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US new home sales tumble; Dallas Fed survey slips; China flood cleanup buoys commodities; China spooks equity investors; UST 10yr 1.27%, oil and gold dip; NZ$1 = 70 USc; TWI-5 = 73

US new home sales tumble; Dallas Fed survey slips; China flood cleanup buoys commodities; China spooks equity investors; UST 10yr 1.27%, oil and gold dip; NZ$1 = 70 USc; TWI-5 = 73

Here's our summary of key economic events overnight that affect New Zealand with news Wall Street and EU equity markets are trying to look past a Chinese rout and some dodgy local data.

US new home sales had a terrible month in June, made worse by a revision lower of their May data. June sales were the least for any month in more than a year and came in far below what was expected. New home sales make up less than 10% of all home sales, but it is a corner of their market that is a bellwether. Some see supply-chain shortages behind these drops and if that proves to be the case, the downturn could be just temporary.

Meanwhile the latest Fed regional factory survey, this one from Texas in July brought more stable news with only a small drift off its quite strong June expansion. New order levels remained good, and the usual indicators about strong cost pressures were in this report too as "strongly elevated".

There was another large US Treasury bond auction earlier today, this one for its 2 year Note. This one was for US$66 bln offered of which the Fed took US$6 bln. The balance got US$148 bln in bids (although that was less than the US$152 bln in bids at the equivalent auction a month ago). The resulting median yield was 0.18% pa, compared to 0.22% last time.

The extensive flooding in China has probably caused more damage that first assumed. Much will need to be rebuild. This is having an impact on commodity prices with copper rising sharply overnight, even the iron ore price recovered last week's -10% drop. China's clean-up costs will be in the tens of billions.

And a spreading set of regulatory crackdowns in China is spooking investors there with a rather fierce pullback in equity prices today in both Hong Kong and Shanghai. There was talk of 'panic selling' yesterday.

And there's more action by authorities in China; their central bank is 'asking' local authorities to impose higher mortgage rates in their jurisdictions.

Japan's July PMI brought the expected contraction in their services sector, and a modest expansion in their manufacturing sector, one similar to June.

Hong Kong's exports were strong in June, running +31% higher than in pre-pandemic June 2019.

Singaporean industrial production disappointed in June with a -3.0% slip for the month when a small rise was expected - and the slip from May's +4.4% makes it quite the miss.

In Germany, business sentiment as recorded by their IFO survey is holding high in July. They did record minor declines and report a shift away from the enthusiastic optimism of June, but these shifts are small at this stage and still leave them above pre-pandemic levels. Supply-chain concerns are behind the dip.


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In Australia, there were 145 new community cases in NSW yesterday with a record 79 not assigned to known clusters, and another 11 in the community in Victoria where their lockdown is in extension with the border closed to NSW. South Australia is also in lockdown although that may end soon. Queensland has closed it border with NSW, which is a last-resort action for them.

On Wall Street, the S&P500 has started their week with a very minor +0.1% rise in afternoon trade. Overnight, European markets were mixed between from down -0.3% in Frankfurt to up +0.2% in Paris. Yesterday, Tokyo rose a full +1.0% on the day. However Hong Kong shed an enormous -4.1% on the day, and Shanghai shed -2.3% in major sell-offs. The ASX200 ended yesterday flat, while the NZX50 Capital Index dropped -0.5% in its Monday trade.

The UST 10yr yield starts today at just on 1.27% and a -1 bp dip. The US 2-10 rate curve is to now at +108 bps and unchanged. Likewise, their 1-5 curve is unchanged at +64 bps, while their 3m-10 year curve is little-changed at +123 bps. The Australian Govt ten year benchmark rate starts today at 1.21% and up a mere +1 bp. The China Govt ten year bond is at 2.91% and -3 bps lower. The New Zealand Govt ten year is now at 1.50% and -2 bps lower.

The price of gold is now just under US$1799/oz which is down -US$3 from this time yesterday.

Oil prices have slipped very marginally and in the US they are now just under US$72/bbl, while the international Brent price is still just over US$73.50/bbl.

The Kiwi dollar opens today just on 70 USc and firmer than this time yesterday. Against the Australian dollar we are unchanged at 94.8 AUc. Against the euro we are also unchanged at 59.3 euro cents. That means our TWI-5 starts today at 73 and a minor rise.

The bitcoin price is now at US$39,227 and up another sharp +13.9% since this time on yesterday in a big move higher. 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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73 Comments

Houston, we have a problem.
Less than 20% of South Aucklanders invited to a mass vaccination have accepted a booking. Whatever your views on vaccines, a high uptake is integral to the strategy to reopen NZ. Especially in South Auckland.

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Just throw it open to anyone who wants it. A lot of people in the prioritized groups don't like being asked to go first.

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Agree, we need to get as many vaccines into as many arms as quickly as possible.

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Numbers and quickly is key. Do always find it humorous the justifications with community leaders saying "maybe there should have been music or entertainment". Isn't it a sad indictment that crap like that is required "motivate" things that are in their, their families best interest and used as a justification for people not doing it! Get off the grass and get the jab when you get the opportunity.

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I agree. Some interesting reasons put forward here as to why the very low uptake. I think a big reason will simply be apathy.
The government will likely be startled by such a low turnout, they need to clearly say if you don't accept your invitation - fair enough but you return to the back of the queue after everyone else has had the opportunity to get it.

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A lot of people are just sick of hearing Jacinda's/Bloomfield's voice, do this, do that, if not I will lock you in your room. Maybe they need to change the pitch of the message, if the numbers are this low.

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Sounds like you are projecting to me.

A lot of older South Aucklanders are tech phobic, working a full time low paid job (or two) and then looking after family. They aren't exactly motivated to go get a jab, not like they'll need it for their intl holiday anytime soon.

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Got my first shot at the Mt Wellington Vaccination Centre on Sunday. At least it was pretty busy there.

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Yep, I agree now. There are far too many people questioning the efficacy and side effects of the vaccine. The longer they hold these position, the more they will convince themselves. This can be fairly easily defeated by having lots of people vaccinated without side effects. This is because that position becomes untenable, once they realise half the people they know are vaccinated and are fine.

The fear is getting stupid. I was sitting near a woman on a train who was talking about a person she knew that was vaccinated. For some reason she had to clean their shower and said she had trouble with her heart and breathing afterwards and blamed it on the person previously using the shower being vaccinated. She therefore would never get vaccinated and would never be around people that were. Of course it was likely the chemicals being used in a small space, but not in her mind. It's truly batty stuff coming from otherwise normal sounding people.

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Why is South Auckland always a problem?

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Be cause regardless of which country, and what race, poor and downtrodden areas always have these issues

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Plus religion plays a big part and nefarious operators who prey on the gullible and trusting.

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And of course when you KNOW you are going on to a better life after this one it's not such a big deal.

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But ONLY if they pay the church a tithe or donate a good portion of their income!!! God is surprisingly picky like that...

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Really? Maybe some that the media want to give the impression it all of the world churches. Sounds like the usual vilification of anyone that is religious.

The Churches I know of are telling the people go get vaccinated as soon as possible. They are doing all the services online too. I'm also seeing the churches get money or support for people who have lost their loved ones or struggling with food.

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Religion is the 'opiate of the masses' after all.

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Nah..I reckon consumerism is..and flipping houses

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This is an imbicillic thread.

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If you are going to call people names can you at least try and spell it properly?

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Perhaps to a certain extent. But I bet if you went to some of the working class areas of England, which are not necessarily very religious, you would get a lot of non compliance as well.

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Always someone else to blame isn't there.

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when you get vaccinated they look you up on their records and verify your identity.some cultures are wary of officialdom or maybe are off the radar and want to stay that way.

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So does that mean the gangs won’t get vaccinated, I would have thought Jacinda would have made them a priority.

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As essential workers who sell and distribute high demand products and get in close physical contact with many, they should be a priority indeed.

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No jab, no P

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court jester
too right,an outbreak in south auckland would be devastating and shut down plenty of factories that depend on their labour,airport.plus the multigenerational living and closeknit nature of living would keep it circulating.

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Took 140000 invites to get 15000 people, now that is around 90% hesitancy in this area, that is a problem,(as this area will be a classic superspreader zone). A total propaganda failure at the highest level after 18 months of COVID.

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Still, those 15000 people will help the rest of the community feel more comfortable able getting the vaccine, so it's still a very worthwhile exercise.

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A friend who got the text thought it was a hoax. I would say a lot would have felt like this. Just a hint but the govt needs to engage the community, they have no idea on how to do this obviously.

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Oh yeah, the texts and emails all looked a little weird.
My initial email came from a nmf.nz domain. What the heck is that? Ideally it would be coming from a .govt.nz domain. The booking email came from a .health.nz domain, just for consistency :-)
I don't really blame the current government too much here. It's fairly clear the state of our health system hasn't kept up with reasonable expectations, and that has likely been going on for at least 10-20 years.

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It helps me when I think of the Beehive as a set for an old black and white Keystone Cops movie with Laurel and Hardy in the main roles, Laurel as Finance Minister and Hardy as the PM.

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Agreed, but plz not another of those 3 water ads we see in tv at present. This ad must be targeting 5 year olds and I hate to think what it cost taxpayers.

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The governments obligation is only to make sure that those that want a vaccination can have a vaccination before reopening the border. We cannot force anyone but we can make clear the date borders will reopen and what those unvaccinated will need to do regarding shielding.

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Brillant plan! Until the unvaccinated population gets exposed to the virus and suddenly all the hospitals are crowded and the entire emergency healthcare system gets clogged.

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You hold them down, I'll get the vaccines. :-)

All we can do is advise people and make it clear this will be important now we are moving out of the pandemic.

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We hear alot from govt about treating communities 'culturally appropriately'. It appears someone didn't get that memo - to liaise with the community.

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Is it just confusion? Most of them likely realise that their peer group hasn't been within the target age demographic for vaccination delivery. Many will likely need to be instructed they have become eligible:
https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-no…

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Squishy, if the govt genuinely communicated/consulted with communities there wouldn't be any confusion. Genuine community consultation simply isn't happening in NZ - other than perhaps with iwi. This govt is hellbent on making autocratic decisions sitting in Wellington - removed from the communities who will be impacted by them.

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Great comment. This government is incredibly autocratic and top down.

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A problem? What percentage get the flu vaccine? An equally devastating virus.

Reading through the CDC stats the other night, and it appears to be a low to non-existent threat for most people.

The target should really be to ensure those over 60 and with high risk co-morbity get vaccinated. Everyone else will probably cope just fine.

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Its your right not to be vaccinated if you don't want it. I know many people that are getting or have had the jab including my mother but I will take a pass on it thanks. Like I have said before, its an individual risk assessment. If your fit and pretty much never get sick and while the boarder is closed you can afford to wait for the next Gen vaccine and see how the rest of the Guinee Pigs are doing on the first Gen rollout.

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> An equally devastating virus.

They're not equally devastating though. Just under 4.2m people died in the last year of covid. On the other hand, 290k-650k people die of the flu each year.

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And that is with a whole lot of lockdown measures. At the moment only 195m people have been infected. If we had 8b infected at the same rate, that would be 172m dead. But we know it would be worse than that as hospitals become overcrowded, the death rate goes up.

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It's Darwinism at work- we shouldn't interfere. We have been disrupting nature too much.

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Looks like inflationary pressures may be easing.

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Why? How?

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The real yield on US 10y debt fell to a record low as concerns grew over the outlook for economic growth. The rate, which strips out inflation, fell 5bps to minus 1.127%. The Federal Reserve is due to set policy later this week. (via BBG) Link

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The 10 year NZ yield down a couple of points too - with zero LSAP / QE this week. Fascinating times.

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yes Audaxes but although I have great respect for your contributions, I feel that fed resave is rigging the bond market at both ends of yield/rates scale.
Look what is happening with other Cb who are removing credit - china today, Russia a few days ago, etc. The panic reflation bubble is indeed deflating but not because inflation is going to drop or is dropping.

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'Examining the relationship between 3m & 10y benchmark rates & nominal GDP growth over half a century in 4 of the 5 largest economies we find that interest rates followGDP growth & are consistently positively correlated with growth.' - @ProfessorWerner - https://www.sciencedirect.com/science/article/pii/S0921800916307510
Link

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yes Audaxes but although I have great respect for your contributions, I feel that fed resave is rigging the bond market at both ends of yield/rates scale.
Look what is happening with other Cb who are removing credit - china today, Russia a few days ago, etc. The panic reflation bubble is indeed deflating but not because inflation is going to drop or is dropping.

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So fair to say the bond market knows something is nit quite right. Any major problems in the markets will start here. Just started listening to Real Vision Finance interview with Cathy Wood from Ark Invest. Enlightening once again. Can’t help but wonder how the NZX will perform with all the technological advancements being discussed. She estimates around 50% of current S&P will be disrupted by tech advances. How will NZ do? Are NZ businesses prepared for the massive disruption that will happen over the next 5 years?

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China has a lot of problems, many more than our resident China fanboys would care to acknowledge.

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Adding a record net 33 billion to the mortgage total was not all about selling/buying houses. The highest rate of increase since 2008. With aggregate interest rates set to continue falling over the next couple of quarters is it time to sell the house.?

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Time to find a new party trick, New Zealand:
CSIRO brews milk for animal-free dairy startup

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The story says they are "working on it" rather than they are actually producing it. But one day...

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Yes, one day ... "Eden Brew is undergoing prototype testing at CSIRO’s Werribee facility and is expected to launch its first product to market in the next 18 months after it gets approval from Food Standards Australia New Zealand."

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Good news…. I commented yesterday that the worldwide demand for dairy was likely to decline over the coming years. There are already some fantastic alternative products to dairy milk. Oatly has done very very well.

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Oatly has done well on the consumer market but last year it increased it losses in 2020 to $60.4m on revenue of $421.4m - up from a loss of $35.6m. It really grew after 2016 when it was bought in to by a jv between Verlinvest and China Resources. Last year (2020) Blackstone Growth and a group of investors including Oprah Winfrey (so it must be good?) invested $200millionUSD in to it. This year 2021 it launched an IPO to raise $1.4b. No dividend will be paid and losses are expected to continue.
Production plants will be established in Asia and USA and it will be interesting to see if it is the provenance of Sweden which it was helps it to do so well, or whether Oatly made in China will have the same appeal.

Global sales of plant-based dairy substitutes reached $18 billion in 2020, or just 3% of the $600 billion dairy industry, according to Euromonitor. So there is plenty of room for non dairy growth.

Here's hoping New Zealanders will support the homegrown oat milk industry. Expect to see a wider variety of NZ grown oat milk once the Southland oat milk plant starts processing. :-)

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Have they started to build that plant yet? Lots of talk no action...sending oats to Sweden and back as Oatmilk is not a win for the environment.

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Plans are to be operational in 2022, but given how long it takes to get resource consents, I would give it an extra year. Agree re sending oats to Sweden to be turned in to milk and then returned back to NZ as oat milk makes no sense at all.
https://www.foodticker.co.nz/ex-barkers-boss-to-lead-50m-southland-oat-…

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"US new home sales tumble"

No worries, can never happen in NZ as unlike President Biden, PM of NZ - Jacinda Arden has given a personal commitment that...........

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US new homes sales tumble - panic, panic, there must be an immediate OCR cut in NZ! We need negative rates right now! And we must restart QE right away!

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US homebuilder sentiment vs homebuyer sentiment.....

https://assets.zerohedge.com/s3fs-public/styles/16_9_max_700/public/202…

In the 40 year history there appears to never have been such polarity between builders and buyers.

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The US has a functional home building market, New Zealand does not.

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I wouldn't be so sure on that.
I have heard form a few sources that because all of the costs of materials and labor has gone up so much in the last year or so, that some companies that were contracted to build a house/started building, have actually been canceling the contract and demanding more to finish the job.

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Global $ (eurodollar) shortage?

Dollar bets flip to bullish for 1st time since pandemic: Aggregate positions vs major peers flipped to over $2bn of net longs last week for the first time since March 2020, BBG reports. Bearish bets totaled close to $31bn on that basis in Jan. Link

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Acc to Wolf Richter new home sale sin USA been falling for 5 months and it is NOT a supply issue as building been booming. China is evidently serious about controlling local government ludicrous borrowing on no collateral. This implies that the China led surge in spending that leads NZ housing market, is going into reverse, as shown on Zero Hedge a couple of weeks ago. Also neglected factor recently is that Auckland is building at record rates and this is going to lead to a glut just as demand falls away, classic cyclical mismatch.

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One day you'll be correct. I look forward to it.

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Yep since Covid you can deduce the logical outcome and what actually happens is the complete opposite.

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Read this morning that China buyers are back looking at the US housing market. Everyday people being priced out of the market by corporates buying up big time paying 35% over list price and Overseas buyers swooping in too.

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sounds like Kainga Ora in NZ market

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