Here's our summary of key events overnight that affect New Zealand, with news the Chinese are concluding that the G20 Trump promises are all hollow.
It is a public holiday in the United States and their markets are closed. That means a key driver of economic data is sidelined today. But of course there is plenty going on elsewhere.
China said that existing American tariffs will have to be removed if there is to be any trade deal between Beijing and Washington. This is a hardening of their position. Further, the Chinese are having doubts that the Trump promise to release exports to Huawei will actually happen. That means some major agriculture purchases that the American expected may not proceed either. It already looks like the G20 Xi-Trump talks were pointless.
Meanwhile exports from major Southeast Asian countries to the US are surging as manufacturers scramble to find alternative production bases not subject to tariffs. Malaysia's exports to the US increased +12% year-on-year in May. This more than offset a -2.2% drop in exports to China, contributing to a good net gain for Malaysia.
One place not benefiting is Singapore, where things aren't booming anymore. Their factory PMI slipped into contraction for a second consecutive month, ending 32 months of continuous expansion. In June, new orders, factory output, inventory, and employment all retreated.
And Singapore's housing market is not booming either. Their Housing Board property resales are falling, and prices are soft too. The chill winds from the trade wars are affecting Singapore a lot.
In the meantime, China is reviving its standard playbook, ramping up infrastructure spending to counter the domestic effects of the trade war. In the first half of the year they have spent an extra NZ$185 bln, although this is only about +0.1% of their GDP.
Markets are also absorbing the implications of the two new US Administration nominees to the Federal Reserve. This will add political risk to a core global institution that will need to be accounted for elsewhere, and in a way that the US can't control.
In Canada, the housing market is back firing on all cylinders in their largest city, Toronto. Sales volumes are up +10% and prices are rising again too.
Eurozone retail sales unexpectedly fell in May from April in data released overnight, and year-on-year they were up only +1.3% and well below the +1.8% gain recorded in the year to April. That is the slowest growth all year, and more evidence the European economy is going to need some official help when Christine Lagarde takes over the ECB reins. But she doesn't actually start in the role until November.
In Australia, retail sales were also weak, coming in with a +2.9% rise in May on a year-on-year basis, down from the April rise of +4.2%. Analysts see this flat lining as a worrying sign.
And Aussie job vacancy growth is falling away as well. The growth in vacancies over the past year of +4.2% is well below the year before, when it was +21%. "This is consistent with the recent slowing in other economic indicators," their statistics agency said.
With the prospect of new juice coming from the US Fed via the appointment of two Trump-friendly governors, the S&P500 ended yesterday's half-day session up +0.8%. The appointment of Lagarde to the ECB didn't quite have the same impact in Europe with their equity markets up just +0.2%. Asian markets yesterday were even less enthusiastic, down in Hong Kong (-0.2%), and Shanghai (-0.3%) while Tokyo was up modestly (+0.3%). Closer to home, the ASX200 was up +½% while the NZX50 struggled for its gain (+0.1%).
The UST 10yr yield is unchanged at 1.95%. Their 2-10 curve is now at +19 bps and their negative 1-5 curve is at -19 bps. The Aussie Govt 10yr is at 1.29% and up +1 bp overnight. The China Govt 10yr is down -1 bp to 3.18%, while the NZ Govt 10 yr is also down -1 bp, now at 1.55%.
Gold is down -US$3 overnight to US$1,415/oz.
US oil prices are a little lower today and now under US$57/bbl as demand fears rise. The Brent benchmark remains at US$63/bbl.
The Kiwi dollar is just a little softer today at 66.9 USc. On the cross rates we are unchanged at 95.3 AUc. Against the euro we are a little softer at 59.3 euro cents. None of that was enough to shift the TWI-5 much and it is still at 71.6.
Bitcoin is firmer again today, up +7% from this time yesterday, and up to US$11,860. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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32 Comments
Morning,
This just sums up Auckland incompetence in a nutshell:
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12246797
I was speaking to an economist acquaintance last night. His view is things are more fragile internationally and in NZ than most people appreciate. He's calling Auckland housing a bubble, which could either crash or only just be kept on life support by the government.
He agreed with me that pricing on so many things has just got too high in NZ. something has to give (and has been giving, in construction, where fees and profit margins have been slashed for some time). A number of firms are teetering,
His view is that the government has been relatively cautious on its budget spending as it knows monetary policy can only do so much now, and fiscal contingency is required for some potentially challenging times ahead.... I would argue that some of that contingency needed to be brought forward in this year's budget, to stop some of the rot happening in the first place.
Yes and everywhere you look the regulatory authorities are looking to impose more costs on taxpayers. Doesn't matter that they can't afford them, make them pay anyway. Compliance is a major issue. Applied almost everywhere, in every field, and at mostly huge cost, but the question is, what value does it add?
Health & Safety is a huge cost for firms, but our record remains dismal, do we even ask why?
So true. At one end imposition of authoritarian costs at the other sheer wastage on inefficiencies and unnecessary grand projects while basic requirements are ignored. Tried to buy some replacement plastic feet for my stepladder. Not allowed. Somebody in a room without windows has decided this alters the original module! (Dig that word!) So go buy a new stepladder. This is utter crap. Will now have to fix something up with pads and duct tape and hope for the best.
It’s absolutely nuts Fox - something needs to happen. Get this, our lawn mowing contractor is required to wear a hiviz vest and safety boots, he also has to put out cones and hazard signs, yet on Saturday mornings our neighbour across the road only wears jandles and a teeshirt. Go figure!
So true: there's still student debt for living costs/opportunity costs of not earning while being Edumicated, and a piece of paper out t'other end which is more or less worthless, as 90% of bright shiny job competitors have exactly the same scrip. Not so for the trades: 'Earn while you Learn' tends to apply there. And tradies actually build and maintain stuff, which is what we need More of. The message is sinking in though: I have two young relatives who have forsworn Uni and opted for jobs instead. No debt, no wasted years. Not to say that all education is worthless, but it's become a racket and a sink-hole for young lives.
Hard to work out whether that comment is more sardonic or sarcastic. Let’s call it a draw. And it would be funny if it wasn’t true. Recall years ago interviewing young grads for a position in the marketing arm of an industrial outfit. Well over half of them came armed with a geography degree. Why? I asked. Because it the easiest degree to get came the obvious answer.
An economist calling markets “ fragile internationally “
Truly enlightening lol
China is pushing its nationals to get into your political party’s & endeavoring to push its electronics as much as it can with built in back doors for surveillance by the CCP just as it collects information on all its citizens in China
Brexit is a disaster for the UK which it’s citizens will pay dearly for
Australia NZ & Canada all have huge housing bubbles
The US is in huge debt
The FED has no idea what to do & scared of crashing the sharemarket
Yes things are fragile lol
"Meanwhile exports from major Southeast Asian countries to the US are surging as manufacturers scramble to find alternative production bases not subject to tariffs."
https://www.commerce.gov/news/press-releases/2019/07/us-department-comm…
Is there really a trade war? looks like Trump backed down, US Soy exports are hurting though. Looks to me like its a liquidity crisis, people would rather invest in negative yielding bonds than take a risk investing.
Fonterra is feeling it, some one commented that their shares have an asset backing of around 50c.
In the real world these bubbles have created a world of hurt. If reasonable politicians don't act then people will vote for unreasonable ones, be warned. My friends who voted for NZ First are seriously pissed.
https://www.stuff.co.nz/business/property/113980972/wellington-rent-ris…
Interesting how Eaquab talks about population explosion in Wellington. From where and how? I don't think the public service will increase much there, if anything it may retrench a bit.
And each time there is a moderately strong earthquake that freaks a few people out
I guess Wellington's citizens are on the road to peonage where annual discretionary incomes will fall as they have in Auckland after servicing the ravages of financialisation.
Evidence: https://www.tvnz.co.nz/one-news/new-zealand/aucklanders-annual-discreti…
https://www.pwc.co.nz/insights-and-publications/2019-publications/citie…
And how are the authorities responding?
Not well: https://www.interest.co.nz/news/100530/productivity-commission-says-cou…
And a farmer commented in the Herald this morning FSF value is in its assets, not its earnings. I suspect that is a widespread farmer view - I guess they are used to assets that don’t earn, or like Westland, will eventuallly sell to someone who can earn from them in a fire sale.
...and the vexatious Remoaner case against Boris Johnson thrown out. "No authority was shown to us suggesting that the offence can be or has been equated to bringing an office into disrepute or misusing a platform outside the scope of the office.”
https://www.judiciary.uk/wp-content/uploads/2019/07/2019ewhc-1709-admin…
"...Boris repeatedly did make it clear during the referendum that £350 million a week was the gross figure. Here he is on GMB in June 2016 explaining in detail over several minutes how £350 million a week/£20 billion a year is the gross figure while £10.5 billion a year is the net figure, he’s also explicit about the distinction on Marr and in numerous other speeches including the big BBC debate just before the referendum. Boris did exactly what the judges said he should have done for there to be no complaint."
https://order-order.com/2019/07/04/judges-say-boris-right-350-million-w…
Fonterra may also go into foreign ownership warns economist
https://www.rnz.co.nz/national/programmes/morningreport/audio/201870274…
Just in time for global food security to become a massive issue, New Zealand will lost many of its productive assets into foreign ownership. Meanwhile, commenters on NBR.co.nz will continue to spout "What does it matter who owns it? We can still legislate over it!" forgetting that we couldn't even keep two French terrorists in jail in the face of trade threats.
I haven't heard the report or read anything on it, but if i understand it Fonterra's primary shareholders are their supplier dairy farmers (you have to own shares to supply milk and only a milk supplier can own shares) So how could foreign ownership work without changing the rules?
The ECB appointment of Christine Lagarde is interesting. The EU French/German bureaucratic elite have reverted to type by appointing a reliable French lawyer to head their central bank, someone who can be relied upon to maintain their iron grip on power. Imperial politics rules in the EU. Should be interesting, even exciting, to watch. Not so good if you live there.
Mass capital flight out of Europe has begun and they cannot stop it. Dying empires tend to make bad decisions. Deflation leads to extremists gaining power. Europe has turned Japanese, but without the social cohesion of the Japanese. This will play out over the next two decades in unexpected ways.
Germany has burnt all the goodwill it gained in the post war years, culminating in the celebration of the fall of the Berlin wall. EU monetary policy to enable the integration of East Germany into Greater Germany caused a massive housing bubble and government debt bubble across Southern Europe. This was followed by mass unemployment on a truly horrific scale. The level of resentment this has created will find its expression in due course.
Rabobank; Houston we have a problem
https://www.zerohedge.com/news/2019-07-04/rabobank-houston-we-have-prob…
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