Here's our summary of key economic events overnight that affect New Zealand with news of turmoil everywhere.
But first, you will probably know that New Zealand is suddenly back in a full Level 4 lockdown with one (presumably) delta case detected in the Auckland community. That has thrown financial markets a swift curve ball and the RBNZ Monetary Policy meeting outcomes will probably not be what markets were expecting this time yesterday. We will know at 2pm today. In the meantime our currency is sliding lower and wholesale interest rates are heading lower as well.
Overnight there was a dairy auction and surprisingly there was an unexpected, if small, overall price rise - and only the second rise in the past ten auctions, even if it was small. The dominant WMP price did fall -1.5% as expected, but SMP rose unexpectedly and both butter (-4.0%) and cheese (-2.8%) also rose. The overall result was a +0.3% gain in USD terms, but with the NZD falling sharply, the gain was magnified in local currency to +1.7%. Volumes offered and sold at the auction were modest for this time of year and almost -30% less than this time last year. But overall prices are +27% higher than this time last year.
Separately, international financial markets turned sour overnight mainly on a surprisingly poor American retail sales data for July. A minor dip was expected after a strong June, but a major dip was reported, more than wiping out June's gain. A sharp fall in car sales is behind this result but sales of general goods were weaker too. Sales in July 2021 may be well above those of July 2019 but this is still a perception of weakness.
Perhaps offsetting some of that gloom was a larger than expected rise in American industrial production in July. It is a strong rise versus the July 2020 result but that is just a base effect. The better-than-expected gain is the one from June.
In China, Beijing's moves to decapitate the leadership of its tech industry and exert strict controls over how it operates is sending messages to foreign investors about the risks of doing business in China. If they do that to their own, they will have no hesitancy effectively nationalising 'by other means' foreign holdings, is the fear. Not only are Chinese equity markets sharply retreating, foreign direct investment is turning away.
Meanwhile, China carried out assault drills near Taiwan on yesterday with warships and fighter jets exercising off the southwest and southeast of the island, in what the China's armed forces said was a response to "external interference" and "provocations".
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In Australia, one of the world's largest miners, BHP, has made some important strategic decisions overnight, quitting its petroleum businesses, betting on decarbonisation, and pivoting to businesses involved in food security. It is also dumping its London stock market listing. It also announced a bumper profit result.
And the RBA minutes of their last meeting shows the delta variant could be a game-changer for their monetary stimulus plans, with the central bank prepared to provide more support if there is a significant setback to the recovery. Any move to reverse a July decision to scale back weekly bond purchases would likely require the economic shock to flow into 2022, given the RBA believes that’s when further buying will have “maximum effect”, they said.
And the Canberra parliament has opened a formal inquiry into housing affordability in Australia.
The sudden surprise pandemic lockdown has thrown expectations for the RBNZ Monetary Policy changes into disarray. Join us at 2pm when they will update us on what they are doing. We will have full coverage.
There were another 454 new community cases in NSW yesterday with another 323 not assigned to known clusters, so they are still not getting on top of their outbreak. It has spread into regional NSW extensively. Victoria is reporting another 24 new cases yesterday, a growing number and their lockdown is extended for another two weeks, this time with a curfew. Queensland is reporting 2 new cases. NT has cases now. Overall in Australia, more than 27% of eligible Aussies are fully vaccinated, plus 22% have now had one shot so far.
After working from a loss to a gain yesterday, Wall Street has turned quite negative today and in early afternoon trade the S&P500 is down -1.3% so far. Overnight European markets generally stumbled to a -0.1% slip, but London was up and Frankfurt was flat. There was a much larger stumble in Asian markets with Tokyo down -0.4%, Hong Kong down -1.7% and Shanghai shedding -2.0%. Going with the trend, the ASX200 was down -0.9% yesterday and the NZX50 Capital Index was down -0.7% with the local market sharply selling off at the end from earlier gains.
The UST 10yr yield starts today at 1.25% and down -1 bp. The US 2-10 rate curve is unchanged today at +104 bps. Their 1-5 curve is slightly steeper at +69 bps, and their 3m-10 year curve is also a little steeper at +122 bps. The Australian Govt ten year benchmark rate starts today at 1.12% and another -4 bps lower. That is an -11 bps fall in four days. The China Govt ten year bond is at 2.91% and unchanged. The New Zealand Govt ten year is now at 1.64% and a sharp -8 bps retreat.
The price of gold is basically unchanged from this time yesterday, down just -US$1 at US$1786/oz.
Oil prices are -50 USc softer from this time yesterday, so in the US they are just under US$66.50/bbl, while the international Brent price is just under US$69/bbl.
The Kiwi dollar opens today sharply lower, down by more than -1c at just under 69.1 USc in a big retreat. Against the Australian dollar we are down -40 bps at 95.2 AUc. Against the euro we are down -70 bps at 58.9 euro cents. That means our TWI-5 starts today at just 72.4, down -80 bps but still in the narrow range of between 72 and 74 we have been in for eleven months now.
The bitcoin price has weakened slightly today and is now at US$45,892 and is down -1.3% from this time yesterday. Volatility in the past 24 hours has been moderate at just under +/- 2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».