Here's our summary of key economic events overnight that affect New Zealand with news costs seem to be rising steeply everywhere now, far from any 'transitory' indications.
The rise, rise and rise of shipping container freight hit a new milestone this week, with the global average exceeding US$10,000 for the first time for a 40ft unit per journey. That is three times higher than a year ago. All this cost is outbound from China's ports. Going the other way into China it is surprisingly cheap.
For some key commodities the overnight movements were very mixed. Aluminium and coal rose again, natural gas prices hit a seven year high overnight, but iron ore and wheat fell again. In the case of iron ore, that is down to a 13 month low.
In the US, the initial jobless claims reported for last week fell to 284,000, and lower than the week before. There are now 2.6 mln people on these claims, the lowest level since the start of the pandemic. But some of this recent decrease is because of expiring qualifications rather than them moving off to work. That may have involved about 50,000 people last week. Only ten states now have benefit extensions in place.
At the overnight UST 30yr bond auction, the Fed took only US$3 bln compared to the US$24 bln at the prior equivalent event. Demand was strong for the smaller about on offer to the public. The median yield was 1.86% pa, and down from the 1.96% a month ago.
The Fed's reverse repo activity is still high and above US$1 tln but no longer pushing the boundaries as it did in mid-to-late August.
There were Fed officials out speaking or being interviewed overnight (Williams, Bowman, Bostic, Bullard, Kaplan) and their message seemed to be that they are still likely to taper their bond buying program in 2021.
In China, and consistent with a slowing domestic economy, consumer inflation fell to under +1% in August. But factory cost pressures rose. On the household front, the cost of milk and beef is holding, but the price of lamb is slipping. All of these had large run-ups over the past few years. On the factory front, the rises were more than was expected, in fact hitting their highest growth since 2008.
And Beijing has told key steelmaking provinces to cut production during their upcoming winter to curb pollution that is now spreading to the capital. It's a move likely to cause the iron ore price to fall further. But China can't get enough coal - not for steelmaking, just for thermal electricity production.
The overnight ECB meeting and review left all its settings unchanged and only slightly scaled back its PEPP bond buying program, a more dovish stance than markets were expecting.
In Australia, there were another 1405 new community cases in NSW yesterday with another 1300 not assigned to known clusters, so zero improvement there. They now have 27,941 locally acquired cases. Victoria reported another 324 new cases yesterday, so it is getting worse there, particularly in Melbourne's north. Queensland is still reporting no new cases. The ACT has 15 new cases. Overall in Australia, more than 40% of eligible Aussies are fully vaccinated, plus 25% have now had one shot so far.
Wall Street is giving up earlier gains in its Thursday session, with the S&P500 currently down a further -0.3% taking the weekly retreat to -0.8%. Overnight, European markets were very mixed with London down more than -1.0% and Paris up +0.2%. Yesterday, Tokyo fell -0.6%, but Hong Kong fell very sharply, down -2.3% but Shanghai actually rose by +0.5%. The ASX200 dropped hard, closing -1.9% lower. The NZX50 fell by another -0.7% and taking its retreat so far this week to -1.4%.
The UST 10yr yield opens today at just over 1.30%, so down -3 bps for a second day in a row. The US 2-10 rate curve is at +108 bps and marginally flatter again. Their 1-5 curve is also flatter at +71 bps, while their 3m-10 year curve is much flatter too at +124 bps. The Australian Govt ten year benchmark rate starts today at 1.23% and down another -4 bps from this time yesterday. The China Govt ten year bond is at 2.89% and up +2 bps. The New Zealand Govt ten year is now at 1.90% and also down -4 bps.
The price of gold has recovered +US$3 today and now at US$1796/oz.
Oil prices have fallen by -US$1/bbl, so in the US they are now just under US$68/bbl, while the international Brent price has fallen to just over US$71/bbl.
The Kiwi dollar opens today at 71.1 USc and little-changed since this time yesterday. Against the Australian dollar we very slightly firmer at just on 96.5 AUc. Against the euro we are little-changed at 60.1 euro cents. That means our TWI-5 starts today at just on 74.1, unchanged and still right at the top of the 72-74 range of the past ten months.
The bitcoin price has stayed down, but rising slightly from yesterday's recent low, up +1.5% to US$46,929. Volatility in the past 24 hours has been moderate at just under +/- 2.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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26 Comments
Having worked in IT in both Europe and NZ, the latter has an alarming lack of discipline around IT security. Now I haven't worked with any of the banks here, but work with DHB's on a daily basis. The way they and their vendors deal with sensitive data is borderline criminally negligent.
In Austria we had to go through so many hoops to get any software update out there that deals with documents, that even the most anal security advisors would get tired of it. In NZ you get an external hard drive couriered to you with gigabytes of sensitive, unencrypted data...
The "she'll be right" attitude has its place, but IT security isn't it.
I've worked in IT in several banks in NZ and my experience is they take privacy and security of customer data very seriously now - plenty of training, security specialist reviews and documented sign-offs. Probably much like your painful experience in Austria.
Despite all that, DOS and other attacks that exploit underlying software are going to happen, and everyone has to at least partly rely on testing and updates done by vendors outside their organisation (and in NZ's case, generally outside the country).
wheat fell again
Wheat price may have fallen but it's still pretty high, expect to pay more for your pasta
https://markets.businessinsider.com/commodities/wheat-price?op=1
Mostly due to the drought in Canada (who was it who was saying that arable land would be expanding because of warming in Canada...?)
I read a report yesterday that indicated that the shipping companies greed is inexorably working against them. the problem is empty containers. They are piling up at destination ports because it is too expensive to send to China, or wherever they will get filled. For some of these areas, they would have been filled with recyclable waste going to China for recovery, but the current cost makes that uneconomic. So China will run out of containers, but before that the big carriers will be running less than full. As the shipping companies try to maintain their profits, the squeeze will get worse until trade effectively stops or competition undercuts them by a lot forcing them back to earth.
Also the cost margin between airfreight & sea freight has now narrowed to where appropriate products are now viable for the former. Airfreight offers too the advantage to cash flow of having the product on the market weeks earlier and for perishables far greater shelf life. Trade by its nature, has a habit of balancing the scales so to speak.
How come. Just for a start NZ lamb was airfreighted chilled from early 1980s on a regular daily basis to the EEC and Asia and lots more. Have a read of the ill fated Fortex and the great success story of ANZCO/Janmark if you want that background but all major meat processors were active internationally. And then add produce such, as premium steer, venison, crayfish. Ask AirNZ how much they carry if still in doubt.
The UST 10yr yield opens today at just over 1.30%, so down -3 bps for a second day in a row.
Yields Plunge After Spectacular 30Y Auction, Lowest Dealers On Record
If yesterday's 10Y auction was blockbuster, one of the strongest benchmark sales on record, then today's $24 billion offering of 30Y paper - the last coupon auction of the week - was nothing short of spectacular.
Printing at a high yield of just 1.910%, the auction not only stopped at the lowest yield since January's 1.825%, but also stopped through the When Issued by a whopping 1.8bps, the most since April and ended 4 consecutive months of tails in the 30Y tenor.
The bid to cover of 2.486 was not only a big jump from last month's 2.208 but also the highest since the 2.500% in July 2020, and far above the six-auction average of 2.276.
The internals were stellar as well, with Indirects taking down a whopping 69.7%, 9bps above the 60.7% in August and also the highest since July 2020. And with directs taking down 17.2%, Dealers were left holding on to 13.1% of the auction, the lowest Dealer takedown on record!
QE reserves remain on the liability side of the central bank's balance sheet offsetting the LSAP (QE) purchased bonds on the asset side of the balance sheet until they are sold or redeemed at maturity.
Banks buy low risk liquid government securities in preference to capital intensive, unsecured, illiquid lending to productive GDP qualifying enterprises - read more.
If there has been anything more unusual about the past few quarters, the love of safe and liquid assets hasn’t been that thing. Instead, it has been the turning away from loans and lending – there the data aligns with Mr. Dimon if, however, for the opposite reasoning.
Loans had already been largely avoided in the post-2008 era, but since 2011 had at least been advancing in nominal and absolute terms (though in linear terms, still shrinking).
Apart from the big jump in loans in Q2 2020 as companies all over the place forced banks to standby their existing revolvers, lending has only dropped ever since. No matter the Fed and its variety of puppet show variations, nor Uncle Sam’s overtures into increasingly every corner of the economic sphere. Banks are saying “yes” to safety in a big way and “no” to risk-taking in a bigger way (which is what loans are, especially in the sense of liquidity risks).
In fact, the banking system’s asset side has been driven exclusively by the most liquid assets: UST’s and agencies but also the Federal Reserve’s bank reserves. Each of those has increased while risk-taking types of assets are now explicitly shrinking.
If we remove bank reserves, UST’s, and agencies, you can see all-too-clearly why there hasn’t been any inflation in the post-crisis era – and equally why there isn’t likely to be anytime soon. The banking system – now through Q1 2021 – continues to de-risk the collective balance sheet.
Thanks, so it is essentially saying no inflation in the cost of money? What about the cost of inflation in the real economy? When the CPI goes up will the Fed not have to respond?
This is the part I struggle with, inflation managed in the banking system which relates to the supply of easy money and the inflation in the real economy as affected by supply side shocks and demand surges.
For some key commodities the overnight movements were very mixed. Aluminium and coal rose again, natural gas prices hit a seven year high overnight
Furious Europeans Protest Electricity Hyperinflation: Lagarde Are You Watching?
In other news, cant wait to get my vaccine passport ....
"
EU on Monday removed Is/ael from the list of nations deemed epidemiologically safe.
Although Is/aeli had three jabs, as they have a very high rate of infection in their Country, they are receiving restrictions at arrivals.
Sweden and Portugal don’t accept them (either vaccinated or not).
The Netherlands accepts them only after a quarantine period.
Other EU Countries in random order.
Epidemiologist Nadav Davidovitch, a professor at Ben Gurion University, said Is/ael is currently a strange case […] We have some of the highest rates for both infections and vaccinations.
Damn
Should have read the fine print
GOVERNMENT PUBLIC HEALTH ORDER
ONLY THE FULLY VACCINATED* WILL BE ABLE TO FULLY PARTICIPATE IN OUR SOCIETY.
* the government reserves the right to redefine the term ”fully vaccinated” at any time.
I don't know why you keep using Israel as an example of vaccine failure? Israel does not have a high rate of vaccination. They rolled out their vaccine early and rapidly. However, they have a large Jewish Orthodox population which is resistant to getting vaccinated. Looking at the current data they are only 63% fully vaxed and 69% single shot.
Is it really a surprise they are getting a lot of cases with these low vax rates?
ahem - I think i was talking about passports... (& the ever changing narrative...
Why arent they letting vaccinated Israelis is to these countries?
Say what? My passport is expired already?
Israel Vaccine Passport Now Expires After Six Months, Boosters Required - Vision Times
Kinda not much use if they dont allow you to go anywhere
Maybe we should rename them the Human WOF ... older models only valid for 3 months ...
"Town rallies around doctor facing scrutiny over Covid-19 consent comments | Stuff.co.nz
Nice to see
I seem to remember there used to be a Health maxim for health professionals... first Do no harm.
"He had some concerns as GP, he thought that was a bit dangerous they [people giving the vaccine] didn’t have the history of that person."
Course, its easier to label as anti-vax
‘First give a dog bad name before you hang it’
Interesting Twitter post from ex-celebrity banking economist:
Calling on businesses. I’m about to start doing a credit survey, focusing on small to medium sized businesses. Access to credit a big issue for many SMEs. Banks stance and diminished capability is not helping. Please email xxx@xx if you can be a respondent
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