Here's our summary of key economic events overnight that affect New Zealand with news inflation risks aren't the only worry - Chinese banking stability might be too.
In China, there have been official warnings to many regional banks of a coming tidal wave of bad debt. Now Beijing is dealing with the issue by bundling many of these vulnerable lenders up in a mass consolidation. Unfortunately for them, this comes at a time when many of the already large national banks are struggling with profitability. And some of these large institutions are being roped in to help shore up the regional risks. Beijing is risking its banking system foundations in trying to avoid regional bank bankruptcies, the result of the excesses they engaged in.
A new report detailing widespread use of forced labour in the global solar industry supply chain includes accusations against the world’s four largest solar panel manufacturing companies. Nearly half the global supply of polysilicon comes from Xinjiang in western China, where much of the Uighur and Kazakh working population is pressed by government and private labour contractors into industries producing polysilicon through so-called “surplus labour”, “labour transfer” and “poverty alleviation” programs. China’s government denies the existence of forced labour in Xinjiang, or anywhere else in the country.
In Hong Kong, they finally have some good GDP data to report. Their Q1-21 economic growth was +5.4% better than the ugly Q4-2020 data, and +7.9% higher than the pandemic-affected Q1-2020.
In South Korea, their booming export sector seems to be quite able to sustain that growth with fast-rising prices. Export prices were up +2.2% again in April from March, capping a +11% rise just in the first four months of 2021.
In Ireland, their official health system was taken down after a ransomware attack. Doctors are unable to access patient records after ‘very sophisticated’ attack. It will be days before it is back online again.
The ECB released minutes of its latest monetary policy meeting, and it now sees the risks if inflation "tilted to the upside", lifting from +1.7%.
The commodity rally is stuttering. The iron ore prices is slipping still and now off its highs. Copper is too. There are market fears that Beijing is about to crack down on buyers who bid higher prices.
In the US April retail sales data was reported as 'weak', with no gain from March. This wasn't the +1.0% rise markets were expecting. Of course, the year-on-year change is barely relevant, but if we look back to April 2019, last month's result is +21% higher, so it really isn't a bad result that was posted. And if you realise that the March 2021 comparison is a very high bar, being able to maintain that should be seen as a good 'win' and a continuation of stimulus-fueled spending.
US industrial production data came in under expectations as well. That too continues a volatile set of month-on-month changes. Since April 2019 it records a -2.5% decline, so this data is no net progress even if there is a good net gain over the last six months.
The latest US consumer sentiment survey, this one from the University of Michigan, is lackluster as well, recording an interruption in their optimism. A key reason is the sharp rise in inflation expectations. This survey finds it up to +4.6%. If it happens at that level, it would be the highest annual rate since 1990. The current actual rate is +4.2%, so it is quite within the realms of possibility - even likely.
The latest weekly Fed balance sheet data was stable at US$7.8 tln or just under 36% of GDP. This coming week Treasury bond issues are relatively small with one 20-year and on TIPS auctions, together about $14 bln and far lower than the US$192 bln auctioned last week. But corporate activity will be strong with US$35 bln being offered by majors, and that follows a week of US$42 bln from big corporates.
Elsewhere, California has declared a severe drought warning as an extended dry grips the state, in fact much of the US west.
In Canada, their bank loan officer survey found lending conditions tightening for both mortgage and business borrowers.
They also reported industrial production data, and that was positive and boosted by rising production in their car manufacturing industry.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 162,644,000 people have been infected at some point, up +635,000 per day over the weekend, still largely driven by rises in India and Brazil. A fast-spreading Indian variant is now a new and dangerous risk. Global deaths reported now exceed 3,372,000 and up +23,000 in two days. Vaccinations in the world are also rising fast, now up to 1.452 bln (+47 mln in two days), and in the US almost half of their population (47.6%) have had at least one dose as they keep up their fast rollout. Now more than one third have been fully vaccinated (123.4 mln people). The number of active cases there has fallen to 5,999,000 after a system revision so fewer new infections than recoveries recently and better progress.
The UST 10yr yield starts today at 1.64% and up a tiny +1 bp from where we left it Saturday. The US 2-10 rate curve is at +149 bps and little-changed. Their 1-5 curve is also slightly flatter at +77 bps, while their 3m-10 year curve is now at +163 bps. The Australian Govt ten year benchmark rate is down -1 bp at 1.71%. The China Govt ten year bond is unchanged at 3.15%. And the New Zealand Govt ten year is also unchanged at 1.91%.
The price of gold starts today up +US$3 from this time Saturday at US$1845/oz. Over the past week, the price of gold has risen a net +US$15/oz.
Oil prices start today at just under US$65.50/bbl in the US, while the international Brent price is just over US$68.50/bbl. These are very similar levels to a week ago.
The Kiwi dollar opens today at 72.5 USc and unchanged after Saturday's rise. Against the Australian dollar we are up marginally to 93.2 AUc. Against the euro we are unchanged at 59.7 euro cents. That means our TWI-5 starts today at 74.1 which is actually marginally lower from this time last week.
The bitcoin price is now at US$47,143 and back down -6.7% from this time Saturday. Volatility in the past 24 hours has been a high +/- 3.8%. Over the past week, the bitcoin price has fallen -19%. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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73 Comments
Nowdays, if bank or any group of individual fails, it is the government and reserve bank that are more worried and freak out than the agencies or group who are at risk and will rush with all support to bail out by throwing money or whatever it takes.
So China government for the sake of its own reputation and credibility will not allow any bank to fail and bad debts is no problem at all as can print as much and if not sure to check with fed.
Exactly, the taxpayer is the last resort banker - checkout the Washington Consensus PPP debacles around the globe.
I agree its really hard to see the exit, almost certainly the exit will be a painful one. We could have explosive inflation at 10-20% for a few years, but the psychology of this is interesting. When the western economies see the need for a 1000$ note we will know we are in a new era. Let alone the lag of wages to interest make this largely untenable.
What will have to stop is the actual practice of QE, while this remains price discovery is not possible and "markets" will still not operate as designed.
That's the big question. The students of history I follow reckon the "exit" is always currency destruction (hyper inflation to death then forced reset).
I suspect the "strategy" is hoping for a luck change, like inflation being somewhat offset by deflation from automation on a timescale that makes a difference, or vaccines making everything all better again.
CV19, Indian variant. Brazilian variant. South African variant. British variant. But a Chinese virus is not allowed to called as such. Ex Secretary of State Pompeo recent statement he is convinced the outbreak originated in subject Wuhan lab. Well he would say that wouldn’t he. But the underlying message is there is potent potential as a biological weapon that cannot be dismissed. Terrorist or not. Just a handful of pre-loaded individuals moving through transport hubs would do it.
https://thebulletin.org/2021/05/the-origin-of-covid-did-people-or-natur…
Lab leak looks likely but I don't think it was intentional.
In other events in NZ today, I'm interested in hearing Immigration Minister Kris Faafoi's announcements today on skilled migration and other immigration reforms. Personally, as I came here as a skilled migrant, I'd like to see a clamp down on the student and partnership visas (having had friends get in much easier despite now working in supermarkets on those visas).
But my bet is skilled will be redefined as rich.
There is an interesting article on Stuff about overstayers today. Halfway down it discusses an Indian man who was eligible for essential skills visas in lower paid employment such as a service station, but was ineligible for a visa in a much higher paid role in the construction industry. Who are the people that make these distinctions!?
Government are just lifting the pay rate required to get a skilled worker visa - circa $57+k salary minimum.
Those working in supermarkets or gas stations won't get a visa unless their employer fakes the pay rate data, then exploits them illegally. Can't see that happening in the supermarket, not so confident about other industries.
It does indicate that we will have the labour shortage intensify. Clever thinking from the Government to use the market to lift wages by restricting the availability of labour intentionally. Or am I giving them too much credit?
It's deliberate. And, while I am no fan of the current Government, I think it's the right thing to do (as does Tony Alexander, of all people). This will force capex investment by businesses to lift productivity and spur some much needed "creative destruction" in the economy; all of which will help increase the nation's productivity and prosperity over time.
I think there are some indications that it's a deliberate policy -- that they've realised huge migration numbers undermine their goals on lifting wages and making a dent in the housing crisis. It's politically awkward for them, but maybe they've decided it's easier to stomach than further failure on those other fronts.
Yes, this is it – no more sleeps left – today is the day of much heralded, “big” announcement regarding the immigration reset.
Well, so reads the promotional handout anyway.
Unfortunately, this is probably going to be an extremely hard, push – a multitude of vested interests will have already prepared their usual media responses ready for release no matter what.
So best be prepared for all manner of somewhat procedural weepy, whinny rebuffs to be paraded out– including cleverly media crafted but self-serving somewhat fake, desperate and woeful personal situations, thrown in with the all to familiar “this is an unkind government” line, coupled with endless “how will business survive” stories, and finally the mindless “this is a crushing blow” sentiment to “whoever and whatever” as a general catch all.
I’ll simply reinforce that the government needs to stay the course – we’ve clearly had enough – address the failure – it’s time overdue to bring the mindless, senseless low skilled immigration scam/endless population growth policy to an end.
How do you clamp down on partnership visa's? Don't think they can do much here.
The problem with clamping down with student visa's (from the govt's perspective) is that the only reason that international students come to NZ in the first place is that they know after they finish their studies that they can get one of the 2 year post study work visa which can lead to residency assuming you meet the income requirements down the road. The international student industry is big money so I don't think the govt will sabotage this.
I imagine this will just be an announcement of the creation of an industry group who will then down the line make more announcements of announcements.
The international student thing does not make money for New Zealand.
Seems to me the "Educationalists" get government money to educate New Zealanders. Then flog that resource off to overseas students. Good for those "Educationalists". Not much else.
Clever people those civil servants.
The experience of my young NZ friend at university is she gets second class treatment.
I won't argue that the unis are without fault. Certainly the UoA VC's house was a debacle.
But if you take the international student money out, staff/student ratios will fall. They already are, and it would get worse. If you squeeze staff pay, which is also happening, it's not going to increase quality. As with any field, your best people have the most options to move elsewhere.
Successive governments, of both stripes, have settled on this arrangements -- having international students contribute a sizeable portion of the uni budgets. Personally I don't like that arrangement much, but the alternatives are either to fund the unis properly (which takes money), or gut them. There's no point in pretending that you can take all that money out of the system and still have the same education system on offer.
Online courses have their place. Some things work, some things don't. They're definitely not a panacea.
Of course they incur costs, same as any student. But at the margin the benefit, in pure resource terms, is greater than the cost. If you want to argue for locking out international students and gutting the unis, that at least is internally consistent. But try to remember what you're advocating the next time we're talking about a low-skill, low-productivity economy, with our best and brightest pushed overseas by a lack of opportunities.
Otago Uni deliberately did not plunge into the foreign student thing compared to the others.
And Otago is doing great, certainly not gutted.
I don't see the overseas student thing changes our low skill economy in any positive way. NZ students are going without because of the 'industry'.
Otago's caps certainly look good in the current climate, and they are less affected than most - at least in the short term. But if you are talking about slashing international numbers long term, they too will suffer.
How international students alter a low-skill economy is a bit complex, but you're definitely going to need unis which are not struggling for survival. I don't necessarily advocate for the international student solution, but I doubt you like the alternative either.
What I don't understand is your insistence that NZ students are going without. Ultimately I suspect that is the crux of it.
frazz,
MOOCs very definitely have the capacity to disrupt the current tertiary education model and in my view, the sooner the better. Long retired, I have been doing on-line courses for the past 7 years and have been able to access courses from universities in many different countries such as the UK, France, Norway, Switzerland, S. Africa, Australia, S. Korea and NZ.
If you reduce the total number of visas granted then partnership visas will fall also.
I'm only guessing, but it wouldn't surprise me if we didn't have any net gain in population due to partnership visas for people born here because if they partner up from someone overseas there's just as much chance that they'd choose to settle in their partner's country. It seems likely most of the partnership visas go to partners of new migrants.
Latest news on how everyone tried hard to block the latest tax changes but failed and the reason presented to stop tax change was to help tenant....recent report had suggested that it was more of a blackmailing than anything though personally feel that over a period of time rent will increase as it normally does, otherwise also.
https://www.stuff.co.nz/life-style/homed/real-estate/125148658/property…
Another argument from them :
"We understand what the Government is trying to achieve in terms of market stabilisation and creating a more even playing field for first-time buyers, but the unintended consequences of this policy far outweigh the benefits.”
Here I highlight again and some will be upset but when news relating to housing crisis are repeated again and again and ignoring the solution that will have minimum unintended consequence (like tax change as it targeted both genuine long term investors as well as speculators), have to highlight again that why has RBNZ put stopping interest only loan as a last resort when it should have been the first and how come experts and media not highlighting it - is it because that it may actually do the job.
Reduction of speculative demand should be the focus - any percentage fall will be good but by acting on IO, it should not be any but substantial as will act as a catalyst.
Instead banks fearing of action are going all out in reducing the interest now though RBNZ cheap money has been on offer for a while but why now..as ponzi has to be maintained.
I don't disagree that IO enabled people to participate in speculative activity in the past, but given the removal of deductibility and the extension of the BLT you'd be a brave (see financially illiterate) speculator to be doing this and expecting a positive return.
interest only loans allow people to have an investment property that makes a paper loss and close to cash neutral.
If you go to P&I loans then you need to find another $20K a year to repay the principal- most rents cant cover this...its a bust business model when/if interest only loans get phased out..
"He would say that wouldn't he" Pompeo on Wuhan.
Since the 'Gulf of Tonkin' we have seen the USA set out to destabilse some place using outright fibs. A constant procession.
They even invaded Iraq at no advantage to themselves. (they demonstrated a chemical weapons plant there but the Kiwi guy said it was a dairy plant - he knew because he actually built it.)
There is vast nastiness in the world - but be sceptical at any USA media campaign against someplace. It's a thing they do.
The Nazi's did with the Jews, early (and possibly not so early) Christians did it to the Muslims, the Muslims are doing it to us, and Israel. It is how Governments control and divert their populations from the more real problems internally. Justifications vary from some basis to rank BS but it still seems to work. Without restraint it inevitably leads to war.
Turns out the settled science (TM) that we rehashing our economy for was based on some dead wrong assumptions.
“People think snow is reflective. It’s so shiny,” said Gavin Schmidt, director of NASA’s Goddard Institute for Space Studies in New York City and acting NASA senior climate adviser. “But it turns out in the near-infrared part of the spectrum, it’s almost black.
...Even though the polar climate looks different with the new data, there are still more steps to take before scientists can use it to predict future climate change, the authors warned”
https://www.nasa.gov/feature/goddard/2021/new-nasa-data-sheds-sun-light…
If you're looking at infrared emission, hot things emit it (and look bright in an infrared image) and cold things don't emit it (and look black in an infrared image). But if you illuminate the scene with infrared light then some things will reflect it or absorb it (appearing bright or dark) regardless of their temperature. The issue at stake here is does the snow at the poles reflect or absorb the energy coming from the sun.
For a visible analogy, a black piece of paper and a white piece of paper are both emitting the same amount of light (none) but they look different when illuminated because of how they reflect light.
More inflation hysteria.- Goldman Warns Of "Substantial" Surge In Home Prices, Expects Bigger Housing Bubble Than 2007
But:
Why do economic data providers continue to overstate reflationary periods? This is more substantial than a pet peeve, though to many if not most it might seem like splitting hairs. We’ve seen this happen repeatedly with each eurodollar cycle. The more egregious economic overstatements were definitely 2014’s, the data errors contributing at least something to the confusion and narrative mistake, yet the same keep piling up even today as if no one learns from it. Link
* RSI indicators currently at 20% show BTC is oversold https://cryptopurview.com/live-price/
* There's an absolute tsunami of support right down to 40K https://pbs.twimg.com/media/E1i0wGGUUAIMQ6G?format=jpg&name=large
* A falling wedge pattern shows BTC will break out with very little resistance with just a 23% rise to 58k https://pbs.twimg.com/media/E1i0wGFUUAEVswt?format=jpg&name=4096x4096
* There's just 1194 coins of resistance to take us to 100k
* Stock to flow indicators are still well within the usual bounds of a bull run https://stats.buybitcoinworldwide.com/stock-to-flow/
* The Elon FUD is a sideshow - good for BTC as it will show how resilient it is once more
* All massively bullish indicators and I've been buying consistently right through with my ARR currently sitting at 215% to May
Bitcoin is inevitable.
Lol, I can see why you'd think that. But for me Bitcoin is the only pure signal in a room full of QE noise. It's a once in forever event, akin to living through the inception of paper fiat. The fact that it's arrived as we near the end of the oil seculum is phenomenal. And it's the most elegant software that's ever been written. Like the internet back in the late 90's, most people can't see this yet, but eventually everyone will. There's nothing financially more important than BTC right now.
Ezy - hasn't bitcoin market share fallen from about 70% to 20% this year? Why is it immune to the forces of supply - i.e. there are a lot of crypto's out there and it looks like people are dumping bitcoin and buying alternatives. Its like moving from one casino to another isn't it and there is an unlimited number of casinos that can be built for people to gamble their money in?
Or am I missing something?
You're looking at cryptocurrency as though all products have equal utility and a similar use case. Akin to saying Golds market share has fallen in the last 15 years, because there's been an increase in tech stocks.
Rather, blockchain as an underlying technology is going to replace the entire mechanisation of the current financial system. If you understand the inner workings of technology, you know that as it grows it adds layers of protocols making it faster, more scalable, more user friendly and most importantly more developer friendly. This is exactly what is occurring in crypto at the moment.
BTC is digital gold, a base layer store of value coupled to a relationship between the cost, output, latency and technological prowess of electricity production through Proof of Work mining. The coupling to electricity is key, because that is what gives BTC it's value. As a base store of value BTC will replace the USD as a global reserve to determine the value of everything measured in SATS. Look at NANO as an energy efficient apple for apple comparison to BTC, it is everything Elon is bragging about making DOGE but why hasn't that supplanted BTC?
Then you get the layer 1 solutions - ETH, ADA, SOL, DOT, ZIL, TRON, XLM etc. These layers are programmatic and provide utility by way of smart contracts. They're all currently competing to develop a solution that excels in being fast, scalable and user friendly. There's likely to be several winners.
Built on top of these are the layer 2 solutions - the platforms - decentralised exchanges, automated market makers, transactional banking accounts, share trading, advertising, video, social media, governance, betting, casinos - basically they're software and will replace/augment the transactional internet. In 10-15 years micro-transactions on these layers will serve as the revenue model for all data. You will connect your wallet (bank account) to your browser and then consume data earning and spending tenths of cents as you click. Literally thousands of up and coming products, many just months old are trying to take market share from and provide utility to the centralised internet. They're completely decentralised, democratic and censorship resistant, controlled by everyone and no one through the magic of blockchain and public/private keys. Any public network technology that goes against this ideology and continues to be centralised is likely to fail, driven out by user migration and profit.
The majority of folks in the financial space don't understand technology, and they're looking at the whole crypto space purely from a financial perspective trying to apply their knowledge. It's the same way David Letterman understood the internet in 1995, applying his knowledge of how audio information was delivered via radio and tape recorders. Bill Gates was a geek spouting mumbo jumbo and everyone laughed at him much as they laugh and deride the crypto geeks now.
If you remember that blockchain is technology first, and apply that lens everything will make much more sense. And regarding supply there is a fixed amount of just 21M BTC that can ever exist - enough for the top 0.001% to own just 0.73 BTC (73M SATS) each by current wealth distribution standards. When you consider that the top 0.1% have an average net worth of $371 million, it's very easy to see how BTC could go to the SAT as a base unit of global value. As Satoshi said, "It might make sense just to get some in case it catches on".
Been to the casinos in Vagas. Boring as hell.
But the shining light in the eyes of some as the casinos took their money was something to see.
I well remember one (a relative) who explained to me that the casino paid his airfare and room to come as often as he liked. He was very excited by the whole thing. He could tell you all sorts of mumbo jumbo detail about how it worked.
Reminds me of "Ezy" above
Fascinating read. Spot the flags Red.
When Castagna went to prison Macquarie judged that it now controlled Nuix, so it consolidated Nuix’s financial accounts into the parent company Macquarie Group, according to a PwC due diligence report prepared ahead of the Nuix float. Following his acquittal, Castagna was officially back on the Nuix board on August 7. Macquarie decided it no longer controlled Nuix and changed how it reported its investment.
https://www.smh.com.au/business/companies/anaemic-at-best-the-inside-st…
Old Musky boi has actually lost it ae. Rather disappointing/embarrassing at this stage.
Might even push down to 40k where there are a confluence of supports. Currently have a bullish convergence on the RSI indicator.
https://www.tradingview.com/x/vb4vjm7n/
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