Japanese style deflation fears in Europe, Berkshire Hathaway shares top US$200k, Chinese gold demand drops, NZ house buying sentiment down

Japanese style deflation fears in Europe, Berkshire Hathaway shares top US$200k, Chinese gold demand drops, NZ house buying sentiment down

Here's our summary of the key news overnight in 90 seconds at 9 am, including news Japanese style deflation is being talked about in the Eurozone following weak GDP figures overnight.

Gross domestic product in the 18-member currency bloc was flat in the second quarter compared with the first, which translates into 0.2% growth in annualised terms. That’s down from 0.8% in the first quarter. German GDP shrank 0.2% from the first quarter, and the French economy stagnated for a second straight quarter. European sharemarkets fell, but government bonds rose.

Yields on 10-year German bonds dropped below 1% for the first time since Bloomberg started tracking the data in 1989, with talk of potential for quantitative easing from the European Central Bank.

In brighter news in the US Class A shares in Warren Buffett’s Berkshire Hathaway traded above US$200,000 for the first time. Buffett has tied the company’s fortunes to the prospects of the US economy, and he says a high share price presents a barrier to entry for short-term investors and encourages shareholders to think like owners.

Elsewhere in the US the Federal Bank of New York said household debt fell in the second quarter for the first time in a year as mortgage originations dropped to their lowest level since 2000.

And in China gold demand shrank in the second quarter, versus the same period of last year, with purchases down 52% to 192.5 metric tonnes, leading to suggestions gold prices will drop during the second half of this year.

Here in New Zealand, ASB’s latest quarterly housing confidence survey shows a net 49% of respondents expect house prices to increase. That’s similar to the previous two quarters but down from 63% early last year. However, sentiment about buying a house has fallen with a net 11% of respondents saying now is a bad time to buy a house, the worst sentiment since October 2007.

Sales and inquiries in the London housing market fell in July at their fastest pace since the onset of the global financial crisis, according to a survey by the Royal Institution of Chartered Surveyors. The group said policy initiatives adopted by the Bank of England in recent months, plus heightened expectations of rising interest rates, has had an impact on sentiment in the market. The Royal Institution of Chartered Surveyors predicted 4.7% growth in British house prices in the next year, down from 5.9% in March, while in London the forecast has dropped from 9.3% to 4.6%.

In the currencies markets the New Zealand dollar is at US84.85 cents, A91.09c, and the Trade Weighted Index (TWI) is at 79.59.

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Berkshire Hathaway shares traded over $200,000 each !

Indeed, fixed now. Cheers.

The EU is having big problems with the Russian ban on  agriculture imports from there , it'scausing havoc and pushing prices down.  Some are expecting significant drops at the next Global Dairy Auction.
 
Western European dairy markets were dealt a blow this past week, when Russia
blocked EU dairy exports from coming into the country.  In 2013 Russia
 accounted for 33% of EU cheese exports, 25% of EU butter exports, and 27% of
 EU AMF exports.  Total EU exports into Russia in 2013 are estimated to equal
 1.5% of EU's milk production.  The full ramifications of the dairy export
 blockade on the EU markets have yet to be realized.  The most immediate
 effect has been lower fluid milk prices on the spot market.  European Union's
 agricultural commissioner is holding meetings this week and next to determine
 how best to assist EU farmers.  Dairy market trading was light prior to the> Russian sanctions, but has all but halted following the announcement.  Most
 market participants are taking a measured wait and see approach.  Lower dairy
 commodity prices are anticipated by many market participants as, once Russia bound, dairy products attempt to find new buyers.  Milk production is
 declining along the seasonal trend, but above year ago levels.  Weather
 conditions are mostly favorable across most regions of Europe with plentiful feed and forage supplies.  According to ZMB estimates, June milk deliveries
 in the EU were 4.3% higher than a year ago.

Overnight the USDA's fortnightly International dairy market reports don't provide any comfort:
 
Europe: Lower dairy commodity prices are anticipated by many market participants as, once Russia bound, dairy products attempt to find new buyers.
 
Western European SMP price is down USD 525.00 per tonne from two weeks ago (now 3,000).
 
Oceania WMP is down USD 375.00 per tonne (now 2,625).
 
Prices being quoted are now below those of the last gDT auction.

Colin, that looks like a %10 + drop coming in next weeks  GDT auction. Sounds like the wool industry all over again.

I certainly can't see any reason to expect a rebound in prices at the next auction.
 
Note to Gareth: The USDA dairy data is usually included in David's 90 at 9.

However Guy Attenborough , from the Agriculture and Horticulture Development Board, said it won't be all export sectors that will be hit by the move.
He said: "The Russia import ban will overall have very limited direct UK impact for our sectors.
"However with butter and cheese and some horticultural produce there will need to be a degree of market realignment required as Russia seeks alternative sources of supply and mainland EU seeks alternative export markets.
"In the dairy sector this is likely to add to the current downward price pressure in the short term.

Read more at http://www.westerndailypress.co.uk/Russia-bans-food-imports-West/story-2...

A Spanish major dairy companies responsible Francisco Rodriguez recently told the media that Russia introduced restrictions , and other overseas markets shrink, the entire field will lead Spain “real panic .” He stressed that he did not want to mention the topic of panic , but this is the reality of the evaluation of the situation . Also Rodriguez also worried Brussels will not make any plans to address this issue .

 

http://www.enews163.com/2014/08/11/russian-anti-sanctions-or-cause-panic...

A new corporate Dairy farmer:
http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&allinfo=&asxCode=app
http://www.asx.com.au/asxpdf/20140801/pdf/42r7c3pr7t5bq3.pdf
we got up to the bit where the 34% shareholder gets 2% of the gross asset value of the trust assets and 15% of the year 1 rent of any lease taken or re-newed by the trust to the framing company...
Spot who the workers are.

A commentor on that artcile sums it up well. remember the EU is the worls biggest economy.
 

John Goodrich

1 hour ago

 

 

 
The continued discussion about sovereign interest rates is a canard.  The carry trade generated by the U.S. Fed's discount window combined with the Greenspan Put provides hedge funds with 0.25% interest to speculate world wide.
QE has nothing to do with this process.  As Janet Yellen said, we will taper bond buying but we will keep interest rates low for an extended period. The two are not linked.
The reason there are no bond vigilantes is that the central banks are making credit at near 0% interest available to the bankers world wide.  Interest rates can thus be completely suppressed, with the unenviable result that savings are destroyed and the middle class cannot provide for its retirement, first time home buyer's downpayments, to start a business, or do anything else which was once the wellspring of Western economies.
We have returned to the government and the financial elites destroying the economics of the public for their own benefit.  The whole thing would be laughable if not so tragic, and particularly tragic as academia and the media has no idea what's occurring.
 

 

I think this guy... John goodrich...  is onto it ....    
Tragic and scary....   
 

Meanwhile the RBNZ hikes interest rates 4 times and keeps the hiking rhetoric going. Meanwhile the world plunges into deflation, ZIRP and war.