Dairy prices retreat; Wall Street equities up but bond investors don't follow; US JOLTS weaker; China warns India; huge Aussie trade surplus; UST 10yr yield at 1.73%; oil down, gold up; NZ$1 = 65.2 USc; TWI-5 = 70.5

Dairy prices retreat; Wall Street equities up but bond investors don't follow; US JOLTS weaker; China warns India; huge Aussie trade surplus; UST 10yr yield at 1.73%; oil down, gold up; NZ$1 = 65.2 USc; TWI-5 = 70.5

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Here's our summary of key events overnight that affect New Zealand, with news we are in the news shadow for the RBNZ rate review this afternoon.

First up today, there was another dairy auction overnight and it was a disappointing downer, reversing most of the gains from the previous event. No doubt the risk aversion sweeping financial and commodity markets world-wide affected bids. In any event, prices dropped -2.6% overall with the key WMP taking the least hit, down just -1.7%. In NZD terms, the overall result was a tiny +0.1% rise as our currency's depreciation took up the slack. Volumes sold in this auction were the highest so far this year.

Wall Street is staging a bit of a bounce-back today, recovering about a third of yesterday's losses. But it was lower yet again in Europe overnight. And bond investors haven't changed their negative view today.

Yesterday in Shanghai, their equity market was down -1.5%. Hong Kong was down -0.7%, and Tokyo was also down -0.7%. But that was light compared top the -2.4% drop in Australia. The NZX50 was down -1.7%. These declines will hurt KiwiSaver funds if they are sustained in August.

We usually wait until the weekend to update how the VIX volatility index is tracking but in just two days so far this week it has jumped to levels we haven't seen in in 2019. The Fear & Greed index we follow has jerked over to the 'extreme fear' range.

In the US, job openings and hiring fell in June, suggesting that demand for labour was cooling in tandem with a slowing economy. Of course, this data well precedes the recent heavy market correction. But things won't have gotten better since then and that may provide another reason for the Federal Reserve to cut interest rates again next month.

Another front might be opening in the trade war; China has told India not to block Huawei from doing business in the country, warning there could be consequences for Indian firms operating in China.

And in China, another company is struggling, this time a large regional dairy company, and it is seeking a state bailout to survive.

In Hong Kong, things are getting even more ugly as Beijing hires the triads to take on the protesters and calling on locals to "defend your home".

In Germany, factory orders rose unexpectedly in June, up +2.5% from the prior month.

The trade surplus in Australia just gets larger and larger. We had reported April as an all-time record surplus, then May was an even larger record. Now we can report that for June that it was another huge surplus, this time far, far larger than any previous month at +AU$8.6 bln (actual, not seasonally adjusted). That means for the year to June, they had a goods surplus of +AU$53.6 bln (or 2.8% of GDP) and far above the +AU$12.9 bln surplus on the same year to June 2018 (0.5% of GDP).

Despite these great trade outcomes, the RBA has trimmed its economic growth forecast yet again to +2.5% for this year (from 2.75% as their May forecast, and 3.0% in February which itself was previously forecast as 3.25%) and admitted inflation will undershoot for years. They did this when holding their official interest rate steady at a record low 1% after two consecutive -25 bps cuts.

Locally, QV figures for July out today show property values on a long slow decline in Auckland, and they are starting to head downwards in several other regions.

The UST 10yr yield is unchanged at 1.73%, embedding the earlier weakness. That may not have moved much overnight but shorter rates did and their 2-10 curve is flatter at just +12 bps while their negative 1-5 curve is wider at -28 bps. Their 3m-10yr curve is now over a negative -30 bps. The Aussie Govt 10yr is holding at 1.03%. The China Govt 10yr is also little-changed at 3.08%, as is the NZ Govt 10 yr which is still at 1.33%.

Gold is up another +US$5 today at US$1,472/oz.

US oil prices are lower yet again. They are now just under US$54/bbl which is another fall of almost -US$1. The Brent benchmark is also lower at under US$59.

The Kiwi dollar starts today softer at 65.2 USc. On the cross rates we are still surprisingly firm at 96.5 AUc. Against the euro we are softer at 58.2 euro cents. That sets the TWI-5 a little softer at just on 70.5.

Bitcoin is now at US$11,725 and virtually unchanged from this time yesterday. 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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The CCP knows how to make friends, it seems. Not sure the standard playbook of bullying, bribing, buying up assets, lending excessive amounts to government projects, encouraging immigration, theft of intellectual property, infiltration of education and government and setting up drug importing ratlines will work on the Indians. They might see it coming.

What a great friend we have!

It is completely wrong to claim that Beijing is "hiring the triads"based on the news article linked to. They look like ordinary guys in the videos and the action with the poles is happening on both sides. I recommend viewing the action in the link provided. I would have thought the triads would be anti-Beijing in general as they could operate a lot more freely in a less authoritarian society. Anyway I imagine there are no shortage of patriotic Chinese men or outraged Fujianese willing to engage the protesters. Searching the link for the word hire, hiring, paid reveal no hits. Triad is mentioned only once and then only in a caption with the word "suspected".Verdict: fake news and shameless propaganda.

Fortunately for Hong Kong there will be no NATO aerial bombing raids.

It is standard practise for the secret service to have strong links to organised crime. Helping organise the supply of drugs and selectively turning a blind eye, in return for a share of profits, plus intimidation and the occassional hit as required, works well for them. The CIA gained notoriety throughout South America for this during the Iran contra era.

"They look like ordinary guys". What did you expect?

Expressly for those seeking a small fortune:

UBS to charge super-rich for cash deposits

"a very scary moment" (China v USA - trade)
https://www.youtube.com/watch?v=g6_cYzH7MzY

fed to cut?

Us farmers hurting.
https://www.youtube.com/watch?v=hYr6KVEY1zM

Then Iran, busily hijacking tankers over the last month.
https://www.youtube.com/watch?v=Yo9TA2w_h_Q

what more could go wrong in Trump world?

Great Depression mk2?

Nice one.

The Brits started the hijacking though

The US farmers are getting the brunt of the tariffs the US put on Russia. Russia went on to become the biggest exporter of wheat in the world and soon to be the biggest supplier of food to China.
Don't forget Iran responded to the UK seizing a tanker. What we are witnessing is the USA hurting, and a dollar shortage. It's ridiculous to on one hand say China manipulates its currency down and then say if it stops the Yuan will fall %20.
https://twitter.com/i/status/1158695732783788034

Farmers are their own worst enemies.
Last year Oregon planted 7k acres of hemp , this year they planted 123k acres of hemp. 2 million pounds of %12 CBD hemp oil on market looking for a home. Hat tip Stock Swami

On the companies that have to report back to Chinese securities, there always appears to be consistent pattern. Kuangchi Technologies remains one of my favourites. A company that was initially a paper gift company. I have mentioned it before on occasion , as it was one of three companies alongside Pengxin of Crafer farms , that gained access to New Zealand airspace in the heady but early days of renewed Auckland house price appreciation
.http://www.scoop.co.nz/stories/SC1411/S00067/kuangchi-science-is-going-t....
Kuangchi would later take over Martin jetpack. ( a single Frenchman has recently made mockery of Kuangchi aspirations ). However , Kuangchi would take a step out of Neil and launch a turtle, apparently the first live animal in near space.
http://www.kuang-chi.com/en/index.php?ac=article&at=read&did=1246.
With its share price , gradually declining over the past 5 years
https://www.bloomberg.com/quote/439:HK?in_source=recentlyViewed, I decided to look for its Chinese website)
http://www.kuangchiscience.com/.
I am sure it will bounce back

Awesome well done California: Trump sues California over candidates' tax return law.
https://www.bbc.com/news/world-us-canada-49257844

California introduces legislation requiring presidential candidates to file tax returns in order to stand in primaries. This law would "directly impede" Mr Trump's chances of gaining the Republican nomination. California provides 14% of delegates needed to win.

I thought he said he had nothing to hide and would totally open his tax returns just like other presidents. Whatever happened to that?

The moment that he realized it would reveal him as a con-man. Donald had no intention of ever showing his tax returns.
Video article: It Was Always A Scam; He Was Always Losing Money' | Morning Joe | MSNBC
https://www.youtube.com/watch?v=zURVpUZf7qA

Michael Pettis on taxing foreign capital inflows. We should do this:
The trade shortfalls that plague the U.S. economy are chiefly a product of imbalanced capital flows, which are driven by distortions in global savings. Selectively restricting capital inflows is the best way to address these imbalances. Tariffs are a far less effective tool: they mostly just rearrange bilateral imbalances and distort the underlying economy without addressing structural issues. Whether it passes or not, the recent Senate bill is the right approach and an encouraging sign because it is the first time lawmakers have sought to address the persistent U.S. trade deficit by way of capital imbalances.

https://carnegieendowment.org/chinafinancialmarkets/79641?utm_source=rss...