Here's our summary of key economic events overnight that affect New Zealand with news investors are worried about their tech investments and the upcoming earnings reports. And they are watching the China equity rout with alarm.
But first in the US, durable goods orders for June came in much weaker than expected. There was a +0.8% rise recorded from May, but a +2.1% rise was expected, and the May rise was +3.2%. If there is a silver lining, it is that non-defense order for capital goods rose faster, up +3.1%.
That key June data may have disappointed analysts, but consumers are feeling bullish, at least according to the widely-watched Conference Board survey. It is now at a 17 month high so back to pre-pandemic levels.
And no-one told the survey respondents in the Richmond Fed district either who reported strong employment gains in July and continuing high levels of new orders - and their June survey results were revised sharply higher. Cost and pricing pressures remain very elevated.
The American home ownership rate fell marginally to 65.4%. This rate has been on an upward trend since peaking low at 2015 (although it did spike up in 2020 during the pandemic). The New Zealand home ownership rate is currently 64.5%.
There was another UST 5 year bond auction overnight for US$67 bln with the Fed taking $6 bln. The remaining US$61 bln attracted US$144 bln in bids and about the same level of demand as the equivalent prior auction a month ago. However the median yield fell to 0.66% from 0.84% the last time.
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Across the Pacific, Chinese industrial profits are up strongly in June, up +45% above the pre-pandemic level in June 2019, an encouraging result after more concerns about a loss of economic momentum there.
In South Korea, they have recorded their fastest economic growth in a decade with their economy expanding at a +5.9% rate in the June quarter. Private consumption lead the way but spending is expected to slow as their pandemic fight grows harder.
The IMF has updated its global economic forecasts for 2021 and overall they are unchanged at a +6.0% expansion this year and a +4.9% expansion next year. But there are offsetting revisions with the US revised higher and "emerging Asia" revised lower.
The US is now expected to expand +7.0% in 2021 and +4.9% in 2022 in their upgrade. China will expand +8.1% in 2021 and +5.7% in 2022 in their downgrade.
But the big downgrade is for India which the IMF says will now expand +9.5% and +8.5% in 2021 and 2022 and making their recovery from 2020 pretty modest. (Neither New Zealand nor Australia get any mention in this report.)In Australia, their Treasurer is hedging his bets all of a sudden.
After saying the expected Q3 economic shrinkage will be a one-off, he is now clearly worried that Q4 could shrink too, pushing Australia into a second recession in two years.
In Australia, there were 172 new community cases in NSW yesterday with a record 87 not assigned to known clusters. NSW is extending their lockdown by another four weeks. And another 10 in the community (all isolated) were reported in Victoria and so their lockdown has been lifted.
But the border with NSW remains closed. South Australia has also lifted its lockdown with no new community cases to report. The Queensland border with NSW remains closed which is a last-resort action for them.
On Wall Street, the S&P500 has turned very risk-off in afternoon trade and is down -0.7% so far. Overnight, European markets were down -0.6% overall. Yesterday, Tokyo rose another +0.5% on the day.
However Hong Kong shed another huge -4.2% on the day, and Shanghai shed -2.5% in continuing major sell-offs. That is an -8.2% fall in just two days in Hong Kong and -4.8% in Shanghai. The ASX200 ended yesterday up +0.5%, while the NZX50 Capital Index dropped -0.7% in its Tuesday trade.
The UST 10yr yield starts today at just on 1.24% and a -3 bp drop. The US 2-10 rate curve is to now at +103 bps and and -5 bps flatter. Likewise, their 1-5 curve is flatter at +63 bps, while their 3m-10 year curve is -4 bps flatter at +119 bps.
The Australian Govt ten year benchmark rate starts today at 1.18% and down -3 bps. The China Govt ten year bond is at 2.91% and unchanged today. The New Zealand Govt ten year is now at 1.53% and +3 bps higher.
The price of gold is now just over US$1802/oz which is back up +US$3 from this time yesterday.
Oil prices have slipped by -50c and in the US they are now just under US$71.50/bbl, while the international Brent price is still just under US$73.50/bbl.
The Kiwi dollar opens today just on 69.6 USc and -40 bps lower than this time yesterday. Against the Australian dollar we are -30 bps lower at 94.5 AUc. Against the euro we are -50 bps lower at 58.8 euro cents. That means our TWI-5 starts today at 72.5 and a big backslide.
The bitcoin price is now at US$37,790 and falling -3.7% since this time on yesterday and taking the top off yesterday's big move higher. Volatility in the past 24 hours has been extreme again at +/- 5.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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22 Comments
the US:
https://kunstler.com/clusterfuck-nation/in-a-hall-of-mirrors-you-have-t…
(read with skepticism, but there's food for thought there)
and:
https://www.resilience.org/stories/2021-07-27/americas-likely-violent-f…
(The first comment is a doozie)
The comments here are all on the money. We all know of people that really should get off the internet as it is leading them down rabbit holes. But I do sense a growing frustration among people that a decade ago would be described as mainstream. Ordinary people that have very little interaction with the state beyond paying their taxes, voting, and occasionally using the health service. They still get all their news from tv at 6 o'clock.
I hope we don't get a political leader that milks that frustration in a divisive way.
Most of this can be fixed by doing two things:
+ Force news sites (Fox/CNN etc) to only report the truth and penalise them severely when they get stuff wrong. At the same time limit any opinion pieces to be small segments (say only 20 minutes of any full day) and clearly labelled in a standard way as OPINION (this can be done for instance by saying 10% of the screen must show the words "OPINION" with specific fonts etc).
+ Force social media sites to a similar standard (as they claim they are PUBLISHERS not PLATFORMS to monetise their content, this shouldn't be hard), once posts get followers/views over a certain level or are reposted. This is fairly simple from a technology perspective.
+ Potentially setting up a non partisan and non political organisation to monitor and hand out punishments to the orgs above for breaches. BUT FREEDOM I hear people say... well they already have a censorship office, why not a broadcasting standards authority like we have? In NZ many of our idiot opinionated idiots get censured for their comments by the BSA all the time, even though very few are upheld.
If you want a decent democracy, you need an informed public. That swings both ways, if you want a failed democracy, you want a mis-informed public, which is what is happening at the moment with their partisan media and near enough to zero social media laws.
Lets say we set levels of objective and subjective truth...say 90/10. So their content has to conform to 90% provable reality(the boring stuff) and the other 10% can be subjective but must be demonstrably from reliable sources. The legal teams they have on staff are supposed to be checking this anyway and if not their standards need to be lifted. We can also ensure there are less 'anonymous sources', security state/intelligence operatives and 'experts' with conflicts of interest used in media reporting. IF they want to use these sources they need to state the possible conflicts or level of accuracy of those sources of information. Transparency, transparency, transparency.
His original writing on cities and architecture was great. I have some sympathy for him -- the collapse he's been predicting never seems to come, it must wear one down -- but he's degenerated from 'free thinker' to conservatism-for-conservatism's-sake misanthropy.
Lending growth in #Eurozone did not slow down further in June. Annual growth rate of loans to non-financial comps was 1.9%, same as in May. This compares w/3.2% in Apr, 5.3% in March, and 7% in Feb. This was due to pandemic-related increase in corp lending in spring of 2020. Link
Behind The Inflation Curtain (Europe)
To put all this in terms of 2021’s Big Debate, inflation transitory or not, there simply will not be inflation if credit growth ends up so narrowly distributed. Inflation, real inflation, sustained acceleration of consumer prices, this requires widespread, more uniform redistribution by the financial sector to all parts of the economy; especially to SME’s and especially in the form of broad lending.
The way QE is talked about in Europe is like it is anywhere else on the planet. You’d be forgiven for thinking it has been highly successful in every channel including portfolio effects. We’ve already looked at US lending before and, no, not even close.
Believe it or not, Europe’s situation is worse. Far worse. Mario Draghi never wanted you to, nor does his successor Christine Lagarde, each preferring you just take their word, but see for yourself:
There was another UST 5 year bond auction overnight for US$67 bln with the Fed taking $6 bln. The remaining US$61 bln attracted US$144 bln in bids and about the same level of demand as the equivalent prior auction a month ago. However the median yield fell to 0.66% from 0.84% the last time.
42 day US Cash Management Bill tender attracts a high 0.04% rate, median 0.035% rate and a low 0.000% rate. All below the Fed's Reverse Repo 0.05% rate floor.
Here's another conflated pairing - Keith W, where are you?
https://thespinoff.co.nz/food/27-07-2021/weve-got-enough-food-its-the-p…
https://www.otago.ac.nz/centre-sustainability/otago623147.pdf
Team of 5 million, Team "A" home ownership rates March 1991 73.8 percent
March 2001 67.8 percent
March 2011 65.3 percent
March 2021 64.5 percent Record low OCR
White gold A2 milk , without any announcements of share buy backs, share price looks set to close the month looking somewhat curdled .
So Amazon denies the rumour that it will start accepting Bitcoin ? That was a very clever pump and dump move by someone. Contrast the price of Gold vs Bitcoin, could Gold be any more stable ? Looking back now you can see how taking Fiat off the Gold standard was such a bad idea.
Got the pump, havent dumped yet. still in the range bound crab market.
Yea gold is doing so well as a store of value compared to Bitcoin, https://www.longtermtrends.net/bitcoin-vs-gold/
You know things are bad when CPI is at 5.4%, but real inflation is upwards of 15-20% and if you look at monetary inflation, last year it was about 30%.
Agree on Fiat being a failed experiment.
But we will never go back to a gold standard, it doesnt work for a digital world where settlement needs to be fast, cheap, uncensorable and final.
Bitcoin is better gold.
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