sign uplog in
Want to go ad-free? Find out how, here.

Factory output gains weaken; producer and consumer prices rise faster; China tries to rein in yuan's jump; OECD sees mixed recoveries; UST 10yr slips to 1.58%; gold and oil firm; NZ$1 = 72.8 USc; TWI-5 = 74.4

Factory output gains weaken; producer and consumer prices rise faster; China tries to rein in yuan's jump; OECD sees mixed recoveries; UST 10yr slips to 1.58%; gold and oil firm; NZ$1 = 72.8 USc; TWI-5 = 74.4

Here's our summary of key economic events overnight that affect New Zealand with news of a very mixed state of affairs across the global economy.

The US is on holiday today, and some of Europe and all of China is too. That obviously means regular economic activity is taking a pause in large parts of the global economy. And that gives us an opportunity to look at activity in a wider set of second tier economies.

In South Korea they reported April industrial production data but it didn't expand anywhere as much as expected. In fact it fell from March. At least they saw gains in retail sales.

In Japan, their April industrial production data was positive although not quite as positive as expected.

China released its official May PMI survey results and those were unimpressive for manufacturing, although expanding at a moderate rate for services which indicates retail spending is holding up. However for quite some time now we have seen these official releases being more conservative than the parallel private sector PMI surveys which will come later today.

But a new pandemic outbreak in Guangdong, the province next to Hong Kong, is recording a sharp rise in pandemic infections and authorities have locked the border around the province. This will have a ripple effect globally as a key port is shutting down parts of its operation and limiting exports. In turn, that will disrupt container supplies expected elsewhere. But to outsiders, China is downplaying the risks.

Malaysia has entered a two week COVID lockdown as a sharp rise in pandemic infections has gotten away in that country.

In Germany, they released CPI data that showed inflation running there at +2.5% in May, and that is high for them - in fact, this is their highest year-on-year rate since 2008.

In Canada, producer price data was released overnight and that revealed very large price increases, in fact the largest increases since the 1980s when inflation was rampant.

Back in China, the central bank has moved to require banks to hold more foreign currencies in reserve for the first time in more than ten years. Authorities are suddenly concerned the appreciation of the yuan is moving too fast for them. The yuan appreciated sharply again overnight.

China also announced overnight that it would allow three-child families, in a new move to address their negative demographic trend.

The OECD has been assessing how this recovery will progress and they see very uneven progress across the various global economies. It sees New Zealand fully recovered on a per capita basis by the end of 2021, Australia by Q1-2022. and much of Europe by much later. It says the USA is already recovered on that basis and China got there late last year.

In Australia, things are on a knife-edge in Melbourne. Victoria has reported more new cases overnight as their aged care outbreak continues to grow. Their government isn't ruling out an extension to their 7-day lockdown.

Wall Street is closed for the Memorial Day holiday. Overnight European markets were down about -0.6% although some of these markets were closed as well for May Day. Yesterday, Tokyo ended a full -1.0% lower while Hong Kong posted a flat result. Shanghai is closed until Thursday. The ASX200 ended its Monday session down -0.3% but the NZX50 Capital Index was up +1.1%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 170,452,000 people have been infected at some point, up +402,000 in one day. India is getting a relief with a falling infection rate. Global deaths reported now exceed 3,544,000 and up +8,000 in one day. Vaccinations in the world are still rising but at a slower pace, now up to 1.9 bln. In the US half of their population (51.1%) have had at least one dose. More than 40% of Americans have been fully vaccinated (137.1 mln people). The number of active cases there has fallen to 5,593,000 with fewer new infections than recoveries recently and steady progress.

The UST 10yr yield starts today unchanged at 1.58% while Wall Street is on holiday. The US 2-10 rate curve is still at +144 bps. Their 1-5 curve is at +75 bps and flatter, while their 3m-10 year curve is at +158 bps The Australian Govt ten year benchmark rate is down -1 bp at 1.64%. The China Govt ten year bond is also down -1 bp at 3.10%. However, the New Zealand Govt ten year is down -5 bps at 1.81%.

The price of gold starts today up at US$1907/oz, a gain of +US$3 since this time yesterday.

Oil prices start today marginally firmer at just over US$66.50/bbl in the US, while the international Brent price is just under US$69.50/bbl.

The Kiwi dollar opens today at 72.8 USc and small firming overnight. Against the Australian dollar we are still at 94.1 AUc. Against the euro we are holding at 59.5 euro cents. That means our TWI-5 starts today at 74.4 which is up on day-ago levels.

The bitcoin price is now at US$36,895, and a +2.8% rise from this time yesterday. Volatility in the past 24 hours has still been very high again at +/- 4.8%. And a key US regulator has signaled (page 13) they are to take a more direct role in regulating crypto markets in the US.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
End of day UTC
Source: CoinDesk

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

55 Comments

Wall Street is closed for the Memorial Day holiday.

How old fashioned.

What is "old fashioned" about it ? We have Anzac Day. What's the diff?

DeFi markets never close, with zero governance.

TAB is the same.

Good point thebrain https://tab-trader.com/

I checked the field...too many skittish doges in the race, i see carnage at the final turn. But i went all in on an unfashionable golden retriever that gives me quiet confidence.

The retriever pulls a carriage of paper options.

Agree..which market trades 24/7 everday day after day?

10
up

When I read the 3 Child policy from China, I instantly can see PDK, Ham n Eggs, et al, slowly shaking their heads.

Firstly, the CCP saying it is now OK to have three children does not make it happen, as they should know from the lack of response to the end of the one child policy. Something commies really can't really get their heads around is the fact that people don't always do what they are supposed to. Children are too expensive in China and many other countries and th modern miss, like her overeats counterparts is more interested in her career, egged on by governments, shopping, dining out and travel.

Secondly, what PKY and co do not seem to realise is that all over the world we have demographic collapse where many countries are now experiencing negative population growth - with all its consequences.

Incel alert.

14
up

Secondly, what PKY and co do not seem to realise is that all over the world we have demographic collapse where many countries are now experiencing negative population growth - with all its consequences

Like deflation of asset prices, lower pollution, less consumption? Oh no!

"what PKY and co do not seem to realise ..."

https://countrymeters.info/en/World

or if you like pretty pictures

https://www.youtube.com/watch?v=PUwmA3Q0_OE&t=284s

skip to 4.00 mark and watch the light show

15
up

So they should. Population increase will be a disaster.

China has settled more than a million of its people across Africa over the last couple of decades.

Their plan goes well-beyond growing the economy through population increase (myopic approach NZ can't get past); it is to create the new wave of global imperialism.

The righteous few never stop shaking their sanctimonious noggins.

11
up

we should listen to those clever economists ... who insist there is no limit on how many sheep you can put in a paddock

Which economist says that?
Name them.

How many economists can we put in a paddock. They talk shit especially Sham does

Ironically, that's more reasonable statement than H&E's.

But I thought you had the belief technology and efficiency gains meant there's no limit to how many sheep can fit in a paddock?
If there is indeed a limit, that would mean you acknowledge that certain physical laws cannot be overcome by the above.

Technology would enable smaller sheep, sheep stacking, sheep rotation, maybe even virtual sheep. So there are limits but higher than you realise.

One day we will be able to 'mine' for sheep and add them to the blockchain

Sheepcoin?....sounds compelling.

There is always a limit.
The thing is you don't understand the behaviour as we approach the limit. Here 6th form calculus may help.

Metaphorically? Basically all of them!

Pro tip - you don't need as many paddocks as you used to.

But although the number of sheep had halved since the 1990s, the volume of lamb meat the country produced was down only about 5 per cent, Burtt said.

"There have been improvements in knowledge and technology that have led to better lambing percentages, better pasture growth and management, and heavier lamb weights," he said.

"The numbers overall might be down by 50 per cent but the average lamb weight is up from about 13 kilograms in the 90s to about 19kg now.

"That hasn't happened by accident, it's happened through deliberate improvement by farmers."

https://www.newshub.co.nz/home/rural/2019/01/sheep-numbers-continue-to-f...

Ahh. That old chestnut.
Surely you know PDK and H&E do not believe in technological advancement (or anything that clashes with their flawed naratives).

What is their narrative exactly?

No sense arguing with old nymad
He thinks that Tech produces stuff ....
He doesnt realise tech needs feeding

Pro tip
It was a metaphor for Aucklanders

Generally speaking, higher output=higher input. That production from those fancy ryegrasses and heavier lambs, didn't materialise from zero extra inputs. When there is standing room only in the paddock, it doesn't matter what high tech pasture plants they are trampling into the mud, something's gonna give!

exactly
Tech always needs FEEDING ... whatever form it takes

they could promote immigration,

Nope, unless women are forced to have children (denial of reproductive and lifestyle choice) they will choose fewer births, as is patently obvious in the western world.
I wouldn't put it past the CCP to introduce such things though, if this does not turn up the results intended.

If vax becomes mandatory, why not insemination? Same principle.

There is a difference between a pain in the arm for 1 day vs a pain in the arse for 18 years.

Looking at demographic trends after ending the one child policy there wasn't much of a response. China is a very different place to 1980, far wealthier and women better educated.

I think China realised that at the last 'Peoples Congress' when the party announced it would improve housing affordability and create a childcare system to help families.

How all so called experts work out a narrative to suit their purpose :

Here, is it to remove LVR or resist government and RBNZ ( who as it is not interested and needs no convincing) from taking any further action as all data and parameters suggests that even after housing policy and reintroduction of LVR, house prices are touching new heights.

https://www.oneroof.co.nz/news/ashley-church-were-deluding-a-generation-...

We must be getting close if Church is starting to use headlines like this...

Haha all I got was blurred text and a blurred image of dear Ashley.. . Only by signing up to OneRoof will I be able to see his lovely mugshot and sage words

The opposing view to his headline is that we've deluded generation/s into thinking that house prices can never fall.

In Germany, they released CPI data that showed inflation running there at +2.5% in May, and that is high for them - in fact, this is their highest year-on-year rate since 2008.

Financial repression intensifies in #Germany. Real yields (10y Bunds-inflation) hit fresh All-Time lows, plunged to -2.67% after inflation jumped to 2.5% in May from 2% in April. Real yields are now NEGATIVE for 61 consecutive months, another fresh historic record. Link

DC - you forgot to add no lockdown Sweden:
"Sweden’s economy returned to its pre-pandemic level in the first quarter as the recovery in the largest Nordic economy is outpacing most of its wealthy peers.

The gross domestic product was unchanged in the first quarter from the year-earlier level, on a calendar-adjusted basis, according to the Stockholm-based statistics office.

Swedbank’s analysts Pernilla Johansson and Maria Wallin Fredholm said GDP reached the pre-pandemic level “much faster” than they or Riksbank had expected, according to a research note."

www.bloomberg.com/news/articles/2021-05-28/sweden-s-export-driven-econom...

"People who believe the coronavirus was manufactured in a lab haven’t been allowed to say so on Facebook since February — until Wednesday, that is, when Facebook announced it was lifting the ban.

Presumably this has something to do with the wavering elite consensus on lab leaks. This consensus was never as monolithic as proponents claimed, nor as stifling as opponents now aver. But it did produce a Facebook ban and a lot of journalism dismissing the hypothesis as a well-debunked conspiracy theory with racist roots.

In one light, this is a happy scientific ending. Over time, with study, natural transmission looked less likely, and a lab accident somewhat more so. As the evidence changed, a previously hard-and-fast consensus became more open to other possibilities, as should be the case for any good scientific theory.

But in another light, this story is a disaster. How did so many smart people come to believe, not just that a natural origin was much more likely than a lab leak — which is still, to be clear, the opinion of many scientists — but that a lab leak was basically an impossibility? For that matter, what other things do “we all know” that just ain’t so?"
https://www.washingtonpost.com/opinions/2021/05/30/beware-expert-consens...

There is science, then there is what political folk and media say about science.
The two are not the same.

Rubbish, Science is a new religion. Question the methodology at your own peril, enforced by the establishment (the government and media).

Case in point: "Oh, you're not an epidemiologist? Sorry but you can't have an opinion on vaccine related Science. Now lets hear from epidemiologist (and political commentator) Siouxie Wiles."

Meanwhile, big corporates pay billions for scientific studies that work in their favour. Nothing new under the sun.

10
up

Because the MSM was anti-Trump and nothing he said, could have been correct :)

Unherd and Freddy with Nicholas Wade

https://youtu.be/qVVE6MD7tRw

The missing chapters from Helen's report.

I dont like how social media think they are so all being that only they know the ultimate truth and therefore control what we are allowed to say or not say.

They are just as myopic as CNN, MSM or Fox News

Here is some real old fashioned journalism you might be interested in profile. It really lifts the lid on the source of the virus. Warning contains sciency stuff. https://thebulletin.org/2021/05/the-origin-of-covid-did-people-or-nature...

Ummm Germany and Canada. I feel like the canary in the coal mine just died.