Here's our summary of key economic events over the weekend that affect New Zealand with news China is struggling to recapture that feeling things are on the improve still.
Firstly in the Middle Kingdom, anxiety is rising as the delta variant of the pandemic is now a risk in half the country's provinces. It is not clear that the tough measures in some are actually stemming its spread but they probably are limiting it. And later today we will get Chinese CPI data for July and that is expected to be very low for consumers and remain very high for manufacturers.
But we already have new data for China exports and that disappointed in July with a flat result from June and a year-on-year increase much less than expected. Compared with pre-pandemic July 2019 however, China's July 2021 exports are up +32%.
China imports were actually lower than the prior month. But compared to July 2019 they are +31% higher. However it is the recent tailing off that is grabbing the quizzical looks, reinforcing the thought that China's expansion is losing some momentum.
Global shipping container rates rose again last week, even if only marginally. But it is a massive +370% rise in these rates in a year. Some routes like Los Angeles to Shanghai are still rising sharply, up +5% last week alone, but the route the other way - outbound from China - actually fell -3% last week. Industry insiders however think the rise will keep coming, even if at a slightly slower rate of increase. So no decreases in sight yet.
Meanwhile for commodities, prices for tin, aluminium and copper are all high and rising, although copper's recent move up could be more about an impending strike at the world's largest mine in Chile. Despite that, the number of new projects attracting investment is impressive. China is taking huge positions in Africa and some of those will come on stream fairly soon. However, on Friday the iron ore price fell again, taking the four-week drop to -24%. And this is despite metallurgical coal rising +22% over the same period, a key commodity buffeted by varying politics in both China and elsewhere. China is acting deliberately to lower the cost of many raw materials. It runs the risk of stranding many of those African projects.
Through all this, the Baltic Dry Index is back up near its recent highs.
In the US, their closely-watched non-farm payrolls report topped estimates at +943,000 added jobs in July, its largest monthly rise since the July 2020 bounce-back. Their jobless rate fell to 5.4%. This is a good result, but it has to be noted that the data is from the first half of July and before the delta virus started biting. There are now 147 mln people employed in their workforce, still -5.7 mln less than before the pandemic started. Still, the pace of hiring has been picking up and wages rose again (up +4.0% and more than expected). The results for both May and June were revised up. This is a very solid result for them with only the hospitality sector still struggling to get back anywhere near its pre-pandemic employment levels. Higher paid industries like construction, manufacturing, business, education, and government can all now see a recovery in job levels to February 2020 levels on the horizon - but hospitality is still -1.7 mln behind.
Wall Street has greeted the data with little fanfare, but the US dollar has risen sharply and the bond market has bid yields higher as it senses the US Fed is closer to its next tapering moves.
Also revised higher has been the levels of US consumer borrowing, which grew +4.1% in June from a year ago, and is up +5.3% from June 2019. But the rate of growth in June activity from May rose to an annualised +10.4% pace. The +US$39.7 bln monthly increase is the largest they have ever recorded.
Wall Street remains flooded in cash, using the Fed's reverse repo facility to park it overnight. But after touching US$1 tln on July 30, it has stay high but less than that since. This is kind of like a canary-in-the-mine facility for some observers, especially uber-bears. But its importance is yet to be tested. It is worth watching though.
Canada also released labour market data over the weekend for July and that came in underwhelming. Their payrolls grew just +94,000 when a +178,000 gain was expected and June delivered +231,000 more jobs. So a definite loss of momentum there. Their jobless rate is stuck at 7.5%.
It is probably also worth noting again the loss of momentum in Canada's two key housing markets. In Toronto sales levels and average prices slipped again in July. In Vancouver markets there is a noted 'moderation' going on there.
And global equity markets are remaining upbeat. Reported results for Q2 have been exceptionally strong so far. At nearly 90%, the proportion of firms that have reported earnings above analysts’ consensus forecasts has been one of the highest since just after the GFC. Future earnings expectations are high too. Analysts project still expect earnings of companies in the S&P 500 to exceed their 2019 levels by around 30% this year and to be around 55% higher than before the pandemic by the end of 2023. Expectations like this will keep valuations up even in the face of rising interest rates.
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In Australia, their central bank has cut back its year-on-year growth forecasts. It was expecting 4.75% for 2021 but now expects 4.0%. It did upgrade its 2023 forecast slightly however.
There were 268 new community cases in NSW yesterday with another 174 not assigned to known clusters, so still going backwards there. Victoria is reporting 11 new cases. Queensland is reporting 9 new cases. Sadly, there are now cases in Cairns indicating a state-wide spread. Overall in Australia, 22% of Aussies are fully vaccinated, 44% have now had at least one shot. Aussie corporates are now starting to insist on 'no jab, no job' policies.
The UST 10yr yield starts today at 1.31% and up another +1 bp since Saturday. For the week it is up +7 bps. The US 2-10 rate curve is to now at just on +109 bps and quite a bit steeper. Their 1-5 curve is unchanged at +70 bps, and their 3m-10 year curve is also a bit steeper at +126 bps. The Australian Govt ten year benchmark rate starts today at 1.22% and little-changed. The China Govt ten year bond is at 2.83% and unchanged. The New Zealand Govt ten year is now at 1.63% and also unchanged. A week ago it was 1.53%.
The price of gold took a bit of a hit over the weekend dropping sharply to US$1763/oz, behaving like iron ore.
Oil prices are lower by -US$0.50 from this time Saturday, so in the US they are over US$67.50/bbl, while the international Brent price is just over US$70/bbl.
The Kiwi dollar opens today just on 70.1 USc. Against the Australian dollar we are little-changed at 95.3 AUc. Against the euro we are also unchanged at 59.6 euro cents. That means our TWI-5 starts the week at 73.2 and marginally lower compared to this time last week. We have been in a narrow range of between 72 and 74 for our TWI for ten months now.
The bitcoin price is now at US$43,625 and up +2.0% from this time Saturday. Volatility in the past 24 hours has been moderate at +/- 2.3%. Volatility over the past week has been off the scale however at +/- 7.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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40 Comments
Interesting article
https://www.reddit.com/r/wallstreetbets/comments/orkpum/how_government_…
There are some fairly firm capitalists that monitor this site, and contribute to the discussions here. Much of which I enjoy as their perspective help me to clarify my own understandings of what should be. Just last week I got involved in a discussion with one re capitalism v socialism. while he suggested i was arguing for socialism, I was in fact arguing for centrism, and he could not get past the need to letting go capitalism for a central position. This article has a couple of statements to point to why capitalism fails people completely; He uses the term neoliberalism, but it is clear he's talking about capitalists.
"Neoliberalism loves markets, because markets enable the wealthy to own everything that produces income and capital gains." and "America's Financial Elite has come home to stripmine the last available pool of wealth: America's middle class." Although referring to "America's financial elite", it is really true for any nations elite. "In America, the middle class has been stripped of income-producing assets and saddled with the tax burdens shirked by the billionaires, financiers and global corporations." This is happening in NZ too.
This is the consequence of politicians being corruptible, Governments failing in their duties to their constituents, and (referring to another earlier article) a "zombie public".
murray86,
I disagree that the problem is capitalism per se. Economies as we have them now need vibrant businesses to provide the tax base on which governments rely to provide citizens with the things we all need and want. The problem lies with governments which allow businesses to operate in a way which greatly increases inequalities in both income and wealth. I can recommend Robert Reich's Saving Capitalism, for the Many, Not the Few. He sets out very clearly the various ways by which the current situation has been reached.
Sort of agree, it is really unrestrained capitalism that is the problem. But even some of the rhetoric out of the US strongly decries any move to a restraint on 'unrestrained'capitalism as being a move to socialism and is utterly unacceptable.
What mystifies me is that many of those taking up that chorus are not only not wealthy, but cannot see that for what they call for to come to pass, then they would little more than slaves to the wealthy.
My view is that aspects of both are required. A centrist, balanced position.
Quote:
It wasn’t the banks that caused the last bubble or collapse. It’s government who created the guidelines that the banks were made to follow that created the subprime mortgages that still exist today and it was government who put us all at risk by insuring those loans to make sure they got approved.
It's almost certain that we will face this kind of compulsion here in New Zealand, it will ramp up from the private sector because they need bums on seats, and it will ramp up from the government as they try to convince the remaining part of the population to vaccinate to achieve some sort of herd immunity.
Liberties are not exactly compatible with mass vaccination campaigns!
The sooner we can move antivaxxers into camps to educate them the better.
Whoever liked this comment needs to re-read our National anthem and have a good long think about what their fore-father's fought multiple wars for.
Godwin's law should be immediately invoked in a few scenarios:
* Eugenics
* Ethnic cleansing
* Rounding people up into camps
Absolutely abhorrent. Shame on you.
The narrative is being subtlety shuffled - a moving set of goalposts
First it was all "immunity" and problem solved ... down to lessening the symptoms and protecting others by non transmission ... now admission that it neither prevents catching or spreading .... so we get compulsion and talk of 5 boosters a year
JPost: 88% of people who receive 3rd shot feel similar or better than 2nd
Or the alternative 12% say the 3rd is even worse than the 2nd. Everyone gets a week of sick leave they can take every 6 months.
This article gives a very nice (dare i say balanced) summary of ths issues involved and why we are seeing this narrative shift. (for anyone interested)
https://ourfiniteworld.com/2021/08/05/covid-19-vaccines-dont-really-wor…
Undoubtedly it will get dismissed as conspiracy.
At no point has there been any communication from the government about our personal health, its well known that if you have risk factors then your outcome from CV are significantly worse. The biggiest issue (excuse the pun), is obesity, the population sat out lockdowns, and ate chips and watched TV. Aside from that low levels of Vitamin D, mean low resistance to infection.
Temporary inflation theory by Fed stand exposed.....Transitory inflation theory floated to play with time and also picked by others like RBNZ has run out of time, now what.......
Reason and excuses....but what will they act at least NOW to avoid FURTHER long term damage or still continue with Wait and Watch
https://www.marketwatch.com/story/u-s-inflation-is-still-running-high-a…
In the US, their closely-watched non-farm payrolls report topped estimates at +943,000 added jobs in July, its largest monthly rise since the July 2020 bounce-back. Their jobless rate fell to 5.4%. This is a good result, but it has to be noted that the data is from the first half of July and before the delta virus started biting.
...on a seasonally unadjusted basis, payrolls actually declined by 133K for those who care about such details)
That’s not all, if we look at the hours index (aggregate hours worked), while the year-over-year changes continue to be huge (base effects) we can “correct” for that particular statistical distortion in the same way we’ve done so for Chinese data; 2-year changes at annual rates.
Not surprisingly, given the other labor series beyond CES, what we find is both a persisting slowdown in the pace of “recovery” as well as the same month of last October for when it seems to have begun.
Then there are the jobless claims tallies. We’ve covered these on several occasions, using them as a sort of off-brand test for possibly significant discrepancies between these major BLS datapoints (the other JOLTS). For the first time since the recession last year began, the two stated here aren’t even in the same neighborhood any longer. Link
Firstly in the Middle Kingdom, anxiety is rising as the delta variant of the pandemic is now a risk in half the country's provinces.
Biden suffers more than Beijing from high tariffs: Global Times editorial
Nearly three dozen of the US' most influential business groups, representing retailers, chip makers, farmers and others, asked the Biden administration to restart trade talks with China and cut tariffs on imports on Thursday, saying the tariffs are a drag on the US economy. They raised the appeal in a letter to US Trade Representative Katherine Tai and Treasury Secretary Janet Yellen. This is the clearest collective voice of the US business community on hoping to restore normal US-China trade since the Biden administration took office.
It would be fairly obvious to anyone who spent just a short time thinking about tariffs, but clearly an awful lot of people at the top in the US who consider themselves clever, are not really, and just can't see past their egos long enough to figure some fairly obvious facts out.
Australia really needs some sort of randomised testing program to quantify this outbreak. Given the geographical extent of spreading, lack of agreed upon data about asymptomatic spreading, it's possible the infection rate is much higher than testing would suggest.
Either way about six months late with the vaccination program, let us pray the same doesn't befall us.
Poor gold, what is happening to our stable store of value!
Volatility over the past week has been off the scale however at +/- 7.5%. Sorry were you referring to Bitcoin or gold on that one? Over the last 2 days gold has dropped 7% from its daily open on Sunday.
https://twitter.com/egfalken/status/1424523555455262725?s=20
Your article, as does other sources, suggest a flash crash of $100/oz . On what basis do you claim 7% drop? 100/1700 = 5.8% and recovered in a few hours.
When you say 'daily open on Sunday' which market are you talking about? The Sun 1st of August GMT +/- twelve hours shows no such 7% drop. Are you refering to the $15 /
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