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US jobless claims fall; US economic activity rises; debt premiums shrink; ECB far from tapering; big but variable climate commitments; APRA says ditch some clients; UST 10yr at 1.55%; oil flat and gold down; NZ$1 = 71.6 USc; TWI-5 = 73.5

US jobless claims fall; US economic activity rises; debt premiums shrink; ECB far from tapering; big but variable climate commitments; APRA says ditch some clients; UST 10yr at 1.55%; oil flat and gold down; NZ$1 = 71.6 USc; TWI-5 = 73.5

Here's our summary of key economic events overnight that affect New Zealand with news climate controls are very much back on the international agenda, even if some say they are not enough yet.

They will be tougher to win given the economic recovery underway.

Last week there were 566,000 new jobless claims in the US, lower than expected and lower than the prior week. Now there are 3,863,000 people on these benefits, and the good thing is that this decline is being driven primarily by rising employment and no longer just the expiry of benefit qualification.

Supporting that, the Chicago Fed is reporting its National Activity Index rose, and by more than was anticipated. There was a good economic rebound underway in March, making back the unexpected February weakness, and more. April factory activity in the Kansas City Fed region is very strong.

But some steam seems to have gone out of the residential real estate market in the US in March. Still, volumes sold were still +12% higher than a year ago, and prices rose, perhaps indicating the sales volume pullback from February is more related to a lack of supply than demand.

The US Treasury auctioned US$21 bln of 5 year inflation protected bonds earlier today and got US$48 bln in bids. The average yield was -1.69% lower than the CPI.

And the premium cost for non-investment grade corporate debt over US Treasurys has fallen below +3% for the first time since 2007. Debt risk is rising.

In Europe, consumer sentiment 'improved' more than expected in April, although it is still a net negative - just less negative. But it is still not back to its pre-pandemic levels.

This negativity mean't that the ECB held all its policy positions in its latest monetary policy review, including its €20 bln per month of money printing. There is no taper talk in Europe. Its balance sheet is now up to €7.5 tln (US$9.0 tln) and that compares to the US Fed's level of just under US$7.8 tln

In Washington, the new Administration said it will boost public climate finance to help poor countries reduce greenhouse gas emissions and adapt to a changing climate, doubling funding by 2024 from average levels hit during the Obama administration. It was part of a wide range of new commitments by global leaders to restrain emissions, although China and India notably are still prioritising "development" over emissions reductions. China won't even start the process of phasing out coal consumption until 2026. And Australia has refused to set an emissions reduction goal for 2050.

But Aussie regulator APRA says bankers may need to cap their exposure to customers at most risk from climate change or even consider ditching some of these clients.

On Wall Street, the S&P500 has thrown its toys out of the cot after lunch. It is down -0.8% in early afternoon trade as the new Administration prepares to push ahead with its tax hikes for the wealthy, including raising the capital gains tax to 43%. Overnight, European markets rose +0.8% for a second consecutive day. Yesterday, Shanghai ended down -0.2%, Hong Kong ended up +0.5%, but Tokyo roared back, up +2.2% and making back much of its big falls earlier in the week. But it is still down a net -1.7% so far this week. The ASX200 ended yesterday up +0.8%, and the NZX50 Capital Index ended up +0.3%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 144,176,000 have been infected at some point, up +919,000 in just one day, largely driven by rises in India where new lockdowns and super spreading events are underway. Turkey and Iran have awful problems too. Global deaths reported now exceed 3,064,000 and up +15,000 in one day. Vaccinations in the world are also rising fast, now up to 953 mln (+18 mln) and in the US more than half of their population (214 mln) have had at least one dose as they keep up their fast rollout. More than a quarter have been fully vaccinated. The number of active cases there is a tad lower at 6,853,000 with -7,000 fewer new infections as recoveries.

The UST 10yr yield starts today at 1.55% and a -2 bps dip. The US 2-10 rate curve is flatter at 140 bps. But their 1-5 curve is stable at +74 bps, as is their 3m-10 year curve at +155 bps. The Australian Govt 10 year yield is down -2 bps at 1.67%. The China Govt 10 year yield is also holding at just on 3.18%. But the New Zealand Govt 10 year yield is now at 1.56% and -6 bps lower.

The price of gold starts today at US$1781/oz and that is down -US$13 since this time yesterday, with the yellow metal unable to hold on to yesterday's good rise.

Oil prices are little-changed at just over US$61/bbl in the US, while the international price is just over US$64.50/bbl.

The Kiwi dollar opens today at just under 71.6 USc and softer from this time yesterday. Against the Australian dollar we are marginally softer at 92.9 AUc. Against the euro we are also softer at 59.6 euro cents. That means our TWI-5 is down at 73.5 but that is only back to its Wednesday level.

The bitcoin price will start today lower than this time yesterday, at US$53,730 and down -3.8% to its lowest level in four weeks. Volatility in the past 24 hours has been high at +/- 3.0%. 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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43 Comments

Typo in that gold price - 1281 -> 1781. Thought it had crashed earlier than expected.

gulp! :(  Thanks. Fixed now.

It will probably go down to about $1000 USD per oz. Already dropped US$400 from the peak.

BTC may hit 40K and then rebound when deflation blows over.

Got a timescale for gold hitting 1000? You've been calling this for quite a while now and no sign of it yet.

10-25 years. And the lower bound is closer to 750 SATS.

Yea by the end of next year when DXY hits 100. I am not saying Gold won't rebound, just that many will lose their shirts because of face-melting deflation for a couple of months.

Looks like the US wants to tax the wealthy to help the poor: https://www.bloomberg.com/news/articles/2021-04-22/biden-to-propose-capi...

New Zealand might be the last refuge to escape rising CGT.

0% is a lot less than 43%. Come all ye oppressed investors! Auckland awaits!

24
up

Tax the wealthy to help the poor? Surely NZ's approach is better - tax the poor to make the wealthy even wealthier. There are many more poor than wealthy so our system is easier to implement.

Jeebus, that seems really high. I wonder what the unintended consequences will look like

"Climate change is real and its impacts are mostly negative, but common portrayals of devastation are unfounded. Scenarios set out under the UN Climate Panel (IPCC) show human welfare will likely increase to 450% of today's welfare over the 21st century. Climate damages will reduce this welfare increase to 434%.

Arguments for devastation typically claim that extreme weather (like droughts, floods, wildfires, and hurricanes) is already worsening because of climate change. This is mostly misleading and inconsistent with the IPCC literature. For instance, the IPCC finds no trend for global hurricane frequency and has low confidence in attribution of changes to human activity, while the US has not seen an increase in landfalling hurricanes since 1900. Global death risk from extreme weather has declined 99% over 100 years and global costs have declined 26% over the last 28 years.

Arguments for devastation typically ignore adaptation, which will reduce vulnerability dramatically.

...The most effective climate policy is increasing investment in green R&D to make future decarbonization much cheaper. This can deliver $11 of climate benefits for each dollar spent.

More effective climate policies can help the world do better. The current climate discourse leads to wasteful climate policies, diverting attention and funds from more effective ways to improve the world."
https://www.sciencedirect.com/science/article/pii/S0040162520304157

10
up

The human enterprise has been planet-forcing in scale, for some time. The time available to do nothing, to obfuscate, to weasel, has been over for some time.

But this isn't just about the climate - that's just the exhaust gases of our energy-burn. That just tells us how big we have become, forcing-wise.

The question now is how we avoid collapse, as we de-grow to fit the planet.

You would be in the devastation camp?
"Arguments for devastation typically ignore adaptation, which will reduce vulnerability dramatically.
...The most effective climate policy is increasing investment in green R&D to make future decarbonization much cheaper. This can deliver $11 of climate benefits for each dollar spent.
More effective climate policies can help the world do better. The current climate discourse leads to wasteful climate policies, diverting attention and funds from more effective ways to improve the world."
https://www.sciencedirect.com/science/article/pii/S0040162520304157

I mean, above you're referring above to purely climate change. PDK is referring to not only that but the decline in quality of most of the resource base that larger society depends on. Globally things are a lot less rosy than you imply when the two issues are considered in tandem.

No, the opposite. I think the crux is that it is not purely about climate change - hence the last sentence in the abstract - "...diverting attention and funds from more effective ways to improve the world."
Climate change is politically convenient, as the problems are always vague and some time in the future whereas clean water, sanitation, vaccination, electrification, malaria... are here and now, and the last thing a politician wants is a measurable target. The last thing the Malthusians want is the dirt poor having access to sanitation, electrification, healthcare etc.

I don't think you can conflate a rising standard of living in third world countries with invalidating PDKs premise. Given that the whole point is that it's likely first world living standards that will decline (as we're the ones who use by far the larger share of the resource base of the planet) I don't see how anything you said invalidates it. Do you feel like the young in western countries will have more wealth and prosperity than there parents generation? I highly doubt it.

That's a good thing right? Less prosperity means less resource intense consumptive behaviour. We should be praying for the entire western world to adopt a more sub saharan subsistence way of life, perhaps nomadic cattle herding with sporadic inter tribal genocidal conflict to keep numbers down. This seems to be the eco choice.

Profile,

Interesting last sentence. Who precisely are these Malthusians and why do they want to prevent the really poor from having sanitation etc? Evidence?
I have been writing about climate change for a good many years now and I concentrate on what is measurable and observable-not what might happen. Significant loss of mass in glaciers has been observed globally for several decades now- increasing permafrost thaw has been observed-increasing CO2 and methane levels in the atmosphere have been measured for decades as has rising temperatures. I am interested in wine and climate change has a direct effect on where grapes can be grown and which varieties can be grown and on harvest dates.There are now over 700 vineyards in England, including one in North Yorkshire.
Here is a quote from Lisa Goddard, director of the International Research Institute for Climate and Society at Columbia University. "It's almost always a situation where a disaster is caused by natural variability...and the climate change part of it is making it worse".
There is still much to learn about our climate and we cannot know what effect adaptation might have on the outcome. I have no idea whether we have 10 years or 50 years to deal with this issue, but deal with it we must.

12
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I read this exchange and find my self persuaded by both of you. I particularly agree with PDK who treats climate change as a subset of a much larger problem. Every week I push our rubbish bins to the roadside for collection and contemplate on how 95% of what I'm putting out would not have been present when I was a child. And then I think about what fraction of it will be recycled.
What really bugs me is my council which talks about climate 'emergency' and then plans for a growth in emissions over the next 10 years.

Tauranga is just getting its new wheelie bins delivered this week as we speak and there are THREE of them. Rubbish. Recyclables and they honestly expect people to put the food scraps in a separate bin. From my experience most people cannot be bothered to rinse out their milk containers and just chuck it along with everything in the rubbish. To be honest its just another example of smoke and mirrors, the whole lot except the glass probably goes straight into landfill anyway.

"what fraction of it will be recycled.."

Recycling's basically a feel good myth that we can keep consuming with a clean conscience ...
when in reality it sucks energy resource to recycle (energy resource we dont really have) & bugger all goes round the loop and in a ever decreasing circle (ie cant keep remoulding the plastics..)

Its more of the Green party delusional thinking that we can recycle our way to greatness

The question now is how we avoid collapse, as we de-grow to fit the planet.

The so called lead economy is enduring the process of slow motion collapse.

US Treasury Inflation Protected Securities (TIPS) yields are negative for no other reason.

Dispassionately speaking, COVID might be the best outcome for the planet possible right now. Drastically thinning out the boomers as they hit peak consumption and tax burden is a gift. I'd be surprised if the countries who have suffered with most deaths from the pandemic, don't pull up better and faster post GFC given the lowered age spread of their population. Less tax burden, younger more open minds, healthier, better prepared for the new challenges of the future.

Dispassionately speaking, Covid-19 is killing the frail boomers such as my 93 year old Aunt who died of Covid-19 last month. She was too old to consume anything other than modest amounts of simple food and while in hospital the expensive health service resources. My U3A group is mainly over 70 and about half my group failed to attend the meeting because they were out touring the South Island or out on their yachts.
Your drastic thinning is not thinning enough boomers and not thinning the peak consumers and after all that thinning in a decade they all will be replaced.
Younger minds are closed not open; they are also inexperienced and unwise. There is accumulating evidence that younger being healthier is no longer true - life expectancy has increased for 100 years until now. But today American men die younger than their fathers. Just check the figures for diabetes in NZ and see how they have changed since fast food became popular.

In relative terms, the biggest news was China's comment. They are going to INCREASE fossil energy use for the next five years, then will look at reducing in the following five. This goes with their comments about 'peaking by 2030'. It's not only a can-kick, it's a power-growth thing politically, and it tells us we have to apportion effort to adaption. And it's planet-scale.

The climate alterations will be the background drumbeat (bushfires, Hurricane Sandy's) to an increasingly desperate attempt by 8 billion humans to stay alive. Those of us who were supping at the best tables, will have to repel boarders. There will be ever-more boarders. Those at the bottom-end, will die. And we'll let them, while pretending we care. Wokeness will fill the gap between conscience and reality. Resource quality will continue to descend.

And at some point, belief in fiat/debt leverage spreads to the masses - who have been shepherded into cash-less, self-insuring, bank-monopolising trading with each other. Greece and Crete tell us what happens, and how folk react. Is Robertson all over this? Or just another pawn? Because it's happening on his watch.

And our media are away back at the 'recovery' stage - reporting relative to a phase which has lasted a few decades as if it were permanent.

Yes its all pretty sad PDK but you must realise it cannot be stopped by man but it will be stopped by nature. The planet will self protect and the result will be far fewer humans living on it.

Yes
Covid is a brilliant front for getting people to consume far less of the pie ... "Stay at home please" ... while the important get special visas ..
but its a tightrope of not collapsing the economy as activity falls

Meanwhile our hapless leader joins a meeting saying "We must all do better", doesn't announce any changes and should be embarrassed as emissions are rising under her government.
https://www.stuff.co.nz/environment/climate-news/124919862/prime-ministe...

https://i.stuff.co.nz/national/politics/300284578/jacinda-ardern-savaged...

“A prime minister who virtue signals whilst crudely sucking up to China whilst backing out of the Five Eyes agreement, which I think is an appallingly, appallingly short-sighted thing to be doing,” he said.

Looks like she should have gone to SpecSavers.

And he from a country that forced opium on China.

Petards come to mind

What else have these folk not been telling the good people of A & NZ?
Hard to imagine msm reporters caught unawares - as this was basis of OIA.

https://www.rnz.co.nz/news/national/441058/how-a-family-fled-and-returne...

The Ministry of Health allowed a family to remain in the community for more than two days after escaping managed isolation during last year's first level 3 lockdown.

The case was never reported publicly and was deemed low risk because they had come from a country without Covid-19.

But it had some officials in Auckland scrambling, with one person writing to the Ministry of Health to denounce their lack of direction over the incident.

Question to RNZ & use of the fake because & (soft and).

"The case was never reported publicly and was deemed low risk because they had come from a country without Covid-19."

The "because" used here is adding context to why the event deemed low risk.

Being deemed low risk, with the because element (country of origin), technically got nothing to do with why, or why not to report, (because of the soft "and" use) but does persuasively read that way (because a quick read skips the soft "and").

Why do reporters & editors select to use language like this.
Why not use two sentences?
If it was one sentence the order of the soft "and" & the "because" would have been swapped - so the non reporting because .... and ......

Who did this? A skilled copyrighter, one who could find a home at any of the advertising agencies, by the looks.

You should go work with the MOH Henry - your time would be better spent.

USD has the cleanest dirty shirt of all fiat (and crypto).

Re: Deposit Guarantee Scheme - although legislation is not due until 2023 TV3 News last night reported that Robertson had said the government would stand behind the guarantee between now and then.

Anyone know whether this is the case as can find no other reference to that?

The implication: a bank is potentially insolvent or at least thought to be so.

Lowering the risk of a bank run will provide some cover. There are some very large mortgages out there with many being recently issued due to house prices. The banks (all of them) have to be carrying a huge amount of risk right now.

Given that the vast majority of mortgages are fixed, and with a term of 2 years or less any interest rate changes will affect mortgage payments rapidly. Good if interest rates go down but bad if they go up. Many people treat money left over after all the bills as money that can be used to make more debt payments. Any increase in payments will end up with a number of people defaulting. Not an immediate issue but a very real risk.

The short-term fixed interest are the biggest issue on these islands.

Eeeks.

I think the government would step in anyway if it all went sideways, just a few more billion dollars on the books. TD's are falling at a fast rate and I'm not that worried, until of course they are next to non existent which in itself is a marker for the beginning of the end.

This little rift is escalating;

https://www.stuff.co.nz/national/politics/300284578/jacinda-ardern-savag...

Seems to me the UN is the place for challenging genocide and other crimes against humanity. That our five eyes partners see their intelligence-sharing consortium as also needing to take action on this issue more or less suggests they see the UN as a useless organisation in terms of human rights protections. And that is a worry - as the only logical action following 'speaking out' to no avail is war.

Suddenly we find ourselves no longer in a 'benign' South Pacific as Helen Clark commented during her time as PM. I wonder how we go about declaring ourselves neutral?

The US vassal acting out under instruction:

Hegemony is incompatible with freedom, democracy, fairness and justice. Washington's hypocrisy lies in its desire to impose hegemony while claiming to be the defender of all sound political concepts of human civilization. So it has tried to rope in allies to give an alienated definition of various basic concepts based on the interests of the US and a few Western countries. Even the most identifiable concept of equality has been distorted by it. Link

The Veto Votes are what kills the UN. Without them this world may actually be a better place!