Here's my summary of the key news overnight in 90 seconds at 9 am, including news Chinese stocks fell another 1% overnight to a 3 year low as more and more Chinese companies reported profit slumps because of the sharp slowdown in Chinese economic growth.
Despite rallies in markets across the Northern and Southern Hemispheres, China's stock market has been the second worst performing stock market in the world in the last quarter. It is down 7.7%, better only than the Cyprus stock market.
Even Chinese retailers and car sales yards are reporting a slide in activity. See more here at Bloomberg.
This slump in China's growth rate as construction and export activity slowed down has depressed the prices of commodities used to make steel and generate electricity, including coal and iron ore. Stockpiles have built up and prices have fallen 40-50% in the last year. This was a factor in yesterday's decision by Solid Energy to suspend production at its Spring Creek coal mine on the West Coast and reduce production at Huntley at the cost of hundreds of jobs.
Another factor is the stubbornly high New Zealand dollar, which has remained high despite the slump in commodity prices. This is different from the 2008 and 2009 falls in commodity prices after a China slowdown, which triggered sharp declines in the New Zealand dollar. The New Zealand dollar was solid around 80.1 USc this morning.
Meanwhile, the second estimate of US GDP growth in the second quarter was revised up to an annualised rate of 1.7% from 1.5% at the first estimate, but economists said this was still too slow for the US Federal Reserve to avoid having to carry out a third round of Quantitative Easing or money printing later this year. See more here at Reuters.
Markets are on hold waiting for Federal Reserve Chairman Ben Bernanke to talk to central bankers at Jackson Hole on Friday. He announced QE II in his speech in Jackson Hole speech in 2010.
The problems in the Euro-zone continued to nag away overnight. German Chancellor Angela Merkel met with Italian Prime Minister Mario Monti and clashed over whether Europe's new rescue fund should get a banking license to buy government bonds. Merkel is not keen, while Monti likes the idea. See more here at Bloomberg.
The European Central Bank meets on September 6 to decide on a massive bond buying plan, although there remains division within the bank. Germany's Bundesbank is opposed. ECB President Mario Draghi, an Italian, hit back at the Bundesbank criticism overnight. See more here at Bloomberg.
15 Comments
Closer to home:
Welcome to massive rate- and tax increases.
Now in a worsening worldwide economic and financial scenario, who will stop local and central governments megalomaniac ambitions and mismanagement of our economy. ??
Listening to parliament and learn how far they are from the general NZpublic - I think it doesn’t take much longer until solid, regular “NZstreet demonstrations” take place.
The beginning of a most needed NZrevolution.
Wow! What triggered this?
So Kunst - I take it that you saw the X St Bedes Woodwork Teacher with his "increase petrol tax" message on TV last night. Terrifying!
How did the story go? Something like "People have bought fuel efficient cars and our petrol tax revenue has fallen" How sad!
So the Woodwork Teacher has reasoned that he has the right to the balance of the middle class motorists money no longer wasted on the old gas guzzler. Gerry has a spreadsheet.
The real truth is evident. Open country roads are relatively deserted these days. Middle class car use is clearly rationed. South Island State Highway service stations are very quiet. Fuel efficient cars - what rubbish.
Brownlee will now surely further diminish the car-use-budget of the middle class motorist - and the volume of tax revenue is bound to fall further.
Enter that Brownlee spreadsheet again
At that time Gerry will have a real brainsorm idea. He will class a diesel Suzuki Swift as a 5 ton truck - for road user charges. At the moment this amazing car is only classed the same as a 3.5 ton truck.
We deserve better than this level of honesty and awareness.
Kunst
I felt sorry to see you sitting out there on your own all day.
Your observation is 100% correct. How to fix it - I do not know.
If you gathered 100 of the most realistic people into a new party they would get 100 votes. From each other.
101 votes !
.... most of the remainder would be voting to preserve their " entitlements " , whether that be WFF hand-outs , or tax minimisation schemes , trusts , or rental supplements .......
"Another factor is the stubbornly high New Zealand dollar"
sorry who hasnt read the memo here?????? we still pay interest here and were not printing money. were so proud, who needs exports any way, very over rated.
stubborn kiwi, naughty kiwi..
Our $ is not high its very low against the Aussie $. The US $ is weak and deservedly so. The £ is also low but again deservedly so, the country is broke. The $ will not safe us costs are too high now, as Ive said numerous times when I started farming in 1984-5 my costs were %35 of gross income, now they are %80 of my gross income. My big costs are Fertiliser, rates/insurance, fuel etc. These will not be helped by a low $. The problems are systemic, council and government are out of control, why did we just get a roaduser charge increase when our costs are already so high? No, a low $ wont save us we need some restructuring and that isn't going to happen.
I rang a friend yesterday, he is altering his house. He just has been informed by the council that even though he is only altering a bedroom he is required to up grade his septic tank, 10k and improve his road access 4k. He was an unhappy chap. Or take my electrical cables, i want to put them underground, cable and trencher cost 3-4k, however they now require an easement and my Lawyer to get involved, cost 5-6k, almost tripling my initial estimate.
Oh no the dollar wont help us, its penury for us.
No A.J. our dollar is at a relative position to the AUD to where it's always been between 77 and 80 see forex ten year graphs or more.....and yes there have been spikes to 96 but that is very very very rare.
Now if I were repatriating USD back home to NZD I'd be arguing that everything is hunky dory here against the USD , pretty much as you appear to be.
I just dont see the currency as a one stop, fix all.
Absolutely agree on that A.J., as it would be useless to have a low currency with nobody buying product....
There are any number of Macro economic adjustments we need to make that will be in turn affected by those adjustments being made by people we trade with. It does not help( or lend confidence ) that by his own admission ,Bollard confirmed we ( as in the RBNZ ) are infantile in this arena.
You see ,we really do just muddle along off the back of Australia's Strength, and we keep the policy of " Wait n See" because we are not in control of our direction from the internal economy to the external.
http://www.zerohedge.com/news/math-behind-italys-28000-cash-gold-outlets
Times are now so tough that Valerio Novelli, a ticket inspector on Rome’s buses, is planning to sell his old gold teeth.
The pawnbrokers, by contrast, can hardly keep up with business. They normally have the gold quickly melted down and sent abroad, making it one of Italy’s fastest growing exports. Official gold sales to Switzerland leaped 65 per cent last year to 120 tonnes, up from 73 tonnes in 2010 and 64 tonnes in 2009.
Aug. 27 (Telegraph) – Unilever will adopt marketing strategies used in developing countries in order to drive future growth in Europe.
“In Indonesia, we sell individual packs of shampoo for 2 to 3 cents and still make decent money,” said Mr Zijderveld. “We know how to do that, but in Europe we have forgotten in the years before the crisis.”
Mr Zijderveld also said that in order to drive growth, better products would need to be matched by better in-store service. Using the example of Apple, he said: "In an Apple store, everyone thinks: Wow, what an experience."
"But in some supermarkets in Europe, you think: half empty shelves, boxes on the floor, not a sales person in sight - how terrible is that?"
"Why can't we sell food like Apple sells devices? Why are there no genius consultants for chicken?"
Because no matter how many times you put two fingers on it and move them apart, the chicken will remain the same size.
Well answered PDK. But the matter of the marketing remains unanswered.
Back in the late 70's - early 80's there was this freighting company named Transport Nelson Ltd - otherwise known as TNL.
TNL started TNL Export Ltd and went out and employed the best staff available. Their business was brisk. Their staff were really innovative. They did some unusual exporting.
TNL Export's overseas trading was huge.
One of their staff was English and X Unilever. He purchased my products to package other products going to the Middle East. They made more profit by selling my 'packaging' than they did from the main contained product.
My small company had a long, happy and profitable trading relationship with TNL Export.
Sadly TNL started an airline>>>>>>>>>FINISH.
A sign of how disconnected he is with ordainary ppl IHMO. A "CEO", Van Zijderveld, the head of Unilever's European business nuff said really.
Apple has huge margins, pak-n-save a handful of %s margin....but if he shops at a deli he'd get that personal service at a huge price that most cant afford....obviously he things his commodity brand is as worthy as apple....it isnt....deluded.
So sell persil in 3 or 4 wash packets rather than $30 bags, huge waste in packaging. Or the consumer can do like I do buy the same weight in an alterntive barnd at $10.
Totally disconnected....
regards
This is unquestionably today's must read - http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829
MEH - Dont forget that Iphones/Ipad is manufactured in near slave labour conditions in China, so probably has lots of margin to cover the cost of a flash shop and nice sales staff. The scale of their sales success hides the RND costs. Margins on breeding, feeding, growing, transporting, processing, packaging and transporting chickens in Europe are a tad different due to more regulated working conditions.
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