Here's our summary of key economic events over the weekend that affect New Zealand, with news pandemic risks have been replaced by climate risks in China.
But first in China, tax revenue is rising again, up +3.2% in June from the same month a year ago and ending a five month streak of declines. In May, the same data fell -10% so this is a healthy revival.
And the Chinese central bank has let its balance sheet shrink, with far fewer claims on it for monetary support. It shrank by -NZ$150 bln at June compared to the level it was at in December 2019. That is a -2% fall after growth in 2019 of +3%.
Meanwhile, Japan is making progress in getting some of its companies to shift manufacturing out of China based on rising strategic risks. 87 companies have qualified for Japanese support to make the move, and of course others are doing it on their own.
China is responding by sending 'survey ships' into Japanese waters and threatening to widen its nine-dash-line extra-territorial waters claim. This comes as the US makes a show of defending the rights of sea passage, but in fact is pulling back its support of traditional allies in the region.
Domestically, the floods in southern China are getting worse. The Three Gorges Dam is at capacity and more rain is forecast so downstream cities are being prepared for very major flooding. The emergency is spreading from the giant Yangtze River basin to the Yellow River basin. This is major event of global significance.
In Europe, they are trying to agree on a huge post-coronavirus economic recovery plan but it is tough going and they are now in an unscheduled third day of a testy summit in Brussels. Some member states (the North) say the proposed €750 bln package is too large and should come as loans, rather than the gifts/grants wanted by the South and East.
In the US, building permit levels in June, and new housing start data for the same month both came in pretty much as expected, up from the May levels but below the levels of the same month a year ago.
But consumer confidence is starting to waver and fall again, after a longer-than-expected positive run in June as pandemic lockdowns eased. But the new gravity of the situation is starting to dawn on increasing numbers of previous sceptics.
In five days the first of their pandemic support programs runs out and then increasing numbers of these programs start to expire. The US Congress now has only six weeks to come up with extensions or new support, but given Republican Senate reticence to act, the risks are growing sharply all Federal support may vanish.
The updated estimate for the American Q2-2020 economic change is coalescing at -35% from Q1-2020. But it is complicated somewhat because they are also to release revisions to all the data for the past year at the same time. The official report is due at the end of next week.
In Australia, they are struggling to figure out how to handle a resurgent pandemic. Decisions they are making there will impact New Zealand significantly and it seems likely they will decide they are just not up to achieving an 'elimination' strategy. If that is where they end up, the Trans Tasman bubble is toast. In fact, the risks of community transmission in New Zealand will rise.
And staying in Australia, the latest release of their Taxation Statistics shows that most landlords were running losing businesses with more expenses claimed than rents earned. "Negative gearing" is their tax rort game, much like tax-free capital gains are in New Zealand.
The latest compilation of COVID-19 data is here. The global tally is 14,356,000 and that is up +155,000 since this time yesterday. Global deaths reported now exceed 603,000 (+3,000).
A quarter of all reported cases globally are in the US, which is up +63,200 from this time yesterday to 3,833,300. US deaths now exceed 143,000 and a death rate of 432/mln (+3/mln). US deaths are rising, now running at nearly 1000 per day, after falling from April to June as the north east states got their initial burst under control. New deaths in Arizona, Florida, Texas and California are driving the upturn. The number of active infections in the US is now up +30,000 in a day to 1,944.200. US data may become unreliable as the White House has instructed hospitals not to send details to the official Center for Disease Control, rather to it and it will be the National Guard that controls the US tally.
In Australia, there have now been 11,802 cases reported, another +363 since this time yesterday, and still concentrated in Victoria but growing in NSW in Sydney's suburbs. Their death count is up to 122 (+6) and 29 people are now in ICU (-3). Their recovery rate has slipped back further to 70%. There are now 3,408 active cases in Australia (up +111 in a day).
The UST 10yr yield is -1 bp softer at 0.62% from where we left it last week. Their 2-10 curve is at +48 bps. Their 1-5 curve is at +13 bps, and their 3m-10yr curve at +50 bps. The Aussie Govt 10yr yield is down -1 bp to 0.88%. The China Govt 10yr is unchanged at 3.05%. And the NZ Govt 10 yr yield is holding lower at 0.90% which is a retreat of -8 bps in a week.
The gold price will start this week at US$1,810/oz which is a small net +US$12 gain over the past week.
Oil prices are a little softer again to start the week. They are now just under US$40.50/bbl in the US and the international price is just under US$43/bbl. Both levels are almost exactly where they were a week ago.
And the Kiwi dollar will start this week at just on 65.6 USc and little-changed in a week. We are also unchanged at 93.7 AUc. Against the euro we stable at 57.4 euro cents. That means our TWI-5 is now at 69.9 and broadly the level for the past two weeks ago.
The bitcoin price is unchanged at US$9,164 but is almost a -1% dip for the week. 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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