Here's our summary of key economic events overnight that affect New Zealand with news markets are waiting for some US Fed tapering signals.
In the meantime we should note the IMF has trimmed their global growth estimates for 2021. Basically they see the developed world handling the Delta pandemic better because of substantial income and fiscal support measures, and they expect this group of advanced economies to fully recover in 2022. But the story is not positive for the emerging economies, for China, nor the low-income developing world. The rich/poor fault-line is worse now, they say.
The IMF's review does seem to be good news for Australia and their minerals sector. It identifies nickel, copper, lithium and cobalt as the top four energy transition metals likely to see surges in prices and production as the world works towards net zero emissions by 2050.
The IMF also reappointed its managing director after questions were asked about her role in the now-disgraced World Bank "Doing Business" report.
After hitting an all-time high in July, US job openings shrank in August and by more than expected. It was their first decline in eight straight months of expansion.
US consumer inflation expectations rose again in September to a series-high 5.3%, the eleventh consecutive monthly increase. This news weighed on Wall Street.
The monthly USDA assessment of their agricultural commodity outlook sees higher dairy prices and lower production in the US. And it sees higher beef production but other meat products reducing. They have raised their beef import expectations in this outlook.
There were two large US Treasury bond auctions today and both resulted in higher yields. The three year Note was up to 0.60% median yield and a sharp rise from 0.40% last time. $141 bln was bid for US$62 bln on offer. The ten year Note was up to 1.54% median yield and up from 1.29% the previous time. US$101 bln was bid for the $41 bln on offer. The Fed took only minor volumes from these two events.
In China, their car sales tumbled -20% in September to an annualised rate of 18 mln/year, and while that keeps it still the world's largest car market, it is back to 2014 levels. The share of electric vehicles being sold is rising fast. And demand for vehicle recharging is adding to their power crisis which doesn't seem to be going away. They have loosened the ability of generators to charge higher prices, but weather, very low coal supplies, and national policy changes are all conspiring to extend this crisis.
And China is bracing for a severe seasonal storm in the Pearl River delta region. But this storm is tracking south and likely to hit Vietnam full-on.
The power crisis in India isn't getting better either. Coal supplies are at the center of its problems too.
In Germany, business confidence is declining, falling for a fifth straight month. Profitability is being hit by persistent supply bottlenecks for raw materials, and these along with cost increases show no real sign of abating.
Meanwhile, business confidence is bouncing back strongly in Australia, at least according to the widely-watched NAB business sentiment survey for September. Early signals in NSW's October 'reopening' suggest a very strong retail rebound is underway.
In Australia, the rise of Delta cases in Victoria has fallen to 1466 cases reported there yesterday, but they may have peaked already. There are now 19,012 active cases in the state. In NSW there were another 360 new community cases reported yesterday with another 249 not assigned to known clusters and Delta seems in retreat there. They now have 6,299 active locally acquired cases which is lower, but they had 5 deaths yesterday. Queensland is still reporting zero new cases again. The ACT has 28 new cases. Overall in Australia, more than 62% of eligible Aussies are fully vaccinated, plus 20% have now had one shot so far.
The UST 10yr yield opens today down -3 bps at 1.58% on the re-opening of the US bond markets. The US 2-10 rate curve is flatter at +124 bps. Their 1-5 curve is steeper at +98 bps, while their 3m-10 year curve has held at +157 bps. The Australian Govt ten year benchmark rate is down -3 bps at 1.70%. The China Govt ten year bond has stayed up at 2.98%. And the New Zealand Govt ten year is up again, this time by +1 bp to 2.12%.
In uncertain trading, the S&P500 is down a minor -0.1% in afternoon trade in their Tuesday session following the prior session's late retreat. Overnight European markets were all lower by about -0.3%. But Asian markets all fell sharply yesterday where Tokyo was down -0.9%, Hong Kong fell -1.4% and Shanghai fell -1.3%. The ASX200 ended yesterday down -0.3% and the NZX50 fell -0.2%.
The price of gold will start today up +US$5 at US$1761/oz.
And oil prices are lower by a minor 50 USc to be just over US$80/bbl in the US, while the international Brent price is now at US$83/bbl.
The Kiwi dollar opens today just marginally softer at just on 69.4 USc. Against the Australian dollar we are little-changed at 94.3 AUc. Against the euro we marginally firmer at 60.2 euro cents. That means our TWI-5 starts today unchanged at just on 73.2, and still right in the middle of the 72-74 range of the past eleven months.
The bitcoin price has retraced a little today from this time yesterday, down -2.4% to be now at US$55,972. Volatility over the past 24 hours has been modest at just over +/-1.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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41 Comments
Auckland's dams should reach the historical average this week. Just got through the 90% level overnight:
https://www.watercare.co.nz/Water-and-wastewater/Where-your-water-comes-from/Auckland-s-dam-levels
IMF Outlook adds to stagflation fears. IMF trims 2021 global growth forecast to 5.9%. Cuts its 2021 forecast for US by full percentage point to 6%, forecast for German GDP by 0.5ppt to 3.1% mainly b/c of supply constraints. IMF increases 2021 inflation outlook by 0.4ppts to 2.8%. Link
"the only other option is for prices to reach levels that triggers demand destruction, and that is the phase we have now entered.”
The whole piece is worth a careful read - the methane graph is telling!
The biggest misconception that is being allowed by govt & greens is that we will replace ice one for one with ev.
This is not going to happen...we might replace say 1000 ice with one ev ...or some such number which no doubt has been calculated and based on available resources.
It is a folly to keep investing in 4 lane motorways...we won't be needing them.
I would like to see a cost benefit on free public transport in Auck.
Savings to the management of the ticketing and finance systems , roads would be freed, more land available from redundant car parks, elimination of capital road works and savings in carbon penalties are but a few positives. Other factors such as a reduction in importing vehicles and fuel, foreign funds saved and the increased spending power of consumers are also benefits.
I would love to see the numbers run by an impartial number cruncher (and not one of these ones that start with the desired outcome and work backwards).
Free public transport has been tried elsewhere
TL;DR: the increase in ridership comes from walkers and cyclists, car drivers don't swtich. There is no money left to provide improved services which might actually get people out of their cars.
https://www.greaterauckland.org.nz/2021/04/13/will-free-public-transpor…
They should be braver and convert one lane to a two way bike lane, if they are really serious about emissions/energy efficiency and climate change. But apparently 4m isn't enough room to build a two way cycleway and barriers, despite almost every other two way cycleway in Auckland being 3.5m wide or less. That's NZTA for you though, braindead to the core.
Stellar 10Y Auction Sends Yields To Session Lows
Bank demand for pristine collateral remains unabated - dealers bid 3 month T Bill auction down to 0.02%
Versus
US Treasury bond auctions today and both resulted in higher yields. The three year Note was up to 0.60% median yield and a sharp rise from 0.40% last time
Why would there be this disconnect? Surely the 3y would also be pristine collateral?
First world mostly realised hard lockdowns were not the solution.
https://www.pbs.org/newshour/show/denmark-and-sweden-responded-differen…
“Hard lockdowns are unsustainable over sort of any extended period of time in a free society. So,unless you find sort of an acceptable level of restrictions and recommendations that people can understand and support, I don't think you can sustain a lockdown”
Nice article, clearly hard lockdowns were the way to go.
Would be nice if they explained who the people they were interviewing were. Obviouslly when they get Andres Tegnells opinoin of Sweedens response you have to be ready for a certain bias.
"During April, Sweden suffered more than 100 deaths a day. In all, there have been more than 5,900 Swedish fatalities. Sweden ranks 11th in the world, one place behind the U.S., in terms of deaths per 100,000."
"Across the bridge, Denmark imposed a total lockdown early in the pandemic. Thus far, its death rate per 100,000 is a fifth of Sweden's."
Not sustainable long term though. Fortunatly here in NZ we have been blessed with the lowest level of restrictions during this pandemic.
To be fair they are (I assume) covid deaths. No measurement of the deaths from suicides or postponed medical treatments etc.
We should not be measuring deaths but years of life lost. How can you treat say the the death of two 90 year olds from covid with the death of one 16 year old who missed his heart operation? Without breaking down the numbers by death years this is how they are presenting.
I am no anti vaccer...but I think there is cause for concern with the way data is being packaged.
Also what about the other costs. People in Auckland aged care facilities have been unable to see there family for 2 months as visits are heavily restricted. A lot of these people have only limited time left. Imagine being one of these residents with about 6 months left on the clock & being told that for most of that 6 months you will be unable to see friends and family. These people are for the most part vaccinated, there is nothing more you can do for them Covid wise. Let them enjoy what is left of their life. Life is not about aspiring to reach a certain age at all costs. Something Jacinda and her merry men seam incapable of understanding.
Rastus
Re: One 90 year old for a 16 year old who missed their heart operation.
Has the overwhelming of the New York or Italian hospital systems with the early less virulent strain slipped your mind . . . under such situations numerous 16 year olds missed their operations.
I look forward to high vaccination rates and no lockdowns.
A telling statistic yesterday was of the 158 hospital admissions during this outbreak only 3 were fully vaccinated. Yes vaccine doesn’t make one bullet proof but even over this period if the average of fully vaccinated was only 35% then there should have been over 50.
Printer8 - What we DO NEED is a clear vaccinated % and a cut off date to work too.
Currently the Tooth Fairy carries on in an unaccoutable way, for how long ? her and Bloomfield are terrified at making a decision to end this seige of Auckland.
Civil disorder is not far away and I will happily be part of that, it's turning into a Stallangrad.
2 only 2 people ( one 90 ) have died out of 1550 odd cases over 8 weeks, mean while the average road deaths have taken 58 people, 100 suicides, 100 flu deaths, perspective has been lost on this.
I have business connections that are watching a life time of work go down the dunny, 2 neighbours so sick of not being able to plan whom are selling up and leaving the country, taking their money but most importantly their skills with them !
Also I high ranking Doctor in A SI DHB resigned yesterday over mandatory health worker vaccination, taking her much needed skills back to Europe !
FOR GOD'S SAKE IT'S GOT TO CHANGE, MOVE ON !
Sorry, but those business folk were dunny-bound anyway
https://advisory.kpmg.us/articles/2021/limits-to-growth.html
Just confirming what some of us have known for 50 years (for me, exactly 46 years). If your cohort chose not to listen (and I see no reason except arrogance and/or ignorance) that is their problem. Unfortunately, those folk have made it OUR collective problem.
Shoreman
Your premise is based on what has been . . . and that is because of lockdown.
Without lockdown the growth would have been exponential and ICU overwhelmed which would have meant less intensive care and a far higher death rate.
You need to get your head around what has been and what could have been. One needs only to look to Melbourne where the army is being co-opted to drive ambulances and triage tents being set up outside hospitals . . . and there has been “lockdown” for far longer period of time.
Bottom line; the current strategy is to get that vaccination rate up so we can look to less lockdown and that is the right strategy. However, getting vaccinated is up to people . . . not the Government.
However, getting vaccinated is up to people . . . not the Government. ----- Yes but that's the problem are we going to be hostage ?? I know it worked in the past and that's fine but its not working now !! We need business minds involved not just medical minds. Lives matter but so do Livelihoods ? Yes ! And I'm really over the drama and fear factor we all seem to have adopted. Its not life or dead !
China is wobbling - the consequences of this are likely to be global. Too many countries for too long have relied on China as a growing export market.
Falling house sales and falling car sales all indicate a country that is slowing in growth - this will hurt any economy who has been reliant on China growth for their own growth. Including New Zealand
You worry to much. House prices will continue to soar and in doing so continue to increase the money supply, bolster the wealth factor, trickle the wealth down to the plebs and the rock star will continue on its trajectory.
Ashley Church, Joh Key, Adrian Orr and others have all worked this out. NZ has it sorted, we are smart, different and have the secret economic recipe,
After hitting an all-time high in July, US job openings shrank in August and by more than expected. It was their first decline in eight straight months of expansion.
The sharp drop in openings took place one month before millions of Americans lost their emergency pandemic benefits, and while we have yet to see a big surge in payrolls as a result of millions of unemployed workers collecting benefits returning to the workforce, we expect continued declines in job openings in the coming months as more and more vacant jobs are filled. But not just yet.
Former Ms CEO of the World Bank (now at IMF) & has just survived a WB Business Report enquiry. This revolved around our friends in China trying to covertly influence things to their advantage, with a little help from Ms CEO. While I don't have a major problem with trying to influence anything or anyone, I'm concerned that the global institutions set up after 1939-45 are now so compromised (read infiltrated) with anti American folk (including in the UN itself) that I can't see how they can be brought back to balance without closing them all down & starting again. This might happen of course, but would only be an option on the other side of a war.
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