Here's our summary of key economic events overnight that affect New Zealand with news two of the four world's largest economies are back in recession or are nearly.
But first up today, there was another dairy auction overnight and prices in US dollars were virtually unchanged (-0.2%). But in New Zealand dollars they dipped -1.7% as the NZ dollar has appreciated by +1.0% in the past two weeks. This is the fourth consecutive event where prices have stayed virtually unchanged, so in effect it embeds in the big rise we got at the beginning of March. Prices are now up +25% from the start of 2021, and up +42% from this time last year. It seems unlikely today's event will undermine any farmgate milk payout price forecast. Volumes sold were +26% higher than at the equivalent event a year ago. This is the season low for product offerings and they will rise from here. And today's auction offered the most at this low season point than at any time in the past eight years.
US housing starts fell quite sharply in April and more than expected, continuing an unusual volatile start to 2021. But building permit levels remained high so the building start miss is unlikely to be a trend. More likely, timber shortages and other supply-chain issues are behind this miss.
The latest weekly US retail sales indicators suggest firm activity. But that is only a full recovery rather than a material gain as levels are now only +3.5% above 2019 equivalent levels.
In China, the massive infrastructure push over the past ten years, one that was financed by more debt, finds that more than US$2 tln of that will fall due over the next 30 months. That wall of maturities is starting to unnerve the debt holders and those who are foreign are quietly trying to offload it. It isn't going to be pretty for global bond markets generally given how much is involved. China already has a big issue with its state-owned Huarong 'bad bank', one set up to manage a debt disaster from an earlier era.
A new report on private wealth in China jointly released by China Merchants Bank and global consultancy Bain & Company highlights the huge volume of investable assets held by the country’s rapidly growing population of high net worth individuals. China has 2.6 mln people with investable assets exceeding NZ$2 mln (and these are considered high net worth investors). They are a key part of the NZ$50 tln of all of China's households. (US households have NZ$180 tln in personal net wealth.)
Japan’s economy stalled in the March quarter, shrinking more than analysts expected. GDP shrank an annualised -5.1% from the prior quarter in the three months through March, ending a two-quarter streak of double-digit growth. Economists had forecast an overall contraction of -4.5%. Growing pandemic restrictions are hitting their economic life hard, raising the risk of a double-dip recession if the country cannot bring these lock downs to a swift end.
The EU also reported March quarter GDP data, and that also retreated, down by an annualised -1.8%. This is the second quarter of shrinkage so the EU is back in recession, a double-dip they just don't need but imposed because they can't get on top of the pandemic properly.
There are small shifts in the trade deal negotiations currently underway. China is making more efforts to join the TPP just as the UK is doing the same. Given that the TPP was set up to counter China, it seems unlikely that the Chinese charm offensive on this will move very quickly. The UK is trying to get bilateral deals going with New Zealand and Australia. But British farming groups are recoiling in horror at the prospect - and freer trade on agriculture is the only key attraction the British can offer Australia or New Zealand - so these ones are probably not likely any time soon either.
The latest global compilation of COVID-19 data is here. The global tally is still rising, now 163,766,000 people have been infected at some point, up +585,000 in one day, 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 3,394,000 and up +12,000 in one day. Vaccinations in the world are also rising fast, now up to 1.502 bln (+27 mln in one day), and in the US almost half of their population (48.1%) have had at least one dose as they struggle to keep up the pace of vaccinations. Now approaching 40% have been fully vaccinated (125.4 mln people). The number of active cases there has fallen to 5,946,000 with fewer new infections than recoveries recently and steady progress.
Wall Street has opened flat following flat markets in Europe overnight. Yesterday the very large Tokyo market closed up a strong +2.1%, Hong Kong was up +1.4% and Shanghai closed up +0.3%. The ASX200 ended its session with a +0.6% gain, and the NZX50 Capital Index ended up +0.2%.
The UST 10yr yield starts today at 1.64% and little-changed from this time yesterday. The US 2-10 rate curve is at +149 bps and little-changed. Their 1-5 curve is also unchanged at +78 bps, while their 3m-10 year curve is still at +164 bps. The Australian Govt ten year benchmark rate is up +1 bp at 1.73%. The China Govt ten year bond is down -1 bp at 3.16%. But the New Zealand Govt ten year is up +2 bps at 1.91%.
The price of gold starts today virtually unchanged from this time yesterday at US$1868/oz.
Oil prices start today a little softer at just under US$65.50/bbl in the US, while the international Brent price is just under US$68.50/bbl. Both are slips of about -US50c/bbl.
The Kiwi dollar opens today at 72.5 USc and firmer overnight. Against the Australian dollar we are firm at 93 AUc. Against the euro we are little-changed at 59.3 euro cents. That means our TWI-5 starts today at 73.8.
The bitcoin price is now at US$43,190 and little-changed (+0.8%) from this time yesterday. Volatility in the past 24 hours has been very high at +/- 4.2%. 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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