusal to understand the political actions and influences.
Resources were not in short supply when political influences began to hijack the narrative, and shift the systems to control access and benefits. Those political influences openly deny the scarcity of resources data and arguments, but persist in securing their control and benefits from what ever aspects of their economy they can secure.
This is a scenario that has replayed itself multiple times through the history of this age of man, where those in power have sought absolute control and privilege at the expense of their societies. The final outcomes have never been pretty for them and/or their progeny. There are several adages that exist that refer to this one being about failing to learn from the lessons of history, another I think that is relevant is about insanity, but shifted slightly as these people seem to think they can do the same as others before them and are somehow immune or invulnerable from the same inevitable consequences.
I appreciate your sincerity, but: broken record, and we covered the relevance of history, yesterday.
Comparing Rome to now is fine re psychologies - psychopaths, egalitarianism and everything in between - and local energy-resource depletion is valid too. But comparing south of 1 billion people, using (human and animal) solar-derived above-ground energy-stocks, is invalid when discussing 8 billion levering low-entropy underground stocks. Also, seen from NZ, resources may not seem to be 'in short supply' - but ask the 3rd world. You just outbid them and it impacted your pocket a touch - but that 'touch' is, in many cases, their total income/life. 3-monkeys...
I appreciate that most folk went along with the premise that 'money is a store of wealth'; and have stored proxy in expectation (of buying real stuff in the future). I'm guessing that your default-position probably includes some of that hope? There is no doubt that there is a reconciliation underway; that the various Ponzis are all deflating (apart from AI - the latest tulip). The Perfect Storm at Manor Park: Why Are So Many Cars Failing to Sell? - YouTube One can see the residual of that 'store of wealth' unthinking - someone commented hereabouts recently that investing in gold was better than food, because food 'goes off'. Food may, but food-production doesn't - and ye cannae eat gold.
My concern is that the whole system tanks (probably just First World, but maybe all) through massed disbelief - as nearly happen in 2007-8, and the bubble is OOM bigger now.
Didn't you read my first sentence? I agree with you on resource depletion overall. We differ a little on timelines that's all - semantics. But what you're talking about here is the effect of politics and the driven economic models the politics uses to get it's way. This largely began in the 1960s when the science on resource depletion was pretty much unheard amongst the general population (remember - the internet did not exist. We all relied on hard copy media, newspapers or books).
I stand by my argument that fiat money is a store of wealth for ordinary people. It is the only practical one available to them. What you're talking about is for much larger entities, governments and very large corporations. It is also the basis of my argument that FIAT money is backed by the resources of a government that issues it. I'm ordinary. I can't afford sufficient land to be self sufficient for food and heating. I can't build a miniature hydro power system. I can't build storage tanks and drill for or import my own crude oil to refine into the products I need to get by. I, like the vast majority, have to rely on our government to ensure the resource I need to survive are available. Yes there is an element of hope. But in everyday life that is always present, on may levels.
"I stand by my argument that fiat money is a store of wealth for ordinary people. It is the only practical one available to them."
Where to even start on this particular jewell - right now, i'm doing a sterling impersonation of a stunned mullet.
What other stores of wealth do you recommend ordinary people with limits funds can use effectively in the modern economy?
Forget your usual bombast Colin, be practical, otherwise you're just spouting BS.
Thank you, Murray - you just reminded me of the reason why I rarely bother to check into ICNZ these days.
Your response says all it needs to, to tell us about you.
Nothing sensible, just a put down. If you can't handle a debate why even read the streams?
I will rely on Mark Twain's sage advice when it comes to debating people of your ilk.
If you still, to this day, imagine that fiat currencies are "a store of wealth", then you are beyond help.
You can do a lot.
If you start thinking in energy terms, it makes more sense. Control your own, be less dependent.
Food - most people can do, or can join in with, food production. If you haven't the backyard space, get together in an allotment, or make an agreement with others re their space (there's one I heard of recently in Nelson, been going 18 years - a small slice of a farm, many shareholders/growers). Glasshouses? Water-capture?
Energy - insulation, passive-solar capture, direct hot water and/or PV. Plenty to do there. Go shares in a firewood-lot?
Never rely on a current-paradigm Government - by definition they're going to be no use in the next
:)
Was watching TV the other day and it showed an animal being born on a farm with some assistance from a farm vet and someone went "That's so gross, cant watch it".
Got me thinking of the huge percentage of our population that have no idea about where our food comes from, where our rubbish goes, where our sewage goes, where our water comes from, where our electricity comes from, where our fuel comes from, where our plastics come from etc etc etc and most disturbing don't care and therefore just consume without any thought of consequence. It's scary.
Highly justified concerns. Not long ago my sister had her son and two his friends, 3rd year University students engineering, asked them to stay for dinner and sent them out to dig up some spuds from her garden. They, the students, were literally thunderstruck that was how they started their journey to the supermarket. Anecdotally a lot of Christchurch households had scarcely any self sufficiency or knowledge when the EQS took out all the amenities. For seniors like me, it is a rather pathetic development to observe.
TBH it's really a deficiency in parental responsibility. I've taught my family how to grow their own food, even find their own way in the dark by the stars, with no sat nav. They are too young and embedded among others who take consumer culture for granted to understand the value , but one day.....
My daughter has a deep seated loathing for AI, probably because she's humanities rather than STEM. I was quite surprised by her passion. We hadn't really discussed it before.
The ability can still exist. My daughters live in the suburbs both produce a supply of vege & fruit and now a grandson flatting, is doing the same with quite some pride. You are absolutely right though. Those attributes need to be encouraged by example when they are young.
Good stuff Foxy.
Couldn't agree more. The other thing to consider is that with cities growing bigger and the boomer generation slowly marching on, more and more kids will be brought up in cities and never leave cities. They'll never know or understand what a rural lifestyle looks like, what views rural folk have and how they get these views from their own experience, and therefore be more closed minded in a different sense than some argue rural folk are.
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