Breakfast briefing: Anxious times on US recovery

Dairy prices fall back; US retail sales disappoint; US industrial production slips; SCMP hobbled; Wall Street marks time; UST 10yr at 1.62%; oil dips, gold firms; NZ$1 = 71.9 USc; TWI-5 = 74

17th Mar 21, 7:25am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news that although American stimulus funds are just now being released, there is nervousness about whether they will really juice up their recovery, or will recipients just pay down debt?

But first up, today's dairy auction has given back some of the prior event's stellar gains. You will recall it rose +15% two weeks ago, but today it slipped -3.8% in US dollar terms, down -2.6% in New Zealand dollar terms. This is actually a sharp variance from what analysts were expected. The average of their expectations was another gain of +9.5% which in hindsight has proven to be quite unrealistic. The key WMP price fell -6.2% and correcting the +20% jump last time. SMP held the line however, up +0.7%. Fewer bidders participated this time, perhaps anticipating those analyst rises. But there were more winning bidders this time.

Although analysts are saying that a broad US economic rebound is shaping up, there has been some disappointing retail sales data reported overnight. In February, sales were down across the board by -3.0% on a seasonally adjusted basis from January, but they are up +6.2% year-on-year, although this is when the pandemic impacts were starting to kick in in 2020.

Last week's Johnson Redbook sales data wasn't positive on a month-on-month basis either.

It may be that anxious American are using their stimulus funds to pay down debt rather than spend, although that conclusion may still be a bit premature.

Adding to the downer mood has been February industrial production data in the US, down a rather sharp -4.2% year-on-year, down -2.2% on a seasonally adjusted basis from January.

The US isn't the only country to report worse industrial production data. Japan was down -5.2% year-on-year although that is pandemic affected. Month-on-month they were up +4.3% and that is probably the more telling indicator of where they are heading now.

In Hong Kong, the South China Morning Post looks like it is the next local media organisation to come under direct Beijing thought-control.

In New York, Wall Street is marking time again today with the S&P500 up just +0.1% in early afternoon trade. Overnight European markets were an average of +0.6% firmer. Yesterday, Tokyo ended its session up +0.5% but Hong Kong rose +0.7% and Shanghai rose +0.8%. The ASX200 ended yesterday up +0.8%, while the NZX50 Capital Index was also up +0.8%. In fact, it is probably worth noting that since Monday last week, the NZX50 Capital Index has risen +4.8% in a series of steady gains.

The latest global compilation of COVID-19 data is here. The global tally is still rising and at a fast pace, now at 120,390,000 and up +370,000 in one day. Global deaths reported now exceed 2,664,000 and +8,000 in one days, so perhaps slowing. Vaccinations in the first world are rising however and in the US nearly a third (108.1 mln) have now had this protection. That is quelling the US daily death rate which was up less than +1000 again yesterday. The number of active cases there is down to 7,304,000 (-61,000 fewer in a day).

The UST 10yr yield is up +2 bps from yesterday at just over 1.62%. The US 2-10 rate curve is unchanged at 145 bps. Their 1-5 curve is flatter at +74 bps, while their 3m-10 year curve is unchanged at +158 bps. The Australian Govt 10 year yield is down -3 bps at 1.71%. The China Govt 10 year yield remains unchanged at 3.29%. But the New Zealand Govt 10 year yield is down a sharpish -8 bps to 1.77%.

The price of gold starts today up +US$3 in New York at US$1732/oz.

Oil prices have dipped about -US$1 and are just over US$64.50/bbl in the US, while the international price is now just under US$68/bbl.

The Kiwi dollar opens today unchanged at 71.9 USc. Against the Australian dollar we are softish at 92.8 AUc. Against the euro we firmish at 60.4 euro cents. That means our TWI-5 opens today unchanged at 74.

The bitcoin price will start today at US$55,277 and down another -1.0% from this time yesterday. In between, volatility in the past 24 hours has been +/- 3.4. 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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Source: RBNZ

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31 Comments

by theglc | 17th Mar 21, 7:56am 1615921017

to summarize the everything bubble

https://wolfstreet.com/2021/03/14/the-wolf-street-report-market-manias-…

by bw | 17th Mar 21, 9:05am 1615925152

From your link, and why "Rising House prices makes me Rich!!" is a fools' philosophy if the prices aren't backed by productive work effort. Will 'our' banks be any different?

Iceland’s very dubious assets were bid to the moon by people buying stuff from each other.
‘Suppose you have a dog and I have a cat. I sell you the cat for a $ billion and you sell me the dog for a $ billion. Now we each have assets worth a $ billion.’

‘Value’ appears with no cash.

In five years Iceland’s ‘assets’ rose about 100 times. And then all three of its banks went bust.

by Audaxes | 17th Mar 21, 8:29am 1615922981

In Hong Kong, the South China Morning Post looks like it is the next local media organisation to come under direct Beijing thought-control.

When the smear is without evidence, but the stain remains, what's the remedy?
Media misquoted Trump in notorious phone call with Georgia investigator

However, the audio shows that early reports in January about that call, based on anonymous sourcing, misquoted Trump. In those reports, Trump was quoted as urging Watson to "find the fraud," and if she did so, the investigator would be a "national hero."

Outlets such as CNN published these quotes, corroborating what was first reported by the Washington Post. The Washington Examiner published an article at the time based on the Washington Post's article.

by SimonRo | 17th Mar 21, 8:56am 1615924608

ugh. I wouldn't mind seeing compelled to attach a disclaimer, inline, to every single quote they publish for 6 months.
eg:
So-and-so said "find the fraud" ( has been shown to provide unreliable quotes and so this information should be independently verified at the sources below)

by Foxglove. | 17th Mar 21, 9:16am 1615925783

Trump created for himself an aura of big porkies by telling them incessantly, often unnecessarily and often on trivial matters, so guess the benefit of the doubt, further down the line, hardly likely to swing his way. False news was his catch cry and you have to concede he was not always wrong, and such news as broadcast was not, and is not, entirely about him either. Lying though is a double edged sword. Recall reading once that one Adolf Hitler response to complaints by underlings about his deputy Goering’s impulsive lying, - nothing can be done, even Goering doesn’t know when Goering is lying.

by profile | 17th Mar 21, 9:45am 1615927538

Taibbi:
The Sovietization of the American Press
The transformation from phony "objectivity" to open one-party orthodoxy hasn't been an improvement. An example is the Thursday New York Times story, “As Economy Is Poised to Soar, Some Fear a Surge in Inflation.” It’s essentially an interview with JP Morgan Chase CEO Jamie Dimon, who’s worried about the inflationary impact of the latest Covid-19 rescue (“The question is: Does [it] overheat everything?”), followed by quotes from Fed chair Jerome Powell insisting that no, everything is cool. This is the same Larry Summers vs. Janet Yellen debate that’s been going on for weeks, and it represents the sum total of allowable economic opinions about the current rescue, stretching all the way from “it’s awesome” to “it’s admirable but risky.”
https://taibbi.substack.com/p/the-sovietization-of-the-american

by murray86 | 17th Mar 21, 11:34am 1615934054

It also reads to me like the elite are saying that they should have been given the money because you can't trust the people with it. JP Morgan is after all a huge bank, but make no mistake sooner or later they will find a way to vacuum it up!

by TuaWai Smith | 17th Mar 21, 2:48pm 1615945693

yes, it is a shame what politics but also people in general have become. The people just dont even know how to spell honor or integrity anymore, including dems and repubs in the US. Considering trump and his enabling fox entertainment lied about 75% of the time, (verified time and again over the course of his miserable presidency), you just pay no attention, its just dribble on the shirt. That was probably the most shameful lying presidency the US has ever seen which has in turn bought out the worst in EVERYONE, because trump made people think it was Ok to be a lying idiot. And dumbty just promoted falsehoods all the way to his crybaby cave. I stopped listening to him about 4.5 years ago as I knew he was a career criminal with nothing to contribute to a more decent world and some media sites were infatuated with him and didn't give a crap about his lies. It simply sold papers and media lines.
Goes back to integrity and honor. Murdoch and co have none whatsoever along with so many other infantile enablers. Its all about the dollar for them and they suck in the masses just like Hitler did.

by profile | 17th Mar 21, 12:10pm 1615936221

Greenwald: How Do Big Media Outlets So Often "Independently Confirm" Each Other's Falsehoods?
The Washington Post's media-spread error about Trump's Georgia call shows the deceitful playbook first invented to undermine Trump and promote Russiagate.

There were so many false reports circulated by the dominant corporate wing of the U.S. media as part of the five-year-long Russiagate hysteria that in January, 2019, I compiled what I called “The 10 Worst, Most Embarrassing U.S. Media Failures on the Trump-Russia Story.” The only difficult part of that article was choosing which among the many dozens of retractions, corrections and still-uncorrected factual falsehoods merited inclusion in the worst-ten list. So stiff was the competition that I was forced to omit many huge media Russiagate humiliations, and thus, to be fair to those who missed the cut, had to append a large “Dishonorable Mention” category at the end.

That the entire Russiagate storyline itself was a fraud and a farce is conclusively demonstrated by one decisive fact that can never be memory-holed: namely, the impetus for the scandal and subsequent investigation was the conspiracy theory that the Trump campaign had secretly and criminally conspired with the Russian government to interfere in the 2016 election, primarily hacking into the email inboxes of the DNC and Clinton campaign chief John Podesta. And a grand total of zero Americans were accused (let alone convicted) of participating in that animating conspiracy.
https://greenwald.substack.com/p/how-do-big-media-outlets-so-often

by Audaxes | 17th Mar 21, 8:42am 1615923777

Looking Past Gigantic Base Effects To China’s (Really) Struggling Economy

Base effects have made the Big Three more difficult to judge, but put altogether all three sets of data add up to what Li Keqiang has already said when announcing the “unexpectedly” low Chinese growth target of “over” 6% this year. These estimates, particularly retail sales, show why authorities aren’t expecting much more than what’s pretty bare bones even after so much time has passed, leaving the rest of the world to deal with the worst two-year period in decades from the one place the rest of the world is really counting on.

The best we can figure, these are not at all the inflationary kinds of results the global economy had been told to pin its inflationary (more completely recovery) hopes upon. But the Chinese, anyway, already know they’re struggling; even if they, like us, aren’t exactly sure by how much.

by MortgageBelt | 17th Mar 21, 9:11am 1615925497

Does the Media hold the USA President to account for anything anymore?
Perhaps US business is in 'wait and see' mode.

by blobbles | 17th Mar 21, 9:16am 1615925778

When the Greens finance spokesperson is smarter than both the lead parties, it's time to worry: https://www.stuff.co.nz/national/politics/300253999/housing-crisis-gree…

by blobbles | 17th Mar 21, 9:24am 1615926297

Also Megan Woods now says the housing announcement will be "By the end of the month"... of course it was supposed to be "By the end of last month", but it doesn't really matter, because it's sure to underwhelm.

by Fritz | 17th Mar 21, 11:06pm 1615975589

She's godawful

by frazz | 17th Mar 21, 9:26am 1615926366

Trouble is over half the population will rally against these proposals (rentier class) ..... and start trotting out the usual "bunch of leftist communists - woke - tree hugging - sandel wearing...need I go on?

by CourtJester | 17th Mar 21, 11:41am 1615934491

IT'S GONNA DESTROY THE ECONOMIES!!!!!

by Squishy | 17th Mar 21, 9:33am 1615926831

That legislation would need to be exceptionally complex to be effective.

Also any restriction on credit is only likely to spur the Reserve Bank onwards with fiscal measures.

by JimboJones | 17th Mar 21, 9:34am 1615926863

• Removing the five-year cap for the bright-line test
• Ending interest-only mortgages
• Implement debt-to-income ratios, especially for property investors
• Requiring cash deposits for investment properties
• The Government to spend more money on income support schemes
• Kāinga Ora to lead a large-scale urban redevelopment and home buying programme

by JimboJones | 17th Mar 21, 9:42am 1615927332

So I assume all the commentators that go on and on about JA/GR/ for not fixing housing will now be voting green?

by bw | 17th Mar 21, 10:19am 1615929543

Yes, - or ACT.
Not out of ideology, but disillusionment with the choices I've made over the last decade or so.

by Independent_Observer | 17th Mar 21, 10:37am 1615930663

bw - its interesting how people are being pushed further to the right or to the left to find some identification with their political views. Similar to the divide that's occurred in the US. If you used to be a Labour supporter you might now be pushed out to the greens. And if you used to be a National supporter you might be pushed right to Act.

by karl seastrand | 17th Mar 21, 10:48am 1615931288

I would think supporting the Greens it if they got rid of that ungrateful whining little Mexican refugee. I was really hoping that Sir Bob would use all his considerable talent, money and resources to expose him for what he is (in regard to his trip to Mexico to jockey his BF into NZ through the back door) while pretending his Mum is on deaths door. I am pretty sure that a deep dive into this would have seen him removed from parliament for good. A perfect example of a "net negative migrant".

by blobbles | 17th Mar 21, 9:45am 1615927543

Actually, this makes me think: Are the Greens being used by Labour to test out policy, to gauge the public reaction to various policies before Labour announces the ones that don't cause the biggest push back?

It certainly seems so, now they have delayed their announcement. The Greens announcement comes out at exactly the same time GR said he was going to announce measures to cool the housing market. Testing the waters with your partners Labour? Certainly seems like it...

by Foxglove. | 17th Mar 21, 9:52am 1615927953

You have to have a suspicious mind to think that one up. That makes two of us. The wealth tax thingy too, had all the elements, in artillery terminology, of being something of a sighter.

by KH | 17th Mar 21, 9:43am 1615927430

Even the Greens are scared to mention "Population Policy" to manage house demand. And politicians generally won't go there, even when that discussion is common on such as interest.co
Ya wudda thought an ecological party would lead the way.

by powerdownkiwi | 17th Mar 21, 10:01am 1615928494

Slightly ideologically hamstrung these days by a 6-offspring instinctive socialist.

We could, indeed, do with an ecological party.

Values, circa '75, would fit the bill nicely....

by sparrow | 17th Mar 21, 12:35pm 1615937754

Richard Prebble had an article in the Herald today, detailing his ideas to fix the housing crisis.

Number one in the list: A policy to hold the population increase to what the nation can house.

It's just a shame that it's neither Act (the most immigration friendly party), Labour nor Green policy.

by karl seastrand | 17th Mar 21, 2:03pm 1615943001

sparrow... more and more people are finally starting to get it, and some are not even afraid to say it.

by bw | 17th Mar 21, 11:46am 1615934806

Good Lord!
Years back, I employed David as my spot Deutschmark dealer ; recruited him from Chemical Bank in London.

Sadness after the death of respected financial adviser David Campbell turned to anger when it became clear he had duped friends and family out of $26 million.

https://www.afr.com/companies/financial-services/sydney-elite-chasing-2…

by Foxglove. | 17th Mar 21, 2:29pm 1615944590

Suspect the identity you employed and that of the deceased were of different ilk and the journey in between something unsavoury. Say that because discovered recently the #2 I employed in the States over twenty years ago, had died unexpectedly, relatively young, and similarly, financially suspect.

by Fritz | 17th Mar 21, 11:07pm 1615975658

Pity about the SCMP. I suspected it wouldn't be long before they were reined in by the CCP.