Here's our summary of key economic events overnight that affect New Zealand, with news equity investors continued to bid share prices higher even as the global economy struggled to get back into gear.
The US is on holiday this weekend and all markets there are closed.
The latest update of the US Fed's balance sheet shows it is still not adding to its holdings with more QE, and it is now a full month that it has held back. Given that the US Senate is blocking more fiscal stimulus, it seems likely that little more assistance for their economy is coming any time soon.
Official unemployment is at 11.1%, wages and time worked are falling. Part-time working has doubled since February. And the the extra US$600 per week top-up of unemployment insurance will end in July which means being jobless will get very tough very soon, and stress about that will be starting to mount about now.
The latest GDP Now tracking suggests their economy is shrinking at a striking rate.
Of course, they are not the only country whose economy is shrinking. Most are, and the outliers are now the ones who are growing.
Among our trading partners, Singapore reported current activity is contracting sharply still, and this is confirmed in a parallel survey.
Japan's PMI is also contracting even though their bounceback is notable. But there hasn't been a good bounceback for their manufacturing sector. Like Germany, it is very dependent on exports, so is now taking a harder hit. Taiwan and South Korea are feeling similar pain on the factory floor.
That is what makes the Chinese factory result stand out.
And now the Chinese service sector has signaled its sharpest increase in activity for over a decade in June. Their service sector PMI rose from 55.0 in May to 58.4 in June, to signal a substantial increase in service sector activity. Furthermore, total new orders rose at the quickest pace since August 2010 and new export work expanded for the first time since January. Firms widely reported that overall market conditions had continued to improve following an easing of measures related to the coronavirus pandemic.
The big question now is whether the Chinese economy can hold on to these expansion rates in the face of the global weakness. Most observers are sceptical.
The iron ore price seems to be topping out at just under US$100/tonne and market chatter is that it is downhill from here. The top has been called many times recently, so this may be a false one too. But with the world in recession and supply still strong it is hard to why it has stayed so elevated for so long. Excessive Chinese inventories aren't helping either.
And the copper price is being watched for the same weakness signals. But so far, it has had a run-up, back to pre pandemic 'normal' levels.
The same could be said for bulk shipping, but the Baltic Dry Index just keeps on rising, defying expectations. However, a supply of ships (and especially crews willing to risk stranding) is shrinking fast and is keeping this demand elevated.
In China, major flooding is affecting agriculture nationwide. Although rice and cotton are unlikely to be affected much, other grains are and especially animal fed grains. That will keep meat prices elevated over the next year and keep up Chinese demand for New Zealand meat.
In Australia, retail sales rose +16% in May from April and marginally better than expected. Year-on-year they were up +5.5% after the -9% year-on-year drop in April.
Yesterday on Wall Street, the S&P500 ended their short week with a +4.0% weekly gain. Frankfurt ended the week with a +3.6% weekly gain while Paris was up +2.0%. London ended with zero gain for the week, losing it all in their final session. The Shanghai index ended last week with a +5.8% weekly gain on the back of a strong surge at the end. Hong Kong was up +3.4% while Tokyo was down -1.0% for the week. The ASX200 had a weekly gain of +2.6% while the NZX50 Capital Index rose +3.9% on the same basis.
The latest compilation of COVID-19 data is here. The global tally is 10,951,500 and that is a jump of +190,000 in one day. Global deaths reported now exceed 523,000 (+5000).
A quarter of all reported cases globally are in the US, which is up +59,200 since yesterday to 2,772,400. US deaths now exceed 129,000. The number of active infections in the US is now up to 1,861,300 and up a modest +6500 in a day. Recording is slower over the holiday weekend. We are coming up to two weeks since lockdown rules eased so next week is likely to show record new infections. Brazil, Russia and India may soon be joined by Mexico as the worst-managed outbreak outside the US. Inside the US, California, Texas, Florida and Arizona are the main states where new infections are rife and Georgia is about to join that unfortunate club. The first-hit North East states all seem to have crushed their curves now, but opening up threatens those gains. A lot depends on social distancing during the holiday weekend.
In Australia, there have been 8255 cases now, another +254 since yesterday but 189 were recording an historic ship set in NSW so the net for the day is +65, mainly in Victoria. Their death count is still at 104 but their recovery rate has slipped back to under 89%. There are now 832 active cases in Australia (up +25 overnight).
The UST 10yr yield is little-changed at 0.67%. Their 2-10 curve is holding at +51 bps. Their 1-5 curve is unchanged at +14 bps, as is their 3m-10yr curve at +55 bps. The Aussie Govt 10yr yield is down -1 bp at 0.91%. The China Govt 10yr is up +3 bps at 2.93%. And the NZ Govt 10 yr yield is down -2 bps at 0.96%.
The gold price is little-changed overnight, down -US$1 to US$1,775/oz.
Oil prices have softened slightly today. They are now just over US$40/bbl in the US and the international price is just over US$42.50/bbl.
But the Kiwi dollar is firmer yet again, now just on 65.3 USc. That is a gain of more than +1c in a week. On the cross rates we are holding higher at 94.1 AUc and against the euro we are marginally firmer at 58.1 euro cents. That means our TWI-5 has risen to 70.2 and its strongest in more than four months.
The bitcoin price unchanged overnight, still at US$9,085. 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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