Here's our summary of key events overnight that affect New Zealand, with news the giant US economy is sagging noticeably.
But first, the overnight dairy auction saw prices fall -1.1% in US dollar terms of a rising greenback, but they were up +3.6% in New Zealand dollar terms. SMP and cheddar cheese prices both rose more than +3% in US dollars, butter was unchanged, but WMP prices slipped -1.5%. Volumes were similar to the previous auction. There is nothing in here that will change the milk payout forecasts. Looking back, prices on this platform have been remarkably stable now for over 18 months.
American factory activity slowed for a second straight month in April although still at a healthy expansionary level, but manufacturers are worried about higher prices as fallout from the Trump administration’s tariffs on steel and aluminium imports.
Those tariffs were delayed by one month for Canada, Mexico and the EU, but no-one else, when they came into effect yesterday. New Zealand and Australia are caught along with everyone else. Even those who gained the reprieve are ticked-off at how all this is being handled.
Higher tariffs are not going to help American carmakers either, or their customers. Those carmakers posted lower new vehicle sales in April as consumer demand continued to weaken and competition intensified. GM no longer releases monthly data but analysts said their results may be down -8%. Ford said its sales were down -4.7%. Fiat/Chrysler had a +5% rise, although the consumer portion was down -1%. Nissan suffered a -28% thump, Toyota a -4.7% drop and Honda a -9.2% decline. All manufacture vehicles in the US. American construction spending fell as well. None of these results will aid their manufacturing sector activity, and with steel prices going up sharply, the slowdown might be quite fraught.
Wall Street thinks so; stocks are lower today with the Dow down -0.7% at one point, although a late recovery may be underway. The greenback is rising in a risk-off mood and the wait for tomorrows Fed meeting results.
In Canada, their February economic growth picked up, hitting +3% pa and that was quite a bit higher than analysts were expecting.
China is on its almost-week-long May Day holiday break. It is a time of very heavy internal travel. But that has allowed a major car maker there to release its first quarter results and they were poor.
We are also seeing a slowdown in growth in India.
In Australia, 28% (of 40) surveyed senior executives believe that bribery and corrupt business practices "are common in industry", almost double the proportion holding that view in other developed countries. One particular issue in Australia was booking revenue too early to meet sales targets, where a quarter said they would accept that.
And also in Australia, ANZ is saying the new standards flowing from their Royal Commission into Financial Services will mean that mortgages will be harder to get, more applicants will be treated as 'marginal', and the whole process will take longer. Whether Australian practices swill flow over to New Zealand is uncertain, but it has to be a possibility
The UST 10yr yield is now at 2.97% and up +2 bps. The Chinese 10yr is at 3.65% (unchanged) while the New Zealand equivalent is at 2.82% (down -7 bps).
Gold is at US$1,306/oz in New York. That is down -US$12 today driven by a rising US dollar.
Oil prices however are lower today, down more than -US$1 at just under US$67.50 and the Brent benchmark just over US$73/bbl.
The Kiwi dollar is starting today down at 70.1 USc also on the stronger US dollar. On the cross rates we are marginally stronger at 93.5 AUc and 58.4 euro cents. That puts the TWI-5 on 72.6, which is unchanged from yesterday.
Bitcoin is at US$8,984 and taking a pause from its usual volatility.
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20 Comments
"American factory activity slowed for a second straight month in April although still at a healthy expansionary level, but manufacturers are worried about higher prices as fallout from the Trump administration’s tariffs on steel and aluminium imports."
What they actually mean is
"Interest rates have gone up, and our free money is no longer free, plus we are expected to pay it back. Uh-oh!"
The world is full of anomalies. It may seem like a paradox, but financial markets are particularly eventful places. Something happens, some people notice, and most often it goes…nowhere. It’s all the time and a constant part of analysis, trying to identify and separate what is truly contained.
AJ... I read thru the linked article , and I have to say it does not make much sense to me.
What is he saying..??
Seems to be stating the obvious,.... That we live in a very fragile, interconnected financial system.
For me...increasing mortgagee sales , banks writing off bad debts ..etc... is more meaningful than a few repo failures.
Long term interest rates rising ( UST 10y above 3% ) , will be far more meaningful to me than repo fails.
Is the credit boom over? Borrowing crashes as Britons cut back
https://www.telegraph.co.uk/business/2018/05/01/britons-go-easy-credit-…
Roelof
That Repo market is huge, i mean really huge, 2.2 trillion a day and thats just in the USA. It's what took Lehman bros and Bear sterns down
Musk sure is awesome
You might want to wait till the results are out before crowing. My bet is that they failed again to hit their model 3 production targets, Model S & X sales are slightly down on last quarter, and as usual they burnt a fat stack of cash. Also their cost per model 3 produced is not going to have dropped much, so they aren't getting any closer to profitability yet. But lets wait and see what the numbers say tomorrow.
They are a start up so they are burning cash like a start up. They are also inventing market leading technology which has ever car manufacturer in the world panicking to catch up.
But the point is sales. Other car manufacturers are struggling to get people to buy their cars in a vibrant economy. Tesla can’t supply enough cars to meet demand. Good problem to have.
Having a production process so screwed up that you are 6 months behind the production schedule you told the world (and investors), and having to resort to throwing a third shift of expensive human labour at what was supposed to be a super-duper almost 100% robotic production line, and not being able to make cars at a profit is a good problem to have?
Err, yeah, okay.
Sorry to burst your bubble, but I was keen on buying a Tesla, even reserved a spot in the model 3 queue, but the more I researched the less I liked. Sat in one a few months back and cancelled my reservation the following day. The battery and powertrain tech is good, the rest not so much. Stop drinking the Tesla kool-aid
To be realistic most commentators concentrate on explaining largely what has happened & to a bit lesser degree, what is happening. Consequently and understandably, the future relies on lessons from the past and trends emerging from that and the present. The arrival on the scene of an identity such as Trump rather confounds the integrity of that reliance.
David could you include the Avocado Toast Index in the housing affordability report?
http://www.bbc.com/capital/story/20170530-the-avocado-toast-index-how-m…
Tiwai is going to restart their fourth pot line: https://www.nzas.co.nz/files/2420_2018050191810-1525123090.pdf
I helped build that potline, working down there in 95/96 and was working there through the coldest winter in record. It didn't get above zero for a week! A damp, bleak and windy place, but stunning all the same.
The 4th potline is only a quarter the size of the other three, it was built on an experimental basis as part of a general $600M upgrade to the plant that including better emissions control. Note that report says it will only add 9% to production, not a third as you would expect. However it would always remain an option to complete the 4th potline.
The electricity generation of Manapouri is almost entirely dedicated to Tiwai Point, and many of the construction workers moved on to the tailrace project after TMB starting winding down.
One not so nice story I heard is that the toxic byproducts from smelting are dumped in sealed pits along the coast and covered over, so left for some future generation to sort out. Vulnerable to a Tsumami also. The workers also suffer from what is known as "Potline Asthma", the cause of which was still unknown when I was there. Respiratory protection is now mandatory as a protection. All the protective clothing required actually makes it a very unpleasant job. Scratchy woolen uniform to protect against molten metal spillage in what is a hot environment. Earmuffs, hardhat, safety glasses and respirator mean you wander around in your own little cocoon. There is a high level of magnetism, you don't take your wallet in and your steel caps are attracted to the 96,000Amps pulsing beneath your feet. Repair work on a pot means you are down in a pit with a live cell working beside you at 700°C. Workers have to do half their days on night shift. They pay better than anyone else in town, but it comes at a price.
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