Here's our summary of key economic events overnight that affect New Zealand, with news investors are still looking at the horizon and see the old normal returning.
Wall Street is up in afternoon trading today with the S&P500 rising +0.7% so far, mainly on the news of promising COVID-19 vaccine trials. Second quarter earnings are expected to be cut by at nearly half, but investors don't seem to care (even if CEOs do). They are still banking of a full rebound in earnings. Overnight, European markets gains a similar amount (although London dropped -0.5%). Yesterday, it was Shanghai which starred again, up a hefty +3.1% as the home team doubled down. That contrasted with only minor daily movements in both Hong Kong and Tokyo. The ASX200 fell -0.5% and the NZX50 Capital Index slipped -0.3%.
The Shanghai result was partly driven by the listing news of Jack Ma's Ant Group, the operator of the giant Alipay payments network.
One of the reasons the Japanese stock market missed the party was because their exports suffered a double-digit decline for the fourth month in a row in June as the pandemic took a heavy toll on global demand, reinforcing expectations that their economy has sunk into its deepest recession in decades. Exports were down -26% in June from the same month a year ago. Imports were down -14%.
In contrast, Taiwan has reported a strong trade recovery in June with export orders, up +6.5% from the same month in 2019 and far above what was expected, and was driven by strong electronics exports to the US, Europe, and surprisingly China. It is their best result in more than a year.
Singapore has announced that more than 140,000 employers, with 1.9 million local employees, will receive payouts starting next week totaling over NZ$4.4 bln under their jobs support scheme, or NZ$2300 per employee. There are about 400,000 registered businesses in Singapore in a population of 5.9 mln. Their employed labour force is 3.8 mln. (New Zealand has 547,000 registered businesses in a population of 5 mln. Our employed labour force is 2.6 mln.)
In Hong Kong, the focus is on their labour market today, and their jobless rate rose to 6.2% although that was not quite the deterioration analysts were bracing for. (We should also note that Hong Kong has an unusually low participation rate of under 60%.)
In Brussels, EU leaders still don't have a recovery program deal.
In Australia later today, they will announce how they are going to extend their pandemic support programs and early indications are they will be cut back from September.
The latest compilation of COVID-19 data is here. The global tally is 14,567,000 and that is up +211,000 since this time yesterday. Global deaths reported now exceed 607,000 (+4,000).
A quarter of all reported cases globally are in the US, which is up +95,300 from this time yesterday to 3,928,600. US deaths now exceed 143,500 and a death rate of 434/mln (+1/mln). The number of active infections in the US is now up +27,000 in a day to 1,970,900.
In Australia, there have now been 12,069 cases reported, another +267 since this time yesterday, and still concentrated in Victoria but growing in NSW in Sydney's suburbs. Their death count is up to 123 (+1) and 33 people are now in ICU (+4). Their recovery rate has slipped back further to under 70%. There are now 3,554 active cases in Australia (up +146 in a day).
The UST 10yr yield is unchanged at 0.62%. Their 2-10 curve is also little-different at +47 bps. Their 1-5 curve is still at +14 bps, and their 3m-10yr curve still at +51 bps. The Aussie Govt 10yr yield is unchanged at 0.88%. But the China Govt 10yr is down -7 bps at 2.97%. The NZ Govt 10 yr yield is holding at 0.89%.
The gold price will start today marginally firmer at US$1,816/oz which is a small net +US$6 gain overnight.
Oil prices are again little changed. They are now just over US$40.50/bbl in the US and the international price is just over US$43/bbl.
And the Kiwi dollar will start today marginally firmer at 65.7 USc. We are unchanged at 93.7 AUc. Against the euro we also stable at 57.5 euro cents. That means our TWI-5 is now at 70 and broadly the level for the past two weeks ago.
The bitcoin price is little-changed at US$9,205. 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
104 Comments
@blobbles , indeed , As David Chaston's leader says 'investors still chasing the old normal ' .
I dont understand how any rational man can be punting on the stock market right now , but then again the local TAB in Albany always seems busy when I walk past it, people chasing rainbows , or something , so I guess I am not on the risk takers Bell curve .
I either have my own separate Bell curve , or I am an outlier of no consequence
I'm not sure property of any description is a hedge against anything.
In The Good Times, it's good (if you see price rises over productivity increases as good). In Bad Times - well, anyone who's ever tried to sell property into a Bad Times market is probably aware that the term 'hedge' doesn't apply. Just finding a willing buyer ( who has a willing lender!) at a semi-decent price is an art form in itself!
Property is best bought in the Bad Times and sold into The Good Times. That's the opposite of a hedge.
At best, property is part of the age-old 'mix'; 1/3 investment in property, cash and shares. But that assumes that one will fall and the others rise, and that is not guaranteed either! So, yes - When have things ever been certain.
They took a beating the other day and had to let a few million OZ go, so ow down on the 20% stake hold. If they continue to spoof they will loose more and not be able to play it as before due to their decreased holdings.
When the Robinhood gamblers get wind of that in mass, it will make some serious gains.
Lookiing like the days of JPM silver price spoofing are at an end. It is up 3% today and close to $20USD an Oz. The price difference between spot price and physical has enabled people to buy a contract have it delivered and sell it straight away for an extra few bucks per Oz at very little to no risk, easy money.
https://www.ainsliebullion.com.au/products/silver-bullion/tabid/85/cat/…
Perth Mint still pumping out coins and 1kg bars and it cheaper than the above, but freight from WA will be a bit more.
I'm seeing the paper market collapsing at some stage in my life.
When the big boys can take out a Comex order and take delivery a month later and sell the next day for a few bucks more per Oz, it is already broken.
5000oz minimum contract, and sell for $5 to $8 more per Oz a $25k to $40k win when there isn't much else out there that is returning bucks. They are just buying one contract.
Hot off the press from NZ Mint.
1kg Silver ABC bar - $1109 per kg (2-3week lead time)
You're probably best to go through Perth Mint given those costs:
http://www.perthmintbullion.com/au/Buy-Silver-Bars/1kg-Cast.aspx?produc…
On the basis that it costs you $50 freight to NZ (which it won't) you'll still end up $50 better off than going through NZ Mint.
3-5 working days for delivery and its insured.
Cross country will be fine with that value if that is your concern.
What I didn't realise is when coins are taken over the border they are recognised at denomination value. Ie - you can take 10,000 silver coins over the border before triggering the $10,000 border declaration as they have a denomination of $1 each, albeit they cost about $40 each.
Thats 283kg of silver though.....
If its minted as a coin with a denomination its deemed legal tender, not PMs, given the country that issued that coin is obligated to redeem it for that value if you show up at their Reserve Bank (although you'd be stupid to do so.)
Silver Eagles are $1, Maple Leafs $5 for example.
MB - Good point on a house being the most valuable asset most people leave behind ! I can remember seeing that as a youngster, it was in that moment I decided to buy property as soon as I could and lots of it ! Thank God I did and ignored the DGM'S at the time saying the same stuff as they do today, 40 years ago !
Isn't there an Italian family who have managed to keep their wealth for 500 years who swear by 1/3 property, 1/3 gold, and 1/3 fine art? Apparently oil paintings are highly portable, you just cut them out of the frame and roll them up. It is an interesting subject, though, and the dangers don't seem to change with time.
Singapore is always an interesting comparison; the population of NZ squeezed into Auckland's footprint, but positioned at the junction of so many of the world's shipping trade routes, and virtually on the way from any place in one half of the world to anywhere in the other half of the world. Those last two bits deny NZ the ability to replicate them.
There are hidden consequences to their success that makes copying them problematic, I agree. But their innovative leadership at the price of a relatively authoritarian Government can still be looked at as an example. Personally their population density is a problem to me. I prefer our wide open spaces, and like to go bush on occasion. This can't be done in Singapore.
Yes authoritarian. The dismantling of the “old town” into high rises, stamped out corruption with the informant laws, and citizens you are not, Chinese,Malay,Indian, Thai et al you are Singaporean settled a lot of ethnicity questions. I was there quite a bit in the 70/80’s it was transforming and growing rapidly. Still enjoy it very much as a destination, but it is rather sterile compared to my earlier times.
Countries in the Lower Gulf have are well-placed in the world's most important trade routes and have also enjoyed access to skilled migration. However, all this combined with all that oil money hasn't earned them the powerful status that Singapore has gained within just 3 generations.
A lot of credit should be given to their highly meritocratic leadership - a system that has set them up for success. Their current PM has achieved more in his career than our last 3 (including the current one) leader have combined.
We've had a good run in terms of investor and expat attention for the better part of a decade and all our leaders have envisioned for us is to bring low-value workers to help us sell our bulk agricultural produce overseas and serve lattes to foreign tourists.
Fair point but even Ardern and Shaw passed a regulation banning offshore O&G exploration and promised the worst-affected region with millions in tourism investments plus a $100k for a business case to explore hydrogen development opportunities.
We keep electing leaders on brand appeal and wonder why they neither have the intellectual capacity to understand the complexities on the job nor the political might to make the tough decisions. Imagine a world where we chose our STEM workers
A bit part of the singapore model involves large quantities of cheap migrant labour either crossing the border everyday from Malaysia or living in domitories conditions that we would regard as unacceptable. Singapore is a first world country and a third world country, depending who you are.
Not something we can replicate here, even if we made it legal.
I never realised Aussie banks are significant USD lenders via FX Swaps on the international stage. View graphic data page 3 (5of 9) PDF
It's all irrational exuberance. It won't last.
I mentioned the other day that some developers are now finding it extremely hard to get development funding. I expect we will see a significant slowdown in that sector by year's end.
Given what I have heard, I would be interested to hear whether investors are finding it harder. I think Yvil said something to that effect.
Lots of developments underway in Wellington all of a sudden, but all 48sqm apartment/townhouse gigs. A couple labeled 'dual key investment' which sees you owning a two-roomed box and you lease out a connected shoebox to some poor soul... or your aging parents if living in a shoebox is their thing (in fairness, in some cultures this is ideal).
Problem is, these boxes are not suited to couples looking to have children or move forward with their lives and away from wining and dining every second night, but they're priced so highly that only people in this stage of their lives (secure, thinking about having kids etc.) should be purchasing them. Or investors, if they can find the lending.
I suspect they are being purchased by people whom are accustomed to raising families in such confined conditions, and thus the picturesque kiwi kid's upbringing in a back yard with a Warehouse soccer goal set and marmite sandwiches is slowly fading away.
Major NZ banks wont lend on Apts less than 50m2 (except ASB on occasions). My daughter and hubbie bought a nice freehold 50m2 1br/1 bathroom Apt with 2 carparks up Grafton hill, Harbour views, view can't be built out, well built & managed, established building. ASB financed.
Is the government hoarding cash collected from taxes and net bond and TBill issuance in it's account (Crown settlement account) at the RBNZ, for a rainy day? If so is this not sterlising bond issuance proceeds which implies monetary contraction?
Disclosure: Treasury claims NZ government issued $24.405 billion net new debt for the 3 months ending 30 June 2020.
Monetary Contraction! Sacré bleu....
"Contractionary monetary policy is driven by increases in the various base interest rates controlled by modern central banks or other means producing growth in the money supply. The goal is to reduce... the amount of active money circulating in the economy. It also aims to quell unsustainable speculation and capital investment that previous expansionary policies may have triggered."
Good on you BB
Baby boomers, aged 55 and over, were showing the most confidence, with applications running at 120 per cent of pre-Covid levels,
https://www.stuff.co.nz/business/money/122129451/whos-borrowing-money-b…
From the article:
“I don’t have to pay cash, and I can afford these six weekly payments. [...] I’m a bit of a budgeter. I’ve always budgeted.”
I know a few people like this. Never saving anything, living from paycheck to paycheck. And when pay comes a day or two late due to the accountant messing up something, they're suddenly in the negative and paying penalties on all their missed payments.
No wonder they are rioting. The political and bureaucratic elite do seem to be playing with fire. The Democrats want power and wealth via bigger government transfers to themselves. The Republicans want power and wealth by smaller government enabling bigger private sector transfers to themselves. They all want more warfare. The average American is being labelled by tribe, as the elites pursue their divide and rule strategies. The people elect a non politician in a vain attempt to "drain the swamp". Does this end with the US becoming like Argentina or like Yugoslavia?
https://www.armstrongeconomics.com/armstrongeconomics101/economics/a-wa…
No a dismantling of the Union a la Yugoslavia would mean virtual civil war again. If I remember correctly the constitution allowed any one state to secede which caused 1861, Lincoln and his government to actually be in conflict. The constitution may have been amended subsequently.
It's like the Civil War origins all over again. After reading a couple of recent articles, I came to realise my education was wanting. While i was correctly taught that the war was about State Government authority v Federal Government authority, what was not taught at that time was that a big part of the issue was the right to own slaves. This was interesting as many 'Northern' landowners as well as supposed 'fathers of the nation' also owned slaves, so the issue was far from cut and dried, and just boiled down to who had the authority. In this case it is not even clear that the 'protesters' that are being arrested are committing a federal crime. So this could get really interesting. This will need to go all the way to the Supreme Court to get a robust ruling, but if it goes against them, will the feds back off?
An interesting 'about turn' by National's Simon Bridges;
https://www.newsroom.co.nz/national-backs-safe-haven-visas-for-hong-kon…
I see you mention investors again. Yes we are still out here. Yesterday I posted off 23 notices of rent increases for my residential tenancies. MBIE actually sent out an email to landlords advising them to do it this week in order to get the increases in place the same week the price freeze expires. The six month price freeze has forced me to double the planned rent increases. Two tenants chose to pay the notified cancelled April increase so of course they will be rewarded with no increase for them for 18 months.
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.