Here's my summary of the key news overnight in 90 seconds at 9 am, including news of a new global economic forecast from the World Bank.
They say we should expect slower but less volatile growth in the coming months and years as risks from the financial crisis in Europe fade and emerging economies adapt to softer commodity prices and the prospect of rising interest rates. They say there’s a growing recognition that this is not the after-effect of the crisis; "It is a new normal."
US retail sales rose more than expected, and jobless claims were lower than expected in data out overnight in America. Together these have built stock market optimism and equities are up nearly 1% in mid-day trade.
At the same time, one of the biggest auctions of 30 year US Treasury debt - a massive US$13 billion - was held resulting in a yield of 3.355%, its highest in more than a year. Bid-to-Cover ratio was less than 2.5x, quite low but not a record low. To give you an idea how big that issuance was, New Zealand's total gross annual issuance is about half that - for a whole year and over every maturity.
In Australia, data out yesterday showed that employment rose in May, somewhat against expectations, and unemployment fell as the job market withstood a weaker domestic outlook. Markets have pushed back interest-rate cut bets. The main effect of their slowdown on the job market there has been the working of less hours, rather than job losses.
There is more drama in Japan. The Nikkei stock average fell into bear-market territory, ending one of the biggest and fastest bull markets in world history. Stocks had risen 80% in six months, but the gains are evaporating now in a series of violent market swings. Reform in Japan is bringing very unstable markets.
Around the world, good weather conditions are about to result in record cereal crop harvests. The FAO says output could be up as much as 6.5% and prices will fall and stocks will be at record levels. It also says that meat and dairy production rises will be at significantly lower levels than increases in demand.
The NZ dollar rose sharply again overnight and starts today at 80.4 USc - that's a 2.5% rise for the week - 83.8 AUc, and the TWI rose to 74.4. The NZ dollar has continued to rise against the US dollar and is now above 81 USc.
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8 Comments
Slowly but surely the happy clappy concensus on all things shale (tight) oil is starting to break down.
One of the first financial houses I have seen break ranks (perhaps because they have some one who is actually analysing the data) has come out and said:
''Productivity of the newest plays to come on drillers’ radars have not come close to what’s been coming out of the Bakken in North Dakota and Eagle Ford in Texas. And even for those two, he says, peak recovery rates of new wells drilled have been declining and flat, respectively. As a result, drillers are moving on to less productive basins and lower-quality acreage.“The prime locations have already been drilled,”
http://au.businessinsider.com/alliancebernstein-shale-oil-boom-ending-2…
Its the Red Queen effect (as I have banged on about endlessly).
Meanwhile from the heart of the US oil empire comes:
http://www.forbes.com/sites/christopherhelman/2013/06/13/why-americas-s…
He doesnt get it all right (he extrapolates too much from what has happened with shale gas and he doesnt really understand how bad depletion is) but he is on the right track.
He has at least realised that even at the elevated oil prices we have now much US shale oil production is only just breaking even. He has also worked out that the sweet spots have already been drilled and that huge amounts of capital is being sunk into these ventures with precious little pay back. Shale oil is expensive to produce (and likely getting more so - it also depletes very quickly as we are about to see).
The Economist looks at the problems facing US coastal cities (why do they keep building?):
http://www.economist.com/news/united-states/21579470-americans-are-buil…
Meanwhile the UN reckon the global population will now hit 11 billion (whats another 800 million among friends).
http://www.washington.edu/news/2013/06/13/uw-research-world-population-…
70-75 million more people every year at the moment.
Unemployment down in AUS.Jobless claims in US lower.
Friend of mine who works for nz post has told me that staff with over 15 years service can now apply for early retirement.Could this be the calm before the storm.
Ipresume if not enough take up the offer then redundancies will be an option.
Good old NZ bucking the trend.
You forgot to mention this article :
http://au.businessinsider.com/edwards-australias-minsky-masher-2013-6
Aren't we glad that China is now our biggest trading partner instead of Australia ??
Ooopps....It means we now have ALL OUR EGGS IN THE SAME BASKET !!!
Globalisation is the one basket. Case.
Unemployment is a red-herring, alle same GDP. It's not even 'what's the wage?' either; it's 'how much can the reward buy? In terms of housing, obviously the answer to that is : a lot less. In terms of everything else, similar. Wage-income purchasing-power has slipped vs every other form of income, for a long time. So - "I'm employed, but I earn enough to buy diddly-squat, and never a house".
So why do we call it 'employment' as if it's a constant?
At the same time, one of the biggest auctions of 30 year US Treasury debt - a massive US$13 billion - was held resulting in a yield of 3.355%, its highest in more than a year. Bid-to-Cover ratio was less than 2.5x, quite low but not a record low. To give you an idea how big that issuance was, New Zealand's total gross annual issuance is about half that - for a whole year and over every maturity.
In your own mind David and possibly that of Bill English going forward.
Treasury debt issue projections concur with your estimate of a government trying to minimise reliance on an economic agenda predicated on needy foreign financed deficit spending.
In reality the government relied on issuing NZD 48.818 billion of new Government debt liabilities over the four calender years ending December 2012 - an average of NZD 12.2045 billion per annum.
Nonetheless, you have highlighted that we are a rounding error economy on the world stage, hence it is generally easier to be rid of such nuisance positions when times are not going as well as one has been told they should be.
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