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Rent stress rises sharply in the US; non-farm payrolls recovery slows; China's reserves expand, China and Taiwan report surging trade surpluses; Victoria struggles; UST 10yr yield at 0.57%; oil soft, gold falls; NZ$1 = 66 USc; TWI-5 = 69.2

Rent stress rises sharply in the US; non-farm payrolls recovery slows; China's reserves expand, China and Taiwan report surging trade surpluses; Victoria struggles; UST 10yr yield at 0.57%; oil soft, gold falls; NZ$1 = 66 USc; TWI-5 = 69.2
Farewell Spit, top of the South Island
Image sourced from Shutterstock.com

Here's our summary of key economic events overnight that affect New Zealand, with news the bounceback data is becoming weaker.

But first in the US, renters are in substantial trouble. With the end of the federal moratorium on evictions that expired on July 31 and the end of the US$600/week boost to jobless benefits, a recent official survey shows just over a third of all renters had "little or no confidence" they can make their August rent payment. In July 27% missed a rent or mortgage payment, so the issue is getting much worse quite quickly.

The US non-farm payrolls gained +1.76 mln new jobs in July in a further bounceback from the -22 mln jobs lost in March and April. +301,000 of the July gain was from Government jobs which was an unexpected boost. But their participation rate remained at a low 61.4%. These July improvements represent a slowing of the rebound, undermined somewhat by the rising pandemic second wave.

Canada also reported its July jobs data and those rose +0.42 mln. Their participation rate is an improving 64.3%.

China has reported its foreign exchange reserves have inched higher again in US dollars, to US$3.15 tln in July. It's its fourth consecutive monthly rise.

And China has reported a strong trade surplus in July. Imports were down -1.2% year-on-year while exports were up +7.2% on that same basis. The resulting surplus of +US62.3 bln for the month was far better than the +US$42 bln expected. Their July surplus involves a stunning +$32.5 bln with the USA. After all the time and energy the America First president invested in this issue, his citizens just keep on buying Chinese goods at an increasing rate, despite the tariffs. China ran a -US$0.5 bln trade deficit with New Zealand in the month.

Taiwan has reported a similar trade trend for July with exports rising (+0.4%) and imports falling (-6.8%) so it has a fatter trade surplus of +US$5.4 bln and proportionately more than China itself.

In Australia, the tension between public health and economic health is playing out in a brutal fashion in Victoria (and inflamed by the Murdoch press). Those on the economic side seem to be fiercely uncomfortable that public health priorities should have precedence. It is unclear whether Melbourne has the discipline to 'stay at home' to beat the pandemic there. The odd thing is that the rest of Australia wants the health risk gone and Victoria to defeat COVID-19, but Victorian business interests are resisting their participation. And you know if the situation was reversed, they would have a completely different view.

Joblessness could rise to more than 10% if the virus pushes other states outside Victoria into Stage 3 and 4 lockdowns the Reserve Bank of Australia has forecast in their latest Monetary Policy Statement. And they warn it will take a long time to recover, pushing them into an extended recession.

On Wall Street today, the S&P500 is unchanged so far in afternoon trade. But for the week it is heading for a +2% gain raising the market cap by +US$580 bln and taking the 2020 market cap rise to almost +US$900 bln. Overnight, European markets were up modestly. Yesterday, Shanghai ended down -1% on the day and capping the weekly rise at +1.3%. Hong Kong was down -1.6% yesterday and taking the weekly shift to a small -0.3% retreat. Tokyo ended the week with a -0.4% decline on Friday, but a weekly gain of +2.9%. The ASX200 fell -0.6% yesterday, so it is a weekly rise of just +1.3%. The NZX50 Capital Index ended yesterday down a full -1.0% and driving a weekly loss of -0.7%.

The latest global compilation of COVID-19 data is here. The global tally is 19,177,000 and that is up +301,000 since this time yesterday. Global deaths reported now exceed 716,000 (+7,000).

A quarter of all reported cases globally are in the US, which is up 55,100 from this time yesterday to 5,054,800. US deaths are now just over 163,200 and a death rate of 493/mln (+1/mln). And the net number of people actively infected in the US rose overnight to 2,308,500, so still more new infections than recoveries.

In Australia, there have now been 20,272 COVID-19 cases reported, another 410 overnight, and still very much concentrated in Victoria. There were another +11 in Sydney however and it is a worry that this growth is still there. Plus there were a couple in South Australia too. Their death count is up to 266 (+11). Their recovery rate is still just under 56%. There are now 8691 active cases in Australia (+196) and almost all are community transfer.

The UST 10yr yield is firm at 0.57% and almost a +3 bps rise. Their 2-10 curve is marginally firmer at +43 bps. And their 1-5 curve is similar at +10 bps, while their 3m-10yr curve is also similar at +47 bps. The Aussie Govt 10yr yield is unchanged as well at 0.85%. The China Govt 10yr is up slightly at 3.00%. And the NZ Govt 10 yr yield is little-changed at just over 0.77%.

The gold price is lower today, down -US$30 to US$2031/oz. But this is just a correction in a week where it reached a record high of US$2071 and for the week the rise has been +3.3%. The silver price has also slipped today but is up proportionately more for the week, up +17% in seven days..

Oil prices are marginally softer today. They are now just under US$41.50/bbl in the US and the international price is now just under US$44.50/bbl.

And the Kiwi dollar has fallen rather sharply overnight against the US currency and is down -¾c to just under 66 USc. Against the Australian dollar we are unchanged at 92.3 AUc. Against the euro we are down slightly at 56 euro cents. That means our TWI-5 is now a softer at 69.2 and also lower than where we were at a week ago.

The bitcoin price is also softer, down -3.6% today from yesterday at US$11,428. But that is just a very marginal rise 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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62 Comments

10
up

And so it begins.
"Academics found Public Health England's methods meant ministers count victims as anyone who died after ever testing positive for Covid-19 — even if they were hit by a bus after beating the disease months later.

It would've meant that, technically, no-one could ever recover from the virus and all 265,000 of England's confirmed patients would eventually have had their deaths attributed to the disease. "
https://www.dailymail.co.uk/news/article-8599213/amp/Thousands-Covid-19-...

China. Inner Mongolia region, one further bubonic death, eating rodents. Jiangsu province seven deaths Bunyavirus, by ticks. Whether the CCP cares to admit it or not, this nation has issues beyond the pale, with the health and hygiene of both environment and people. What are they going to inflict on the rest of the world next then?

Bubonic plague has literally been around for centuries and is found in many rodent populations around he world. Most human populations have resistance to it and it is easily treated by penicillin. Nothing to be concerned about.

Sure. Best not to eat rodents then! And then ask, why do you need to? The issue is not the disease(s) itself, it is the cause.

They eat rats due to a lack of cheap protein in their diet.
NZ has a possum problem that costs the country hundreds of millions per year.
Possum meat is high in omega nutrients and very healthy.
Export opportunity as well as saving NZ hundreds of millions. The venison market started very much the same way.

There it is. Granny Clampett’s favoured flavoured recipe. “That’s the thing about salted down possum, just as good the second day.”

https://www.nzgeo.com/stories/making-possums-pay/

Promoting possum products would have be hugely beneficial to controling them, providing employment, export returns etc. DoC disagrees but they would as it would slash their budget.

Oh, I see the point you're making now.

Bubonic plague"easily treated by penicillin", maybe something to be concerned about. Penicillin is not the recommended treatment for bubonic plague, nor is the plague easily treated if not treated early. "Go hard go early"

Developed markets have self created, well established economic issues that need addressing, irrespective of China's actions.

Calm down! From same article:

"One of the leading experts who uncovered the flaw told MailOnline his 'best guess' was that more than 1,000 people have had their deaths wrongly recorded as caused by Covid-19."

Given total deaths recorded so far are over 41,000 that is a less than 3% overstatement in numbers.

Covid 19 is real and is sadly killing alot of people.

Daughter living in UK has two friends who had family members die who had both tested negative for covid- one in a car crash (not at fault) - recorded as dying of covid. In both cases the families had to really battle to get the death certificates changed. Covid as cause of death, also changes the processes for funeral directors. It makes it more stressful for families.

Also in that report you quote from is 'The blunder could see up to 4,000 deaths removed from England's official toll of 41,749, according to reports." That is almost 10% not your 3%

"The blunder could see up to 4,000 deaths removed from England's official toll of 41,749, according to reports."

The operative phrase being "according to reports" i.e. non-attributable, a well known journalistic technique for slanting a story in the direction you or your editor wants it to lean.

The figure I quote of 1,000 deaths is from "one of the experts who discovered the flaw" i.e. attributable.

"I do know that other doctors put down Covid-19 on anyone who died from early March onwards. I didn’t. What can be made of the statistics created from data like these? And does it matter?

It matters greatly for two main reasons. First, if we vastly overestimate deaths from Covid-19, we will greatly underestimate the harm caused by the lockdown. This issue was looked at in a recent article published in the BMJ, The British Medical Journal. It stated: “Only a third of the excess deaths seen in the community in England and Wales can be explained by Covid-19.

...David Spiegelhalter, chair of the Winton Centre for Risk and Evidence Communication at the University of Cambridge, said that Covid-19 did not explain the high number of deaths taking place in the community.”

“At a briefing hosted by the Science Media Centre on May 12 he explained that, over the past five weeks, care homes and other community settings had had to deal with a ‘staggering burden’ of 30,000 more deaths than would normally be expected, as patients were moved out of hospitals that were anticipating high demand for beds."
https://www.rt.com/op-ed/490006-death-certificates-covid-19-do-not-trust/

The cost of lockdowns - more harmful than COVID-19. Put mitigations in place - like protect rest homes but don't lock down. "However, when morbidity is taken into account, the estimates for the health impacts from a lockdown and lockdown induced recession are greater in terms of QALYs than the direct COVID-19 deaths."
https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

And there we get what Profile is about. Trolling, on behalf.

My uncle died of Covid after UK government policy had him moved from hospital to a care home where deaths were from Covid were not registered in the national figure , the FT established a more accurate figure being 64,000. But even the false figure leaves the UK as one of the worlds worst Covid managed countries .

A better measure was one carried out by the FT , comparing average deaths to the year before , which provided a figure of around 64000 . The UK also excluded deaths from care homes so sadly not enjoying the same degree of success that NZ is , 100 days Covid free , we have a lot to be thankful for .

Good old Swiss Central bank can show us a thing or two
https://wolfstreet.com/2020/08/05/top-40-us-stocks-at-the-swiss-national...

Doesn't surprise me, the Swiss have been "money and gold shufflers" for a very long time.

The Swiss population owns 920 tonnes in private gold, next to 1,040 tonnes in official gold reserves. In total, Switzerland likely has the highest amount of gold per capita in the world.

The main motivation for the Swiss to save in physical gold is as a long-term investment (53%), followed by security reasons (39%), and financial stability (34%). The study shows that in 2019 the Swiss invested 1.42 billion CHF in gold, which equals to a gold savings rate of 11.6%

https://www.voimagold.com/insight/switzerland-gold-savings-rate-12?fbcli...

1kg silver selling for $1600 on TM. That is a 60% increase on a few weeks ago.
Crazy.

for all you with high Cholesterol, time to chill

https://drmalcolmkendrick.org/2020/08/05/cholesterol-lowering-has-no-imp...

It's weight that's a risk

It is indeed bizarre - but what are their other options when you can't get blood out of a stone?

Financial chicanery where the proletariat are laughing all the way to the bank. Outright debt forgiveness must be on the horizon.

I think it's important to think "what's next?".

Because I suspect all the debt is now too big to fail. As reserve banks are prepared to do "anything it takes" and economic deterioration is here to stay for the next few years, the printing has only just begun. I suspect we will have extensions and expansions of all debt relief programs, the recognition of delinquent loans as performing is just the latest step. But it certainly won't be the last.

I am increasingly convinced the only way out now is a wholesale debt relief/jubilee through a mass debt relief/money printing splurge. And as soon as one Western country does it, the others will almost certainly follow. I envision this will come as a government gift of say 100k to every adult/50k for youths/20k for kids with the money credited to loans/credit cards/mortgages for adults who have them, for those that don't, it goes into their bank account. For youths/children in NZ, this could be put into either a special IRD "future tax" fund (diminishing as they start paying taxes or being used as a student loan kick start) or their kiwisaver.

I am so convinced of this now, that I would actually recommend buying property. No government will tolerate a drop in house prices to the extent it will cause negative equity situations, so nothing >10%. They can see the destruction that this caused around the world (Ireland etc) and will print money instead of allowing it to happen. That's part of their "anything it takes" mantra and under COVID relief programs, they have the license to do this from the public. Money will be printed to prop it all up and if they are smart, they will simply write it off at the central bank or Treasury level. Unsure about how the mechanics would work, but there is precedent. https://www.newsroom.co.nz/the-case-for-a-modern-debt-jubilee

10
up

Thanks for the link. Interesting reading. I have no faith in this Government and its ability to think on its feet. This will be dismissed or ignored by them as it doesn’t fit the narrative.

What narrative is that Exput?

No brainer. Anything that justifies QE and the RBNZ getting cozier with the govt

Im thinking it is the narrative that supports all the decisions that have been made, in regards to the "projections" made , relating to Covid 19 ....
Seems to be the normal political/bureaucratic thing to do..
This becomes more important than the truth ..? ( which hindsight can reveal .? )

A different subject but still health, put this article together with some of the ones above. They all show just how little we know and how much is assumed and dependant on money, even in a scientific discipline .

Very interesting.
My brother just got back to the UK after two weeks in Sweden with his Swedish wife and kids.
Said it was pretty much running as per normal.
I can't help but think the low rates of obesity in places like Sweden and Japan are a big influence on their covid outcomes.

Sweden still have a higher death rate per million than the USA (and Brazil). They averaged 300-400 new cases per day last week.

https://www.worldometers.info/coronavirus/country/sweden/

I worry that the cost of producing primary products in this country makes us longer competitive. meanwhile councils are still climbing all over us.

"Chinese milk powder imports fell short of last year’s substantial volumes, but they are still higher than most years. New Zealand accounts for the lion’s share of China’s imports, but last month they ceded a noticeable share of the skim milk powder (SMP) market to the U.S. and several European nations. U.S. SMP is the cheapest in the world, and it is becoming even more competitive as the dollar weakens. But domestic demand is worsening. Both spot milk and WPC 34% are cheap, and they are edging out nonfat dry milk (NDM) at the margins. This week CME spot NDM slipped 1.25ȼ to 97.75ȼ.'

Dairy underpins all beside it.
This coming year contracts for small seeds are in Flux, the over build south of Auckland has brought havic south round potatoes.
Cereal prices are same as 20 years ago.

I can hire a semi truck in the States for $800 US$ a day, and that's is expensive California. This year I tried to bring some cattle up from way down south and they wanted 8k one way. That's about 12 hours plus ferry from there to here.

Yep the margins on primary allied services are eye-watering.

As an agricultural contractor I strongly disagree. It's very cut throat and unfortunately dog eat dog. As a consequence margins are poor. And the farmer tends too win.
Because no one can afford to go farming anymore (unless they are spoon fed into it) , thanks to easily gotten machinery finance they go contracting instead.

I agree with you, the costs come from central and local government, running machinery is very competitive and none of my contracting friends have made money, except the chemical applicator one. Many farmers are also very poor payers, I'm still waiting for payment for some hay sold months ago.

When do you get to the stage "bugger it" and try something else? As much as I enjoy your rural posts it does sound like you are running against the tide most days?

im fighting it, I will have to get positive. Got rain last night, a welcome 5mm, with these warm soil temperatures things should really start to move.

Here is a real Minister of Agriculture.
He is just in Ausralia.

https://youtu.be/gvavnw7BfvY
Sky news

Compare and contrast to the the bode we got here. smh!

Here both Nat and Labour want to widen the roads in rural areas to get more people out there.

$4500 to transport 54m3 of shop stock 160kms from Auckland. The container from China was cheaper.

Reserve Bank of Australia has forecast in their latest Monetary Policy Statement. And they warn it will take a long time to recover, pushing them into an extended recession.

“First, it [deflation at the ZLB] drives up the real return on money and will lead to negative net investment. Second, when the zero nominal interest rate constraint binds, the opportunity cost of money to [sic] becomes negative, leading to a change in the nature of currency. The natural response is a flight to quality, in this case cash or other government liabilities, that puts the banking system at risk.”

Paramount liquidity preferences, in other words, expressed right where you’d think. Link

The RBA board commented:

The Board also reaffirmed the importance of the longstanding principle of separating monetary policy from the financing of government. This principle has served Australia and other nations well. Australian governments are currently able to fund themselves at historically low interest rates and have retained ready access to capital markets. Monetary financing of budget deficits is not an option under consideration in Australia.

Hmmmm. - Japan’s Bonds Hold Above 0% Even as More Debt Goes Negative

I highly recommend readers visit pages 75-77 (79-81 of 104 PDF): "Box D: Recent Growth in the Money Supply and Deposits" embedded in the RBA's latest Monetary Policy Statement

Many misconceptions proliferating on this website are addressed.

Who comprises the Private (Non Bank) Sector? Are these what is known as Primary Dealers?

I've long said it doesn't matter really who spends and consumes, as long as there is consumption. But I take it what you outline is a different process to the QE asset swap one?

Who comprises the Private (Non Bank) Sector
Superannuation funds, Investment funds, bond ETFs, wealthy investors.

But I take it what you outline is a different process to the QE asset swap one?
Not at all. From the article: Section entitled - The Reserve Bank’s purchases of government bonds have created deposits

These bonds were purchased by the Reserve Bank from a panel of commercial banks via auction, and were paid for with newly created money credited into banks’Exchange Settlement Accounts (these balances do not count as deposits, as they are not held with the private banking sector).
Some of these bonds sold by commercial banks would have been purchased from non bank investors, generating a flow of funds into non-bank investors’ deposit accounts.[5]

[5] In the case where the Reserve Bank buys bonds that were not on-sold to banks from non-bank investors, no new deposits are created.

Clearly, banks swap fixed interest rate government bonds for 'newly created' floating interest rate RBNZ debt (money), until the bonds are sold or redeemed.

I read this Aud but not sure what misconceptions have been addressed.

Maybe, it's not for your edification.

covid Response, life imitating art.
2 years quarantine, might as well .mean life for many.
As the bubble is pushed to all the backend.

On the Beach is a 1957 post-apocalyptic novel written by British author Nevil Shute after he migrated to Australia. The novel details the experiences of a mixed group of people in Melbourne as they await the arrival of deadly radiation spreading towards them from the Northern Hemisphere, following a nuclear war a year previously. As the radiation approaches, each person deals with impending death differently.

https://www.amazon.com/Beach-Nevil-Shute/dp/0307473996

An underrated author, quite skilful in emotional and humanitarian, even pathos, depictions, not typical of a very capable qualified engineer, in the first instance. Interestingly Graham Greene commented that had he (Shute)not been so damn lazy he could have been right up here with me and Somerset.

An engineer who saw that humanity was too full of ignorance.
His Slide Rule is a must-read

"Those on the economic side seem to be fiercely uncomfortable that public health priorities should have precedence"

About time some stand up against this nonsense

You mean to stand up to those selfish enough to push short-term growth at the expense of all who follow?

Yep, we're standing.

No economists in our ranks either.....

Covid-19 Ethical Dilemmas
Peter Singer Professor of Bioethics at Princeton University
https://www.youtube.com/watch?v=CsuajqEh9rs
Lives versus Economics

Days to the General Election: 24
See Party Policies here. Party Lists here.