Here's our summary of key events overnight that affect New Zealand, with news the world's economies seem to be separating between those in trouble (emerging markets) and those doing well. Fortunately, the signals are that New Zealand is in the latter group.
Firstly, Wall Street has ended the week on a positive note, and the NZX's Friday gains were similar. But Asian equity markets booked big losses at the end of the week and some of them were quite substantial. Hong Kong was down -1.8% on Friday, Shanghai was down -1.4%. Jakarta was down -1.9%. Even Tokyo was down -0.6%., and the ASX was down as well.
In Canada, their May employment data showed a surprise loss of jobs. But wages rose at an unexpectedly quick pace, up overall +3.9% year-on-year. Within that, female wages rose +4.1%. Wages for non-unionised employees were up +4.5%. These are impressive gains.
And Canadian housing starts surprisingly fell in May compared with the previous month as multi-unit urban starts declined, principally because multi-unit housing starts in Toronto slumped.
China’s trade surplus shrank sharply in May on strong imports. The overall monthly surplus was down to +US$24.9 bln and well below the +US$32.6 bln analysts were expecting. But the gap with the US widened, representing 98% of the total monthly surplus. Advance shipments to the US ahead of possible new tariffs may be behind the unusual data.
And analysts are expecting a record wave of bond defaults in China as their the government’s national financial deleveraging campaign squeezes companies that have weak funding bases. But they seem confident the situation won't result in international contagion.
In India, officials are getting very bullish about their economic prospects. A key minister there is saying India could grow at an +8% rate in the next year or two, taking the size of their economy up to US$5 tln by 2025. It is already the world's fifth largest economy with GDP at US$2.8 tln. Fast growth could make it economically larger than Germany soon.
Argentina and the IMF have agreed on a three year deal to lend it US$50 bln to help it deal with its currency and reform crisis. They say they will draw on the first tranche of the loan, but the rest is just for emergencies. Part of the deal requires the country to reduce its fiscal deficit to zero by 2020. This deal gives President Macri the cover to make some tough choices to rein in crippling inflation and bloated public spending.
Yesterday, the Turkish central bank raised its policy interest rate yet again, and sharply to 17.75%. Today we can report that the Turkish lira is still falling quickly, bank equities are taking a hammering. The issue is that they have an election in October and markets don't believe the country will address its issues properly after its strongman president engineers another dodgy win. He has no international credibility so any formal policy actions taken by the bureaucracy are undermined.
And this is the weekend Switzerland votes on its 'sovereign money' referendum. We should know the result on Tuesday, NZT. A recent poll by their public broadcaster suggests it will be defeated.
The UST 10yr yield is holding at 2.95% and up +1 bp in New York today. The Chinese 10yr is at 3.69% (unchanged) while the New Zealand equivalent is now at 3.02% and that is up +15 bps overnight according to our records. That is a very big move indeed and we will need to confirm it, so hold fire for that.
The VIX is back into a normal range at 12.2, lower than this time last week. The average index level over the past year is 12. The Fear & Greed index is moving over to the 'greed;' side of the index, the first time we have seen that in more than a year.
Gold markets have closed in New York up just +US$1 at US$1,298/oz in New York.
Oil prices are again down today and the US price is now at US$65.50 which is where it was at this time last week. The Brent benchmark is now just under US$76.50/bbl also similar to this time last week. The US rig count has inched higher again. Apparently it would be higher, but there are real problems getting sufficient labour now in the major US oil producing basins.
And this is an important milestone.
The Kiwi dollar is ending the week up at 70.4 USc. On the cross rates we are higher too at 92.6 AUc and at 59.8 euro cents. That puts the TWI-5 at 73.1 and approaching a seven week high.
Bitcoin is now at US$7,648 and little changed from where we left it last night.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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36 Comments
Well done NZ for hanging in there with those that have done well. Surely we can credit previous governments, Labour and National for achieving this.
But, whew, this present lot could send us all to South America status. Don't you think? Less than three years to go hopefully.
We still have a situation where a meltdown in house prices could create a major depression in NZ. And although overseas buyers may be an important driver of our current housing ponzi. You property speculators have most certainly been another. It surprises me that your ilk still has the audacity to post here. Hang your heads in shame.
Oh god, here’s the other loony
Why are you posting? Why aren’t you out walking the streets looking at property porn and fumbling in your pockets? Don’t get caught. #sadpropertypornaddict
So worried.....here’s a link for some help to cure your addiction
http://www.intimacycounseling.co.nz
I think it will really help you get over your property porn issues:
“Is your pornography use out of control? Is pornography ruining your ability to have relationships? Viewing pornography can become compulsive and develop into an addiction. People suffering from pornography addiction spend increasing amounts of time watching pornography. This can lead to numerous negative consequences such as an inability to have a relationship with a real person, relationship problems, increasingly dangerous behaviours, legal charges, and adverse effects on finances and occupations. Take back control of your life and contact us today for a free 15 minute consultation.”
Well, I can understand why DGZ isn’t into rough property, it’s not everyone’s cup of tea. It’s a lot more effort and rough property can be really untidy and messy...don’t get me started! He’s more into blue chip property, something classy but restrained, bigger the better, lots of room to play, a little bit al fresco is nice (who doesn’t like the feel of a nice lawn), maybe a multiple occupancy kinda thing. And that’s fine, I get that
OMG, DGZ this is you, right!? Please know you are not alone with your addiction, we are all here to help.....take care
http://www.dailymail.co.uk/femail/article-3338540/Why-m-hooked-snooping…
Haha, nice troll. The single biggest threat we face is the fall out from the unwinding of this ridiculous credit and real estate bubble. Govts since the early 2000s have acquiesced in this bubble, such bubbles apparently being a “nice problem to have”. I don’t think any govt would rationally want to be in the position we are now, but they played with fire and are now worried whether the house will burn down. We are now at the mercy of events. It was ironic that both key and English are now knighted, we have had our own “Fred Goodwin” moment. The best this govt can do is attempt an orderly deflation of this bubble. But if the debt house of cards does collapse the blame lies squarely with the political cowards who stood by while it got bigger and bigger and refused to even acknowledge it’s existence.
I thought it was more of a tie with Helen Clarke and Michael Cullen. I think nationwide that the Labour pair managed 100% nationwide and the National pair only 63%, but clearly National should have known better. Clarke and Cullen still think they were very clever. Sigh. We expect too much from politicians and bureaucrats, far more than they are capable of delivering.
I thought it was more of a tie with Helen Clarke and Michael Cullen. I think nationwide that the Labour pair managed 100% nationwide and the National pair only 63%, but clearly National should have known better. Clarke and Cullen still think they were very clever. Sigh. We expect too much from politicians and bureaucrats, far more than they are capable of delivering.
Agree entirely. The extent to which the hoi polloi denigrate / praise political parties is part of the whole problem. Both Labour and National are addicted to bubble economics and the inevitable shot it gives to the economy in terms of consumer spending.
Pray tell how will the current government make New Zealand a banana republic (if we aren't already - but don't know it.). Unless the current government start borrowing heavily and start splashing out on grandiose schemes I can't see much changing. Or are you implying that the previous governments weren't as astute and prudent as you would like us to believe and that in reality we're just one external crisis away from complete collapse.
Which is it.....
( even David seems a bit confused - "with news the world's economies seem to be separating between those in trouble (emerging markets) and those doing well. Fortunately, the signals are that New Zealand is in the latter group." )
Ignorance is bliss for some. The creators of the GDP measure said it should NOT be used as a primary measure of a countries success - until you get that through your head Zachary Smith you're living in economic la-la-land.
China's GDP may be in decline but their domestic economy is booming and continues to left millions into the middle class. NZ's GDP looks like it's hanging in there, by only through the lens on neo-lib measures. The FIRE economy (Finance, Insurance and Real Estate) is what drives our unproductive GDP growth.
So yeah, NZ is a feudal system, therefore benefiting rent seekers - grinding everybody else down. The domestic economy is pretty down-trodden - by 'domestic economy' I mean the Real Economy. The cracks have been around for a long time, now they're opening up - 'mind the gap'.
Our housing may currently suck but here, something that sucks is very good news.
https://www.bbc.com/news/science-environment-44396781
Re the carbon capture technology, there's a lot of discussion on HN: https://news.ycombinator.com/item?id=17260500
Labour shortage in Texas sounds fun, $100,000+ for driving trucks. They are paying double or triple police and teacher pay to get people. Nothing like mining for high paying jobs in the regions. Of course we prefer kiwis to have nice minimum wage jobs cleaning, making beds and serving coffee, none of that nasty dirty mining here, thank you very much.
https://www.zerohedge.com/news/2018-06-08/its-crazy-texas-roiled-unprec…
Driving a big rig in Texas ain't a lot of fun though. Boring as hell outside of the high adrenalin jousting on interstates and freeways near big city areas like Houston, Austin and Dallas. Meanwhile the Texas refineries and oil infrastructure keeps right on multiplying while tin pot NZ sabotages any hope of energy self sufficiency. All for the sake of self righteous posturing and political expediency. The world laughs at our naivety.
The globe's been running on bullshit for some now. We can be inventive and we can be lucky (to live in NZ for example) but bullshit is bullshit at the end of the day. We on the white horses have had our day. Too liberal for our own good sadly. Those on the red horses are gathering and most of them have got nothing to lose. There will be blood. There is already bad blood. It will get ugly, and the last thing on your minds then will not be house prices.
Why do you think they have nothing to lose? Why haven't they been able to fill .. even just one barn with treasure? How did "those on the red horses" get so dispossessed?
If you're a rent seeker enriching yourself through tax avoidance and capital gains, you're blessed to be in NZ - that's one way to look at it. If your an employer and can't be bothered training, so you import workers and pay them poorly, NZ might be working for you. NZ has become a feudal system, not sure how that is a blessing for most people.
If you listen to Nomi Prins, if you can just listen to the eight minutes from 32.00 mins in, the last eight minutes , i would recommend the whole thing but the last eight minutes is a good start.
http://www.crusoeresearch.com/quick-take/nomi-prins-wall-street-and-cen…
Then take look at Brazil
http://www.alhambrapartners.com/2018/06/08/charts-of-the-week-they-just…
Danielle DiMartino Booth
go to 28 mins
https://goldsilver.com/blog/danielle-dimartino-booth-is-a-regime-shift-…
automobile loan delinquencies are the highest they have ever been, while the USA is technically in expansion?
FHA delinquency %10, trying to borrow our way to prosperity.
There is no growth and once central banks admit that, we need to know the exit plan from our 'Spineless politicians'.
Riots in Trafalgar square, could it be linked to the fact that wages relative to cost of living are the lowest in four decades while the country lets in over 500k immigrants a year? one in ten people in the UK were not born there.
https://metro.co.uk/2018/06/09/tommy-robinson-supporters-hurl-missiles-…
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