Here's our summary of key economic events overnight that affect New Zealand with news China sues Australia at the WTO.
But first, US durable goods order levels for May were slightly disappointing, rising +2.3% from April when a +2.8% bounce back was expected. Still this was the largest month-on-month increase since July 2020. But it is only +0.9% higher than the May 2019 level. Non-defense capital goods orders were actually down -2.3% month-on-month and only up +0.8% from May 2019.
American new jobless claims came in at a relatively high +393,000 last week and more than expected. There are now 3.2 mln people on these benefits and while this is now far below the pandemic peak it is also far above the 2 mln level it needs to reach before they can say they are back to pre-pandemic levels.
The US merchandise trade deficit rose to -US$86 bln in May with imports up and exports slipping. This result means the annual total has now hit -$1 tln bln in the prior twelve months or -4.5% of GDP.
The Kansas City Fed factory survey is still reporting a strong expansion in that region and expectations for future activity increased to a survey record high. They also report that firms are successfully passing on the much higher input costs they are facing.
We should also note that the results of the Fed's annual stress tests for US banks is released at about 8:30am this morning (NZT).
And we should note that a bipartisan but slimmed-down US$1 tln infrastructure plan has been agreed and the White House will now attempt to shepherd through a closely divided Congress.
In Mexico, there was something of a surprise rate hike their overnight. They unexpectedly raised their benchmark rate for the first time in three years by +0.25% to 4.25%. It was a split decision. Concerns are mounting that persistently high inflation may threaten the economy’s rebound - and they took action despite previously describing current inflation as transitory.
The English central bank also reviewed its rates overnight, but it was a non-event.
German business sentiment rose markedly in June for both manufacturing firms and service providers.
The tit-for-tat between Australia and China continues. China said it filed a claim at the WTO over Australian anti-dumping and anti-subsidy measures on Chinese exports of railway wheels, wind towers and stainless steel sinks. This would be the third recent WTO case between the two countries, after Australia sued over Chinese tariffs on wine and barley.
Meanwhile, China is making top-level efforts to extend its influence into the South Pacific, with President Xi making a personal phone call to Fiji's prime minister Bainimarama. The Fijian leader apparently thanked China for its help in their current pandemic situation.
In Australia, the latest data shows that their full-year budget deficit is on track to be almost half the -AU$$214 bln originally forecast. Surging income tax receipts from companies and individuals is driving the improvement.
The Aussie stats bureau released household wealth data as at Q1-2021 and that had their "Wealth per capita" up at a record high of AU$492,055 and up a remarkable +15.3% in a year, its fastest growth in more than a decade. Rising house prices drove the gains with with property prices contributing +8.5 percentage points to the growth and superannuation balances +4.1 percentage points. Household wealth grew more in the last year than it did during the preceding three years combined. (New Zealand's household wealth position was published on June 4, but we will need to wait until September 3 for the housing valuation bit.)
Wall Street is firmer today with the S&P500 up +0.6% in afternoon trade. Overnight, European markets rose by about +1% with the best result in Paris (+1.2%) and the laggard was London (+0.5%). Yesterday the very large Tokyo market ended flat. Hong Kong was up a minor +0.2%. And Shanghai was also flat on the day. The ASX200 ended with a -0.3% daily retreat, while the NZX50 Capital Index ended no gain or loss.
The UST 10yr yield starts today unchanged at 1.49%. The US 2-10 rate curve is little-changed at +1.23 bps. Their 1-5 curve is a little steeper at +83 bps, while their 3m-10 year curve is basically unchanged at +145 bps. The Australian Govt ten year benchmark rate starts today at 1.51% and a -3 bp fall. The China Govt ten year bond is unchanged at 3.11%. And the New Zealand Govt ten year is now at 1.80% and that is down just -1 bp.
The price of gold starts at US$1775/oz which is down -US$8/oz from this time yesterday.
Oil prices are little-changed from this time yesterday. In the US they are now at just over US$73/bbl, while the international Brent price is just on US$74.50/bbl.
The Kiwi dollar opens today firm at 70.6 USc. Against the Australian dollar we are also firm at 93.2 AUc. Against the euro we are a little firmer too at 59.2 euro cents. That means our TWI-5 starts today at 73.1.
The bitcoin price is now at US$34,832 and up +3.6% from this time yesterday. Volatility in the past 24 hours has been very high again at +/- 4.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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51 Comments
This tells a story. Commodity prices over last year...
Lumber: +104%
Natural Gas: +98%
WTI Crude: +81%
Heating Oil: +78%
Brent Crude +76%
Gasoline: +75%
Corn: +65%
Copper: +63%
Coffee: +57%
Soybeans: +49%
Cotton: +46%
Silver: +45%
Sugar: +43%
Wheat: +35%
Palladium: +35%
Platinum: +28%
Gold: +0.1%
https://twitter.com/michael_saylor/status/1408058985270349824
Ok, I'm on a bit of a tangent here.
Point I'm trying to make is that within NZ, I can only see a huge demand spike for labour and materials for the water infrastructure renewal programme.
And my guess is that the sharp spike in rates rises we're seeing around the country that are future looking, i.e. budgeting for this work, will be reviewed upwards by a not insignificant amount. And councils won't just swallow these price increases like in the private sector that has some level of competition. They'll be going straight on our rates bills.
One problem with that hypothesis is the $ billions of deprection stored away, plus the super-profit margin added to rates and water rates by way of constant re-valuation of the assets producing even higher depreciation and then frittered away on vanity projects. If the Government and through the Auditor General demanded the councils cough up all that reserved funds there woudn't be any need for the doomsday scenario you paint. Make me the "government" and thats the first thing I would do. There would be corruption trials, the cancellation of a few Knighthoods and other "Honours". Don't worry - that's what would be done. Just requires some number 8 courage - Ask - where all that money is?
Choosing a baseline in the middle of global lockdown is highly misleading. Lumber prices are now half what they were 2 months ago. Corn prices are at 2016 prices etc... What we are seeing is the impact of global consumption kicking back in - we need to ride the wave.
That's what I thought too, but the 5 year graph here tells a story...(at least for lumber)
https://www.nasdaq.com/market-activity/commodities/lbs
Actually, looking at the 5 year graphs here is interesting...
https://www.indexmundi.com/commodities/?commodity=copper&months=60
Wow. Having gone through a lot of the 5 year graphs, a hell of a lot of them look like this:https://www.indexmundi.com/commodities/?commodity=food-price-index&mont…
Who says there's no inflation?
Could never happen here? (Twitter, Wolf Richter) https://twitter.com/wolfofwolfst/status/1407914531230150661?s=21
Also from Wolf
https://wolfstreet.com/2021/06/24/central-banks-did-it-wont-admit-it-to…
New Zealand at the Top again.......
Indeed it is. As the price of housing gets further imaginary, the lending is going to be similarly fantastical so 11%pa growth is only as low as that due to the "space scale" quantum of debt already out there. With prices at "she cannae take anymore capn'" speeds (30%) you simply have to price the house at what you think it is worth to replace and add a zero.
That time the doomster set left adaption out of their chicken little model projections. 'Globally, by far the largest bias is introduced by not considering human adaptation, which can lead to an overestimation of coastal flood risk in 2100 by up to factor 1300. But even when considering adaptation, uncertainties in how coastal societies will adapt to sea-level rise dominate with a factor of up to 27 all other uncertainties.'
Uncertainty and bias in global to regional scale assessments of current and future coastal flood risk
https://agupubs.onlinelibrary.wiley.com/doi/abs/10.1029/2020EF001882
Human adaption = abandoning half the cities on the planet.
Where well over half of humanity live.
And which, ex fossil energy, cannot be serviced even at the just-in-time level we are currently managing.
Excellent. No worries, them. Let's take her to sea, Mr Murdoch.
adaptation has three related meanings. Firstly, it is the dynamic evolutionary process that fits organisms to their environment, enhancing their evolutionary fitness. Secondly, it is a state reached by the population during that process. Thirdly, it is a phenotypic trait or adaptive trait, with a functional role in each individual organism, that is maintained and has evolved through natural selection. - Wikipedia
Global issue: How Mobsters Control U.S., UK, & Netherlands
This is a very good link. It flags another threat to our democracies. While at one level I do believe that the Judiciary needs to be nominally independent of Government, it is clear that there needs to be very clear legislation that establishes some form of accountability, perhaps to the Ombudsman? There are clear concerns in NZ about peoples rights and access to 'justice', but anyone with even a small level of experience with it will tell you that 'justice' is a joke in NZ. And I personally have been told by a Judge that their role is not about justice, but to administer the law. But then we continue to call it the 'Justice Department'.
Helen Clark's disestablishment of the Privy Council was a knife in the back of our democracy.
Indeed it was. I have worked in the Justice Sector before and what should be known is that there is not one common way for courts to run. They run as the Judge would have them run. One might want a set of psych' reports for exactly the same case where another Judge may not. The implementation of Justice is highly, highly variable and revolves almost 100% around the rulings of the Judicary.
Don't even get me started on the desperately weak law. Murder someone in cold blood (not manslaughter where it is rage) and get 7 years (minus and time spent in jail waiting for the trial). That is not justice.
Raised from 4% to 4.25%, that is raised by 0.25%. Not from 0.25% up to 4.25%, raised by 4.0%.
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