Here's our summary of key economic events overnight that affect New Zealand with news the week is starting with new stresses in the world of commodities.
In China, who produces about half the world's steel (using coal fired furnaces), the price of steel is rising. In fact, it is on the rise everywhere. Not only is the global recovery behind the surge, but the expected faster transition to greener economic policies and incentives are also too, in an ironic way, adding to the rise. The Chinese want to lessen their use of coal in steel production, so output is expected to fall when demand is rising. And the big new infrastructure plans in the US are expected to pass in some significant form, keeping demand high. And the policy drive to build new 'greener' infrastructure in Europe adds further demand. Although some new steel-making capacity is being added, more is being taken out, and the rising demand is expected to be much faster than the ability of manufacturers to supply.
The iron ore price is staying at the top of its 2021 range (and some newish Aussie supply issues may be behind some of that), and steel making coal is up as well. Demand for thermal coal is rising for electricity production and to keep prices under control. To add irony, China is releasing supplies from its strategic reserves. Corn and rice prices are falling modestly, but soybean prices are staying very elevated. There is another dairy auction coming up this week, and more declines look like they are ahead with WMP possibly down -3.1% and SMP down -1.0%.
The Baltic Dry Index is still high but it isn't pushing any higher.
China has opened its carbon market with the first trades at NZ$11.50/tonne. (The NZU price is NZ$47.50/tonne and the EU price is NZ$82/tonne.) But it is a start towards their net zero target by 2050 goal. In contrast, the coalition partner of the Australian government has declared there is a "net zero chance" Australia will adopt a net zero carbon goal.
US retail sales data for June was much better than expected but the May decline was revised worse, so much of the gloss was taken off their June outcome.
And the shine was well and truly dulled by the University of Michigan consumer sentiment reading for July. To be fair, this survey reported good gains in employment, but these were overwhelmed by sharply rising concerns about consumer inflation.
Back in Asia, Hong Kong is facing a two way vice. The US is warning its firms that the CPC takeover of the city is a serious security risk for them. And Beijing is pushing ahead with trying to make Shanghai its main investment and innovation center - at the expense of Hong Kong. Beijing is giving up on it in the face of the international pressure and just going all-in on Shanghai.
And as we have noted previously, China and other countries 'encouraged' to adopt its Sinovac vaccine, are now backtracking fast. Efficacy of Sinovac is low, and not effective against the Delta variant. China's vaccine diplomacy is collapsing in the Asian and African regions.
There were 105 new cases in NSW yesterday and another 18 in Victoria. Neither levels give confidence the Trans-Tasman travel bubble will re-open anytime soon. The COVID crisis in Indonesia is getting really bad. And sadly, it is a spreading problem in all of South East Asia. (Malaysia, Philippines, Thailand, etc.)
Perhaps one day, the world will put this pandemic behind it. But there are likely to be lingering costs - "long COVID" is looking like a serious debilitating condition and so far getting up to 200 mln people worldwide have been recorded as having got it; probably very many more.
EU inflation data was out for June over the weekend, and because we had the German and French data already, it was no surprise that the +2.2% year-on-year level was as expected. But when it comes, the July levels might show what the rest of the world is showing. Still, +2.2% is relatively high for them.
The UST 10yr yield starts today at just on 1.30% and up +1 bp from this time Saturday. The US 2-10 rate curve has stayed flatter at +107 bps. Their 1-5 curve is also little-changed at +71 bps, while their 3m-10 year curve is also still at +125 bps. The Australian Govt ten year benchmark rate starts today at 1.26% and down -2 bps. The China Govt ten year bond is at 2.97% and unchanged. The New Zealand Govt ten year is now at 1.65% and also unchanged.
The price of gold is now just on US$1812/oz which is down a mere -US$1/oz from this time Saturday.
Oil prices have also changed little so in the US they are now just under US$71.50/bbl, while the international Brent price is now just under US$73/bbl. However, over the weekend OPEC+ agreed to increase production by 400,000 barrels a day, moving to restore capacity they cut at the start of the pandemic.
The Kiwi dollar opens today just under 70 USc and small dip from where we left it Saturday. Against the Australian dollar we are unchanged at 94.7 AUc. Against the euro we are also unchanged at 59.3 euro cents. That means our TWI-5 starts today still at 73.
The bitcoin price is now at US$31,685 and down -1.0% from this time on Saturday. Volatility in the past 24 hours has been moderate at +/- 2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».