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Inflation expectations rise in the US; China's CPI rises, PPI deflation eases; China's military pushes boundaries; UST 10yr yield at 0.57%; oil firm, gold soft; NZ$1 = 65.9 USc; TWI-5 = 69.2, bitcoin records annual high

Inflation expectations rise in the US; China's CPI rises, PPI deflation eases; China's military pushes boundaries; UST 10yr yield at 0.57%; oil firm, gold soft; NZ$1 = 65.9 USc; TWI-5 = 69.2, bitcoin records annual high

Here's our summary of key economic events over night that affect New Zealand, with news consumer inflation in the world's two largest economies is on the rise and above policy targets.

US July consumer inflation expectations rose to 2.9% from under 2.7% in June. The impact of tariffs is being felt by consumers and is now higher than its 12-month average. It is also threatening the Fed's 2% policy target limit for inflation. Unemployment expectations also rose.

Inflation in China is rising. In July it was up to 2.7% pa, a rise from 2.5% in June and more than the 2.6% expected. Food prices are rising fast (+11.9% pa) driven by pork prices (up more than +100% pa) and the impact of their floods. Beef prices however seem to have stopped rising in recent months but lamb prices are still going up, up +11% year-on-year and up +1.1% in July from June. The cost of medical care, and education, both are rising but only at only modest rates. Rent is declining. Petrol went up sharply in July, but is still down significantly year-on-year (-12.6%).

Deflation in producer prices eased a little in China in July.

In Hong Kong, police have been sweeping up the owners of an independent news organisation, Next Digital, accusing them of endangering national security and "working for foreign powers". They were handcuffed, removed and denied access to lawyers. Independent reporting out of Hong Kong is now suspect. In addition, overnight they rounded up a range of other protest leaders, taking them to unknown destinations. Internationally, Chinese military forces breached both Taiwanese and Philippine borders overnight.

Wall Street has started the week on a restrained note with the S&P500 up just +0.2% so far today. Overnight the European markets were similarly restrained. Yesterday, Shanghai ended its session up +0.8% but Hong Kong was down -0.6% and Tokyo was down -0.4%. The ASX200 rose a strong +1.8% on an expectation that the pandemic crisis in Victoria will ease. The NZX50 rose +0.3%.

The latest global compilation of COVID-19 data is here. The global tally is 19,937,000 and that is up 231,000 since this time yesterday. Global deaths reported now exceed 732,000 (+4,000).

A quarter of all reported cases globally are in the US, which is up 49,600 from this time yesterday to 5,218,600. US deaths are now just over 165,500 and a death rate of 501/mln (+2/mln). Only nine countries have a higher death rate, most of them European, and one of them is Sweden. And the net number of people actively infected in the US rose overnight to 2,378,900, so still more new infections than recoveries.

In Australia, there have now been 21,397 COVID-19 cases reported, another 313 overnight, and still very much concentrated in Victoria. There were another +14 in Sydney and NSW can't seem to shake its small community transfer outbreak. They are bracing for more school clusters. Their death count is up to 313 (+18). Their recovery rate is still just over 56%. There are now 8950 active cases in Australia (+30) indicating a rising recovery rate but still more infections than recoveries.

The UST 10yr yield is holding at 0.57%. The idea that this instrument is no longer the core signal it once was is growing. Their 2-10 curve is marginally firmer at +44 bps. And their 1-5 curve is similar at +10 bps, while their 3m-10yr curve is also similar at +49 bps. The Aussie Govt 10yr yield is little-changed at 0.86%. The China Govt 10yr is also holding at 3.00%. And the NZ Govt 10 yr yield is likewise little-changed at just on 0.78%.

The gold price is at US$2,032/oz which is down -US$3/oz from this time yesterday. The silver price has risen however and by more than +3%. The speculators have shifted to silver.

Oil prices are firmer today by about +US$1/bbl. They are now just over US$42/bbl in the US and the international price is now just over US$45/bbl.

And the Kiwi dollar fell marginally overnight and is now at just over 65.9 USc. Against the Australian dollar we are soft at 92.1 AUc. Against the euro we are up slightly at 56.1 euro cents. That means our TWI-5 is now lower at just under 69.2.

The bitcoin price is up +4.2% overnight at US$11,906. And that takes it over NZ$18,000 for the first time in a year. 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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45 Comments

Would be nice

the inability to get skilled foreign workers into the country is delaying projects and may impact on future investment decisions

This is turning out to be a problem with our managed isolation facilities running out of capacity simply on returning Kiwis, leaving very little room (pun intended) for high-skilled workers to be brought in.
The construction sector is insisting the government announces more shovel-ready projects but planners are unsure if our economy has enough skills and productive capacity to deliver on those, exposing the coalition to another Kiwibuild-like failure.

An auction is the only fair way. Otherwise it will be who you know rather than who will benefit NZ most. Not only the fairest but also the fastest and least bureaucratic.

RBNZ May Hold Fire on Additional Stimulus as Economy Outperforms

Not sure where the outperformance is and there is zero evidence attributed in the article. Even John Key was suggesting that this could be disastrous. Not his style. He's more of the "happy days are here again" motivational leaders of NZ.

What kind of propaganda is Bloomie trying to convey here?

There is a school of thought, that's its job done.

https://mobile.twitter.com/henrycooke/status/1292672820279820288

seems kind of boringly obvious that we did covid well with combination of luck, societal cohesion, and a well-functioning state? there is no great own of other countries to be had, but similarly “being an island” is not the only thing that happened

And
almost forgot: centralisation of power baby. the AOG team didn’t have to ask local bodies if they would be okay with a lockdown.

Ummm, the whole country is in isolation.
Imagine the health event as quarantine is unwound in?, 2, 3 4, 5 years time.

In an age where rumours and speculation spread unchecked on social media, Stuff’s professional standards of accuracy, fairness and balance are more vital than ever. Please consider becoming a supporter. Make a contribution from as little as $1 and help sustain trustworthy independent journalism.

Does my dollar mean that Stuff will start being accurate, fair, and balanced? Seems quite fair. I didn't realise Stuff's honesty was so cheap.

HCooke, not having a great run.

https://mobile.twitter.com/henrycooke/status/1293026869168619520

Deleted my tweet about police numbers as it is not really clear-cut. Depends if you take the increase from June 08- June 09 as National's or Labour's (and whether you look at Collins' second term as police minister.) Apologies to the various people having fights in the replies.

That is:
chief political reporter at
@ nzstuff
. send tips to henry.cooke @ stuff.co.nz or +64278011190 on signal/whatsapp

Careful how you go, you know one man's whistle blower is another man's leaker...

14
up

Well blow me down ....expectations of inflation rising in the US ?

I am not really surprised at all , you cannot debase your currency to the extent they have through money printing without consequence .

Even if you control the world's reserve currency , its simply unsustainable , and something somewhere in the system has got to give.

If one looks at all Empire's in history, be it the Egyptian , Greek, Roman , Ottoman or British Empires , they all eventually collapsed due to financial hubris, leading to financial mismanagement and eventually bankruptcy , along with an expensive and protracted war war or two.

(edit ) and you can add to that the Spanish and Portuguese Empires in the last century

Not for long if these new US bank capital requirements do there intended job of reducing bank profits.

Looking forward, how many creditworthy customers will there be that qualify for bank loans that demand collateral assets that are not impaired?

On Wednesday July 29, the U.S. financial markets quietly made history, as our projection of 12-year nominal total returns for a conventional passive portfolio mix (60% S&P 500, 30% Treasury bonds, 10% Treasury bills) fell to -0.45%, the lowest level in history. While 10-year Treasury bond yields are at just 0.6%, we estimate that the 12-year average annual total return of the S&P 500 will fall short of that level by about 2%, producing a very long, but likely interesting, trip to zero or negative returns for more than a decade.Link

How can Boatman pen such an insightful comment, yet not see that National are peddling the narrative of a dying Empire (neoliberalism/elite advantage/globalism)?

Interesting comments emerging in respect of your claim: - https://thesaker.is/covid-candide-isnt-this-the-best-of-all-possible-wor...

I have not voted for National in almost 6 years ......... FYI .

And I am not about to either , I am seriously considering boycotting the election in protest at the total lack of decent policies , lack of depth and skill and total lack of a plan in the event of a deep and expensive recession .

And ......forget about that saying ' if you dont vote , you cant complain "

If you DO VOTE vote for these incompetent , dishonest people and they get into office and screw everything up , then YOU have no right to complain .............YOU caused the problem for voting for them , so YOU have no right to complain

You got hit with the Labour / Green 'complain about the Gov't, you must be a capitalist pig National supporter'.

Not all capitalists are pigs, and not all pigs are capitalists. Remember Animal Farm. The Socialist pigs were more equal than the other animals.

15
up

The Chinese understand the art of war, the best time to strike is when your enemy is on its back, this is where the US is now and at its weakest for a very long time, expect more incursions across borders, more detention of "subversives" and more state control of everything. Some significant event is not far off.

13
up

Showing their true colors ey? Yet plenty of the status quo elite in the west still worship at the CCP altar....
This is self defeating behaviour from the CCP.
The Art of War? We aren't talking about swords and bows in the 21st century...

14
up

And rapidly becoming a pariah state. The world has options, we can and should decouple from their economy, and hopefully will as their treatment of their citizens and neighbors worsens.

Let's not forget that it was the various colonial powers that showed China that warfare had changed in the 19th century, and led to China being a virtual vassal/subservient state for ~100 years. Even Japan managed to show China what warfare was all about, a mere 70 years ago. So the question is:" Is China again fighting today's war with yesterdays weaponry?". Most likely judging by what we see today. ( They are acting just like the British/French/Portuguese and Americans did in the late 1800s?)

When my UK ancestors fought the Opium war they hadn't a moral leg to stand on; they were 100% in the wrong. And the opposition in the UK parliament couldn't stop it but sure made a big deal about it. Compare with modern China's sabre rattling and threats in the South China Sea or their treatment of indigenous peoples of East Turkestan or any other debateable issue; where is the vocal opposition in China? That is the big difference.
Note Opium wars are a big deal to China; understandable but 1st Opium war killed 3,100 chinese and the second by combined UK and French killed about 250. Compare with Mao's great leap forward killing about 45,000,000 and Mao is still praised!

Yes the Chinese military has significantly closed the technology gap with the US and it appears that COVID may be placing the US military's readiness under stress. But we don't know to what extent COVID is impacting the PLA. One or two aircraft and a couple of survey ships are not an invasion, but they may well be a statement of intent. I think the Taiwanese minister is correct, it is past due time that a discussion is held on Chinese provocations in the region. But then China will just do what it has always done - tell the world to stop interfering in its internal business. Time for the rest of the world to step up?

While we hope that Russia and China will engage in more productive and cooperative behavior in the future, we are posturing our forces to deter aggression and counter their malign influence.

Russia's response - Any Inbound Missile Will Be Seen As Nuclear" - Russia's Military Warns Amid Arms Treaty Talks

Productivity NZ style

A Whangārei Painter allegedly forced his way into a Covid-19 isolation facility and had a conversation with someone has appeared in court via phone hook-up. He has been remanded in custody in Whangarei Police Cells. He faces charges of failing to comply with a Covid-19 order and unlawfully being in an enclosed area at the Crowne Plaza. He is being held in the Whangarei Police Cells. Fortunately there was no costly application name suppression.
Had he done his ALLEGED offending in Australia he would have been issued an instant fine of $1650. Done and dusted. No Allegeds

10
up

I suspect most people don't realize that the US Federal Reserve has been busy buying bonds in companies such as Coca-cola and Visa (no doubt with the justification of keeping their borrowing costs down).

Free markets my a++e.........

https://www.cnbc.com/2020/08/10/the-fed-bought-more-blue-chip-and-junk-b...

The rulebook has certainly gone out the window.

Nike last week announced a 38% drop in revenue and their share price is at a ATH at present.

And early reports of the Fed buying up shares in some companies. Buying up bonds will be the equivalent of pumping money into the companies to keep them afloat, but buying shares, unless they are new issue, is only bailing out share market gamblers (assuming they were buying On-Market). The share purchases may have been an attempt to prop up the share price to limit the likelihood of a (foreign), perhaps hostile, takeover bid, but then having the Government as a significant share holder is probably not seen as a bad thing, and then there is the conflicts of interest.

Youtube and Twitter commentators have been on this for a while now. Bond markets giving out “bad for the market” signals so the Fed are buying up big time. The insolvency stage cannot be far away now. 2021 has been touted as when this will start. Before that though, if Biden wins, we’ll likely see a big drop in the markets followed by incredible gains. Debt debt and more debt with the Fed well and truly in charge.

Communism by stealth

The Fed amounts to date are piddling view section 4

But perception has a price - U.S. Junk Bond Market Sets Record-Low Coupon in Relentless Rally

More Steak Knives

Wong-Tung threatens to sue Newsroom
https://www.newsroom.co.nz/wong-tung-threatens-to-sue-newsroom

Remember Oravida Kauri and Ruakaka Kauri and Kauri Investments

NZG Ltd ---> major shareholder NZG 2010 --- major shareholder ---> Kauri Investments Limited

Directors
David WONG-TUNG, director, 11 Oct 2012-
James William BLACKWELL, director, 18 Apr 2017-
Julia Jiyan XU, director, 6 Sep 2011-
Stone SHI, director, 12 Sep 2010-
Inactive Directors / Officers
Chang Fa KAO, director, 10 Sep 2010-22 Nov 2010
Jing HUANG, director, 6 Sep 2011-11 Oct 2012

More Steak Knives

Legal challenge might have been instigated behind the scenes by his better half. Not sure why he feels 'defamed' in any way by being seen as leaving DOC in a mess. Interesting to see that he was possibly looking for a gold claim.

Pillow talk and Fingerprints

Reading the Newsroom response - over a period of time NZG successfully lobbied DoC to revise downward the remediation requirements. The current situation appears to be that NZG regard those as the finish of their obligations. It appears to be a matter of interpretation of the amendments. Where do you think the amendments were coming from. For DoC to capitulate over a number of amendments the pressure would have to be internal within government. One can only speculate whose fingerprints were on that

10
up

I have no doubt Crusher would use the state apparatus to feather her own nest and that of her mafia. It's becoming increasingly common in NZ and rampant in Australia.

Rubbish. She will be keeping things as squeaky clean as possible after the Oravida witch hunt 10 years ago. She's not in politics for the money, which she has tonnes of, and could obviously make more of doing other things. She's in it because she (obviously) wants to serve the public good.

Clean Hands?
You are forgetting the 2 week shutdown of the Whangarei - Auckland fuel pipeline in 2017
Oravida Kauri which morphed into Ruakaka Kauri and morphed again to Kauri Investments
Enquiry Report concluded - The 2017 damage to the fuel pipeline at Ruakaka which provides the main supply of petrol, diesel and jet fuel for Auckland, "must have occurred" by a contractor looking for kauri logs on the site three years earlier in 2014

Very subtle sarcasm there.

I can put that in Winnie-speak:

Has form.

Left going dirty again - going after family of politicians.

Nope. "The left" are equally captured by self entitlement. Birds of a feather really.

You justify the hole in the ground they have walked away from? Environmental Vandals
Who is going to pay for it?

Foyle - I'm neither left or right. I'm about long-term sustainability.

As it happens, the left are usually - but not always - closer to my way of thinking, but my judgement of people is irrespective of politics. I just don't like people who advantage themselves to the detriment of others (which includes the biodiversity 'other').

Instititutional blockchain and crypto investor Grayscale is sitting on USD5 bio of funds and ready to take things to a new level. The company kaunches an ad campaign across the U.S. on CNBC, MSNBC, FOX, and FOX Business. Monumental really.

The TVC is well done and gets straight to the point. Nice choice of music (The Ramones) considering they're here to shake up the establishment.

https://beincrypto.com/grayscale-launches-national-ad-campaign-aimed-at-...

What, independent news organization Next Digital..... Assanged?
What's the world coming to?

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