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US house sale volumes fall, prices rise; US, Japan, EU PMIs strong; IMF sees Australia poised for growth; UST 10yr at 2.90%; oil down and gold unchanged; NZ$1 = 73.4 USc; TWI-5 = 74.6

US house sale volumes fall, prices rise; US, Japan, EU PMIs strong; IMF sees Australia poised for growth; UST 10yr at 2.90%; oil down and gold unchanged; NZ$1 = 73.4 USc; TWI-5 = 74.6

Here's our summary of key events over night that affect New Zealand, with news the IMF is largely positive about Australia.

Firstly however in the US, home resales in January experienced their sharpest annual drop in more than three years as low inventories and rising prices and interest rates took a toll. They fell -4.8% from the same month a year ago well below the small gain analysts had been expecting. Median prices were up, however, up a strong +5.8% year-on-year. Inventories of unsold homes are -9.5% lower on the same basis.

The first readings of the US PMIs are out for February and they are quite positive. Their factory PMI is up marginally from a very good position while their services PMI has risen strongly to match the factory one.

Similar PMI reports were released for Japan and the EU. Both showed small reductions in expansion from high levels - in fact both are at levels near to or higher than the US. The broadness of the expansion across the world major developed economies is encouraging.

Markets are awaiting the release of the US Fed minutes and we will update that when they become available. Update: Minutes here and they show that they are increasingly confident on the growth track and more confident on their inflation prospects.

The IMF has released a largely positive Report on Australia. All the usual risks and vulnerabilities get an airing, but overall they see it well placed to grow from here.

In New York, the UST 10 yr yield is marginally lower at 2.90%.

The gold price is unchanged at its lower level of US$1,328.

Oil prices are slightly lower today too, with the US benchmark now just over US$61.50/bbl and the Brent benchmark over US$65/bbl.

The Kiwi dollar is little changed this morning at 73.4 USc. On the cross rates we are up at 93.7 AUc and holding at 59.6 euro cents. That leaves the TWI-5 virtually unchanged at 74.6.

Bitcoin is now at US$10,490, down a massive -9.8% from this time yesterday.

This chart is animated here. For previous users, the animation process has been updated and works better now.

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

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25 Comments

well done to A2 and all the investors that got in early
https://www.nzx.com/instruments/ATM

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Yes, but the performance of ATM/s stock price is not a new revelation.

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Yes but there was a lot of knockers of the science and research behind A2 milk, same crowd that thought Xero was just a simple accounting package that anyone could write...sigh.
Disclosure - I am an early adopter of A2 shares

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But with P/E ratio of 57 I'm just a little sceptical that the share is just a little over priced.

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... if it was a platform company such as Apple is ... selling high priced tech gadgets ... with a super profit margin ( as someone else has to manufacture the goodies ) ... then I could understand the nosebleed valuation placed on this company ...

But ... it's milk powders ... isn't it .... ummmm , yeah ... supremely untech primary produce ...

... so it just goes to show , the Kiwi love affair with whatever is local and in vogue , continues ... until it commits a Fonterribly bad mistake ... or a Feltchering ... and then look out below , this birdie will come crashing down from it's stratospheric perch ...

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The price seems to be largely driven from Australia - that's where most of the trading volume is. There is a point of difference - A2 can sell their infant formula for more than others because of the (somewhat) scientifically proven health benefits compared to other milk, and has patent protection for selling this kind of milk. The beauty is, it doesn't cost much more to produce (the farmer is paid a little more to tempt them into converting), so the margin is much tastier than other milk companies. There is also patent protection on the technology needed to identify pure A2 producing cows.

From the latest report, the gross margin is 49.8%, I'm not sure of your definition of super profit margin is but it's not exactly tight.

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Yes but there was a lot of knockers of the science and research behind A2 milk

Really? Would you like to give some pointed examples? Typically with health science, research is continuous and iterative. As for the word on the street, has there been strong protest against A2 protein products?

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The difference between A2 milk and regular milk is not the A2 protein.. its the A1 protein which A2 doesn't have. Regular milk has A2 protein and A1. The science behind A2 is weak.. small studies, sponsored by A2 milk corp. Jury is definitely still out.

https://theconversation.com/science-or-snake-oil-is-a2-milk-better-for-…

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The difference between A2 milk and regular milk is not the A2 protein.. its the A1 protein which A2 doesn't have. Regular milk has A2 protein and A1. The science behind A2 is weak.. small studies, sponsored by A2 milk corp. Jury is definitely still out

Right, but we do differentiate between "A1" and "A2" and referring to them as such, but I agree that my description is somewhat erroneous. The main point is the association between A1 and Type 1 diabetes.

Re your link, you may want to refer to the following. Within the link, you will be able to see links to research showing "accepted science" about the links between proteins and peptides and the causal link with diabetes.

[The article below was intended to be published some weeks back at The Conversation. The Conversation is the online portal, funded by Universities in Australia, New Zealand and the UK, where academics are encouraged to communicate and converse with non-academics. However, this particular article was blocked at the last minute by the Senior Editor(s) at The Conversation, having previously been approved within their editorial system. The Senior Editor(s) felt that the interests of associated commercial parties, who might benefit from dissemination of the article, were too great. A fuller story of that publishing saga will be posted shortly.
The content, formatting and supporting links are shown as originally agreed with The Conversation and reflect the prior input of one of their editors. This article can be freely republished, with or without this foreword, but retaining the title as posted here, and with acknowledgements as to source [https://keithwoodford.wordpress.com].

https://keithwoodford.wordpress.com/2017/10/31/study-suggests-link-betw…

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Ok,
Looks like a literature review but can anyone point to a peer review of that literature review, or of the referenced work.
Ditto lists of citations maybe.
If not, the jury is out.
I dont mind that because after all we promote the benefits of alcohol when it is nearly a Class A drug.
Thats science for you.

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"The evidence in our paper comes from 71 studies covering population epidemiology, animal trials, in vitro laboratory experiments, biochemistry and pharmacology. Our assessment is that the evidence is highly suggestive that A1 beta-casein is associated with the onset of type 1 diabetes, but proof remains elusive."

And the key sentence about the "accepted science" from the paper published in Nature is the first one in the conclusions section: "The evidence for milk and, particularly A1 β-casein, as a primary dietary trigger for type 1 diabetes is intriguing although causation remains unproven. "

Unproven.... oh well, bugger. As I said, the jury is still out.

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Whatever science says about the effect of A2, that's not your real problem with milk. Once Fonterra get hold of milk anything results, given the bastardisation of what they do to it. They take stuff out of it and put stuff into it long before we see it.
Even if A2 is great, will you be sure that is what you are buying ?

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New Zealand's public sector has been ranked the least corrupt in the world:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119…

A slap in the face with the wet fish of reality for the conspiracy theorists?

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Measuring corruption works in your favor when your own tribal affiliations and value system are behind the metrics.

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I would suggest the source of the value system is less important than whether it accurately measures actual acts of corruption.

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Wonder how they arrive at that measurement - where do they get the data from

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I would suggest the source of the value system is less important than whether it accurately measures actual acts of corruption.

Well you're not measuring rainfall. Value systems are extremely relevant when measuring corruption, as it means different things to different cultures and societies. A prime example would be the relationship between the Big Four and central govts in the Anglosphere. Kiwi Bob is unlikely to see any issue and association with corruption, even though it can be perceived as institutional corruption.

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"Value systems are extremely relevant when measuring corruption"

My point exactly, it is more important than who proposed them.

"even though it can be perceived as institutional corruption"

Perhaps I am less inclined to think truth is a cultural value than you. In fact, I would go so far as to say when societies explain corruption in cultural terms (for example excusing bribery as 'part of our culture') I believe it is more than likely they are conducting a coverup of said corruption and probably to their own gain.

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There is explicit corruption (like paying a govt official cash to get something done) and implicit corruption (such as perks for politicians and "granted" relationships, such as those enjoyed by KPMG, Deloitte, etc). The former is rife in countries like Cambodia and Vietnam and the latter is part and parcel of the Anglosphere.

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New Zealanders becoming a more sickly lot?
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11999171

"..the population had grown at 9.4 per cent but emergency department attendances had increased 18.8 per cent"

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... there is a connection ... the growth of the population , thanks to the Gnats flooding our ranks with low skilled folks seeking " an education " ( ha ha ha ! ) , has led to a ramping up of demand for housing ...

Hence the rapid escalation of demand at hospital emergency services after these immigrants and local citizens face the concomitant massive hike in rental prices and house values ...

... head off to any property auction around Orc Land ... they're dragging the unconscious out on stretchers ... and the less sturdy of heart , in body bags ...

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But in the days most bizarre news China has decided to crack down on the practice of hiring funeral strippers to increase attendance at funerals ..

http://www.abc.net.au/news/2018-02-21/china-cracks-down-on-rural-funera…

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Crikey I need to add that clause to my will...

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Wonderful world we have isn't it.

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