Here's our summary of key economic events over the weekend that affect New Zealand, with news the world's largest economies are struggling to stabilise.
In China, they reported surprisingly weak retail sales in July, and an unusual decline.
Rents were weak too. Rents in 20 major Chinese cities fell -2.3% in July from the same month year earlier, the fourth consecutive month of decline in a market that’s been buoyant for years. But it is a trend that is corroding the fortunes of millions who bought apartments for rent. Now they face mortgage payments that aren't being covered by rents, and vacancies are rising.
They also reported electricity production fell more than -4.6% in July from June and was up only +1.9% year-on-year. In China's terms, these are very weak results.
And they reported stable industrial production. It was up +4.8% year-on-year, the same as in June, and the same as for July 2019. But for the first seven months of 2020 it was lower than the same period in 2019.
In good news for Australian iron ore demand, China's crude steel production jumped more than +9% in July to over 90 mln tonnes. Iron ore prices are higher yet again and now well over US$100.tonne.
And a survey by the American Chamber of Commerce in China has found that almost 90% of American companies had no plans to leave China, despite sour American-Sino trade relations. In fact, they are finding trading conditions quite good compared with their home markets.
American industrial production is, in contrast, still shrinking fast, down -8.2% in July form the same month a year ago, but at least that is better than the June shrinkage of -11%. The real weakness is in the production of business equipment; that is down -14% year-on-year.
And that is quite the contrast with Canada where industrial production is rising, and fast (although admittedly this data is for June). Canada seems to be a winner with the new NAFTA trade pact.
American retail sales rose in July, but by less than was expected. The +1.2% gain in July from June was timid compared to the +8.4% rise in June from May, and less than the expected +1.9% rise. And without a +24% jump month-on-month for purchases of electronic goods (almost all of which are imported) it would have been even weaker.
American consumer sentiment is staying low, down almost -20% from August a year ago. And the number of Americans who say they can’t afford enough food for themselves or their children is growing and is likely to get larger as some government benefits have expired.
Wall Street ended last week on a flat note. But the S&P500 posted a modest +0.4% gain for the week. The futures market suggests a soft start tomorrow. Shanghai ended with an unchanged weekly result. Hong Kong was up +2.7% for the week. Tokyo was up more with a +4.3% gain for the week. The ASX200 had a +2.0% weekly rise. Bank shares were responsible for most of this rise. But the NZX50 Capital Index had a weekly loss of -1.7%.
The latest global compilation of COVID-19 data is here. The global tally is 21,528,000 and that is up +517,000 since when we last checked this time Saturday and no slackening of the spread. Global deaths reported now exceed 772,000 (+11,000).
A quarter of all reported cases globally are in the US, which is up +93,200 in the past two days to 5,543,000. US deaths are now just over 173,000 and a death rate of 522/mln (+6/mln). And the net number of people actively infected in the US rose overnight to 2,462,700, so more new infections than recoveries.
In Australia, there have now been 23,288 COVID-19 cases reported, another 545 since we last checked on Saturday, and still very much concentrated in Victoria. But there were cases recorded in other states too. Australia's death count is up to 396 (+21). Their recovery rate is now back up to 60%. There are still 8812 active cases in Australia (-211) indicating a turning tide and more recoveries than new infections.
The UST 10yr yield is holding at 0.71%. Their 2-10 curve is +6 bps holding at +56 bps. And their 1-5 curve is slightly flatter at +16 bps, while their 3m-10yr curve is steeper at +62 bps. The Aussie Govt 10yr yield is unchanged at 0.93%. The China Govt 10yr is still at 2.97%. And the NZ Govt 10 yr yield will start the week at 0.67%.
The price of gold is holding today at US$1,945/oz. That locks in a -4.3% fall for last week. Silver is down too and a net -7.6% fall for the week.
Oil prices are softish today. They are now just on US$42/bbl in the US and the international price is now still under US$45/bbl.
And the Kiwi dollar fell on Saturday to 65.4 USc and has held from there. Against the Australian dollar we are softer at 91.2 AUc. Against the euro we are down too at 55.2 euro cents. That means our TWI-5 has dipped to 68.5 which is where it was when we were about to go down Level 1 at the beginning of June.
The bitcoin price is up +3.2% from this time on Saturday at US$11,854. 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
63 Comments
Auckland Property like housing market in other developed countries will boom as long as stimulus is running the economy supported by low interest rate.
Low interest will not change for long time to come so one has to wait to see what happens when many subsidies and stimulus comes to an end.
It doesn’t matter how low interest rates go. consider the prospect of people losing their jobs en-masse and having to sell, huge over-supply on the market, lower selling prices, people waiting for ever lower prices and there you have deflation. We’ve seen it in Europe throughout the recession - not even negative interest rates is enough to keep the housing market propped up if the economy is struggling enough.
Thanks cowpat, I just googled it. https://www.rbnz.govt.nz/statistics/c65-bank-customer-lending-flows. Forgive my ignorance, but this seems only to show the weekly mortgage deferrals, from 25,000 deferrals sought in the week of 10 April to hundreds of deferrals in recent weeks. If that's right, surely the more relevant data is the total number (and value) of mortgage deferrals? (ie the current (total) number/amount, and showing the rise and fall over time of the total number/amount, as some people seek deferrals one week and others start repaying their mortgages in that week). Is this something RBNZ shows too?
As the RBNZ suggests "can you add the cumulative data to get the stock position" No.
:Cumulative flows will be higher than the ‘as at’ position in part because the flows are only increases in credit events and not any decreases as customers move off schemes. Over time some treatments may have been applied and then removed and/or facilities may be repaid.
Also over time a customer may have repeated counts as they flow into one treatment, then out and back in. For example; a customer may request a mortgage deferral, then revert back to principal and interest payment and then change to interest only."
The C32 monthly data may indicate timely changes in the flow from principal plus interest to interest only mortgage payments and the quarterly C35 reconciliation data may possibly provide information on scheduled mortgage payments. However scheduled repayments (,or reduction or increase) may be distorted , because payments may or may not be received by the lender.
At worst the c65 data simply gives a timely indication of ongoing borrowers distress. End of day, the regulated banks will in time need to disclose and clarify any lending issues, to its shareholders and exchange .
Thanks so much. A shame RBNZ doesn't give the more meaningful data. Sure, banks disclose, eventually, many months after the event, but near real-time market wide data is invaluable for transparency. The US system has many faults, but at least they provide lots of meaningful, timely, public data.
Check out spa pools, I went for a look around last Friday and it is only pre orders for the next shipments in a couple of months.
One salesperson told me that people
aren't going on an overseas holiday this year so buying a spa pool. Guessing that it's still on tick and only 1/4 actually buying with cash.
"In federal elections in the United States, you can't vote online. The only way you can vote without going in-person to a polling place is to use an absentee ballot."
https://www.usa.gov/absentee-voting
Mail Voting isn't as easy as it may seem! In those States that require voters to request a mail-in form by mail, first, how many will actually be bothered!
US elections are held mid-week. You stand in a queue for 6 hours. If you are on the bread-line and hold down 2 low paying jobs you don't vote. The system effectively dis-enfranchises the poor who tend to vote for the socialist side of politics. That's why Trump opposes mail-voting - to maximise the non-socialist voting numbers
Because online voting at insecure terminals cannot be made secure.
Online voting in person at secure polling places potentially could be. But if you have to turn up in person you might as well just use the current pen and paper system which is cheap and effective and you don't have to worry about problems like the power going out or the software going wrong which shuts down a polling place.
Dalio exits positions in 20 year Treasury bond etf, high yield corporate bond etf and emerging market bond etf. Buys more gold.
https://www.google.co.nz/amp/s/markets.businessinsider.com/amp/news/bri…
https://www.google.co.nz/amp/s/markets.businessinsider.com/amp/news/gol…
Warren Buffet also goes for gold.
https://ca.yahoo.com/news/warren-buffett-buy-barrick-gold-201428776.html
A few interesting things went on with this call.
After decades of saying 'gold is not the thing to be in' , and 'don't bet against the dollar' this major swing.
If other fund managers don't buy in to PM's in some way shape or form they are putting themselves in major risk of being sacked.
He sold bank stocks.
This was his Q2 holdings so he has most likely acquired more PM holdings since then.
Expect some major price increases in gold and silver and the USD to react to this.
Silver -7.6% on the week.
PM's may take a hit but the money exiting the stock market has to go somewhere, sitting on cash could be very risky as well. PM's is where you have to go to hedge for that... especially with the news that a couple of the big boys are going PM's.
10 minutes into PM trading and already climbing fast.
Silver physical is selling on TM for $1750 per kilo, last week it was $1600, the week before $1450. With Sept being a COMEX silver delivery month, it is highly likely that contracts with stand for delivery and sell at the much higher physical price or they just hold long.
It still is significant given his previous stance on both commodity / mining stocks and gold in particular. The only reason that Barrick is able to maintain high dividends is that it produces a lot of gold. He is either buying in because he expects them a) produce more, b) reduce their AISC, c) the price of gold to go up and therefore their revenues. Whilst Barrick has had some resource upgrades recently, there is nothing to suggest that a) or b) have changed the fundamentals of their production. I'd say he is therefore betting on c.
Hmmmm.........
...the iron law of investing is that a security is nothing but a claim on a future stream of cash flows. Valuation is a crucial determinant of long-term returns. The higher the price an investor pays for those cash flows today, the lower the long-term rate of return earned on the investment..
The corollary is also true. The lower the long-term rate of return demanded by investors, the higher the price moves today. So clearly, changes in investors' attitudes toward risk will strongly affect short-term returns. If investors become more willing to take market risk, it is equivalent to saying that they are demanding a smaller risk premium on stocks (that is, a lower long-term rate of return). Prices rise as a result. Now, the fact that current stock prices are higher also implies that future long-term returns will be lower, but that's part of the deal. Link
Widely misreported that Buffet bought gold. Sensationalised presumably because Buffet famously eschews gold as a non-investment. In fact, he bought into Barrick, a (big dividend paying) mining company.
If you want exposure to Barrick but don't have access, you can buy GDX. Barrick, Newmont, and Franco Nevada make up 30% of the ETF.
Furthermore, Buffet disrupted the PMs market once before in 1997 when he bought 3.500 tonnes of silver.
https://markets.businessinsider.com/news/stocks/warren-buffett-bought-3…
J.C.
Crazy watching the PM prices go up then down then coming back up and we're only at the start of the day.
Some selling, others buying, bit of a tug of war going on. The interesting thing is that the market has only just opened and most of the world is still in Sunday evening / night chill mode.
Hmmmm..
“Isn’t Modern Monetary Theory the cure to all our problems?”
Alice really was au courant with the latest trends in economics.
“Why those snake-oil peddlers,” replied the sage, showing an irascible side, “would have us believe six impossible things before breakfast – government debt doesn’t matter, deficits are the cure not the problem, governments don’t have to raise taxes or issue bonds, they can just print money, blah, blah. It’s the most complete nonsense!”
“Here’s the root of the problem,” Oirob continued, his eyes burning intensely. “For two decades or more, central banks have played around with interest rates, pushing them lower and lower. They meant well, but didn’t understand they were messing with the price of time. If you set the clock – the tempo of capitalism – to run backwards, the normal order of things breaks down: companies turn into zombies, herds of unicorns appear, investment discipline disappears. Wealth becomes virtual. Inequality is unleashed. Society melts down, markets melt up...” Link
As NZ being a small player in world trade market, needs to strongly advocate for free trade agreements in order to sell to more markets as a key diversification strategy.
https://www.scmp.com/comment/opinion/article/3097119/new-zealands-china…
There's many a slip 'twixt the cup and the lip. Amongst Peters' many options (and he is in desperate straits with his polling and is easily bought off with baubles) is withdrawing supply and confidence from Coalition, and forming a brief govt with National. That would see the daily covid propaganda press conferences switch from Labour to National - who could endlessly hammer the incompetence of Labour, with full access to info on all their cockups, for the next 6 weeks unopposed. Low probability - but still. Anyway, Labour are no longer setting the schedule.
Tend to agree with you on this one. I'd like to see more from National than roads, gangs Covid boundary management - and selling more land and houses to American millionaires and anyone else who needs to launder a few million. Policies that promote equity AND economic growth, and an independent foreign policy would be a good start
I would do well out of it but seriously as a country it's bad.
I looks t National and they are too close to China for me, Labour I just dont see them being able to change their history of no delivery. All I can do is vote for a handbrake for them but NZF isn't upto much and most likely Winny is exiting within the next year leaving Shane Jones running the show who is a shocker.
A wait and see untill the day before the election for me.
NZ Steel Glenbrook written off
Australia's biggest steelmaker, BlueScope, has reported a 91% fall in net profit to $96.5 million, due to a $197 million non-cash write-down of its NZ division and declining steel profitability during the year. The company flagged redundancies and cost-cutting at its NZ operations and warned it could be forced to cease steelmaking at Glenbrook
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.