Here's our summary of key economic events overnight that affect New Zealand, with news benchmark bond yields have resumed their aggressive rising trend today, causing even more pain for bond investors as inflation expectations stay high.
This latest spurt is soon to be followed by a scheduled US Fed meeting on Thursday (NZT) and all eyes will be on their reaction to these benchmark rises. The Fed grew its balance sheet by +US$140 bln over the past month to almost US$7.6 tln, but perhaps much more is coming. However, at this time markets aren't betting on it.
Elsewhere in the US, consumer sentiment rose very sharply as a result of the passing of their stimulus package, a measure that currently has wide bipartisan support.
In Canada, there has been a surge of hiring in February, and far more than was expected. But although there were good full-time employment gains, most of the rise was in part-time employment. Their jobless rate fell sharply from an uncomfortably high 9.4% to a still-high 8.2%. They have a long way to go yet for their labour market to recover. Canadians are doing the pandemic tough.
In China, they are getting a surge as well, in their case of foreign direct investment. It was up +32% in February from a year ago although to be fair, the 2020 base was severely compromised by the pandemic.
Not surging, or even improving at all is Hong Kong industrial production. The latest data down that down -6% year-on-year, a retreat similar to the prior period data.
India also released industrial production data overnight and that declined too, disappointing because a small rise was expected.
Slightly more positively, EU industrial production rose when a decline was expected. This was led by Ireland and a number of northern and eastern European states. Germany was a drag on these results.
In the UK they are suffering the consequences of their Brexit decision. Their economy is now -9% smaller than a year ago, and shrinking almost -3% in January alone. Exports to the EU have dived more than -40% while imports from the EU shrank -28%. No other trade has stepped up to replace those sorts of shifts and it is unlikely they will either, in the intermediate term at least. Managing atrophy and decline is their immediate priority.
Back in China, their African Swine Fever risk is remaining high, generating tough new restrictions that threaten pork supplies and therefore food prices and to some extent food security. Adding to concerns is the discovery of new variants.
And not helping is the rise and rise of animal feed commodities with soybean and corn prices on the rise again.
Iron ore prices fell almost -2% three days ago, but that shift lower hasn't gained any momentum since. Australian miners will still be very happy at these adjusted levels.
In Australia, they moving to close the 1500 MW Yallourn thermal coal fired electricity generation plant in Victoria. This follows the close of the coal-fired Hazelwood plant earlier. These are actions that reduces electricity generation resilience, but coal is no longer financially viable in the face of fast-falling electricity from renewable sources. They are going to have to live with the variability of renewables, and as they have seen in recent times, that can be painful at just the wrong times.
At the OECD, the conservative Australian politician Mathias Maruis Corman has pulled off an upset to win the Secretary General position.
In New York, the S&P500 has opened today with a -0.2% dip in early afternoon trade. But that is heading for a very respectable +2.2% rise for the week, and the second best week since the sharp jump when the US election result was known in November 2020. Overnight European markets closed with mixed results. Yesterday in Asian markets Tokyo closed up with a very strong +1.7% gain and taking the weekly change to +3.0%. Hong Kong ended yesterday down -2.2% giving a weekly loss there of -1.2%. The Shanghai market was up +0.5% yesterday and for the week it booked a loss or -1.4%. But this is a market where the "home team" is buying hard to prevent a much harder retreat. The Beijing put is in full effect there. The ASX200 ended its session yesterday up +0.8% but for the week it was also up just +0.8%. And the NZX50 Capital Index gained +1.2% in Friday trade, taking the weekly rise to +1.8%.
The latest global compilation of COVID-19 data is here. The global tally is still rising and at a fast pace, now at 118,799,000 and up +577,000 in one day, especially in Brazil, so no let-up globally. Global deaths reported now exceed 2,634,000 and +21,000 in a day. Vaccinations in the first world are rising however and in the US more than a quarter (97.4 mln) have now had this protection. That is quelling the US daily death rate which was +1500 yesterday. The number of active cases there is down sharply to 7,892,000 (-788,000 fewer in one day).
The UST 10yr yield is up +11 bps at 1.63% with a sharp rise to its highest in more than a year. The US 2-10 rate curve is sharply steeper at 148 bps. Their 1-5 curve is also much steeper at +77 bps, while their 3m-10 year curve is steepening too at just on +160 bps. The Australian Govt 10 year yield is up +16 bps at 1.82%. The China Govt 10 year yield remains an island of stability at 3.28%. And the New Zealand Govt 10 year yield has hardly changed overnight, so far up just +1 bp to 1.74%.
The price of gold starts today marginally softer in New York, down -US$2 to just on US$1721/oz. Central banks are back as net sellers of gold, even autocrats like Russia are selling down.
Oil prices have stayed high overnight to just over US$66/bbl in the US, while the international price is now just over US$69.50/bbl.
The Kiwi dollar opens today noticeably weaker at 71.8 USc mainly because the greenback has strengthened. Against the Australian dollar we are softer at 92.5 AUc. Against the euro we are little-changed at 60.1 euro cents. That means our TWI-5 is at 73.8 and a small overall softening.
The bitcoin price will start today up almost exactly +US$1000 from this time yesterday at US$57,578. While that is not an all-time record high, it is close. In New Zealand dollars however, it is, breaching NZ$80,000 for the first time ever. Volatility in the past 24 hours has been +/- 2.8%. 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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28 Comments
"In the UK they are suffering the consequences of their Brexit decision." (from above)
Perhaps they got out just in time?
Lagarde's attempt to stave off global bond contagion is going badly wrong
And comments from The Telegraph, written by people after my own heart:
"Any first year accountancy student will be able to confirm most,if not all, Eurozone central banks are already insolvent, even The Bundesbank. The Bundesbank’s Balance Sheet is propped up by irrecoverable Target 2 balances which continue to grow with capital flight from the Club Med countries."
"Does anyone in Europe look at a demographic pie chart? In 2022 Germany begins mass retirement.
That vast export engine begins shutting down in months.
America is withdrawing from the world trading system, and will increasingly require that products sold in America be made in America.
Spain, Portugal, Italy, Greece, Germany, and others have all gone beyond even a theoretical recovery of population. Full on demographic death spiral is setting in.
Consumer growth in such a world is virtually impossible"
My interpretation of that comment is that as a population ages, there will be both (1) fewer consumers in number as population replacement rates fall and (2) shrinking disposable income will be applied to 'consumerism', as those who age already have most of what they need and/or will be cashing in their nest eggs (shares and property etc) to use in their latter years and (3) those who have the capacity to 'borrow and spend' against current wage/asset levels have pretty much done so. Those things are Deflationary.
All of those issue = less 'consumerism' as we knew it pre-2008(?) and if that is what 'they' are relying on for the salvation inducing "Inflation!" then disappointment is a likely outcome.
Will that be benefit New Zealand? It depends on what one sees as beneficial'.
If you see it, as I do, as less spending for the sake of spending and more productive application of funds (debt in our case) then, yes. But, of course, that will be fought tooth-and-nail in the vain effort to support current asset prices. (Hence the continuing madness of the RBNZ and their compatriots)
And those who want "Inflation!" at any cost, to reduce the real cost of existing debt, in the end are likely to be sadly disillusioned.
It is not all bad news. Germany has had a falling population for years. So do Japan, Korea and and a group of other very prosperous nations. If you plot gnp growth rate per capita versus population growth rate, as I have, there is only a very small correlation, and you may be surprised to learn that it is negative. i.e. the lower the population growth rate the higher the gnp growth rate per capita. With a low or negative population growth rate, a nation has to invest a lot less in new infrastructure for the growing population. The population can then turn it's focus to exports and other endeavors that materially add to it's populations well being. Those infrastructure projects that are required can be executed to a very high standard and in accord with long term and intelligent planning: as opposed to the short termisim that we see here.
You make sense. When I went to PNG it had 4.5 million population and now it has 9 million. It was poor but fairly equitable and now is still poor but inequitable. There is plenty of land for the population to live in (PNG is bigger than NZ and without winters) but the resources have stayed the same and the profits are distributed over twice as many people. It the population had not grown then Papua New Guineans would certainly be better off.
Well – isn’t that just so lovely – Jacinda, after confirming the move out of level 2, beaming and smiling entreats Aucklanders to enjoy their weekend.
However, unfortunately Jacinda, some Aucklanders will not be able to enjoy their weekend – as despite considerable efforts, they yet again fail to find an affordable, decent rental or an affordable, liveable first home.
She appears, unbelievably, completely blind to her governments continuing failures, apparent indifference and policy dithering regarding issues that really matter – issues of their making, but then simply have no clue as to how to address.
Hopelessly out of their depth and harming those they pretend to represent.
She is a leader you can count on immediately after a crisis.
At all other times, she is not a leader and is the face of a government of dithering ineptitude backed by policies and acumen that has nothing to do with the real world. When your leaders are living in fantasy land, it should surprise nobody that any policy delivered is likely to do the opposite of what they claim to want, while making themselves look better and incidentally enriching themselves.
Well Custard I could see it even at the first election so never voted Labour but 3 years after that I thought its pretty obvious to everyone she is totally out of her depth but I guess not. All she had to do was hit the red stop button on Covid, which anyone could have done and suddenly everyone voted for her. Managing the country for the greater prosperity of all is far harder than closing the boarder. I think when her numbers in the Polls crash she will bail out on a "High" before the next election.
It is now clearly evident that for the first term WP & NZF added experience, savvy and direction and some backbone too. Without that Labour look rudderless, policy on the hoof. Fortunately the Greens are not involved in cabinet, otherwise by now they would be holding the government and country to ransom, the ten or so of them collectively look more formidable on their policy than the entire Labour caucus. On the other side of the house National offer little as an alternative. Still divided and a leader that divides. Come 2023, looking at parliament today, thinking about voting then is entirely depressing.
The Fed grew its balance sheet by +US$140 bln over the past month to almost US$7.6 tln, but perhaps much more is coming. However, at this time markets aren't betting on it.
That's possible, but:
Effective December 17, 2020, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York to continue to increase the System Open Market Account (SOMA) holdings of Treasury securities by $80 billion per month and of agency mortgage-backed securities (MBS) by $40 billion per month. Link
The financial times report the EU is drafting legislation for a carbon border tax to be imposed on reticent countries.
https://www.ft.com/content/3d00d3c8-202d-4765-b0ae-e2b212bbca98
Or alternatively
https://www.afr.com/policy/energy-and-climate/european-parliament-backs…
The UST 10yr yield is up +11 bps at 1.63% with a sharp rise to its highest in more than a year.
US Producer Prices Soar Most Since 2018 As Gas Prices Spike
US Five year real yields (TIPS) stuck around minus 1.80%
Fed's new short term money market benchmark 1st percentile reading prints -0.01%
Dealers exchange cash for Treasury securities at 0.0% at Fed's Reverse Repo window.
DTCC Treasury GC repo rate 0.012%
US Daily Treasury Bill Rates Data
Reserves Are Definitely Abundant; Money’s Becoming Another Story
Seeing Interest Rates Counter To What They Actually Are
NZ has been well positioned to be supported by few of CCP's elite, 5millions team benefited from it. The recent FTA is paving the way to ensure for those Sinovac vaccinated service & support workers can come soon after the border re-opens, and after majority of Kiwis get their Pfizer jabs. Fascinating world of binary conditions.
And where does the oil price stop with America and other parts of the world going greener?
With no cost effective substitute for transportation the higher cost will continue to impact goods services imports exports etc pushing inflation well above wage growth.
The world's population is about to get a serious downgrade in their quality of life.
Yes - as the Covid distraction slowly slips into the rear view mirror – the America’s Cup could be her new “happy place” – but sadly for her, not for very long.
After that, anything will do she says – just give me a diversion, anything – those pesky questions on “delivery” are just a prime time annoyance and something I simply have no time for.
It must be personally troubling when you’re Prime Minister and being so scared of making difficult or meaningful decisions on things that really matter.
Meanwhile in Germany https://www.zerohedge.com/geopolitical/we-expect-worst-german-towns-los…
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