Here's our summary of key economic events overnight that affect New Zealand with news China is facing a major energy crisis that could have worldwide implications just as it tries to deal with its Evergrande property crisis.
But first in the US, American durable goods orders rose more than expected in August, up +10% above the July level, and up +25% above the pandemically-affected August 2020 level. A more relevant comparator is the August 2019 level and they were +5.3% higher than that. So, overall a very positive result.
Further, new orders for capital goods were similarly impressive and also a new record high. Boardrooms seem to be investing heavily again. But with both sets of data you can't help but wonder what the impact of higher prices has been on the results.
However, the Dallas Fed factory survey, while still expanding, did pull back in terms of overall general business conditions. In fact, the forward outlook turned negative in the face of hesitating order levels and sharply rising costs.
There were two US Treasury bond auctions overnight, for their 2 year and 5 year paper and both recorded rising yields. The 2 year one wasn't as well supported this time as the prior one a month ago. The 5 year one was as well supported but the median yield rose faster at this event than the last one, also a month ago.
Meanwhile the latest update of the US federal budget shows a narrowing of their large deficits, down -7% lower than last year and down to -12.5% of US GDP from -16.1% in 2020. By the way, there is still no resolution to the US debt limit crisis.
Taiwanese industrial production is still rising at a fast clip, but their retail sales shrank again in August, but not be as much as they did in July. And an update on the Taiwanese water storage crisis and drought. You may recall it was a severe event, its worst in 50 years. But recent rains have replenished all their reserves. Droughts are 'news' when they happen; the passing of the event is not. (The same is true for Cape Town.)
As the northern hemisphere heads into its winter season, and with coal burning unfashionable these days, the pressure is on natural gas prices and supplies. In fact prices are already up +125% since the beginning of June and the sky seems to be the limit. Russia will be the main beneficiary in Europe. Australia will also be a huge beneficiary. China will also be paying the price of their relative energy deficiencies and inefficiencies.
In fact, the Chinese electricity crisis may turn out to be more important that the Evergrande crisis. High demand and soaring energy prices have forced some Chinese factories to shut down, adding further problems for already snarled global supply chains. And commodity prices are starting to show the impact of a sudden drying up of demand from Chinese buyers as their plants shut down. Nickel and bauxite are already feeling the squeeze. Coal may get a lifeline.
In Australia, there were another 787 new community cases in NSW reported yesterday with another 596 not assigned to known clusters, and these numbers are a material improvement - or perhaps they just relate to weekend testing. They now have 11,260 active locally acquired cases. Victoria reported another 779 new cases yesterday. Queensland is still reporting zero new cases although mystery surrounds a possible new outbreak there. The ACT has 25 new cases again. Overall in Australia, more than 51% of eligible Aussies are fully vaccinated, plus 24% have now had one shot so far.
On Wall Street, they have started their week with the S&P500 down -0.4% in afternoon trade. Overnight, European markets were relatively subdued and all up about +0.2%. Yesterday, Tokyo ended unchanged, Hong Kong was up a minor +0.1% while Shanghai was the big mover, down -0.8%. The ASX200 ended up +0.6% while the NZX50 ended down -0.2%.
Some readers may recall a reference to skyrocketing US margin debt levels issued by brokers to their customers. At the end of June, it was up to US$600 bln. Well, it has grown sharply higher since the and by the end of August it has risen to US$910 bln, an unprecedented growth of +50% in eight weeks and approaching US$1 tln. Reverse repo activity has blown past the US$1 tln level which it reached at the end of July. Now it is more than +30% higher in just eight weeks.
The UST 10yr yield opens today at just over 1.48% and up +3 bps from this time yesterday. At one point it hit 1.50%. The US 2-10 rate curve is steeper at +120 bps. Their 1-5 curve is steeper at +90 bps, while their 3m-10 year curve has steepened further to +142 bps. The Australian Govt ten year benchmark rate starts today up +3 bps at 1.43%. The China Govt ten year bond is at 2.90% and up +1 bp. And the New Zealand Govt ten year is now at 1.94% and unchanged since this time yesterday but still in a rising trend.
The price of gold will start today marginally firmer again, up +US$2 at US$1750/oz.
And oil prices have moved higher again and by +US$1 to now just over US$75/bbl in the US, while the international Brent price is even higher at just under US$79bbl.
The Kiwi dollar opens today at just on 70.2 USc and little-changed since this time yesterday. Against the Australian dollar we are soft at just on 96.3 AUc. Against the euro we now just under 60 euro cents. That means our TWI-5 starts today at 73.6 and like yesterday, still below the top of the 72-74 range of the past eleven months.
The bitcoin price has slipped today but only by -0.5%, and is now at US$42,978. Volatility in the past 24 hours has been modest at just over +/- 1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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49 Comments
Depends on the user. Most peoples definition of what "perfect" is varies. If you were to propose your version, I'd pretty much be able to guarantee that someone would disagree. You could say it has the capability of being an emotive term. A literal view could be 'cannot be improved on', but then we don't know what we don't know. In some circumstances 'perfect' may just be 'good enough' because waiting for some level of idealisation may mean missed opportunities.
I think saying "we are all perfect in our uniqueness" is meaningless for achieving anything useful. Perhaps something modern teachers would tell primary school children. I would rather be told that I am flawed but can work on improving that to a level of "good enough" or maybe even better. It's all semantics or as Wittgenstein suggests there are no philosophical problems, it's all about understanding or misunderstanding words, playing a language game.
Disagree, I use it for developing tolerance of others. Too many people are too quick to find fault and criticise others, often for very trivial reasons. Learning to accept others for who they are, just as we want to be accepted ourselves is an important part of being not only a decent human being, but also a decent society. BUT it doesn't mean we have to agree with them, that they are right and we are wrong, that we have to like them, live with them or sleep with them. it just means they have the right to be who they are and accept responsibility for that, just as we do for ourselves. It also means we can debate and argue with them if we don't agree, but that also means we can agree to disagree. Accepting that "perfection in uniqueness" is a fundamental part of humanity allows us to celebrate diversity, accept foreign cultures without fear while preserving the values that uphold all in our society, not just a few privileged people. It allows us to move beyond tribalism and become a nation.
""celebrate diversity, accept foreign cultures without fear while preserving the values that uphold all in our society"" ?? My response to Attila the Hun and Hitler would have been fear. Most values can coexist but there are some that can't. My favourite food and my favourite music are products of foreign cultures; so is my wife. I can rejoice in diversity but fears are rational too. Ask the European Jews in the 1930s. Ask the Uighurs and Rohingya today. It becomes sadly counter-productive when we assume our values are universal and presumptuously force them on others (Afghanistan) or assume all refugees will love NZ and adapt.
What I have learned from my wife is that most of our values are the same and we have both adopted practises from one one another's culture but some matters we just have to choose to disagree. To give one very simple example is marriage to a cousin incest? One culture is very deeply offended and the other doesn't mind.
Claiming foreign cultures can coexist fearlessly is much the same as saying culture doesn't matter.
You're all extremists! "Perfect in uniqueness" does not make Hitler right, and doesn't mean you don't take action to protect yourself and others. It is more a view of ordinary people, and of yourself to prevent yourself being judgemental for little or no reason. Both Hitler and Attila enacted policies that were horrific against others and needed to be resisted, but we are talking about politicians in the end who are making rules for others. "Perfect in uniqueness" is about someone you don't like or disagree with having the right to be themselves. But yes sometimes they will break laws that are designed to protect us and deserve fully what they get, and in that we should always act to protect ourselves and others, but where they are just different, why should that be feared?
Maybe it is just a matter of how you look at things. If I had been a Jew in pre-war Poland I would not have been worried by Hitler himself but very worried by the majority of the German population who believed I should be killed to make the world a better place. One culture's set of values. I had an uncle captured by the Japanese after the fall of Singapore. He was lucky to survive those unique Japanese values. You suggest we permit foreigners to break our laws? Cultural valus such as food and music can be appreciated or ignored but polygamy is either legal or it isn't.
We may just be failing to communicate. The point I was trying to make, albeit poorly, was that the term "perfect" implies a sort of standard and a standard is not unique by definition. If you google the term "perfect in uniqueness" you don't really get any results which implies it is a murray86ism and not a concept that is widely embraced.
I think a better expression would be the first precept of Dokkodo which is, "Accept everything just the way it is".
At least its been delivered and no shortages....
https://www.theguardian.com/politics/2021/sep/27/end-freedom-movement-u…
https://www.stuff.co.nz/life-style/homed/housing-affordability/12650168…
Katrina Sutich maybe wasn't inspired by Good Will Hunting.
"Students were expected to contribute to the cost of studying through holiday earnings, part-time work, as well as help from parents, or partners, Sutich said"
I wonder how many young people with the talent and drive out there who could solve their generations challenges are locked out with that sort of vision.
Lets do the comparison with pensions again. A single pensioner, who is renting privately, and who lives in Wellington, will qualify for the pension, AS, and Winter Energy payment. This will give them an average income of $515 net a week over the course of the year.
A single student under 24, who is renting privately and has no parental support, will qualify for the student allowance and the accommodation benefit. They are allowed to earn a maximum of 227.18 during term time (if they earn any more, their allowance is reduced dollar for dollar). Assume they work full time over the 15 weeks of summer, earning minimum wage. Their average weekly income will be $542 net.
They had better hope that their transport costs to work and university come out at less than $28 a week, or else they will be worse off than a renting pensioner.
I'm trying to point to another driver of increasing inequality in this country.
Somebody up the food chain at the ministry of education states in this article that university students will need support from their parents or partner.
So for those who can't access such a support network, I guess they should have chosen better parents.
You're right both that the AS is really dumb at that my figures are slightly off. I calculated the AS amount based on being in Wellington (because that's where the student in the article was as a point of comparison), but forgot to take into account that the pension decreases if you don't live alone. If you assume that a pensioner pays $200 a week for a room in shared accommodation, they end up with a total of $474 a week. If they live alone and spend $350 a week on rent, they end up with $549 a week.
(I've calculated these using the work and income AS calculator, as well as the published rates for super and the winter energy payment).
Of course there are advantages and disadvantages to each - a pensioner is likely to have a lot more difficult time finding suitable shared accommodation than a student. But a student doesn't have the option of moving to a cheaper suburb without also having to bear transport costs to work and university that a pensioner won't have to carry.
One thing worth noting I think is that on these figures, everyone (the student, the pensioner living alone, the student) get less to live on in Wellington than the Massey Retirement Expenditure consider a 'No Frills' budget for someone living in the provinces ($586.10). The 'No Frills' budget for someone living in Metro areas, including Wellington, is $703.60, more than $150 more than anyone we've discussed is getting.
The situation in China is very interesting, for years we exported emission to them and now they are reversing that trend by decarbonising. That's likely to express itself as years of higher consumer goods prices and a crunch in local energy demand which may well give Reserve Banks and Governments a headache. I propose the title of governments Emissions Reduction Plan (ERP), should it ever be published, be called "How to take a Punch."
The 'shortage' of electricity in China is deliberate -- they're restricting output from coal. Which is exactly what we asked for, right? Carbon et cetera. It will make things more expensive. Can we stop displaying this kind of faux-naivete and surprise when implementing measures that make energy more expensive actually... make energy more expensive?
It's a very real problem the world over. we develop a level of dependency on something or other, somebody else comes in a says that's harmful we must stop it, but there is no alternative. what we have seen in fact is some industries with interests in the activity take action to prevent alternatives being developed. this happens directly and indirectly. The fossil fuel industry abounds with stories about people who were developing alternative fuels or energy sources coming under pressure to stop or being forced to when they seemed to be nearing a degree of success. Our Government has started legislating against some vehicles BEFORE there is an affordable alternative available.
Experts believe US Federal Reserve chairman Jerome Powell will not be reappointed to the most important role in global monetary policy ....an announcement on a Fed chairman appointment or renewal is typically made between August and November in the US....If equity investors liked Jerome Powell, they’re going to "love Lael Brainard”....She’s going to suppress rates. And there really isn’t going to be anywhere else to invest in terms of large pools of capital other than equities...
Hopefully Powell goes, he reminds me of a crazy little wizard that represents everything that has gone wrong with western society over the past 20-30 years.
"look i push the button on my screen and me and my Fed mates, who just took new equity and bond positions yesterday, just got richer at the expense of the bottom 50% of society"
"you know, we're not supposed to inside trade as its against our ethical standards, but are we really insider trading?"
I'm not sure if anyone has posted this previously, but twitter has integrated tipping over the Bitcoin Lightning network.
Twitter is now the best global remittance tool in the world. Why would anyone use western union again?
https://twitter.com/DocumentingBTC/status/1441108465036902406?s=20
Welcome to the future.
'Talen Energy Corp. has entered into a joint venture with bitcoin-mining company TeraWulf Inc., which has started land development for a mining facility the size of four football fields next to its Pennsylvania nuclear plant. Nuclear generator Energy Harbor Corp. will provide power to a Standard Power mining center in Ohio starting in December.
“We are building demand adjacent to the existing nuclear plant,” said Talen Energy President Alex Hernandez, who heads the subsidiary jointly developing the mining project near the Susquehanna Steam Electric Station'
https://www.wsj.com/articles/bitcoin-miners-eye-nuclear-power-as-enviro…
Bitcoin provides a profitable energy use that can be used like a battery. In times of low demand you can continue to produce high amounts of electricity and sell that to Bitcoin miners. When demand comes on line during peak times or storms for example, you can immediately switch off the miners to provide the power to the grid. Makes everyone more profitable.
Also similar to the hydro dam in America that has started mining Bitcoin and is now actually profitable for once.
Also used for gas flaring and other stranded energy sources. Now with nothing but an internet connection you can monetise all this previously wasted energy and help hte environment as well. Flared gas might only burn with 70% efficiency, releasing a lot of methane. When you run it through a generator to make electricity to mine Bitcoin, not only do you burn all the methane, but now you can actually make some money off it as well. Win win for everyone.
🏔Adam O🏔 (@denverbitcoin) / Twitter This dude does amazing work.
Can also mine bitcoin in Canada and use the heat generated to warm glass houses to grow food during winter.
So many applications :)
yip
underestimate the ramifications of energy problems at your peril
Basically $90 oil cant happen... the economy breaks before this point
" The crisis in Europe presages trouble for the rest of the planet as the continent’s energy shortage has governments warning of blackouts and factories being forced to shut."
we need cheap energy to run this show
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