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US trade deficit stable; US job openings surge; Japan and Germany report better conditions; ditto Australia; air cargo trade rises; food prices rise; UST 10yr slips to 1.53%; gold down and oil unchanged; NZ$1 = 72 USc; TWI-5 = 73.5

US trade deficit stable; US job openings surge; Japan and Germany report better conditions; ditto Australia; air cargo trade rises; food prices rise; UST 10yr slips to 1.53%; gold down and oil unchanged; NZ$1 = 72 USc; TWI-5 = 73.5

Here's our summary of key economic events overnight that affect New Zealand with news that is generally positive and sees good progress in mending the global economy.

The US trade deficit in goods and services remained high in April but it shrank from March as exports rose and imports fell. However year-on-year it is higher and now represents a deficit over the prior twelve months of -3.5% of GDP. A year ago it was -3.0% of GDP. Neither is a severe imbalance for such a large economy.

The latest April data for job openings records an American labour market on the rise with many more unfilled positions and a record number of positions awaiting to be filled.

The US Treasury auctioned US$66 bln in a three year bond overnight, and the Fed took only $5 bln of it, a recent low. The US$58 bln available to the public was very well supported getting US$143 bln in bids. The median yield was 0.295% pa, down from the prior equivalent 0.35% pa a month ago.

Japan announced an 'upgrade' to its Q1-2021 economic data overnight. Originally it has reported a -5.1% annualised rate of shrinkage. But that has now been reduced to shrinkage at an annual rate of -3.9% as it turns out domestic demand was better than first estimated.

In Germany, even though a key survey has found firms more upbeat about their current conditions, the same survey took an unexpected turn lower from a high level when it comes to how these firms see the future.

Business conditions in Australia rose to a fresh record high in May (now +37 index points), driven by further gains in every key component. But unlike in other countries, the prices aspect isn't zooming higher, not yet at least. A key aspect is the strong pickup in business investment, a positive portent for productivity. NAB is also saying the Australian economy is now larger than pre-pandemic, and the Q2-2021 growth will be strong.

The global air cargo trade rose sharply in April. Compared with April 2019 (which bypasses the pandemic impact), aircargo volumes were +13% higher in international markets, a remarkable improvement. In the Asia-Pacific region the rise was +9.2% on the same basis. The spike in prices we saw when stress levels were high seems to have dissipated.

And the World Bank says the global economy is set to expand +5.6% in 2021, its strongest post-recession pace in 80 years. But this recovery is uneven they say, and largely reflects sharp rebounds in the major economies, especially the US and China.

The May global food price rise is the biggest month-on-month gain since October 2010. It also its twelfth consecutive monthly rise and it's highest value since September 2011 and now close to its all-time high registered in February 2011. The sharp increase in May reflected a surge in prices for oils, sugar and cereals, along with firmer meat and dairy prices. This is just another element of the broad surge in commodity prices. Semi precious metals like copper are staying very high. Iron ore and coal prices are also staying high - even the command-economy mandarins in Beijing can't seem to get them reduced in a market that where high demand and limited supply is calling all the shots.

Wall Street has opened with the S&P500 recording a minor +0.1% rise by early afternoon trading. Overnight, European markets were mixed with changes between -0.2% and +0.3%. Yesterday, the very large Tokyo market closed down -0.2%, Hong Kong ended flat, and Shanghai recorded a -0.5% retreat. The ASX200 ended its Tuesday session up +0.2% and the NZX50 Capital Index was up the same.

The UST 10yr yield starts today down -4 bps at 1.53%. The US 2-10 rate curve is decidedly flatter at +138 bps. Their 1-5 curve is also flatter at +72 bps, while their 3m-10 year curve is as well at +152 bps The Australian Govt ten year benchmark rate is -7 bp lower at 1.53%. But the China Govt ten year bond remains at 3.13%, and the New Zealand Govt ten year is down -5 bps at 1.81%.

The price of gold starts today at US$1893/oz, and down -US$4 overnight.

Oil prices start today just marginally firmer at just over US$69.50/bbl in the US, while the international Brent price is just over US$71.50/bbl.

The Kiwi dollar opens today almost -½c weaker at just under 72 USc. Against the Australian dollar we have fallen to just under 93 AUc. Against the euro we are down at 59.1 euro cents. That means our TWI-5 starts today at 73.5 and about where it was this time last month.

The bitcoin price is now at US$32,027 and down an eye-catching -10.2% than at this time yesterday. Volatility in the past 24 hours has been extreme at +/- 7.7%.

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

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22 Comments

Judgement day for BTC..China goes for full court press with outright ban. Let's see if BTC prevails or the no coiners were right all along.

Must have been the catalyst for crypto prices seemingly staring at the abyss last night

What might be stoking surging inflation in food prices is that many countries have enacted, or are talking about enacting, restrictions on food exports. Russia, Ukraine, India and several smaller SE Asian nations to name just a few. Hungry people revolt and they can see there is going to be a protracted squeeze due to logistics issues, drought and failed harvests.

or they are acting to prevent too much food leaving the country seeking high global prices .... prices that locals cant afford

Doesn't seem to be a priority in this part of the world.

Australia is a major gas exporter but its own power plants face chronic fuel shortages, the only leafy greens most low-income Kiwis can afford comes in their Big Macs, we export hundreds of truckloads of timber logs each day but our hardware retailers have their sawn timber shelves running empty, and the list goes on.

But lettuce, cabbage, broccoli, etc., are all cheaper than Big Macs. And do we even export those?

I volunteer with my local foodbank from time-to-time and often hear about hardworking families ending up with little money for days running up to their payday due to high unforeseen expenses.

Even on a good day, spending even $20-30 a week on 'low-calorie' nutritious items such as leafy greens is a tough choice for these families.

16
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Why does on sees this type of headlines " Signs that the house market may be on the verge of cooling down" when reality is that activity in auction room and all data suggests that house prices are breaking all record.

A two bedroom unit in Bucklands Beach area sold for appox $1.3 million, CV $820000.

https://homes.co.nz/address/auckland/eastern-beach/1-60-vivian-wilson-dr...

This was sold on 02nd June (3 Months after reintroduction of LVR and housing policy announcement) - Mr Orr and his advisors, still waiting for LVR effect or new housing policy impact on house price ....All news coming out, suggest that market is still hot and house prices touching new height on a weekly basis, yet this blood sucking $#@% thirst is not quenched....may be only after putting the final nail in the coffin of FHB.

Is it correct Mr Orr and Jacinda Arden.

27
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If I went and stole money from a poor person to give to a rich person I would be thrown in jail? Ardern and Orr can do it freely and with a smirk?

Agree fully, it is the most obvious sign of a wrecking ball on inequality in action, makinh every non home iwning family hundreds of thousands of dollars worse off,relative to their long term housing security needs ,and financial stability needs,in a very short 12 month period. It is essentially anti-egalitarian,and frankly disgusting,.It is a direct penalty on the poor ,and an immediate penalty,however they are not spared from the taxation burden of contributing to the future pay down of excessive artificial monetary supply into the economy, registered as increased debt and RBNZ profligacy. So caught both sides,and kicked in the nuts on the third side by inflation driven costs,rents,utilities,food,gas, without commensurate wage inflation to meet that ,either. Ms. Frowny face is either thick ,or cynical and callous, .

The increase in house value given to owners free is greater than the whole annual wage being offered to working nurses in general.

11
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Getting on the ladder. A Lockwood. Property estimate $685-825. https://homes.co.nz/address/waiheke-island/oneroa/67-makora-avenue/DX99N
Sold under hammer.
"67 Makora Ave Oneroa Auckland Auckland 05/06/2021 Sold Under Hammer $1,620,000 Waiheke' against RV $680

21
up

Some time ago Dr Cullen remarked, something like - it’s bad enough when new rungs keep being added to the top of the property ladder but it is even worse when those rungs are being taken from the bottom of the ladder.

15
up

Even the RV is ridiculously high for the dump it is. I wish more of Jacindas neighbours would sell so she would finally realize what a disaster she has created.

11
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Vanity shacks on Waiheke are all the rage right now. The well heeled need somewhere to go to escape the vibrancy of Auckland.

The value isn't in the utility of the shack, it's the prospect of selling it to a greater fool in a few years.

In Germany, even though a key survey has found firms more upbeat about their current conditions, the same survey took an unexpected turn lower from a high level when it comes to how these firms see the future.

OOPS! In April, German Industrial Production drops by 1.0% MoM, misses estimates of +0.4%, due to chip crisis and construction timber shortages. Link

Inflation Or Deflation, China Or US Goods?
Graphic depiction

There has been this ongoing perception, the very one underneath all the inflationary hysteria, that the frenzy in the US goods economy is representative of conditions first in the rest of the American domestic economy as well as for the entire worldwide system. In truth, as we see time and again in foreign figures – China most of all, a huge marginal chunk of any growth/anti-growth period – the US goods economy isn’t just an outlier it is an extreme one.

The vast majority constituting the rest is really struggling.

The view instead from China, consistent with that vast majority, is a very lackluster return from the depths and one that may just have reached its fullest if disappointing speeds already some time ago. This, along with money/liquidity risks epitomized by Feb 24’s Fedwire disruption and its Feb 25 impact on UST liquidity, would more than begin to explain the changing bond viewpoint.

Dealing in probabilities, it would then make perfect sense why global yields which had previously sprung suddenly into reflationary trading almost as suddenly jumped right out of them. Or, more specifically, balance of probabilities that had been more favorable after last November, risks tilting toward a limited reflationary upside, tilted right back down again and remain steadfastly lower the longer it goes and the more China (and the rest of the world) fails to converge with US goods – despite having been artificially buoyed by that frenzy in US goods.

And if the US goods economy converges with everything else, as we keep asking, then what?

Whatever these increasing downside possibilities, which doesn’t necessarily mean more contraction or outright negatives ahead, the one thing they don’t contain is actual inflation either for the rest of the world let alone the United States. None of this, however, will do much to sway the sure-to-be even more colorful interpretations of this week’s May US CPI figures.

Just yesterday I stumbled on an article about Nissan having to delay rollout of their new flagship model. Due to shortage of processor chips.

Ironically, the company in the auto industry that had the smarts to build redundancies across its complex supply chain well-ahead of the pandemic is the one that pioneered lean manufacturing in the first place - Toyota.

Tesla Inc. attracted a lot of flak in its initial auto production days from industry experts for trying to bite off more than it could chew. The company brought much of its upstream supply in-house, which has given its product designers the ability to understand current supply challenges and pivot away the production from parts in short supply.

Things might not be a rosy as what is being made out:

https://www.newshub.co.nz/home/money/2021/06/mortgages-credit-account-cu...

How modern science works. "Wade points out that the “consensus” that Covid must have an entirely natural origin was established by two early pronouncements, one in The Lancet in February 2020 and the other in Nature Medicine in March 2020. These were op-eds, not scientific papers. Both spoke with certainty about matters which it was impossible to be certain about. Wade writes: “It later turned out that the Lancet letter had been organized and drafted by Peter Daszak, president of the EcoHealth Alliance of New York. Dr Daszak’s organisation funded coronavirus research at the Wuhan Institute of Virology. If the SARS2 virus had indeed escaped from research he funded, Dr. Daszak would be potentially culpable. This acute conflict of interest was not declared to the Lancet’s readers. To the contrary, the letter concluded, “We declare no competing interests.”
https://unherd.com/2021/05/how-scientists-sacrificed-scepticism/?=frlh

And our friends at Facebook (and others) were censoring anybody who dared to speak about it.

And yet RNZ seems able to completely miss this point.
No mention of the Facui & Co.funding of gain of function.
Notes nothing about the emails released or large elements redacted.

We don't deserve RNZ.