Here's our summary of key economic events overnight that affect New Zealand with news all signals point to high inflation and lower growth, and bond markets are scratching their collective heads.
The global economy's recovery track seems to be faltering as the combination of rising inflation and supply chain bottlenecks is undermining consumer confidence in their future buying-power, from Japan to Germany. Delta isn't helping the mood either.
In the US it is touch-and-go.
American consumer price inflation came in at +5.4% in September, marginally higher than for August and slightly above what was expected. Core inflation - without food or energy costs - was an unchanged rise of +4.0% in the year to September. These rising costs are so far more or less keeping pace with the weekly income gains of +4.6%.
It is uncertain whether the US Fed will stay patient, or now get aggressive on how it deals with inflation.
The Fed minutes show that the central bank policy makers have plans to begin reducing their bond-buying stimulus program next month and will aim to wrap up these asset purchases entirely by the middle of 2022.
The US Treasury ran an auction for their 30 year bond overnight and that delivered a median yield of 1.97%, up from 1.86% at the equivalent event a month ago. Support was similar with $58 bln bid for the US$26 bln offered. The US Fed only took a minor slice.
China turned in a very strong export result in September, up +28% from August and very much better than expected. It was also a record high. That led to a strong +US$67 bln trade surplus in the month, +US$42 bln of which was with the US. China ran a -US$9.1 bln deficit with Australia and a -US$0.5 bln deficit with New Zealand in September.
But new loan growth in China rose in September from a weak August but by much less than expected. Perhaps that is more robust than it first seems as lending to their large property sector is a clear restraint on the overall levels. Property development may make up as much as 30% of China's economic activity, so to get any growth when that sector is under a cloud is actually quite impressive.
German inflation came in at the expected high level of +4.1% pa in September, similar to August.
EU industrial production slipped in August from July and it looks like its recovery has topped out - and below the pre-pandemic levels.
Japanese machinery orders slipped in August from July, which was a bit of a surprise. But year-on-year the improvement grew and the trend higher is still in place.
Globally, despite the Chinese releasing some strategic supplies to restrain it, the price of zinc is racing higher. Power problems at smelters in China and Europe is crimping production even though demand remains strong. Prices for this key commodity are now closing in on their 14 year highs.
In Australia, the new incoming NSW premier is signaling that the State is about to go on an immigration bender "to catch up some of those numbers we've lost" over the pandemic. He seems to have eyes on technical, construction, and healthcare skills.
And staying in Australia Delta cases in Victoria have risen to 1571 cases reported there yesterday, and that wasn't exactly expected. Deaths rose there to 13 yesterday. There are now 19,627 active cases in the state. In NSW there were another 444 new community cases reported yesterday with another 309 not assigned to known clusters, and another unexpected rise. They now have 6,044 active locally acquired cases which is lower, but they had a sharp jump to 13 deaths yesterday. Queensland is reporting zero new cases again. The ACT has 58 new cases. Overall in Australia, more than 63% of eligible Aussies are fully vaccinated, plus 19% have now had one shot so far.
The UST 10yr yield opens today down another -3 bps at 1.55% as other markets lack direction. The US 2-10 rate curve is flatter at +120 bps. Their 1-5 curve is however marginally steeper at +99 bps, while their 3m-10 year curve is flatter at +154 bps. The Australian Govt ten year benchmark rate is down -6 bps at 1.64%. The China Govt ten year bond is unchanged however at 2.98%. But the New Zealand Govt ten year is up again, this time by +2 bps to 2.14%.
In uncertain trading, the S&P500 is up a minor +0.3% in afternoon trade in their Wednesday session. The Fed minutes helped the mood improve somewhat. Overnight European markets were all up by +0.7% except London which lagged with only a +0.2% rise. Tokyo was down -0.3%, Hong Kong was closed for a typhoon, but Shanghai rose +0.4%. The ASX200 ended yesterday down -0.1% but the NZX50 recovered by +0.2%.
The price of gold has moved up smartly today, up +US$33 at US$1794/oz.
And oil prices are essentially unchanged and still at just on US$80/bbl in the US, while the international Brent price is now at US$83/bbl.
The Kiwi dollar opens today just marginally firmer at just on 69.6 USc. Against the Australian dollar we are little-changed at 94.4 AUc. Against the euro we marginally softer at 60.1 euro cents. That means our TWI-5 starts today little-changed at just on 73.3, and still in the middle of the 72-74 range of the past eleven months.
The bitcoin price has risen +1.7% today from this time yesterday to be now at US$56,948. Volatility over the past 24 hours has been moderate at just over +/-2.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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33 Comments
oil - https://bylinetimes.com/2021/09/22/gas-crisis-reveals-the-imminent-end-…
'As the Guardian’s economics editor, Larry Elliott, wrote in August with a compelling insight all too rare among financial commentators, it’s not that we simply face the prospect of another financial crisis. In reality, the 2008 financial crisis never ended. The 2020 pandemic-induced slump just appears as yet another episode in “one long crisis stretching back two decades,” he observed.'
1929 crash & the Western world at least, then began picking itself up by its boot laces, for instance ultimately FDR’s “new deal.” A recovery based on public works equals infrastructure. 1987/2008 equivalents based on debt write off and debt rebuild, public and private. The common individuals that were able to regain their livelihoods in the 1930s were not burdened by a maxed out credit card and a mortgage larger than their household value.
Putin today:
I repeat: the rise in gas prices in Europe was the result of a shortage of electricity, and not vice versa. And there is no need, as they say, to shift from a sore head to a healthy one, as we say, as some of our partners try to do. Sometimes you listen to what is being said about this, and you are surprised, it’s just amazing, as if they don’t see the numbers - I’ll say more about this - they don’t see the reality, they just cover up their own mistakes. Over the past decade, step by step, systemic flaws have been laid in European energy. It was they who led to a large-scale market crisis in Europe. Let me remind you that as long as the leading positions were atomic and gas generation, there were no such crises, there was nowhere for them to come from. I will add that today, thank God, such problems in Russia are unimaginable. A long-term approach to the development of the fuel and energy complex allows us to provide electricity prices for the population and enterprises at the lowest level in Europe. For comparison: the average price of electricity in Russia in terms of euros is about 20 euros per megawatt-hour, in Lithuania - 256, in Germany and France - 300, in the UK - 320. Link
That's incredible Audaxes, I have always thought Europe should have stuck to nuclear. Why they are trying to go totally renewable is a mystery. Heard from family in Sweden that Denmark has to get power from Sweden when the wind dies. Most of that power is from nuclear, even though there is plenty of hydro power in Sweden. Not sure if I am right but Sweden was considering shutting nuclear power plants, probably a bad move.
From our supplier, three days ago: 6 month ETA for a new digger out of Japan, 9 month ETA for a new commercial mower out of USA. Also, now 6 months into our 4 month wait for a new NZ-made trailer. Trailer guy was happy we were understanding and didn't try to stab him through the phone like 90% of his customers.
I can feel the wheels grinding to a halt.
Talking of mass delusion..note the comment in the article above --
In Australia, the new incoming NSW premier is signaling that the State is about to go on an immigration bender "to catch up some of those numbers we've lost"
This sort of backward thinking just shows how out of touch these BAU fossils are.
... should solve the problem of insanely high house prices in this country ... NSW isn't alone , each state ( even Tassie ! ) has a massive skills shortage .... expect 10's of thousands of us to jump the pond for far higher wages , cheaper living costs , and to get away from Jacinda ...
Luckily for Oz , we have a surplus of skilled well educated workers .... huh ...
Yes the good times are coming
Emergency measures introduced in UK as energy bills soar – and NZ should brace for rising prices, too, thanks to exploration ban
https://pointofordernz.wordpress.com/2021/10/13/emergency-measures-intr…
Yes the good times are coming
https://pointofordernz.wordpress.com/2021/10/13/emergency-measures-intr…
The US Treasury ran an auction for their 30 year bond overnight and that delivered a median yield of 1.97%, up from 1.86% at the equivalent event a month ago.
Stellar Demand For 30Y Auction As Curve Comes Crashing Down
In short, an absolutely stellar auction and one which appears to confirm that the bear flattening is here to stay because with every tick higher in short-term rates, the long end drops as the curve prepares to flatten and then invert ahead of the coming recession which the Fed will tighten right into.
Decidedly more negative US real yields ignites gold demand in anticipation of something bad happening.
This is such a good page from Singapore
84% of pop. double jab, 3,190 new cases, 487,000 had booster jab.
A Singapore Government Agency Website
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COVID-19
COVID-19 Situation at a Glance
As at 12 Oct 2021 (COVID-19 vaccines under National Vaccination Programme only)
Total
9,518,022
Doses administered
4,609,566 (85% of population)
Received at least one dose
4,548,440 (84% of population)
Completed full regimen
Booster Dose
760,000
Eligible
487,673
Received booster shot
117,000
Booked their appointment
As at 13 Oct 2021, 12:00pm
New Cases
3,190
2,686
Community
498
Dormitory
6
Imported
(From the UK this morning)
"The Office for Budget Responsibility has warned that a 1pc rise in interest rates and inflation could add £25bn to the UK’s debt interest bill .....The nation’s benchmark cost of borrowing for 10 years has almost doubled to 1.13pc since the beginning of August amid concerns that the Bank of England could be forced to raise interest rates to stave off inflation.....global debt in 2020 jumped by 14pc to a record high $226 trillion (£165 trillion)....Interest rate rises risk bringing house price growth to a shuddering halt and causing turmoil in government finances around the world."
(NB: Who knows what that Global Debt figure really is!)
"Turnover is possibly more important than price"
Turnover and Price might be inextricably linked?
The reason '"people aren't selling" (Turnover) is because the cost of moving (Price) has been made 'impossible' for many. Someone posted not too long ago "I, and many people I know" couldn't afford to buy the home I live in today, at today's prices". So they stay-put, and renovate etc.
What will free up that logjam? Either the ability to borrow more (we've tried that and look how that's unfolded?) or prices that allow for movement.
What will allow the former? Lower Interest Rates (unlikely though it seems at the moment, don't discount it, because the alternative is...) Lower prices and all the household sunk debt pressure that brings with it.
This poor planet we call home does not need us to be 'growing' any more, we need to understand that and act on it before the planet demands we do (it could well be argued it already is)
Can we please, please get some new thinking that is compatible to us having a livable planet in the future.
https://www.newsroom.co.nz/a-supply-chain-strategy-for-a-remote-island-…?
So the infrastructure commission forecasts 7.4 million Kiwis in the next 28 years. So NZ needs 50% more teachers, nurses, schools, hospitals, recreational parks, etc. It is actually worse than that since we know that NZ born families have a well below 2 fertility rate so this means growth by immigration. It has been widely known for 100 years that immigrants tend to end up in big cities. I suppose I should be glad to own property in Auckland but I'm mad not glad - just how long must growth continue? For eternity?
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