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 ».