Restarting trade talks appears to have been an empty boast; US data solid; China adds more stimulus; trade war twist boosts palm oil; UST 10yr yield at 1.49%; oil and gold up; NZ$1 = 63.7 USc; TWI-5 = 68.9

Restarting trade talks appears to have been an empty boast; US data solid; China adds more stimulus; trade war twist boosts palm oil; UST 10yr yield at 1.49%; oil and gold up; NZ$1 = 63.7 USc; TWI-5 = 68.9

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Here's our summary of key events overnight that affect New Zealand, with news the Kiwi dollar is now depreciating consistently as confidence in commodity currencies wanes.

But first, Wall Street is losing steam today as the US-claimed restart of tariff talks appears to have been an empty boast. The S&P500 started the day positive, but has slipped since and is now down by -0.2%. Benchmark rate curves have turned even more negative.

The influential Conference Board survey of consumer sentiment in the US fell, but by much less than expected in August, with households still upbeat about their labour market despite an escalation in trade tensions. This survey isn't showing the reaction to the trade wars that the other University of Michigan survey does. Not yet anyway.

And the next regional Fed survey of manufacturers, this one by the Richmond Fed, shows 'moderate' conditions in August and an improvement from July. That means their contraction has eased somewhat, but there is no real expansion yet.

And the independent survey of house prices in the US, the Case-Shiller survey, shows that growth continued to decelerate in June, the latest sign that lower mortgage rates are providing little to boost a housing market that has been slowing for the past year.

In China, industrial profits actually rose +2.6% in July compared with the same month a year ago. In June they were -3.1% lower on that same basis. This better July pared back their year-to-date fall to just -1.7%. This was much better than markets were expecting.

China set its exchange rate against the US dollar noticeably lower today. That now puts it at its lowest reference rate since 2008.

And in a new move aimed at reviving their retreating car industry, Beijing has relaxed some key car-buying rules. It part of a set of new stimulus moves.

One of the consequences of the trade war is that the food industry in China can't get soybean or corn oil like it used to, so it is turning to alternatives, and a primary one is palm oil. And that means that the current EU campaign against it is being less effective, allowing Indonesia and Malaysia to easily push back, even ignore the pressure.

The UST 10yr yield is down -4 bps at 1.49%. And most key rate curves are now more inverted. Their 2-10 curve is now negative by -4 bp. Their 1-5 curve is at -37 bps. Their 3m-10yr curve is at -59 bps and all of these are wider negatives than this time yesterday. The Aussie Govt 10yr is at 0.90%, down overnight by -3 bps. The China Govt 10yr is unchanged at 3.08%, while the NZ Govt 10 yr has firmed by +4 bps to 1.11%.

Gold is still rising, up another US$13 to US$1,542/oz.

US oil prices are up about +US$1 at now just under US$54.50/bbl. The Brent benchmark is also up to US$59.50.

The Kiwi dollar is marginally softer again, now at 63.7 USc. On the cross rates we have slipped to 94.2 AUc. Against the euro we are also softer at 57.4 euro cents. That pushes the TWI-5 down to 68.9 and its lowest since September 2015.

Bitcoin is now at US$10,177 and that is down -1.7% from this time yesterday. The bitcoin rate is charted in the exchange rate set below.

 

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44 Comments

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Highlight new comments in the last hr(s).

Haha. You are so "glass half empty" about the USA!

I've noted that on several occasions. Positive data coming out of the US is supposed to be "short-lived" while negative data has an "I told you so" response.

The constant use of adjectives (actually he's more often optimistic) is interesting.

I find a more interesting philosophical question is this: If GDP is a falsehood (in that it ignores human-existence-requiring items) then what describes the reproduction of same?

Brazil is giving us a classic example at the moment - Macron is very clear - he sees our planet as one home and that we're in deep shyte. Bolsonaro has to deny, to keep peddling the myth. On the outcome of this - and it seems that stressed societies vote for short-term continuance - rests the question of whether the human race continues. Or of course, you could worry about business confidence.....

Expect obesity to go up in China with its move to using more palm oil.

Expect our dairy to pay more for palm.

The true madness is pension funds being forced to invest in assets which will be guaranteed to lose, such as in the case of long dated inflation-linked gilts at real yields of -3%,” said Mark Dowding, chief investment officer at BlueBay Asset Management, which has pension-fund mandates. “It is financial vandalism and the government and central banks need to wake up to this.” Link

After Mark Carney Admits That Low Rates Lead To War, San Fran Fed Suddenly Changes Its Mind On NIRP

I thought it was government policy to steal from pensions to fund the polticians and bureaucrats? When they get pushback against taxation, they persue other means, like inflation, to steal what they feel they need. We seem trapped in a manipulative relationship.

On that basis the NZ Superannuation Fund is not long for this world

Well I think you know my mantra from my early days on this site, once I figured out the basics. The battle for unearned income. I find it fascinating that someone always seems to be blamed for low interest rates, like it was a choice rather than the predictable outcome it is. That is the very nature of interest!

"It's an ill wind that blows nobody good", as we used to say (why don't we use these old sayings anymore? Have we willfully thrown away the wisdom of our ancestors?) Great to hear our democratic friends in Malaysia and Indonesia are benefiting from the push back against CCP aggression.

12
up

Ah yes Roger “The wisdom of our ancestors” - seems to have been flushed down the sink. Don’t live beyond your means, save for a rainy day, treat others as you would wish to be treated, and a great one from my banking days 30 years ago “if it was your money would you lend it to this person/business.

Now it’s just borrow too much at low interest rates then buy loads of stuff that you don’t really need to fill the over priced house that will take you 30 years to pay off ... and for those of you who have got savings just go out and spend it on more stuff you don’t need as we the banks will be charging you a ridiculous amount if money to look after your money but what we’ll really be doing is using to to make huge speculative bets on the derivatives market. Remember Your Country Needs You!

Interesting to see how much minimalism is making a resurgence, at the same time. Younger people finding that being sold this paradigm of excess from would-be Gordon Gekkos is actually not so appealing after all.

Don't worry guys, everything is fine, nothing to see here. Just keep listening to the Bank economists that are telling us the NZ property market is going to keep going up.

Stunning how the cracks are increasing at an alarming rate but the influencers attempt to sell more debt, which will sink the country further when this really hits.
There was an interesting artical the other day saying banks should be utilities. High time that the tail stops wagging the dog! This tail is so over grown now that it has become the brain and the mouth.

That's a snake :)

Lol

The article concerning Beijing's relaxing of automobile purchasing rules has way more than just concerns about automobiles. It is quite an interesting read and covers a lot of things. The Chinese do appear to be trying to modernise and relax their culture. There is probably a lot of potential for improving their internal economy.

"The Chinese do appear to be trying to modernise and relax their culture" Yes the people of Hong Kong are fully on board with this relaxed culture they want to bring in?

Baby steps, evolution not revolution.

Up and down.
Not harder and softer please

On USA: see James Rickards: Aftermath.
On risk and stock market, fed, everything. Especially gold and the establishment plans

While a UST will rise in value during a liquidity event partly or even mostly because of its status in repo, the opposite happens in the gold market. Though gold is a collateral of last resort, too, it isn’t as flexible and so it gets dumped whenever deployed that way. Very negative for its price.

So, it ends up in a tug-of-war between what I’ve called collateral gold (negative price) and fear gold (positive price). What ultimately might determine which one wins out is hard to predict, and it’s not a precise and straightforward mix at least inferring ahead of time.

The cost of owning gold as a hedge is determined by the opportunity cost of not holding something else while you do. The metal pays no interest and if the market expects interest rates to rise or stay high, then it is a relatively more expensive and therefore unappealing hedge. Link

Return ON your capital v return OF your capital.
When it hits fan, gold will not go down and if you hold it yourself, cannot be ripped off by the State

Gold can be taken off the people as it has been before, silver on the other hand has never been.
$2400 plus for one gold coin or 2.5 kilo's of silver.
$2400 plus for one oz coin doesn't rock my boat.

This is the same reason people buy "shit coins" (alt coins) instead of bitcoin - because they get "more" for their money. Makes no sense. Why buy 2.5kg of silver when you could buy 272kg of copper for the same price? Silver is no longer a monetary metal. There's a reason central banks are buying gold by the ton.

Silly buying cyrpto anything.
Gold isn't money either.
Copper use is declining and the price with it.
Silver rising 3.5%, gold 1.5%.
I dont care if it's used toilet paper rolls, if it's rising faster than anything else, I'm in.

Take a look at the European Central Bank's balance sheet - Assets column - Line 1.

Silver is still a monetary metal. An oz buys about a week of groceries in Venezuela at present.

5000 years of trade says gold and silver are the only forms of money in the world. The rest is either currency, barter or debt.

Bloody hell.
What dose an oz of gold buy?

If they want to take the gold they have to find it... with a $2500 1oz gold coin being about the same size as a nz $2 coin, i'm pretty sure I could conceal $40k of gold (16 coins) a lot easier than 40kgs of silver.

I'm a gold bull. For now. I believe a feeding frenzy will happen as the institutions and citizens decide they need it in their portfolio's. Just look at the gold ticker today.....the run is only just starting.

https://www.kiplinger.com/tfn/ticker.html?ticker=GOLD

Up aprox 1%, silver up 3%.
$2400 plus for a shiny coin still a hard sell to me.

I thought same for a time. Not now (as in about 4 months ago), did a lot of reading before I was convinced.

Bugga, sounds like I've got to do some more digging into this or just hindge my bet.

I'm a gold bull. For now. I believe a feeding frenzy will happen as the institutions and citizens decide they need it in their portfolio's. Just look at the gold ticker today.....the run is only just starting.

Really? I don't see Granny Herald or Antonia Watson espousing the importance of gold or silver (even if Ray Dalio is). We're still a long way from when the mainstream starts considering gold as an asset more valuable than anything else.

Gold and silver have risen sharply on the bad news of late, faltered slightly then rissen slowly without any bad news. How long till the next news artical or tweet that throws the stock market down again?
Not huge gains at present but the momentum is gathering. 20% gain on silver in a year, I don't see anything else returning that.

Might want to check the gold price.. Wish i'd got gold for my birthday in May just before it took off. .. I'd be up 20% already, up 27% YoY.

Exactly. I'm planning ahead. Might be wrong. It's a punt.

Always a punt...( from an educated platform )
Risk 'v' reward.
Perceived risk, if you back yourself and it turns out to correct. What the hell was I thinking, if you're wrong...

It has been a Foie gras market since 2008 with more to be stuffed down out necks before
1, the bird comes home to roost.
2, our goose is cooked.
3, the slaughter.
Choose your own ending.

The correction is coming .............asset prices have become disconnected from reality , debt levels are beyond the atmosphere , our understanding of economic orthodoxy has been turned on its head.

Every indicator of a looming recession is lurking in the gloom or shadows

I have no idea when the correction ( or worse) is coming , but its going to be way sooner than the second coming of Jesus

..truth be known we are already in it.