WMP prices rise; Wall Street slips; Canada manufacturing falls; China fx outflow slows; Italy government collapses; EU says no to Irish border relief; Aussie confidence slips; UST 10yr yield at 1.56%; oil unchanged and gold up; NZ$1 = 64.2 USc; TWI = 69.5

WMP prices rise; Wall Street slips; Canada manufacturing falls; China fx outflow slows; Italy government collapses; EU says no to Irish border relief; Aussie confidence slips; UST 10yr yield at 1.56%; oil unchanged and gold up; NZ$1 = 64.2 USc; TWI = 69.5

Subscribe to our daily podcast here.

Here's our summary of key events overnight that affect New Zealand, with news the Europeans are now struggling with two major political crises that have strong economic implications.

 

But first up today, the overnight dairy auction came in with very little change, marginally lower by just -0.2% in US dollar terms on good volumes offered. In New Zealand dollars, prices are up +1.4%. The big mover however was the WMP price which gained +2.1% in US dollars terms and was up +3.6% in New Zealand dollar terms. Overall, prices are essentially unchanged since June and nothing today will cause any reassessment of farmgate milk prices.

International news is light because the northern hemisphere is now deep into its holiday season. Market trading volumes are also light.

Wall Street has given up much of yesterday's bounce with the S&P500 down -0.6% so far. This follows European markets overnight that turned negative on the situation in Italy. Yesterday, Asian markets marked time, but the ASX200 was up +1.2% and the NZX50 was up +1.0%, both outliers on the international scene.

In Canada, data for June manufacturing sales was disappointing, down because of sharpish falls in sales of coal and oil.

In China, their banks sold a net US$6.1 of foreign exchange in July, the least in a long time. This is signaling that capital outflows from China are drying up quickly and the August flow is expected to be even less. The devaluing yuan won't help, but at least it isn't causing them capital flight.

In Italy, their coalition government has collapsed, plunging the country into deeper political turmoil and triggering a scramble to form a new coalition, or hold snap elections that far-right populists would likely win. It was the far-right coalition partner who pulled the plug.

And the EU has rejected the UK's 'demand' that there be no hard border with Ireland in the event of a hard Brexit. It looks like a formal border crossing will need to be re-established.

In Australia, consumers are getting worried about the general economic situation. The latest ANZ-Roy Morgan consumer sentiment survey has the overall index falling below its long-term average, and the perception of future economic conditions falling a massive and sudden -8%.and its lowest level since late 2017. Aussie retailers will worry that the "good time to buy" index fell sharply as well.

The UST 10yr yield is still at 1.56%, unchanged from this time yesterday and giving up the brief rise to over 1.60% in the interim. Their 2-10 curve is flatter however, now at just +4 bps and their negative 1-5 curve is wider at -30 bps. Their 3m-10yr curve is wider, out at a negative -51 bps. The Aussie Govt 10yr is unchanged at 0.93%. The China Govt 10yr is also unchanged at 3.04%, while the NZ Govt 10 yr is up +2 bps at 1.09%.

Gold is back higher today and now at US$1,506/oz, a gain of +$8 overnight.

US oil prices are little-changed today at just on US$56/bbl. The Brent benchmark is up slightly to US$60.

The Kiwi dollar is little-changed at 64.2 USc. On the cross rates we are stable at 94.7 AUc. Against the euro we are still at 57.8 euro cents. That leaves the TWI-5 at 69.5.

Bitcoin is now at US$10,752 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 ».

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

Daily swap rates

Select chart tabs »

The '1 year %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '2 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '3 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '4 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '5 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '7 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '10 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

60 Comments

Comment Filter

Highlight new comments in the last hr(s).
10
up

https://kunstler.com/clusterfuck-nation/there-is-no-normal/

" We’re on the verge of a lot of things coming apart: supply lines, revenue streams, international agreements, political assumptions, promises to do this and that. We have no idea how to keep it together on the downside. We don’t even want to think about it. The best we can do for the moment is pretend that the downside doesn’t exist. And meanwhile, fight both for social justice and to make America great again, two seemingly noble ideas, both exercises in futility" .

Yes - the level of disconnect with your average person's awareness is quite mind blowing ...
eg the womans rugby player I saw interviewed last night hoping that they will soon be all full time professionals ....

Not much difference between that and all the women soccer players wanting the same pay as the men.

https://www.fishpond.com.au/Books/This-Civilisation-Finished-Rupert-Read...

Book of the week, heck, of the month.

"Sooner rather than later this global capitalist system will come to an end, destroyed by its own ecological contradictions".

Yet the whole of our media are fixated on petrol prices at the pumps. Is this fear and denial, or genuine ignorance? It is equivalent to every major daily front-paging the rising-damp problem in the lower-deck staterooms of the Titanic.

SO what is your solution? culling 60% of human population using a 100% random assignment system (or should we design as system that excludes anyone under 25 years old or something)?
What you keep saying is not new. Malthus (and others before him) have said a simpler version of it many generations ago. Yet, there does not seem to be anyway to prevent it.
Lets say that we say bye bye to economy as we know it. I guess we all then need to go and live in sustainable villages, like Atamai Village in Motueka? is this the solution?
As long as they are human societies, they will get closer to each other and create bigger communities. these bigger communities will become more and more complex and will require specialization of labour. This in turn will create an economic system that will determine how members of a society exchange goods and services with each other. There will be always "economy" and it will always be very important. the the degree that people will go to war with each other and risk being killed or kill others for that economy. Hate it as much as you want, but socialisation will always give prominence to economy.

Why do you think there is any responsibility for powerdownkiwi to solve it? We are allowed to make an observation without knowing a solution.

Great post.

Yes, we've done as you describe, and seem predetermined to do so. The difference is that flourishings and failures of civilisation have hithertofore been local. This is the first - and only - time we have run it globally; There probably won't be enough easily-gotten energy left for a re-boot (we didn't climb very much until Fossil Fuels, and won't again without them). I split it up into things we can do, and things we can't. We can't do anything about global overpopulation - that has been unsustainable since around 1930, if not earlier. And we can do little about global conflict - although out current PM is doing a good lead-by-example I'm not sure that will/can hold back the tides of desperation.

But we can sort out our own population, turn out food-production into full-circle nutrient, and get our transport infrastructure both resilient and off FF. Our cities are entirely entropic, resource-guzzling waste-emitting edifices, total unmaintainable in the long term, and many of their occupants will end up in food production. It would make sense to effect that move before it became time-forced. And we could have a discussion about future-appropriate skills. Also, to keep a society cohesive, we have the reign-in wealth-disparity (which is really disparity in resource/energy access). Then there's energy efficiencies, re-connection of generations (how much useful knowledge is dying untapped in rest-homes?) re-valuation of social inputs........

I just can't see the point in continuing the uncontinuable, given that to do so make things worse by any real count.

Start with the deplorable members of society (child molesters, murderers, drink drivers, politicians) and then see where that gets us.

I took the blue pill

Capitalism compared to what? - the Soviet Aral sea or the Huangpu River?"The number of whales spotted in the waters off New York City has increased by 540 percent in the last eight years, according to researchers.
In 2010, experts from non-profit Gotham Whale identified just five whales in local waters across the whole year. However, in 2018, the number of sightings jumped to a staggering 272, the vast majority being humpbacks, Patch reported.
The non-profit says that the recent spike in whale sightings is the result of several successful environmental policies—including the Clean Water Act, the Endangered Species Act and the Marine Mammal Protection Act—as well as a decrease in pollution in the Hudson River."

Boring. Spin 101 - conflate one topic with another, only take a short piece of a time-frame, present selective segments. Sounds good but irrelevant. Send bill in to supporting edifice. In this case, the simple question is: How many whales were present, in pristine surroundings, pre European intervention?

It's actually growth of resource-consumption (including sink-capacities) that is the problem. Irregardless of political format.

...conflate one topic with another, only take a short piece of a time-frame, present selective segments.
Sounds a lot like mainstream climate science, too...

Nup. We evolved in a period when the fossil carbon was locked away. By default, that meant we were suited to that set of conditions. We have extracted that locked-away carbon, thus forcing the T1/T2 equation. It ain't rocket science. Just an overpopulated, overconsuming species swamping the parameters of a bounded system.

But of course, bounded systems don't exist according to one briefly-popular dogma.

But of course, bounded systems don't exist according to one briefly-popular dogma.
Please tell us which 'dogma'.
Because I know you are not trying to make your go-to incredibly stupid point that economics somehow isn't founded on scarcity.

You saying you realise there are Limits to Growth?

Now we're getting somewhere.

Growth of what?
There is no reason why growth in technology or human capital cannot be infinite.
Mathematically there is no reason in which growth in total resource extraction also cannot be infinite - the whole idea of limits underpins this.
If you do not understand the idea of simple limits in mathematics, you really aren't qualified to be commenting on anything you suppose to be an expert in. Especially not the physical sciences.

You were talking about conflation before. You continue to conflate linear and non linear growth as the same thing to suit your narrative.

"Mathematically there is no reason in which growth in total resource extraction also cannot be infinite - the whole idea of limits underpins this".

Eh?

Confusion about limits?
Surely not.

Here. Wiki can explain 'em for ya!
https://en.wikipedia.org/wiki/Limit_(mathematics)

https://en.wikipedia.org/wiki/Flynn_effect#/media/File:Sundet_et_al_2004...

Humans are in decline both physically and intellectually. Elsewhere there is solid research that equates protein in the diet to average height. Very big difference between resource limits, and resources per person. If you are going to be a dick and argue in an attempt to prove you are smart, at least pursue the right argument.

Glad we have the political format clear up - thought you having a dig at capitalism there. If "it's actually growth of resource-consumption that is the problem" why are more and more whales living NY Habour, more tigers in India and more forests in rich countries? Growth is the solution not the problem. Without it you'd still living in a cave with no fossil fuel derived computer to tap on or solar panel to virtue signal with.
"Among 50 nations with extensive forests reported in the Food and Agriculture Organization's comprehensive Global Forest Resources Assessment 2005, no nation where annual per capita gross domestic product exceeded $4,600 had a negative rate of growing stock change."
https://www.pnas.org/content/103/46/17574.short

There he goes again. Classic. Not even subtle.

For those who need the explanation, most of those countries with incomes above the 'threshold', have already depleted their forest-cover and are acquiring same from places below the threshold. Today's news is of the burning-off of the Amazon, for instance... What his 'statistic'says, is that we richies have offshored our consumption.

Bernard Hickey made the same incorrect conflation recently (2 cents worth, re Raworth/Doughnut Economics/growth) saying 'our waterways are cleaner'. Yes, but what about the real resource draw-down in food-production?

So we have depleted our whales and forests and now we are getting more from "places below the threshold." The statistics on offshoring are pretty good - but you know that. "One possibility is that by cracking down on air pollution, we simply pushed our dirtiest factories overseas to countries like China. If so, that would be bad news — it would mean we're offloading pollution elsewhere rather than cleaning it up.

But this gloomy story doesn't appear to hold up. In a recent NBER working paper, Georgetown economist Arik Levinson estimated that more than 90 percent of the drop in US factory pollution since 1990 was due to companies adopting cleaner production techniques — things like switching fuels, becoming more efficient, recycling, or adopting pollution-capture technology."
https://www.vox.com/2015/2/8/7999417/US-factory-pollution-offshoring

I'd love to see PDK turn up at the NBER.
That would just be the most amazing thing to see.

Pity they didn't turn up at this:

https://www.youtube.com/watch?v=HMmChiLZZHg

If economic activity could have been decoupled from the extracted/drawn-down resources of our finite little planet, they would have done so. But nobody ever has - anything not directly involved in draw-down is parasitic upon same. Enough, eh? How about you get some learning under your belt before wasting people's time?

I think youre clutching at straws .... "Georgetown economist Arik Levinson estimated that ..."

An economist estimated something ....
There doesnt appear to be any limits on the stupidity of those who take note

"The number of whales spotted in the waters off New York City has increased by 540 percent in the last eight year"

Perhaps they were going where the surplus is consumed ....
The number of possums on my roof last month was also a July record (records dating back at least a year).
Im pretty sure we can therefore conclude global warming is in reverse

Actually, Sir David Attenborough attributes mankind's predicament to overpopulation; all other ills (global warning,etc) can be subsumed under this.
I seriously think that Aldous Huxley's novel, "Brave New World", written in the 1930's, is worth revisiting: in this novel there is an upper age limit for everyone of 65 years. Upon reaching the age of 65 years you take a pill and expire leaving more for younger generations. My MP, David Seymour, would be ideally placed to further this remedy.
Then there is a famous essay by the 17th century writer, Jonathan swift, the author of "Gulliver's Travels, who suggests we should redevelop our appetite for human flesh by farming the children of large families that can't be cared for by their parent (sic); this would certainly take the pressure off the despoliation of our land caused by the current necessity of the overuse of pastoral farming. Human farming would take up a far smaller area: for instance 100 children could be reared in say a mere 1 acre of housing whereas it would take at the very least 100 acres to rear the equivalent quantity of beef or lamb. I think we are at the point where we need to look radical remedies.

I think the answer is do nothing. Like any species with out natural predators, humans will expand until they consume all resources which will ultimately lead to a population collapse.

The planet will carry on just fine, it will heal itself within a few million years, if not less.

The only question ideally is how brutal will it be on the way down? Will it be any worse than the citizens of Syria, Iraq, Afghanistan have suffered in recent years (I haven't even mentioned Africa!). Will it be any worse than the torment that is currently inflicted on millions of people daily already?

Is my suggestion any different really than a population cull as you suggest - certainly I think it's a fairer way, those who survive deserve too - just like our long ago ancestors.

Are you secretly Rupert Read?

Interesting stats about Japan. Seems they have had 10% growth of their GDP per capita in a decade despite a rapidly aging population and minimal immigration. The comments about an even income distribution and social cohesion leading to a harmonious society are worth a cool discussion.

I read this article. It is hard to disagree with what he says. letting in low skill refugees does not benefit Europeans. I totally accept that this is a fact.
But how on Earth Europe is going to stop the wave of refugees? by mass killing them? locking them up in islands? paying Turkey to create refugee camps? Fund militia in North African countries to "close" their borders?
I do not blame Europe for Middle East and Africa problems. But unfortunately for them, they are very close (and relatively easy to access) from these regions. So even if Europe is 0% responsible for problems of the ME and Africa, there is no way that Europe can steer clear from the consequences of these fundamental problems. And unless things change at those regions, nothing (well except full blown violence and mass killing) can stop the wave of immigrants. Europe is in trouble whatever option they chose. They accept the refugees, they will be in trouble as article states. If they stop them by force, they will have a different sort of problem that can start small but will surely escalate to a disaster in due time.

The current policy is to make the process as unpleasant as possible to dissuade immigration. It is not working and will get worse. As a purely ethical issue which of these options do readers prefer: [1] allow those immigrants with sufficient money to pay the usually evil rapist people-smugglers to get in unseaworthy boats to cross the mediterranean with about 5% dying by drowning en route or [2] use Easyjet to fly whoever wants to come but kill a randomly selected 4% by painless lethal injection. For a utilitarian the second is the choice because fewer killed, eliminates rapes, eliminates profits going to criminals, immigrants get to keep more money but is still a deterent.
OK that will not be accepted so the solution is to remove the cause for people wanting to move: poverty, lack of prospects, too many people not enough resources. That is not too difficult if you provide honest institutions, education for women, old age pension. How to get governments to do those three things - the only solution is a return to imperialism.

The EUSSR erects another Berlin Wall between Eire and Northern Ireland ? Just like they did between Poland and Ukraine?
https://www.irishtimes.com/news/world/europe/on-the-poland-ukraine-front...

"Fletcher Building back in the black"
Fits in with the share price spike at 1 pm yesterday....

3.6% spike from 1pm yesterday. When were the earnings released?

Last evening to shareholders

Is this a classic financial market bait and switch sucker play?:

Is Pimco Right That Negative Yields Make Sense?
Caveat emptor:
Pimco Looks To Offload Ultra-Hot Bonds After Huge Rally

The cracks are getting bigger! Here we go...
Big ups to Interest.co.nz the only Kiwi news agancy calling a spade a spade.

and thankyou to all Interest readers for providing links to other worthwhile sources of information. You aren’t going to learn what’s really going on around the world if you rely on the mainstream New Zealand press! I raise my mug of coffee to you all!

Germany will sell a 30-year bond at a 0% coupon for the first time on Wednesday, in a flurry of debt sales in the next two weeks offering negative rates. The nation has previously only sold debt with a 0% coupon up to 10 years of maturity, including sales in the past month during a global debt rally. This week’s 30-year auction will test the continued demand for haven assets now that the whole of Germany’s yield curve is in negative territory. Link

This seems concerning. If there's no growth on the horizon does this mean there's likely no inflation either? Thus those who are holding large debts cannot count on them being inflated away?

Happy to be informed otherwise.

It is the RBNZ's mandate to ensure inflation at 2%. If inflation is below this target then it must do "what it takes" to get there. This may include negative OCR so that banks require less to be repaid than is borrowed (see Denmark's example https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...). There are also other options such as QE to ensure the inflation target is met.

The Bible has guaranteed us a debt jubilee every 50 years (Leviticus 25:8-13) and the Government ensures this by maintaining 2% inflation "whatever it takes". Don't mess with God!

I don't fear imaginary friends myself. But Central Bank error is a real and present danger.

Wonder how long before someone is going to wise up and change the RBNZ mandate.. oh, wait, they've already expanded it to include employment. Don't bet the house (literally) on the 2% mandate staying in place forever.

Without inflation everything falls apart though. What would you see as it potentially changed to?

Compulsory minimum TD rates of 12% for deposits in all registered banks by people over the age of 65. A strong show of confidence by RBNZ and NZ First (Winnie where are you?...) is required.

Amend age to 50 and above

Heavy G - Is that a Bo Polny quote? heard something similar on a YouTube interview with Greg Hunter

Sorry, no idea who those people are. It's all me (for good or bad;)

Mark Mobius recommende buying gold at any level.

“You have all these currencies, new currencies coming into play," he said. “I call them ‘psycho currencies,’ because it’s a matter of faith whether you believe in Bitcoin or any of the other cyber-currencies. I think with the rise of that, there’s going to be a demand for real, hard assets, and that includes gold."

https://www.livemint.com/market/commodities/buy-gold-at-any-level-mark-m...

As a 24 year old trying to make sense of the economic climate- these articles and consequent comments from fellow readers prove invaluable compared to the garbage fed in the mainstream.. Have a genuine question for those who more-likely-than-not have a lot more experience and wisdom in these fields - what would you do if you were in my position? In terms of the next few years pre-family and pre-responsibilities with regards of setting yourself up for long-term sustainability? Interested to know. Thanks.

You need to accumulate wealth because that gives you options for your unknown future. Probably only need fairly modest wealth - just a little more than the average. Easiest done in a country that pays more per hour than NZ. Easiest to access and easiest to return from if it doesn't work out is Australia. Good luck. Oh and stay healthy.

24, no family, few responsibilities. Set a big BIG goal, write a business plan, start a business in an industry with no ceiling (avoid discretionary spending industries for next few years), work 6-7 days a week to “break through” don’t read any of the media stuff about work life balance etc, don’t listen to people whom say to much work is not good for you, just go hard and teach yourself stuff, or get help for stuff you cant teach yourself. That’s about it really. By the time you start thinking about work life balance etc, you have some security if you have been smart.

Start a business in an area that is unpopular and especially unpopular with other youngsters so avoid music, fabric design, fine arts and aim for something involving either toilets, killing animals or interacting with elderly decrepit people. Avoid any work area that is dominated by immigrants on low wages because they attract dishonest businesses like bees to honey and assuming you are honest you will not be able to compete.
While agreeing that work / life balance should not be in your mind if you find yourself continually working 6-7 long days per week you have made a mistake, firstly because you will be too near to the problem to see the big picture and secondly when something goes wrong (eg your irreplaceable 2nd in command falls ill) you will have no spare time to fix the problems.

Or he could go to a place that is unpopular with working youngsters, like PNG and get ahead there..

Consider what's important to you when making the decision about your future, do you want to be your own man / woman? Or do you forever want to be reliant on some other man or woman's decisions, governance, skill or lack of. Answering that question will help you decide how hard you want to work while your young and fit. The work, 6-7 days a week isn’t “work” as some employees or sole traders on here might perceive it to be, its work that involves building an organisation (in line with your big goal!), frontline staff, frontline managers, middle managers etc, investing that time outside of business hours if necessary in the early days / years will give you the “long-term sustainability” in time and finance you asked about. The life of a business owner is not for everybody, but if your independent in spirit go for it now while your free to succeed and fail. Just my opinion. Put in a good 10 – 15 years of work, learning and teaching (your staff) and you will be far ahead of your employee counterparts in time and security.

Thanks for the interesting feedback I'm taking it all on board! More background I suppose is I have saved from $0 around 50k and instead of looking at a house deposit I'm more inclined to throw money at starting a business.. I am in the corporate system but have a desire to try and be my own man as you put it! Much appreciated everyone.

I was told that if you 'love your work' you are stealing from your boss. Great motto. And you are still young enough to try and fail a couple of times without it being a disaster.

The EU are bastards ............ vengeful Frenchman , dogmatic Duitzers, irritating Italians and sloppy Spaniards .

The English should never have got into bed with this mob to start with .