Here's our summary of key economic events overnight that affect New Zealand with news some investors are focusing on the positive, others on the negative today.
Firstly the bond market is tanking today, even though the equity markets are holding high. Investors may be sensing that the best of the recovery is behind them and the rapid spread of the delta variant is a reminder that we’re going to have to learn to live with the virus for years to come. But despite this, there are still reasons to be optimistic. Firstly, most of the Q2 GDP reports have been quite good and when ours are released next month, it will likely be too.
Secondly, the US is going to get its big infrastructure deal.
And thirdly the US PMIs for July were really very strong - but not quite as strong as markets expected, which is why some investors are pulling back. However that doesn't alter the real expansions in manufacturing (and this).
European factories are expanding fast too.
It is true that China is in a slowdown, and approaching a stall. But they are the weak one, the outlier. Beijing is eyeing a recovery that is "not solid" and "uneven", blaming global forces, with promises of more stimulus support on the way. It is an admission that is getting almost zero press attention inside China.
It is Russia and ASEAN countries that are the laggards reporting shrinking factory output, mainly because the delta virus strain has them in a very unfriendly grip.
Separately, Hong Kong reported a recovery in retail sales, partly juiced by some local incentives. But they remain far below pre-pandemic levels; in fact, more than -20% below 2019 levels.
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But the new rolling lockdowns are taking a toll and quite quickly. The Aussie press may be enamored by the Afterpay deal, but in fact behind the scenes the RBA and the Australian Treasury are dusting off their crisis stimulus playbooks. Everything about the pandemic economic effects has happened fast; the approaching crisis, the official responses, and the V-shaped recovery. Now the impact of the delta strain is happening fast too so the regulatory response needs equal quickness.
There were 207 new community cases in NSW yesterday with 107 not assigned to known clusters, so still going backwards there. Brisbane had entered a three day snap lockdown, but new cases yesterday has seen that extended. Queensland has closed its border with NSW, which is a last-resort action for them.
On Wall Street, the initial opening bounce has faded and they are flat (+0.1%) in early afternoon trade to start the week. Overnight, European markets ended up about +0.5% led again by Paris. Yesterday, Tokyo bounced back strongly with a +1.8% daily rise. Hong Kong chipped in with its own +1.1% rise after a slow start. And Shanghai trumped them all with a +2.0% rise, also after a slow start. The ASX200 ended its Monday session with a +1.3% gain and the NZX50 Capital Index was up +0.9%.
The UST 10yr yield starts today sharply lower again at 1.17% and down another -6 bps overnight. The US 2-10 rate curve is to now at just under +100 bps and much flatter. And their 1-5 curve is also significantly flatter at +58 bps, while their 3m-10 year curve completes the trend at +113 bps. The Australian Govt ten year benchmark rate starts today at 1.15% and down another -4 bps. The China Govt ten year bond is at 2.84% and down another -2 bps to a new yearly low. The New Zealand Govt ten year is now at 1.54% and actually up +1 bp, unusual in the circumstances.
The price of gold is now just at US$1816/oz and up another +US$2 from where we were yesterday.
Oil prices are sharply lower today and by about -US$2.50/bbl and in the US they are now just under US$71/bbl, while the international Brent price is down -US$3 at just over US$72.50/bbl.
The Kiwi dollar opens today just on 69.7 USc and unchanged since this time yesterday. Against the Australian dollar we are back lower at 94.7 AUc. Against the euro we are unchanged at 58.8 euro cents. That means our TWI-5 starts today at 72.5 and marginally lower.
The bitcoin price is now at US$39,766 and down -3.0% from this time yesterday. Volatility in the past 24 hours has been high at +/- 3.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».