Here's our summary of key economic events over the weekend that affect New Zealand, with news major write-downs are ahead for commercial property portfolios.
But first in China, they have started to withdraw the emergency monetary policies introduced to offset the impact of the coronavirus outbreak as their economy continues to recover. Given the stronger-than-expected economic rebound in the second quarter, and with concerns looming of creating excess debt and financial bubbles, the need for easy cheap debt is easing now.
But their rebound is still threatened by wild weather in July. They are bracing for torrential downpours and hurricane-force winds across large parts of the country in the coming week, and 93 major rivers are still above emergency warning levels. There are no new updates on risks to major river dams but the flooding is spreading.
Not every Asian country is recovering well. For example, Thailand has suffered a massive fall in trade in June, with imports down -18% year-on-year, and exports down -23% on the same basis and a worse result than in May. Still, they managed to keep a positive trade balance despite the very sharp reversals.
Singapore's rebound is disappointing, with industrial production in June not showing the gains analysts were expecting.
In the US, early indications of factory and service sector activity in many major economies were released over the weekend. American firms showed a stabilisation of business activity at the start of the third quarter, with the contraction in service sector output slowing and manufacturers signalling a modest upturn in production. But the rate of decline of new orders gathered steam. And a feature of this report was the rise in inflation in both input and output prices. The combination of the pandemic and trade tensions seems to be working to make American goods less competitive, and quite quickly.
The sales of newly-built American single family homes were back to pre-pandemic levels in June and +7% higher than the same month in 2019. It was a bounce that caught up some of the very sharp falls in April and May.
The retreat in the US Fed's balance sheet has stopped, and the total is unchanged now for the past two weeks. It remains under US$7 tln however although it did start at US$4.2 tln at the beginning of 2020.
[And staying in the US, a crude and disrespectful insult played out in an amazing way in their Congress. Start by reading this. Then watch this. And finally this. You can see from this what she is going to be an international megastar for a long time.]
In the EU, business activity is rising in July, and strongly too, at the best rate since February. Orders in both their factory and service sectors are rising, but inflation isn't. France led the upturn, but Germany joined in too.
In Australia, the easing of lockdowns prior to the latest re-imposition saw a very strong rebound in economic activity. But events may have overshadowed this impressive result. And Australian companies are reporting earnings down -20% in this cycle. Part of this is because CBD office towers are going to need to be revalued sharply lower. Citibank analysts said by -15% when they reported in June, Goldman Sach's July report says by -30%. The Sydney CBD now has 194,000 sq m excess capacity, Melbourne had 75,000 sq m - and that was before the latest lockdowns. Commercial property, especially retail and office, are going to suffer massively and property fund portfolios will take major hits.
The latest compilation of COVID-19 data is here. The global tally is 16,118,000 and that is up +529,000 since this time Saturday. Global deaths reported now exceed 645,000 (+10,000).
A quarter of all reported cases globally are in the US, which is up +136,100 from this time Saturday to 4,341,600. It took the US 98 days to reach the first million cases. 2 million cases came in 44 days. 3 million cases in 26 days, and 4 million cases in just 15 days. It will just be a week of so at this rate for the 5th million, US deaths now just marginally under 150,000 and a death rate of 452/mln (+5/mln) with the expected rise now kicking in to well over +1000/day as their lack of personal responsibility starts to have consequences. The number of active infections in the US is up +55,000 in two days to 2,119,400.
In Australia, there have now been 14,403 cases reported, another +808 since this time Saturday, and still concentrated in Victoria but growing in NSW in Sydney's suburbs. Their death count is up to 155 (+16 in two days). Their recovery rate has slipped back further to under 64%. There are now 5078 active cases in Australia (up +551 in two days) and almost all are community transfer.
The UST 10yr yield is little-changed at just under 0.59% and still near its three month low. Their 2-10 curve is unchanged at +44 bps. Their 1-5 curve is also unchanged at +13 bps, and their 3m-10yr curve is marginally firmer at just under +50 bps. The Aussie Govt 10yr yield is unchanged as well at 0.88%. The China Govt 10yr is unchanged at 2.90%. The NZ Govt 10 yr yield is also stable at 0.83%.
The gold price is at a record closing high of US$1,901/oz. (The record intra-day price is US$1,925/oz. In New Zealand dollars, the record high price for gold was reached in mid-May.) It has taken gold nearly ten years to return to these levels, and on an after-inflation basis gold would now need to be US$2,093/oz just to be even with inflation - although in New Zealand dollars it has managed to beat inflation, but not because of the intrinsic price of the yellow metal, but because of currency changes that applied to many assets.
Oil prices are unchanged today. They are just above just above US$41/bbl in the US and the international price is just above US$43/bbl.
And the Kiwi dollar will start today marginally firmer at 66.5 USc. Against the Australian dollar we are now also firmish at 93.6 AUc. Against the euro we unchanged at 57 euro cents. That means our TWI-5 has at 70.1 and still in the range it has found itself over the past two months.
The bitcoin price has risen sharply over the weekend, up +3.5% to US$9,914. 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 ».