Here's our summary of key economic events overnight that affect New Zealand with news the NZ currency is rising as commodity currencies are back in favour again. Bond yields are up, equity prices up. Risk is back 'on'.
The OECD is reporting that world trade in goods reached a new record high in Q2-2021 beating the previous record in Q1-2021. But a large part of this rise is price inflation in commodity prices, and demand stress due to shipping and supply issues around semiconductors. Trade was uneven however with most changes confused by the varying 2021 bases. Most advanced countries saw rising exports, but China was notable for its export shrinkage. And that is consistent with what Chinese officials are warning about the rest of 2021 and 2022.
In the US, new home sales were expected to dip in July, but in fact they rose. While they are running well below the pandemic-affected levels of a year ago, they remain +10% above the equivalent 2019 levels.
That may be a positive surprise, but the latest Richmond Fed factory survey in the mid-Atlantic states isn't. It is the first of these surveys to record a manufacturing slowdown in the US. All three component indexes, for shipments, new orders, and employment, decreased but remained positive even if only just. These may have turned lower but the cost and price measures haven't. In fact, factories are pushing through increases in the range of +10%. Canadian factory sales disappointed in July as well.
There was a large US$68 bln US Treasury bond tender today for their two year Note. The Fed took US$8 bln of it, and the remainder attracted bids of a massive $159 bln. The resulting median yield was 0.21% pa, up from the 0.18% pa at the equivalent tender a month ago.
And staying in the US, the extreme hot weather is shrinking crop yields. That will have global implications and we saw reversals in China's commodity markets for corn and soybean yesterday with prices jumping. There are also reports that the US is short of fresh milk, not so much because of supply but a surge in demand from re-opened schools.
Yesterday, prices for iron ore suddenly reversed and moved +7% higher in a surprise. Coal prices rise so sharply, market limit triggers were activated to prevent an even higher scramble. Fears of under-supply are back in China.
And just as the Ningbo container terminal re-opens fully after a pandemic shutdown, Shanghai's main airport is closing for the same pandemic-exposure reasons. This too will roil cargo freight to and from China, although there are plenty of alternatives. And there seems to be no end in sight for the cost of shipping.
In Japan, steel prices are on the move up.
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There were another 753 new community cases in NSW yesterday with another 619 not assigned to known clusters, so they are still out of control, even if this latest data is slightly less than the prior day's. They now have 11,484 locally acquired cases all in their leaky pseudo lockdown. Their lockdown has been extended and they are now under curfew too. Victoria is reporting another 50 new cases yesterday, so it is still bad there too and their lockdown is extended, also with a curfew. Queensland is now reporting six new cases with growing threats there. ACT has 30 new cases. Overall in Australia, more than 30% of eligible Aussies are fully vaccinated, plus 23% have now had one shot so far.
Wall Street has opened their Tuesday session with a minor +0.3% rise for the S&P500. Earlier, European markets were mixed although actually little-changed with Paris giving up some of yesterday's gain and Frankfurt leading with a +0.3% rise. Yesterday, Tokyo ended yesterday with another positive +0.9% rise, Hong Kong followed with its own big +2.5% rise and Shanghai posted another +1.1% rise for the day. The ASX200 only managed a modest +0.2% rise yesterday, but the NZX50 Capital Index could not follow up with any significant rise.
The UST 10yr yield is up +4 bps today at 1.29%. The US 2-10 rate curve is steeper by +3 bps at +106 bps. Their 1-5 curve is also a little flatter at +73 bps, and their 3m-10 year curve is +4 bps steeper at +126 bps. The Australian Govt ten year benchmark rate starts today at 1.16% and +6 bps firmer. The China Govt ten year bond is at 2.88% and soft. And the New Zealand Govt ten year is now at 1.63% and up +4 bps.
The price of gold is just a touch firmer today, up +US$1/oz from this time yesterday, and now at US$1806/oz.
Oil prices have risen again, this time by another +US$2, so in the US they are now just over US$67.50/bbl, while the international Brent price is just under US$70.50/bbl.
The Kiwi dollar opens today firmer again, back up to 69.4 USc. Against the Australian dollar we are slightly firmer at 95.7 AUc. Against the euro we are also firmer at 59.1 euro cents. That means our TWI-5 starts today at just over 72.8 and back in the 72-74 range of the past ten months.
The bitcoin price has fallen back from this time yesterday with a -2.8% retreat to US$48,044. Volatility in the past 24 hours has been moderate at just under +/- 2.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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67 Comments
hmmm ... back to business you reckon
“Covid surge triggers fresh travel slump in China. China’s aviation and hospitality sectors have suffered a sharp drop in demand amid a return of Covid-19 restrictions after leading the world’s pandemic recovery for more than a year.”
https://travelweekly.co.uk/news/air/covid-surge-triggers-fresh-travel-s…
“China’s Box Office Sales Slump Amid Covid Surge… “In the week through Aug. 22, Chinese cinemas’ box office takings slumped 37% from the previous week… According to Alibaba-owned online ticket platform Dengta, as of Aug. 21, 20% of cinemas were closed in the market because of the Covid surge..”
https://www.caixinglobal.com/2021-08-24/chinas-box-office-sales-slump-a…
“Covid shutdowns at Chinese ports squeeze container rates. Pandemic problems at Yantian caused container prices to triple between June and August, Container xChange says. “Weary shippers are likely to encounter reduced container availability and rising prices at key maritime hubs in the coming weeks, thanks to a continuing spate of Covid-19 outbreaks at ports in China and Vietnam…”
https://www.supplychainquarterly.com/articles/5321-covid-shutdowns-at-c…
“China to ensure ‘appropriate money growth’ after credit, economic slowdown… China’s economy decelerated more than expected in July.. “New credit expanded in July at the slowest pace since February 2020, driven by a sharp slowdown in shadow banking and government bond issuance.”
https://www.scmp.com/economy/china-economy/article/3146136/china-ensure…
Lotta things you can't exclude; stupidity of neoliberal economics being one of them:
https://arxiv.org/pdf/2108.07847.pdf
"Section 5 concludes with our assessment of the contribution of economists to the climate debate and a plea that science-based approaches should take precedence."
Quite.
People like you still rail against Rogernomics, but it is telling that the Clark and
Ardern Labour governments haven't reversed it's key planks for a good reason -
there is no going back to the Keynesian policies that led to the destructive
stagflation of the 1970s.
Bollocks.
Both are wrong - can I respectfully suggest you take 40 minutes of your time, clear the accumulated whatever in your mind, and watch this:
https://www.youtube.com/watch?v=9oVTHKzC7TM
It doesn't matter which ideology we pursued; draw-down of resources was the issue in the 1970's, and has been ever since. The neolibs pared down everything - health, what is taught, capacities everywhere. It worked for a predictably short time, for a predictably lessening cohort. But it has been past its use-by date for two decades. Or more.
https://www.amazon.com/Collapse-Globalism-Reinvention-World/dp/15856762… Been in my bookshelf for years.....
Absolutely. The first oil-embargo (1967) wasn't effective; the second (1973) was.
The repercussion were all energy/work/growth-underwrite related, and lasted all decade. The neoliberals weren't a a cause, they were a repercussion. To arrogant, in the main, to see themselves that way, but that's what they were. But their ideology doesn't fit the facts (as indeed, most currently-held ones don't) and is thus in tatters; Trump, Collins, they're going nowhere: no direction and shooting from the hip. Actually, they've been that way for a while; I saw Key in the Milk and Money docco, lambasting water-scientist Mike Joy - how did a nation vote for that for nine years?
Outrageous 3 waters proposal.
If you do nothing else today you should put 15 minutes aside to watch this. Every Kiwi should see this.
https://www.youtube.com/watch?v=SR_hkRwudUY&t=22s
https://www.neighbourly.co.nz/public/rotorua/horohoro/message/66865754
Read/watched this yesterday. EVERY ratepayer should be all over their council demanding they do not let the muppets in Wellington take our hard won water asset!!!! This proposal is an absolute scandal! GET OFF YOUR BUTTS and get informed now! This is a power/asset grab that Stalin would be proud of!
Do you honestly think that you or my mokopuna will see $1 of that. I can tell you that you will certainly see huge water costs along with the rest of us. Tell me whose pockets do you think the money will end up going into?
Lets look at some numbers.
5 million people = say 1.67million houses at say $1,600 water costs per house according to West Coast mayor.
Total income $2.67 billion per year income.
They plan to borrow $150 billion so they have to pay for the interest on that. So already their numbers are starting look to way off. Ok I know that there will be other commercial and industrial income streams so lets double the income to $5.3 billion. On long term interest rates that still looks light at 3.5% of the borrowed money.
And then they have to do some real stuff and run the enterprise with what if anything that is left after you pay the interest bill. If we work back through the existing running costs given by the mayor we end up with 1.67 m houses x $600/year = $1 B/year just for houses. But remember we doubled things to include industries and other businesses, So $2 B/year (just to do what they are doing now) But they are going to do more than what is being done now lots more. Twice? well that's going to cost $4B/yr. But wait they are also going to have to run a bunch of centralist bureaucratic top heavy organizations to achieve this. How much extra will that cost? $1 B/yr?
So lets see. $5.3 B/yr to fund the interest on $150 B, $4b/yr of real output, $1B on top heavy organizations. It doesn't even begin to add up.
So what will really happen? Nothing like the water improvements promised. Larger annual costs than the $1600/yr water costs described which you will pay.
if after all the bullshit settles and it does get up and running delivering questionable water improvements at questionable costs and does make a profit. Maori will be entitled to half of it. By the time that filters through all the elders and "betters" clicking the ticket before it gets to you, how much do you think will be left? If each of the 800,000 Maori in NZ received $100/year that would equate to $80 M/year. Twice that$160M/year. Do you see the above system producing that for you? Even if you do get that, is that going to go anywhere near the extra $1,000/ year/property (if we are lucky) that the water services will cost? We will all be going backwards even Maori.
I am afraid that Mahuta has been sold a bunch of beads and blankets or she is trying to sell us same. The real question is who is behind all this and pushing this line of BS and why. Scottish Water? Maybe maybe not. When you look at it that $150 B loan is the thing that stands out the most. Well it all stands out as pretty crazy but lets just focus on that for a minute. Without that loan accruing normal interest rates, The interest rates that you would not have to pay would release a cash flow of Several billions of dollars per year. This could all be spent as capital improvements to our water systems each and every year. To put that into perspective, that is a Fulton Hogan sized companies NZ operation plus a reasonable chunk of it's larger Australian bushiness, purely devoted to upgrading our water assets year after year. Can the country actually efficiently spend money and get real assets in our hands back that fast. I doubt it. They cant even manage to build a few houses. Sure they could splatter it all about and fritter it away pretty quickly. We have seen plenty of that recently, but where is it going and what are we getting back that is real? The other question is what is wrong with our water systems that it needs such an enormous injection. Mostly we are well served. Anyway that is just about the cashflow from interest we could save by not borrowing. What about the quantum of money if we borrowed $150 B? How could we spend that in any meaningful time frame when we would be struggling to spend the interest on it. Presumably if somebody gave you a dollop of $150 B you would stick it in the bank and probably earn higher interest than you are paying because to make this fly the interest rates we would be paying must be pretty low. That means that we would be having to invest in capital improvements just to keep up with the surplus cash-flow plus profit on the interest received less the interest paid. It just doesn't make sense. The key to it is that loan. It's like the mortgage on the house. The bank owns the house. So who ever is loaning us that money effectively owns our water resources. Not Maori or councils. Who ever has lent us that money will be calling the shots. Could it possibly be the Chinese? Do you think that they would like to own our water assets and have a stranglehold over the whole country? This is exactly the sort of thing that we are seeing them do with countries all around the world through their Belt and Road scheme. Buying off countries through seemingly cheap huge loans that will never be paid back. It is entirely possible that Mahuta is selling out all NZ for beads and blankets. Don't expect Collins and the National Party to object because as we saw during their term they were totally in the pocket of the Chinese.
Maori being given 50% control of water is yet another undermining of democracy. While it is just one step it affects the whole country. So again the politicians of all colours are again working to drive the people deeper into dependency. Any complaints against how this is managed will risk response accusations of racism.
Having cornered themselves by disclaiming any notion of tax grabs that had been in mind prior to the 2017 election this Labour government is resorting to taxing by stealth, but this one here is even worse, tax by subversion. Any attempt to legislate this prior to the next election will undoubtedly get the people marching. Certainly with sinister hidden agendas like this nobody in their right mind would give any government more than a three year term period.
Agreed Chris this is undemocratic it is a barefaced asset grab for maori by a maori minister . I am on a small rural scheme that will be affected and not happy about the likely massive increase in water charge resulting from this . This needs to go to a general election it was not mentioned at the last election labour will be toast when people realize the financial implications of this proposal and the loss of control to a racial entity.
For myself anyone else but Labour and the Greens. I don't care how woke people are but I do care about how greedy others are. Long after Covid has gone you will be paying water fees that will be unaffordable. This is a neo-liberal model that has failed very badly in the UK and In Europe. The city of Berlin had to eventually buy back their right to distribute water after the privatisation of the council services turned into a train wreck.
You give an entity the right to borrow and charge fees without any accountability and that entity will increase and build up debt and charge fees until it is stopped, presumably by the next govt because the debt is unsustainable and people are unable to afford the cost of water and sewerage. Wait till you see what this will do to the price of housing development and rents.
Theft of the assets built up by our ancestors can always be justified by politicians by the taking of Maori land but this set-up won't benefit anyone except Maori elites and whoever ends up owning the other 50 percent of the water entity.
If we are really lucky, the water entities will end up with 50% Iwi ownership 50% Veolia, SUEZ or some other private water company and water will cost more than rent ,mortgage or electricity payments. At some point the govt will have to nationalise the entity and the taxpayer will have to pay the iwi, the private water company and assume whatever debt the entity has taken on.
For myself anyone else but Labour and the Greens. I don't care how woke people are but I do care about how greedy others are. Long after Covid has gone you will be paying water fees that will be unaffordable. This is a neo-liberal model that has failed very badly in the UK and In Europe. The city of Berlin had to eventually buy back their right to distribute water after the privatisation of the council services turned into a train wreck.
You give an entity the right to borrow and charge fees without any accountability and that entity will increase and build up debt and charge fees until it is stopped, presumably by the next govt because the debt is unsustainable and people are unable to afford the cost of water and sewerage. Wait till you see what this will do to the price of housing development and rents.
Theft of the assets built up by our ancestors can always be justified by politicians by the taking of Maori land but this set-up won't benefit anyone except Maori elites and whoever ends up owning the other 50 percent of the water entity.
If we are really lucky, the water entities will end up with 50% Iwi ownership 50% Veolia, SUEZ or some other private water company and water will cost more than rent ,mortgage or electricity payments. At some point the govt will have to nationalise the entity and the taxpayer will have to pay the iwi, the private water company and assume whatever debt the entity has taken on.
Day of reckoning. Experiencing the tragedy and carnage of the Canterbury EQ sequences found myself saying to others you have to handle it individually but you can’t take it personally. This now seems to resonate again with the forthcoming reality that eventually CV19 will be living amongst us like it or not. This will affect all of us but in different ways and levels. For my part I am not that young and I had a rather rotten joust with pneumonia some 25 years ago that left scarring, bronchiectasis and lungs that seem to seek out bronchitis every winter. I have had the two jabs but have no idea as to how much protection that will give to susceptible humans such as me and I don’t expect that I am all alone but I do know that complaining about it will not make the slightest difference. This just illustrates that everyone will be affected differently just as at present some of those young and fit suffer badly while some who are the opposite not at all. Therefore the reality is don’t expect to find much solace from statistics and experience of others because your body is obviously unique to you. Instead recognise and react to what is going on around you in society and adjust your lifestyle as best you can to avoid risk that you might be vulnerable to. Tallyho!
In well vaccinated European countries very roughly Covid deaths are double road accidents. It is possible Covid side effects will compare with injuries from road accidents.
As usual predicting the future is impossible. Maybe like other historic pandemics Covid will just disappear and if it does it might be fast or slow. Then again scientists may make a break through and eliminate it as they have smallpox. Although the future is uncertain I'm planning for your prediction: living with it. Like you I'm in the high risk category. I had planned my really old age as moving into in Auckland's CBD - plenty of life, action and a great hospital. Now I'm thinking of the opposite and moving to a village off the beaten track.
It is the last part of The Three Musketeers novels (that being the first title.) Would need to start there and it is the best of them, Iron Mask the next best. If you are looking for a more modern historical fiction try and get A Gentleman in Moscow by Amor Towles, best read I have had in many a year.
"My grandchildren matter more than myself."
Finally - someone is thinking about kids
https://www.stuff.co.nz/national/health/coronavirus/300390708/under12s-…
"Cases are on the rise among children in New South Wales, but to date this hasn’t been accompanied by a large increase in paediatric hospitalisations. Recent data show increased rates of hospitalisation among children in the US with Covid-19 compared to last year, alongside rising infections with the Delta variant. But even though the rate has gone up, it remains low. ..."
"Reassuringly, a recent study found only a small proportion of children had symptoms beyond four weeks after their initial Covid infection, and almost all children had recovered by eight weeks.."
The article then goes on ask, so What is the benefit of injecting kids? Yes, good question.
And that old cracker, herd immunity & collective benefit comes up .... sigh
We can rest assured, the drug companies wont be cutting any corners to popping out another few million jabs indemnity free ...
What if we do get through this lockdown, delta is held at bay. We raise our immunity above 70% and pursue the strategy to keep highly infectious diseases out of NZ through our MIQ facilities. Would this not be a great competitive advantage and majour draw card for future tourism / desirable place to do business . Maintaining a COVID / Delta free country. Also increasing peoples stay due to quarantine. (If the could invest in MIQ and make it fool proof )?
I don't blame Bezos (which doesn't mean I like the guy) but Bezos making a profit by risking his own money is fair enough (so long as others can compete). What aggravates is remembering ATEED boasting how the Auckland film studio facilities was a justification for ATEED and its $50m pa of taxpayers money. ATEED has disappeared but the memory lingers on. If a facility is a worthy investment risk leave it to investors putting their own money into it.
... hmmm .... how to make MIQ foolproof ...
Well , for a start ...all perspex screens which divide a room in two ought to go all the way to the ceiling ... so we dont get another Delta breakout like the current one ... hmmm .... who didn't see that a partial partition would allow covid to jump to uninfected people ?
... figures banded around radio stations this morning were that people who catch covid are 20 times more likely to need hospitalization if they're not vaccinated than if they are jabbed ..
Hipkins ... Little ... Bloomfield ... anyone awake to this ... you guys who spurned Moderna & Astra Venica last March ...
Vaccination is one aspect (I am vaccinated and hope you are too). But have a look at the most vaccinated country in the world today - Israel, with a population of 9 million and has 514 patients hospitalized with COVID-19 as of Aug. 15 (with 59 percent fully vaccinated). Currently NZ (with 5 million population) has 9 hospitalized. And Israel had more than 8,000 new cases with 26 deaths yesterday. So I'm personally glad the Hipkins, Little and Bloomfield have been awake and chosen a balanced approach, suitable for New Zealand.
Everyday one sees a news or an article that surprises like below article that mentions that 99% of properties were sold on profit....is that a news !!!!
https://www.newshub.co.nz/home/money/2021/08/housing-record-99-pct-of-n…
One buy a property today and sell after a week, will be in profit even aftef paying real estate agents commission and all other expenses.
This is what is happening everyone who owned a property using equity to buy anither and sell, in pricess earning much more they would in few years and fir some, is life time saving goal achieved.
In absence of of rbnz and government action to control even now, the ponzi cintinues.
German GDP grew 1.6% in Q2, upwardly revised from +1.5% published in flash release. Growth doped by debt. Deficit in H1 of €80.9bn biggest since 1995 when debt of Treuhand agency was integrated into b.udget. Govt spending rose by 1.8%, strongest quarterly increase since Q1 2019 Link
You don’t fight the Fed, so it goes, because those at the Fed know way, way better than you.
For nearing a decade, these bureaucrats have waged war against one not of their own: LIBOR. The actual reasons they have done so have nothing whatsoever to do with the charges they’ve trumped up in order to sanction its termination. Officials hate LIBOR because it had so nakedly exposed their true crime(s).
Having been at it anyway for nine years, you’d think they’d have been able to at least come up with a useful alternative. Make what you will over the justifications, at the end of the day regulators should be able to say they’ve studied the situation well and used their vast (presumed) technical proficiency to produce a better product.
It’s August 2021 and they cannot even say they have finished their product.
Shanghai port opens, airport closes. Freight rates go through the roof. Where does that put our "super-mark=it up" retail sector. If only we made our own chine, shoes, red bands, rugby shirts. To quote Tim Finn et al "And I'm beginning to wonder if its time for a change" of how we do stuff.
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