NZD jumps on third consecutive good dairy auction; US services growth slows; global airfreight growth rises; Aussie car loan defaults rise; UST 10yr yield at 1.54%; oil stable and gold up; NZ$1 = 74.2 US¢, TWI-5 = 77.1

NZD jumps on third consecutive good dairy auction; US services growth slows; global airfreight growth rises; Aussie car loan defaults rise; UST 10yr yield at 1.54%; oil stable and gold up; NZ$1 = 74.2 US¢, TWI-5 = 77.1

Here's my summary of the key events overnight that affect New Zealand, with news the NZ dollar is sharply higher.

Today's dairy auction brought higher prices, the third substantial gain in a row. Prices are up +7.7% in US dollar terms but up only +5.75% in New Zealand dollar terms. That is because the Kiwi dollar rose strongly on the news, up to 74.2 USc and its highest level in sixteen months.

There were good gains in price for most commodities - butter, cheese, skim milk powder - but WMP lagged at this auction, up only +3.7%.

Still, the cumulative impact is growing and overall, prices are back to levels we last saw briefly in March 2015, but were sustained in July 2014. Since March this year, prices have risen +43% in US dollar terms although only +27% in NZ dollar terms. Our currency tends to rise in concert with these dairy auction prices.

In the US, the closely watched ISM survey of services slipped sharply to its lowest level in more than six years. The only problem is that this survey is known to be a poor predicter of growth. The earlier Markit survey is more telling. But markets do react to the ISM version. The bottom line is that consumers are confident, their jobs market is solid, but business investment is the weaker point.

It is a similar story in Europe. Growth is up +1.8% pa, but it is low business investment levels that are restraining these economies.

The latest data out from airlines shows that airfreight volumes rose in July, up +5.0% from the same month a year ago. The strongest growth was in Europe and the Middle East, the weakest in Africa and Latin America. North America and Asia/Pacific grew in the high +4% range.

The Aussies left their benchmark interest rate unchanged at 1.5% late yesterday in their monthly review. It was Governor Glen Stevens swansong after ten years in the role. When he started, their benchmark rate was 6% and got as high as 7.25%, but it has been the standard slide since then.

And staying in Australia, Fitch is reporting that car loan losses are at a six year high - and that is only because their tracking started in 2010. The levels are not overly high, but they are rising quite quickly.

In New York markets are open again after their long weekend and trading shows the UST 10yr yield down sharply to 1.54% today. Equities however are up.

The oil price is pretty much unchanged today with the US benchmark price now just under US$45 a barrel, while the Brent benchmark just over US$47 a barrel. The recent brave talk of an output freeze agreement between Russia and Saudi Arabia, with Iranian backing, seems to have been a mirage.

The gold price however is much higher, up more than US$20 to just over US$1,347/oz.

The New Zealand dollar has pushed higher today as well on the good dairy auction result. It’s now at 74.2 US¢, 96.6 AU¢ and 65.9 euro cents. The TWI index is now at 77.1 and that is its highest level since May 2015. Good data next week on the current account and Q2 GDP growth is probably not going to hurt the Kiwi dollar either.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

21 Comments

Comment Filter

Highlight new comments in the last hr(s).

It was the US dollar that moved due to other news. The dairy price didn't have much impact.

like this news, its like a juckie, they will find it near impossible to change from NIRP untill they are forced cold turkey.
for those with assets , property , equities we will continue to get richer those without will continue to get poorer.
and you just need to look to history to see what happens next
http://www.cnbc.com/2016/09/06/negative-rates-will-stay-for-another-five...

What happens next...??? I can't find it in history..??
Curious to know what u think..??

Revolution?

take your pick
https://en.wikipedia.org/wiki/French_Revolution
https://en.wikipedia.org/wiki/Russian_Revolution
https://en.wikipedia.org/wiki/English_Revolution
https://en.wikipedia.org/wiki/Spanish_Revolution_of_1936
me I think we will have a wave of socialist policies passed,
rent controls harsher rules for rental owners, taxing on houses or land, worker rules enacted for the lower paid, I think we will shoot left like never before in NZ history
we already have the top 10% pay for the bottom 37% they will get slammed harder, time to move some more funds offshore

LMAO. No I really did!

The words from the song in Les Miserables, about the French revolution, say it all;

Do you hear the people sing?
singing the song of angry men,

... who will not be slaves again!

Yes lthe lessons of history are well enshrined in our text books, and opera.

"we already have the top 10% pay for the bottom 37% they will get slammed harder"
There is an inevitability about this, you can't have half the population on less than a living wage and expect them to be happy with the status quo. Our median pre tax income is $32,000, significantly below the widely recognised living wage of $40,000 and, of course half our people are below that $32k level. Average income is about $75K so we look to be developing some rather feudal looking disparities. Our current government seem determined to bring the revolution forward with their crazy immigration policies.
BTW
I have been trying to find out how a typical Kiwi school leaver can get the skills and apply for jobs with this broadband roll out. This is the one where we supposedly need all these Indian and Filipino "technicians" .
Chorus weren't very helpful referring me to their so called partners. The only jobs on their websites looked to be rather unusual office/admin/management rolls. Can anyone explain it all to me?

Didn't get any success with finding out about jobs and training from the companies. I posed as a concerned father looking to get his son into telecom work as a trainee or even starting as a labourer. I spoke to folk but no one new anything about it or where to direct me.
Eventually I found vacancies on Trademe but all seemed to be for experienced staff and clearly intended to preclude our young folk. Here is the ad: DUTIES

•Physically install Fibre optic, Category 6e Structured Cable Distribution Systems.
•Performs site surveys. Assesses and documents current site network configuration and user requirements
•Prepares engineering plans for UFB(Ultra-Fast Broadband) Network design and site installation technical design packages.
•Provides coordination in the design, analysis, and installation process.
•Programming ONT(Optical Network Terminal).
•Installing and Configuring Modem/Router.
•Installation of outlets, pulling cable and per-termination including organizing, forming, dressing and labeling cables to industry standards.
•Cabling multi story building through existing routes.
•Installs, maintains/repairs, and tests residential/small business telecommunication service (POTS and DSL).
•Connects wires and cables to terminals, and attaches/detaches various kinds of hardware to wires, cables and buildings.
•Mounting, Installation of BUDI, FTP, ONT and connecting to FAT, Cabinet.
•Terminate, assemble and install 8-pin modular connectors and coaxial connectors in existing or new network system.
•Accurately test copper and fiber (multi mode and single mode) cables to required certification parameters utilizing appropriate test equipment as required
•Diagnose and correct copper and optical fiber problems
•Identify causes of hardware malfunctions and organise repairs or replacements needed
•Respond to enquiries from clients and help them resolve hardware problems
•Responsible for follow up with internal technicians once incidents are resolved to ensure resolution and positive impact on customer satisfaction.
•Assist in developing and maintaining a problem resolution knowledge base.
•Ensure all open incidents are current and updated, and that all parties are aware of the incident status.
•Determine closet and equipment layouts and install closet hardware including backboards, connecting blocks, racks, patch panels and fiber enclosures.
•Fiber optic cabling and Fusion splicing in commercial and domestic properties (FTH project).
•Maintains/repairs and tests Fiber optic and Data cable in an underground, aerial, or buried environment.
•Troubleshoots problems that will require cable repair, cable maintenance, air pressure, splicing, faultfinding, etc.
•Makes splicing rearrangements on existing facilities in buried, underground, aerial and building work locations.
•Advise clients of proper steps to be taken to fix minor problems with equipment
•Explain information system policies as required.
•Analyzes and troubleshoots basic technical problems or issues.
•Reviews and discusses service order requirements and equipment requests with customers, evaluating customers’ telecommunication needs and suggesting additional/alternative service as appropriate.
•Escalate more complex calls to the relevant technical staff or service companies
•Attend training and safety meetings. Work safely at all times utilizing the necessary Personal Protection Equipment. Demonstrate safe working practices to other technicians
•Serve as a liaison between office and field, communicating all information that is not classified as confidential
•Perform administrative tasks including, documenting test results and as- builds, completing safety reports and customer consent form etc.

About you
Technical Qualifications on Electrical/Electronics/IT& Telecommunication will be advantage.
Full Class 1 drivers license (or be ready to sit your full)
Good communication skills
Be comfortable interacting with a wide variety of team members, subcontractors and the general public
Site safe Construction passport
Excellent customer service skills
Be comfortable working at heights and in confined spaces
Ability to travel when required and be willing to work occasional overtime
Have high energy levels and great enthusiasm

This is a great chance to join a team, step up from what you’re currently doing and add value where it matters.

Applicants for this position should have NZ residency or a valid NZ work visa.

The typical kiwi school leaver is shafted by high minumum wage rates (relative to OECD) and red tape fangled youth rates. If you raise the cost of something it lowers demand. Employers are forced to employ experienced staff to remain competitive/survive. It feels good to raise the minimum wage - unless you are a school leaver/unskilled.

No need for a revolution, we can have an evolution at the ballot box. Encourage everyone affected to get out the vote - that should do it.

Action fraction traction satisfaction

Auction....Dairy Auction

The bottom line is that consumers are confident, their jobs market is solid, but business investment is the weaker point.

Hmmmmm....

The Federal Reserve’s Labor Market Conditions Index (LMCI) fell to contraction again in August. After rebounding in July for the first positive reading of 2016, the LMCI dropped to -0.7 in the latest update. As usual, revisions have reshaped the levels of indicated problems throughout the past two years, but overall the trend remains. From this view of the labor market, the economy is surely slowing even if taking two years to suggest by how much.

As I wrote earlier today, I believe that is the natural tension between an economy that “wants” to grow but can’t due to monetary suppression. This is nothing to do with quantitative easing or “stimulus” in broad terms, except that it further shows that no form of central bank policies has had the effect of increasing the money supply to the real economy.

What Friedman actually meant, and what we can observe now, is that low interest rates indicate tight monetary conditions for the real economy. On that score there is no mystery about “tightness” so much that even labor statistics and the seemingly impenetrable services economy are now openly displaying it. You look at the TED spread and see that “something” changed in August last year; you look at the ISM Non-manufacturing PMI and sure enough, same thing. Where eurodollar decay had before cut a great deal off global economic growth (the depression), the “rising dollar” variant of it seems to be that much worse in that it is pushing the real economy into active deceleration and contraction (some places already alarmingly deep). Read more

Stephen ,at 9.00am D.C always does his Bloomberg impersonation. Everything is good, and if it is not we can always make it sound better. Hey ,with central banks setting negative rates , it can only get better, it can , can't it. D.C is a glass half full kind of guy, at 9.00 am he has had a latte and croissant , life is good.

The glass is beyond empty.

As the WSJ reported earlier, German multinational Henkel AG and French drugmaker Sanofi SA are set to pay, pardon collect, a yield of minus 0.05% on new issues of short-dated bonds on Tuesday. The German household products is set to sell €500 million of two-year bonds that yield negative 0.05 percent, while Sanofi will be paid to issue three-year debt. Read more

And amongst all this madness, it is the reason why I am hedged against continued medium term rises in the Auckland(NZ) housing market with open currency positions on NZD/USD reaching 90, as the madness continues for longer than any rational individual will contemplate.

This is crazy crazy stuff Stephen. Never heard of anything so stupid. You get paid to borrow money. Loopy, loopy...cannot carry on forever. Financial system will collapse.

I noted a comment on a US fx site overnight, in regard to Auckland real estate inflating at a faster pace than London and the like. The comment noted, you do not get much for 1 million NZD .

Can you suggest any US fx sites that discuss USD/NZD?

Oanda, , fxcm , TD ameritrade, forex.com.

The headline has a typo error , action instead of Auction