Here's our summary of key economic events overnight that affect New Zealand with news of some relief the US didn't surprise with its inflation report.
American CPI inflation for July was reported overnight at 5.4%, the same as for June. Components of their core inflation (that is, excluding food or petrol) slipped slightly to +4.3% for the year to July, raising the prospect that it may have peaked. But analysts say a retracing lower from here may take a long time
US Federal budget deficit in July came in at -US$302 bln, almost exactly as expected. That makes the deficit for the prior twelve months as -US$2.9 tln or -12.6% of GDP. In the equivalent 2020 year it was -16.1% of GDP so that is creditable progress over the past year. (The New Zealand Government deficit to June is still to be finalised, but on roughly the same basis as the US, it looks like it will come in as a deficit of about -3.3% of NZ GDP.)
There was a US$59 bln auction for the US Treasury 10year Note overnight and the Fed took US$18 bln. The remaining US$41 bln attracted $108 bln in bids which was almost +20% more than for the prior auction a month ago. This time the median yield was 1.32% pa compared to 1.31% at the last equivalent event.
China's new yuan loans in July have stunned analysts by coming in at a very weak level, confirming the overall China economic slowdown - right for the month the CPC celebrated its 100 year successes under the leadership of Chairman Xi. The economy has delivered him a rebuke, it seems. The debt growth was -10% below analysts' forecasts, and a stunning -50% below the June level. And it is essentially the same as in July 2019. For a country powered by new debt, this is a worrying signal.
Worse, China's July new vehicle sales came in at under 2 mln, and its lowest July since 2015. Given that 2020 was pandemic-affected and 2021 basically isn't, this isn't a strong result.
China is banking on exports to bolster its 2021 economic position as the local momentum seems to be fading.
However, its geographic neighbour and economic competitor turned in some very good data overnight. Japan's iconic machine tool manufacturing industry is booming again and turned in a cracker month in July in terms of new orders. At ¥135 bln for the month, this is the highest since mid 2018, and is one third higher than the July 2019 level. It is a recovery that augers well for Japan's industry and export sector.
Singapore's economy grew by +14.7% year-on-year in the second quarter of 2021, faster than expected. Singapore appears to be on track to have an economy +4.2% larger in 2021 than 2019. They also upgraded their GDP growth forecast for 2021 to 6 to 7%, up from 4 to 6%.
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Australian new home sales fell by -20% in July, with declines experienced in almost all major states. With lockdowns in multiple states restricting trade and eroding confidence, it is not surprising that fewer people were able to visit display homes, says their homebuilding industry body. Consumer confidence isn't flash either.
The iron ore price is lower again today, and is now down -25% in just 4 weeks. This is a bear market now and it probably has more to run because China is cutting steelmaking sharply.
There were another 344 new community cases in NSW yesterday with another 229 not assigned to known clusters, so they are still not getting on top of their outbreak. Victoria is reporting 20 new cases yesterday including 5 new mystery cases and their lockdown is to be extended. Queensland is reporting 4 new cases. Overall in Australia, more than 23% of Aussies are fully vaccinated, 45% have now had at least one shot.
Wall Street us up a marginal +0.2% in Wednesday afternoon trade. Overnight, European markets were up about +0.5%, led by London's +0.8% gain. Yesterday, Tokyo rose by +0.7%, Hong Kong by +0.2% and Shanghai by a minor +0.1%. The ASX200 ended up +0.3%, while the NZX50 Capital Index dipped by -0.1% in a late by small selloff.
The UST 10yr yield starts today at 1.34% and unchanged since yesterday. The US 2-10 rate curve is still just on +111 bps and little-changed. Their 1-5 curve is slightly flatter at +72 bps, and their 3m-10 year curve is also a bit flatter at +128 bps. The Australian Govt ten year benchmark rate starts today at 1.21% and little-changed. The China Govt ten year bond is at 2.90% and also little-changed. The New Zealand Govt ten year is now at 1.73% and up another +2 bps overnight.
The price of gold has recovered somewhat today. It rose +US$21 from this time yesterday to US$1753/oz on the no-surpises US CPI data.
Oil prices are up +50 USc/bbl from this time yesterday, so in the US they are just over US$69/bbl, while the international Brent price is just over US$71/bbl.
The Kiwi dollar opens today at just under 70.6 USc which is its highest level since late June. Against the Australian dollar we are up at 95.6 AUc and its highest level this year. Against the euro we are firm at 60 euro cents and a four month high. That means our TWI-5 starts today at 73.7 and now near the top of the narrow range of between 72 and 74 we have been in for ten months now.
The bitcoin price has firmed slightly today and is now at US$46,479 and is up +1.1% from this time yesterday. Volatility in the past 24 hours has been low at just over +/- 1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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