Here's our summary of key economic events overnight that affect New Zealand, with news American economic data is generally more positive while Chinese economic data is generally less positive.
First, American durable goods orders for May came in better than expected with a +12% rise from year-ago levels. As good, orders for capital goods also rose +12% on the same basis reflecting that board rooms are still investing strongly. For both measures, the month-on-month gains also beat forecasts.
Also positive, pending home sales broke a six-month skid with a slight rise of +0.7% in May from April. There was a noticeable surge in the Northeast region. Year-on-year they are down however -13.6%.
Not positive however is the Dallas Fed factory survey for June with a sharpish deceleration recorded. Of particular concern is the quick fall-off in new orders.
The US Treasury tendered their five year bond earlier today and it was again well supported. The resulting median yield however jumped to 3.18% pa from 2.66% pa at the prior equivalent tender a month ago. That is quite a rise.
In Japan, new data shows that the Bank of Japan now owns half of all Government bonds there, a relentless buildup as they continue their easy money policies to bring back inflation.
Meanwhile, Russia has defaulted on its foreign debt. It can't pay largely as a result of sanctions inhibiting its ability to shift funds. It's their first default of foreign debt in 100 years. But during Russia’s financial crisis and ruble collapse of 1998, then-President Boris Yeltsin’s government defaulted on $US40 bln of its local debt.
(We should also note that the Russian theft of Ukrainian wheat (and shipping it to Syria in exchange for Syrian fighters) is actually suppressing the global price of wheat by removing a major buyer from the demand side.)
The struggles of China's industrial companies continued into May. In the month, profits were -6.5% lower than the same month a year ago, and it is little comfort that decrease was less than for April. That takes their year-to-date gains back to just +1.0%. The whole situation is actually much grimmer; manufacturing profits are almost -18% lower and utility companies -6% lower. The overall results are only restrained by profit surges in coal and other mining companies.
The Chinese central bank injected a total ¥100 bln (NZ$23 bln) into their banking system yesterday, by a seven-day reverse repurchase at a rate 2.1%, to ease pressure from rising cash demand toward the end of the first half of the year. They started pumping more cash into the financial system on Friday. Demand usually surges towards the end of the quarter, when commercial banks also have to shore up cash positions for an administrative quarterly health check by the central bank. But the size of this may suggest more is at play this time.
Taiwanese consumer sentiment fell in June, and the slip from May was sharp as it has been for a couple of months now, and it is now at its lowest since November 2009, lower than during the 2020 pandemic
In Australia, they released 2021 census data today and that shows some important trends in their demographics. For example the millennial demographic now equals the boomer population (both now at 21.5% of their population), and soon to outnumber it. And it also shows that more than half of their population is first or second generation immigrant.
The UST 10yr yield starts today up +6 bps from this time yesterday at 3.20%. The UST 2-10 rate curve is little-changed at +6 bps and their 1-5 curve is also little-changed at +38 bps. Their 30 day-10yr curve is steeper at +205 bps. The Australian ten year bond is +13 bps higher at 3.84%. The China Govt ten year bond is up +3 bps at 2.85%. And the New Zealand Govt ten year will start today down -10 bps lower level of 3.91% after yesterday's retreat.
On Wall Street, they have opened their Monday session a little lower, down -0.2% on the S&P500. Overnight, European markets were mixed with London up +0.9% but Paris down -0.4%. Yesterday Tokyo ended up a strong +1.4%, Hong Kong went even better up +2.4%, and Shanghai managed a +0.9% gain. The ASX200 ended its Monday session up +1.9% and the NZX50 ended its day up +1.7%.
The price of gold is at US$1823/oz in New York and down -US$3 from this time yesterday.
And oil prices are +US$3/bbl higher from this time Saturday at just over US$109/bbl in the US, while the international Brent price is now just over US$111.50/bbl.
The Kiwi dollar will open today at just over 63 USc. Against the Australian dollar we are unchanged at just under 91 AUc. Against the euro we are nearly -½c lower at 59.5 euro cents. That all means our TWI-5 starts today at just on 70.8 and down -30 bps.
The bitcoin price has moved lower from this time yesterday and is now at US$20,699 and down -2.4%. Volatility over the past 24 hours has been moderate at +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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66 Comments
Meanwhile, Russia has defaulted on its foreign debt.
We'll have to see what the courts say about the situation first. It's a bit like me selling you a car, refusing to accept payment for it, and then accusing you of stealing. Russia has the will and the means to make the payment, it's just not being allowed to do so. It's not a default the normal sense.
Exactly, if they are unable to transact because they have been excluded from the financial system, that's not really their problem. They could also tell the people that they owe money to, to ask the US to pay from the Russian funds they have frozen. Either way,its not really a default.
Yes - they need to keep those funds aside for booting out those nasty Nazis next door and bombing malls,
As Russia continues its military assault on Ukraine, the heavy toll on the Russian economy could be felt for years to come.
The invasion is now in its third month, and sustaining it requires approximately $900 million a day, Sean Spoonts, editor-in-chief of SOFREP, a media outlet focused on military news, told Newsweek.
Several factors play into that heavy price, according to SOFREP's estimate. That includes paying the Russian soldiers who are fighting in Ukraine; providing them with munitions, bullets and rockets; and the cost to repair lost or damaged military equipment. Russia also must pay for the thousands of critical weapons and cruise missiles that have been used during the war, which run about $1.5 million apiece, according to Spoonts.
https://www.newsweek.com/russia-spending-estimated-900-million-day-ukra…
Nothing to do with 'funds'. It's to do with grunt; who has it.
Russia has the energy, and wants its currency to be aligned (as Kissinger organised the USD to be aligned, back in 1975 (from memory). Wants to be paid in Roubles. Who cares what it 'owes' in a debt-issued fiat system, well advanced into ponzi territory? Bluff-calling time, and the West holds the weaker hand.
https://www.rigzone.com/news/diesel_price_shock_imminent_as_reserves_dr…
“If supply does not improve, governments will be forced to enact emergency plans to limit sales to consumers to ensure essential sectors are kept going,” says Per Magnus Nysveen, Head of Analysis at Rystad Energy."
This is what it is all about, from here on in. Putin knows why the Arab embargo of '67 didn't work, but the '73 one did (US peak conventional oil happened in between). He's timed this, having waited until the fracking pulse passed. And the number of journalists putting 2 and 2 together? None. All steeped in econo-speak. Funded - grrrrrr..... Energised is the more accurate word.
Good angle. I think they're a different animal now, than then. Then, they were running a rigid set of infrastructure as entropy accelerated, and lost the fight to keep all those concrete balls in the air. The crash did a good job of triage; only the viable were maintained/sold. Now it's a hybrid; some flair tolerated, still ultimately repressed, but not so many foreign intruders parasiting on their resources. Which are essentials (oil, gas) in a world with no remaining swing-producers and no spare capacity at many levels (from drilling options to refinery capacity).
It's a kleptocracy, it doesn't need foreign intruders parasiting their resources.
It's 5% of global reserves. Obviously it's absence isn't going to be pain free, nor will it's existence provide Russians a decent standard of living, on it's own.
About the only way Putin would get the upper hand is if he gets his population accustomed to living an agrarian lifestyle, and the rest of the world eventually turns to shit also. I'd say he'll be long dead.
And adding to that check out the US strategic Oil Reserves forcasted
https://www.washingtonpost.com/business/energy/the-us-is-depleting-its-…
Yes, but given that Russian oil & revenue & gas revenue is more than $1b per day, one wonders whether they might be able to sustain their war effort, longer than the West's support ... ?
Russia Sees Extra $6.4 Billion Oil Revenue In June As Prices Rally
Please don't simply copy and paste text from another website and try to pass it off as your own comment. It's not really considered good etiquette. At least put it in quotes so it's clear.
Just think about what this means: "...sustaining it requires approximately $900 million a day...". NO IT DOESN'T. What the hell does that amount in USD mean to Russia anymore? It may as well say "...sustaining it requires approximately 700 moon bricks a day...". The USD has zero meaning to Russia anymore as it sells it's oil outside of the US controlled financial systems. The journalists are failing to grasp the situation entirely and that's a problem. There is quickly emerging a secondary energy quasi currency now that is not in USD. Hence measuring anything in USD is pointless when referring to those who are transacting in non USD.
They should really put it in barrels of oil terms. That's now only the common medium of exchange for the US/Russian systems, given that 1 barrel of oil in Russia is the same size as the US.
Please don't simply copy and paste text from another website and try to pass it off as your own comment.??
The link is pasted on the bottom as anyone with a pulse can see that the words are from the link- etiqutte police up early this morning I see, maybe have a coffee first before tap tap tapping.
"The same is true in other spheres as well. Imports in the auto parts market compose 95%; games and toys 92%; shoes 87%; telecommunications equipment 86%; clothing 82%; perfumes, cosmetics and detergents 57%, and so on. In April, Federation Council Speaker Valentina Matviyenko admitted that she was surprised to discover that Russia does not even produce its own nails."
Hey, if you don't know how to comment, maybe don't comment? Good to see you learnt the second time...
You will note that she is asking that Russians start making their own nails, further punishing countries that used to sell goods to Russia. Pushing Russia further outside of the Wests sphere of influence.
As has always been the way, alienating a country and subjecting them to economic and financial isolation works with small states with broad support. With major states who make up much of the worlds economic/energy backbone, it's a whole different story and can lead to a shakeup of the world order. The West decided to treat Russia like it treated North Korea and that major mistake will lead us into a world where the West doesn't lead, but competes.
Blobbles - thank you, great comment. As I said, it's bluff at this point, and the US side holds the weaker hand. As Putin has known from the start.
It just shows, again, how far adrift the MSM have become, because they first swallowed the econ-speak (economic growth, GDP) rather than do any thinking or research. Actually, it's worse than that; put the stuff directly under their noses....... and you still get econo-speak.
Funded - gr, hiss, mumble. The word should be outlawed. 'Supplied, using earmarked resources' is what it should have been, should be...
This is a very important point most people are still unaware of and why I have said repeatedly that the over the top sanctions to exclude a major energy producer from the worlds financial systems are a massive "shoot myself in the foot" moment for the West. Russia now doesn't have to pay for any of it's debt, because it can't. Guess who it owes money to? Yep, Western investors, who can't be paid. That affects all our kiwisaver and markets etc which are used to grow economies. And Russia is right, it's a manufactured default from the West that makes little sense.
And so we head further into a multipolar world which is not led exclusively by the G7. It's possible the BRICs are now going to band together economically for cheaper Russian energy and give a middle finger response to the G7, setting a stage for a non US dominated trade empire that the US can't respond to because it will no longer control nor have power of the financial systems they will setup. And if we go down that route, there is little chance they can confront it militarily given how many fronts they would need to cover.
Aren't you being a little too precious Blobby? The comment only uses a commonly understood international reference. What it refers to is the consumption of resources at current approximate values. If they'd expressed the figure in Rubles which few would have understood, would you have been so upset? Or has your Comrade Tsar Putin (the Great) told you to stop letting people build connections between the enemy and imperial mother Russia?
No you just spout nonsense. Putin has said it himself. He is bringing back imperial Russia. The one history tells us conquered or tried to conquer all it's neighbours. Putin has tried to dress it up as the west being the threat, but his actions are the loudest speaker in that shouting contest - the only threat is Putin and his ambitions.
Consider this, Russia is resource rich. If Russia shut it's own borders to imports and exports it would not run out of energy until most of the rest of the world had. so what is happening is not about oil or gas, as some would have us believe. As you indicate Russia has its own currency, and is trying to set up a financial system that is outside the international Eurodollar(?). And also as you indicate there are a few players who will be quite happy to operate in it. But consider this, of those players, none come from places that enshrine democracy or individual freedoms. They are all autocracies of some sort or another. None of them want to be accountable to laws they cannot ignore or manipulate. Why should we accept or even agree that such a situation is acceptable?
So "no", falsely claiming someone is a shill of a mad dictator is not a personal attack huh? That pretty much fits in with your knowledge of facts, you believe anything you say is the absolute truth and is above any form of reproach and need not be checked for accuracy. Given you want us to believe your statements as gospel, it reeks of a severe narcissistic personality disorder.
If you want to see nonsense, you should read back your own posts where you claim hilarious things like that NATO is not nuclear armed and that the West is a benevolent entity that spread peace love and democracy around the world without hurting anyone. And then you claim you know Putins motivations and future intentions implicitly! Your record of knowledge of the whole situation is laughably shallow. If you believe that being a democracy or having individual freedoms leads to a stable peaceful world order where the West obeys all it's rules it asks other to obey, maybe you have been asleep for the past 50 years or so through America's foreign adventurism.
Maybe go back to your little Trump fan club Telegraph echo chamber where you can stimulate others with such thoughtful commentary while singing the American national anthem and stroking your AR15 in the hopes that someone invades so you can act like a hero.
I was wrong re NATO and admitted it. I don't claim to know Putin's motivations, but do read his actions as an indicator, but he has said himself he is trying to revive imperial Russia. Are you saying that is not so? If so what is your evidence? What justification do you have for Putin invading Ukraine?
You decry democracy. Does that mean you are a supporter of facism? Trump fan club? You seem to be more the person to sign up for that than I'll ever be, he wanted a dictatorship too, just like Putin, you probably supported his efforts to overturn the election too. Have you suggested he had a case too?
Please don't quote anything that is sourced from Newsweek. The only good thing about your mentioning them is that we have to do no work to discredit the people you are quoting. They are the most dishonest, lying "news" source out there. Their only claim to fame is their famous cover story they were told to run by their controllers about Hillary Clinton being elected president of the USA.
Why are the Taiwanese so unhappy? Surely with demand coming in for their products from the US there would be some good economic winds, so what gives?
G7 talk a good game but Ukraine is still losing and losing at a rising pace. If the Un-united States gives them some missile defences (muted for Kyiv) that might slow them down, but only slightly.
What chance the dissolution of the Un-united States in the next 5 years?
They actually can. But it doesn't suit the MSM to say that control has been passed by the Supreme Court of the US to each state to decide for themselves. If the majority of the voters in each state want to do stuff that is absolutely brilliant, then they can. If they don't think that should be done, then they can't. Quite simple. Quite clear. It is literally democracy at it's finest. Majority rules.
They literally can't. Some American's will not be able to legally abort. This is a fact. So no, PDK and the MSM is correct and you are wrong. American's cannot abort.
Geez, criticising the MSM for bias then lying about a clear fact, I'll take MSM over your bias anyway.
I am not sure of the exact legalities here but did Texas not mute leaving the union a couple of years ago? Civil war is not impossible and might even be likely as sporadic break-away states form their own militias. What would make this less likely is the military bases evenly spread across the country to strategically reduce the ability for this to get momentum up.
(We should also note that the Russian theft of Ukrainian wheat (and shipping it to Syria in exchange for Syrian fighters) is actually suppressing the global price of wheat by removing a major buyer from the demand side.)
Tit for tat:
Iran, Russia and Turkey denounce continued US theft of Syrian oil
Saudi-led coalition loots 400,000 barrels of Yemeni crude oil
"(We should also note that the Russian theft of Ukrainian wheat (and shipping it to Syria in exchange for Syrian fighters) is actually suppressing the global price of wheat by removing a major buyer from the demand side.)"
That's a big assumption given the linked report suggests higher production is the cause of lower prices, or am I reading it incorrectly. I see no reference to a swap for Syrian fighters. I would've thought that removing a large chunk of supply from the market would increase price?
David Chaston has a black and white view on the war, and many commentaters here here have a different view.
How many are aware there are two other republics involved, (named what? ) and they are rebels against Ukraine. Since 2014 14,000 have died, often from artillery. It's useful to know this stuff.
As for the wheat? Again not a simple story.
I don't advocate for any side, I think they are all mad and dangerous.
Lets not fall for the simplistic narrative.
surely that would only happen if buyers were still in the market? Take a big chunk out of the supply side and give it to a buyer, then doesn't the market remain 'balanced'? The remaining buyers/suppliers still have to agree on price for what supply there is, but regardless there remains balance. The only fly in that picture is that the stolen wheat could be much more than Syria needed and the excess is possibly available, cheaply, being sourced as it is.
Are mainstream media companies no longer required to flag sponsored content? This article here is pushing people to leave their miserable, 'boots on the ground' careers behind and switch to the high-paying remote-working bliss that is a career in IT.
I looked into the wage stats quoted here and these conveniently include the high salaries enterprise architects, robotics engineer and devops engineer attract.
So much misinformation luring people into the sector, being fed lies by dodgy institutions offering courses as a shortcut to riches. Not unachievable but you really need to be a technical guru to earn those big bucks.
https://www.stuff.co.nz/business/prosper/300613692/people-are-giving-up…
100% of the news is opinionated and that opinion has been given to them by the left-leading academia and so called progressives.
Radio Red is the peak of this nonsense but all the mainstream have infections of this. Regardless of your political and social perspective having a very, very poor quality of reporting (repeating in the main) using a uni-polar lense is really weakening our ability to grow as a society. The fact that voices that might cry "facists" are in effect silenced makes it even more disquieting.
"that opinion has been given to them by the left-leading academia and so called progressives."
Classic. Especially since I see the exact opposite opinion being given about the media almost daily i.e.
"that opinion has been given to them by right-leaning think tanks representing corporate interests and so called conservatives or reactionaries"
The fact these two opinions can exist at the same time tells me the MSM must be in a reasonably healthy state, and it is only those who are intellectually incapable of understanding that people can have different opinions on the same issue who are the ones harping on about MSM bias.
People having two different opinions on the same issue sounds like a mental health condition but I get your point. I was exaggerating for effect but the fact we have one or at most two right leaning outlets (none of them prime time news outlets) does not even up the playing field.
In a NZ context the MSM is very left leaning.
The NZ Herald has a long conservative legacy that hasn't just disappeared or been usurped overnight. As New Zealand's remaining journalistic flagship it has to remain balanced but a conservative bias is written all over it. Maybe because you are standing so far to the conservative right - all you see are socialists. Is it the Matt McCarten column that has you confused?
I would have thought that the reason we are here is partly because the only reason we have any contact with MSM is to remind ourselves that most MSM news should be in the fiction section. MSM is all opinions and agendas. Only the sort of people who eat American Industrial takeaways and buy stuff off infomercials would ever think that MSM and truth are in any way connected.
It is that. But the very great thing about this site is the comment streams, which I view as a major strength, and a source of education and entertainment, which most MSM site do not support and encourage. The quality of articles comes under intense scrutiny by most who come to this site and post comments, thus the level of journalism is vey much likely to be of a higher standard as well, else those Journo's would be vilified roundly.
U.S. inflation by the Fed's preferred measure is running at more than three times the U.S. central bank's 2% target.
Georgieva said the responsibility to restore low and stable inflation rests with the Fed, and that the fund views the U.S. central bank's desire to quickly bring its benchmark overnight interest rate up to the 3.5%-4% level as "the correct policy to bring down inflation." The Fed's current policy rate ranges from 1.50% to 1.75%.
"We believe this policy path should create an upfront tightening of financial conditions which will quickly bring inflation back to target. We also support the Fed's decision to reduce its balance sheet," she said. Link
In other words - recession.
Yes it is interesting, everything is pointing to a recession, there are fundamental drivers of that visible to the naked eye (CPI, Fuel Costs, Mortgage Rates) but still the NZ Stock Market goes up 1.7%. It seems one-dimensional to be re-pricing the stock to anticipate inflation adjusted profits while ignoring the obvious demand destruction of the same economic drivers.
Us and them
And after all we're only ordinary men
Me and you
God only knows it's not what we would choose to do
Forward he cried from the rear
And the front rank died
And the general sat and the lines on the map
Moved from side to side
Black and blue
And who knows which is which and who is who
Up and down
And in the end it's only round and round, and round
Haven't you heard it's a battle of words
The poster bearer cried
Listen son said the man with the gun
There's room for you inside
(They're not gonna kill ya
So if you give 'em a quick short, sharp, shock
They won't do it again
Dig it? I mean he got off lightly
'Cause I would've given him a thrashing
I only hit him once
It was only a difference of opinion
But really, I mean good manners don't cost nothing, do they, eh?)
Down and out
It can't be helped but there's a lot of it about
With, without
And who'll deny it's what the fighting's all about
Out of the way it's a busy day
I've got things on my mind
For want of the price of tea and a slice
The old man died
Lyrics by Roger Waters from the Pink Floyd album Dark Side of the Moon
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