Here's our summary of key economic events overnight that affect New Zealand with news equity markets are now listening to the 'fear' signals the bond markets have been sending recently.
Overnight, there has been wild swings in markets. The bond squeeze deepened and spread to shorter-term US Treasuries, there has been a sharp sell-off in equities, and there is a continuing and sharp rise in the USD. A risk-off sentiment grips investors.
Not helping in the US, was that the expected improvement in the jobless claim levels last week didn't eventuate. There are still 3.2 mln people on these benefits and still far above the pre-pandemic levels of below 2 mln.
And investors are looking ahead and seem to be worried that the Q2-2021 growth spurt might be it for the other side of the V bounce back - and that the trajectory after that won't be so bullish.
This comes as current data about consumer appetites for new personal debt is rising in the US. Demand for car loans, credit cards and personal loans were up +11% compared to the equivalent 2019 levels according to one credit score reporting service.
And the Fed's own consumer credit data for May reveals its own continuing strong rise, jumping sharply by a +10% pa rate and marking the fifth consecutive month of solid rises exceeding +5%.
Separately, the New York Fed said it will start selling down its corporate bond holdings on July 12, the next phase of unwinding a portfolio acquired to help offset the economic damage from the pandemic. It currently holds $14 bln in this facility, so its not huge.
In Europe, the ECB changed little in their usual policy position, but they did approve a climate change action plan which is being seen as 'ambitious'. Investors are unsure how this will change the financial landscape. And that uncertainty is elevated because the ECB delayed releasing its policy guidance.
In China, their big story is all about how Beijing is cracking down on their tech giants, and hard. That crackdown is both on their growing financial power, and their reach into social communications. These enterprises have become central to Chinese commercial life, too big to fail, and are being drawn in to tight state control. The stock price of many of these firms is falling hard in Western markets.
In Australia, expectations are rising that new macroprudential restrictions will be introduced before the end of the year. APRA is already using a soft touch approach, but harder limits look likely in the next few months. Housing finance continues to rise rapidly, with investor lending now surging. This points to a further sharp acceleration in credit growth, which is set to outstrip income growth by a significant margin, something that regulators have highlighted as a criterion for acting. Measures being considered were: increasing the serviceability buffer on the mortgage rate (currently at +2.5%), targeting high LVR, and targeting high DTI loans.
May international air cargo data was out last night and it was particularly strong, coming in more than +10% higher than pre-pandemic levels. In the Asia/Pacific region the gain on that same basis was only +5%. It was North American that drove these gains. Air cargo capacity continues to slowly improve despite the lack of international passenger traffic. Having said that, the market remains tight, with no clear decline in cargo load factors. June is also likely to be equally positive.
But international air passenger travel is still dead-in-the-water, down more than -85% since May 2019. The only domestic air travel markets open 'normally' are China and Russia. (Australia is down -30%; the US is down similarly.)
Sydney’s COVID-19 outbreak jumped by 38 new cases yesterday and 40 people are now in hospital. The NSW Premier says ending Sydney’s lockdown on July 16 depends on people following the rules more closely - which they aren't doing in Sydney's south.
And staying in Australia, their compulsory superannuation levy on employers increased to 10% of payrolls last week and is legislated to step up to 12% over the next four years. There are competing lobbying forces, some wanting it capped at 10%, others in the superannuation industry wanting it increased to 15%.
The New York equity markets are lower with the S&P500 down -1.0% in afternoon trade although they were down more than that earlier. Overnight European markets all fell by about -1.8%. Yesterday, the very large Tokyo market was down a sharp -0.9% and Hong Kong dived by another -2.9% and Shanghai fell by -0.8%. The ASX200 ended its session up +0.2% while the NZX50 Capital Index finished flat.
The UST 10yr yield starts today down at 1.29% and down another -2 bps, and extending its retreat. The US 2-10 rate curve has stayed flatter at +1.10 bps. Their 1-5 curve is flatter at +68 bps, while their 3m-10 year curve is also flatter at +124 bps. The Australian Govt ten year benchmark rate starts today at 1.33% and down -6 bps. The China Govt ten year bond is at 3.03% and down -5 bps which is another unusually large move for them. And the New Zealand Govt ten year is now at 1.57%, down -9 bps and still chasing the US and Australia lower.
The price of gold is now just under US$1800/oz which is down -US$3/oz from this time yesterday.
Oil prices have stabilised overnight, up by +50 USc. In the US they are now just over US$72/bbl, while the international Brent price is now just over US$73.50/bbl.
The Kiwi dollar opens today just under 69.5 USc and down almost -¾c from this time yesterday. Against the Australian dollar we are lower too at 93.5 AUc. Against the euro we are sharply lower at 58.7 euro cents. That means our TWI-5 starts today well down at 72.3 and an -80 bps retreat.
The bitcoin price is now at US$32,968 and down -4.5% from this time yesterday. Volatility in the past 24 hours has been a very high +/- 4.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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70 Comments
Looks like everything is going back to normal. Good news indeed.
You might strike gold soon.
https://www.rnz.co.nz/news/business/446468/plenty-of-jobs-on-the-horizo…
Quite the opposite actually, government are already thinking about opening the to vaccinated travel starting a post MIQ scenario:
https://www.rnz.co.nz/national/programmes/checkpoint/audio/2018803007/g…
Life has to move forwards and keep moving forwards. The pandemic threat is abating in vaccinated countries with very few deaths reported at levels which would be typical of any flu. We're about five months behind however.
The hysteria about India was all over the evening news here while it suited. Although one thing I noted from the images, as if that means much, is they were all fat people. I'd be interested to see a class break down of deaths there. But rest assured if it wasn't over in India we'd be hearing about it. But even with the USA you can see overall mortality dropping like a stone from about March and that doesn't match with the vaccine eradicating the virus story.
One thing that is most likely under reported is people dying from the vaccine. But even the official number shows that more people in the USA have died from the Covid Vaccine than all other vaccines combined for the last 30 years.
"But even with the USA you can see overall mortality dropping like a stone from about March and that doesn't match with the vaccine eradicating the virus story."
It seems to align with the way they reported the mortality figures. Initially the USA (and to be fair most other countries) were reporting all deaths where the deceased had covid. Rather than where covid was a cause of death. I understand they are a bit more methodical with this, hence the decline in deaths being reported before the vaccine uptake.
The co-morbidity and age demographics that were a major factor in mortality, unfortunately have already passed on. So the remaining populace appear to be more resilient.
For the overall mortality in the USA that information is available at the CDC. I've downloaded an image from their website and would share here if I could.
For the vaccine deaths, this is all from the Vaers database and is again public information. All anyone has to do is look. I'd suggest you look up the podcast given by Dr Brett Weinstein where he interviews Dr Malone (inventor of mRNA technology) and Steve Kirsh. Three very smart men discussing the situation.
Before you take any notice of VAERs be aware these are reported ,but not investigated, or confirmed causal deaths in people that (may have) received covid vaccinations, and the reporting is open to anyone. Ie, its unfiltered, unconfirmed, un-investigated. Between those that coincidentially died of something else after receiving the vaccine, and the pure BS injected by the anti-vax brigade, its not worth a hill of beans unless you can go and investigate every case for yourself and see if it has any basis in reality.
Well I wouldn't dispute that. Although if you watch the podcast I suggest the "experts" there have done their homework and suggest that the true number of deaths from the vaccine is well under reported. Possibly by a factor of 20x. However the 4000 deaths are stated as more likely 20,000.
Then there is the long vaccine, just like long covid. The adverse effects are similar to long covid and just as prevalent.
Elsewhere I've seen it suggested by a cardiologist that deaths involving stroke could easily be caused by the vaccine and misrecorded as such. More so it it happens weeks or months after the vaccine. The most scary thing about the mRNA vaccines is that they don't know where else in the body it will show up, or how long those effects will last. Might be someone aged 20 has the vaccine but is killed by a stroke at 50 quite prematurely.
Explanation of happenings. https://www.rt.com/shows/keiser-report/528586-central-bank-interest-rat…
Great info as always David. Perhaps a little to much optimism about an instant bounce back to pre-Covid levels as soon as the vaccine started rolling out. Its still going to take years to recover, if ever if another Covid variant pops up. Its just going to be wave after wave in densely populated 3rd world countries with the constant risk it spreads worldwide.
"So that generation of politicians voted in by boomers decided to cut taxes, impose user-pays fees on university students and stop investing in public infrastructure such as state housing, public transport and public health. However, their “war” on high taxes to shift their wealth to others now and others in the future did not extend to themselves. They fought to ensure their own future state-funded benefits from New Zealand Superannuation would be protected by forcing their politicians never to touch the age of eligibility of 65 and to link their pensions to average wages, rather than prices, as the beneficiaries of the day were forced to accept. This generation also embedded into law through the Public Finance Act that governments, both central and local, must consistently drive down public debt to keep interest rates low and enable more income tax cuts. The creation of the RMA in 1991 acted as a perfect weapon to fight back attempts to build new infrastructure and to keep taxes low. That generation of voters, who are still largely in charge, also voted to remove land taxes and never to tax capital gains, especially on land. They beat down a capital gains tax over four successive elections to the point now where it’s a smoking and radioactive ruin only to be visited, Chernobyl-style, by tax wonks and political history tourists."
Any rebuttals from the large contingent of Boomer commentators ...?
I always recall a photo of a video taken in China revolution times. It was of a old woman who's crime was a landlord. They had placed a sign over her neck and beat her. Then the mob placed tires on her and burnt her alive. Your words today would promote the mobs actions. Who else would you like to drown, burn, shoot ? What's the requirement for murder? Just age or later will race, religion play a part. Blaming on a group of people born at a certain time and wanting to do them hard.. Pathetic and cowardly.
I always recall a photo of a video taken in China revolution times. It was of a old woman who's crime was a landlord. They had placed a sign over her neck and beat her. Then the mob placed tires on her and burnt her alive. Your words today would promote the mobs actions. Who else would you like to drown, burn, shoot ? What's the requirement for murder? Just age or later will race, religion play a part. Blaming on a group of people born at a certain time and wanting to do them hard.. Pathetic and cowardly.
I always recall a photo of a video taken in China revolution times. It was of a old woman who's crime was a landlord. They had placed a sign over her neck and beat her. Then the mob placed tires on her and burnt her alive. Your words today would promote the mobs actions. Who else would you like to drown, burn, shoot ? What's the requirement for murder? Just age or later will race, religion play a part. Blaming on a group of people born at a certain time and wanting to do them harm.. Pathetic and cowardly.
We called em ‘alligator pears’, I got one for Christmas once. I saved it and used it as down payment on my first house. That was in Taumaranui on the old trunk line. The manager at the Post Office Bank said, ‘that’s a fine gator pear, son.’ I think I was working three or four jobs and the time and mostly ate bees, so I think it was just as hard as it is for kids today. It’s always been difficult to get on the property ladder.
Is that Trevor? Trevor from the old Department of Works?
I think we might have lived on your street back in the day. Your wife knitted a lovely cardigan for Sid Holland one year and he wore it to the opening of the first petrol station in town. You're that Trevor, right? I remember we almost went into business together, tried to buy old Turner's egg license off him but he wasn't budging. Anyone can sell eggs nowadays, but the kids still complain about houses??
No but i knew Trevor - we lived a couple of streets over. I can still see him now in his backyard beating his washing dry on a upturned rusting whaling schooner
He actually helped put a good word in for by brother in laws cousin when he was promoted to sub assistant to the assistant reserve foreman at the forge
Helped put them in cornflakes for weeks
mind you, the cornflakes were smaller then
Pretty slanted article - does it qualify as hate speech by the proposed laws? What choices did the voters of the times have? What were the available alternatives? These same problems and questions exist today. At the next election, voters will be given a choice that most likely there will be either a National or Labour led Government, possibly diluted by a coalition agreement. They will get canned policies promised up front, but no way to hold a Government to them once they are elected. Today much more information is available to voters through the internet, so voters are more able to make educated choices, irrespective of their level of education. But like the voter Bernard talks about and are referred to above, many are still very much reliant on the MSM to describe, critique, and explain the policies. What is the quality of that analysis? many today actively criticise the MSM for it's obvious or perceived bias, but would an analysis of the MSM back then reveal those same flaws? And with multiple elections passed since the 70's how well have those next generations of voters done?
Bernard clearly blames the boomer voters, but does not indicate what the quality of their choices were, provides no intelligent analysis of any alternatives that were made available or of the messages the voters were receiving. But he still blames the boomers!?
What were the promises made to them at the time? I was a very young voter in the late 70's and must admit that at the time I did not understand most of it, and was heavily reliant on what was in the news and what others told me. Sam Stubbs identified that dropping the GSF was a part of Piggy Muldoon's platform (before I could vote) but I only remember the surprise when he dropped the fund into the consolidated fund because his "Think Big" projects weren't going as well as he promised. I certainly don't recall what labour were saying at the time.
Take of it what you will? Voted for abolishment of the GSF over employment and export development. I'm sure there's probably more to it though?
The Government was desperately unlucky; the world economy crashed after the 1973 oil shock, and Kirk died in August 1974. His successor, Bill Rowling, prioritised employment and export development but was defeated in an ugly election in 1975.
It’s water off this Boomer’s back. I owe my existence to a shared bottle of cider after a Cliff Richard Concert in 1961. Not quite baby in a manger material but it has been a charmed existence. The only cross I’ve had to bear is thanks to Chloe (ok boomer). Hopefully another 25 years to go. I might turn my hearing aid off then to quieten the shrill whining or is that tinitis
You need to take your slanted blinkers of Murray?
"The future seemed like another planet, rather than the place their kids and grandkids might grow up. That generation inherited affordable housing, cheap electricity and free university educations, built up and paid for through the sacrifices of high-tax-paying parents through the 1940s, 1950s and 1960s. Their parents had paid it forward, but they decided instead to both spend it today and pull forward wealth from the future. It seemed a costless exercise because Treasury and IRD didn’t properly calculate the future liabilities building quietly in the background of our societal balance sheet. The benefit cuts, the massive increase in electricity prices and the underinvestment in infrastructure are powering rising prison costs, rising preventable disease costs, falling productivity rates and rising mental health costs. Even with the recent talk of “livings standards frameworks” and “wellbeing budgets”, none of it was and is being priced into the societal liabilities side of the ledger, but it is very real."
Well they paid taxes all their life so they deserve something back. So what if the life expectancy of 82 means a boomer will rake in $350k in their golden years? Just import another migrant, pay them $50k and their PAYE for the next 42 years will cover that expense.
The bond squeeze deepened and spread to shorter-term US Treasuries,...
Eurodollar Curve Quirk Trivia, But Not Trivial To Anti-Inflation
Auction demand for pristine collateral remains unabated and below the Fed's 5 bps Reverse Repo window short term interest rate floor.
Not helping in the US, was that the expected improvement in the jobless claim levels last week didn't eventuate.
In Europe, the ECB changed little in their usual policy position, but they did approve a climate change action plan which is being seen as 'ambitious'.
Letting filthy private jets go tax-free shows how the EU prioritises the mega-rich over the masses
Gradually the markets are getting it.
Inflation is rising and is not a blip.
Inflation is eroding purchasing power and living standards
Supply cannot keep up with demand stoked by CB
Interest rates will have to rise and that means reversing continuous sweetie insulin injections of last decade worldwide.
Meanwhile China is tightening media grip, has taken HK and will take Taiwan once it has decided its internal demand consumer society is sufficient to counter world affront. China is also withdrawing its default protections from the over-indebted corporate State market. The anaesthetic administered in OECD countries in last 18 months is wearing off and here come the consequences.
How true ! Everyone is just putting money in stocks and property ......Should one be not fearful when everyone is greedy - Warren Buffet :
We’re looking at stocks as money pots, and that’s just not in the cards: https://on.mktw.net/3dTtuMP
12 month returns look good however prices are overcooked due to the wash of cash in the market looking for a home. Growing KS funds with onshore investnent mandates are also over inflating values not backed up with assets or returns merely the expectation of future growth and or profits.
I keep telling you guys that interest rates are in a long term downward trend, but keep seeing this nonsense about interest rates spiralling out of control.
And right now we are just seeing everyone doubling down at the casino in an effort to make up their losses. Good luck with that.
We probably wont find out what true interest rates are until the central banks stop their bond buying programmes
The conundrum arrives when persistent cost increases arrive and wages inflate while "stimulus" and low interest rates continue.
That is the recipe to crash your currency, and I believe once one of the 1st world economies crashes it currency, it will be all on from there...
CBs have got themselves into a debt cycle, it must result in currency crashes because the alterative is to stop QE which every bubble in town is reliant on.
So whats it gunna be???
https://www.nzherald.co.nz/business/stock-takes-inflation-is-coming-wha…
Why everyone is worried about inflation as is only Temperorary as Mr Orr - expert and who knows all has as data to support confirmed unless - he is a liar and taking chances as he personally has nothing to lose
The role of commercial banks in the global economy is changing, with lending to governments and their agencies now more important than lending to goods and services industries. It is a trend which is due to continue.
The new Basel 3 regulations seem set to encourage this trend, despite retail depositors being accorded a stable funding status. Central bank digital currencies are anticipated to augment and perhaps replace non-financial business credit over the next five to ten years.
The price of gold is now just under US$1800/oz which is down -US$3/oz from this time yesterday.
U.S. Dollar Index Cash (DXY00)
Forget Inflation, Half A Deflation Signal: Yields Down But Not (yet) Dollar Up
Immigration levels helped keep wages low for years: RBA Governor
Reserve Bank governor Philip Lowe has reignited the argument over Australia’s dependence on migrant workers after saying the nation’s high levels of immigration are partly to blame for years of low wages growth while allowing businesses to avoid properly training their own staff.
https://www.smh.com.au/politics/federal/immigration-levels-a-factor-in-…
From Pfizer:
As seen in real world data released from the Israel Ministry of Health, vaccine efficacy in preventing both infection and symptomatic disease has declined six months post-vaccination, although efficacy in preventing serious illnesses remains high
https://thehill.com/policy/healthcare/562169-pfizer-to-seek-fda-authori…
If Pfizer them selves are telling us we are going to need another shot already I think it's time to re-evaluate the vaccine goals and pause the propaganda (the radio ads are making promises that the vaccine can't deliver).
Anyone more hesitant on biannual shots?
I have finally decided to take a Boomer mentality on it, sit back and let everyone else do the hard work and get the shot so I don't need to. But seriously I'm going with the gut feeling on this one and its a big no from me. There should be enough Guinee pigs running about to do the testing and hopefully a second gen vaccine will be the go.
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