Here's our summary of key economic events overnight that affect New Zealand, with news of more evidence the global economy is closer to a serious long-term downturn.
But first up today, there has been another satisfactory dairy auction overnight. On average prices were up +2.2% in US dollar terms and up +3.4% in New Zealand dollar terms. Volumes sold were about the highest offered in 2020 and the most bidders of the year showed up for this one. The result was driven less by WMP (up +1.7%) than by some ingredients, especially butter which was up +8.4%. It is the second good auction in a row, and aided by a Kiwi dollar that isn't as high as it was. Over these two latest auctions prices are up +5.8% in US dollar terms and +7.7% in New Zealand dollar terms. While today's event alone won't change farm gate milk prices, it does seem to end the 2020 downward trend and start the new season positively.
In the US retail sales last week were unchanged and held on to the modest year-on-year gains posted recently.
American job openings slid again and although they decreased by more than expected, it wasn't a big miss. However private sector levels were nearly -10% lower compared to the same month in 2019. New hires were only boosted by the +246,000 the Federal Government made, principally due to taking on temporary census workers.
The American trade deficit got worse again, this data being for August, and now at worst-ever levels. Their monthly goods deficit was -US$84 bln, a record, and their monthly services surplus was +US$16.8 bln, and that too is lowest in a very long time. Their deficit with China was just under -US$30 bln and lower than recently. But clearly American competitiveness isn't improving overall. No Administration has presided over such a quick, sharp deterioration, ever. It is an Economics 101 lesson about how not to apply tariffs.
And still no progress on fiscal relief from Congress or the Administration for their ailing economy. In fact, the Fed boss warned of potentially "tragic" economic consequences that could result if they aren't forthcoming soon. The IMF boss issued a similar warning, although on a more global basis. And in Europe, the ECB did the same.
In Australia, they have responded with a huge NZ$107 bln new spending Budget with large tax breaks and cash for everyone.
And yesterday the RBA kept its settings unchanged but hinted strongly it need that fiscal action to steady the Australian economy. And they also hinted they would have new measures ready next month.
And new trade data suggested things are turning down quite quickly. Australia’s trade surplus surprised to the downside in August. Exports were down -4.2% vs an expected -2.7% and imports rose not fell, +2% vs an expected -4.4%. That resulted in a trade surplus that fell to $2.6 bln, down from an average of +$7.5 bln in the past five months.
The international airline industry is in big trouble. They will burn through NZ$115 bln in cash during the second half of 2020, despite the restart of operations. And that is not expected to stop. The slow recovery in air travel will see a continuing to burn of cash at an average rate of NZ$8 bln per month in 2021. Their international lobby group is calling on governments to support the industry during the coming northern winter season with additional relief measures when the pressures will be most intense. Few will survive without taxpayer cash injections. Boeing warned it will be hit long-term too.
Wall Street is holding today, up just +0.2% on the S&P500. European markets closed about +0.5% higher last night. Yesterday Hong Kong rose +0.9% and Tokyo was up +0.5%. Shanghai is back trading later today. Yesterday the ASX200 ended up +0.4% and the NZX50 Capital Index was up +0.7%.
The latest global compilation of COVID-19 data is here. The global tally is 35,600,000 and up +326,000 in one day. Global deaths reported now exceed 1,046,000 but clearly many are going unreported.
The largest number of reported cases globally are still in the US, which is up +42,000 in one day to 7,692,000. The number of active cases is at 2,567,000 so as many new cases as recoveries and no progress on that front. Their death total is over 215,000 and still rising at about +1000 per day.
In Australia, there have now been 27,174 COVID-19 cases reported, and that is +25 more cases than yesterday. Deaths are little-changed, up to 895 (+1).
The UST 10yr yield is firmer again today, up +2 bps at 0.77% in a move that in anticipation of new US stimulus. Their 2-10 rate curve is steeper at +63 bps, their 1-5 curve is also steeper at +20 bps, while their 3m-10 year curve is up at just over +69 bps. The Australian Govt 10 year yield is up +5 bps at 0.96%. The China Govt 10 year yield is unchanged at 3.16%. The New Zealand Govt 10 year yield is up +1 bp to 0.53%.
The price of gold is down -US$12 this morning at US$1915/oz. Silver has fallen -1.9% in an outsized drop.
Oil prices start today firmer by +US$1, now just under US$40.50/bbl in the US, while the international price is up to just under US$42.50/bbl.
The Kiwi dollar starts today unchanged at 66.4 USc. Against the Australian dollar we are firmer at 92.7 AUc. Against the euro we unchanged at 56.3 euro cents. And that means our TWI-5 is still at 69.6.
The bitcoin price is little-changed today, now at US$10,730. 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 ».