Dairy prices slip again; Powell positive and on track; US industrial production up; same in Canada; China new home prices rise; UST 10yr at 2.86%; oil stable and gold down; NZ$1 = 67.8 USc; TWI-5 = 71.4

Here's our summary of key events overnight that affect New Zealand, with news markets are watching the real economy, sidelining the crazy political rhetoric.

But first up today there was another dairy auction. That brought prices that were -1.65% lower overall in US dollar terms, down -2.1% in New Zealand dollars. That is now the eighth fall in the last ten auction events and takes prices to -10% lower than they were at this time last year. But it is not all bad; 80% of the product sold was powders, and WMP actually rose in price by +1.5% while SMP rose by +0.8%. It was the fats that took the beating; AMF was down -5.2% from the last auction, butter was down -8.1%, and cheese was down -3.3%. Even though volumes for these weren't large it was enough to push the overall index lower. While this auction by itself won't change any farmgate payout forecast, the relentless small series of declines is adding up and that will be encouraging the sharpening of pencils.

Markets were more influenced by the comments of the US Fed chairman. He said in testimony before Congress he sees the United States on track for years more of steady growth. He reaffirmed that the gradual path for rate hikes is what he favours. But he was challenged by senators worried the Trump administration's trade policies were already damaging businesses in their districts.

Wall Street is up but by less than +0.5%. But yesterday, Hong Kong and Shanghai tumbled, both down about -1%. (Tokyo however saw good gains, up +0.4%.)

In the real economy, Fed data on American industrial production in June came in marginally better than was expected, and better than for May.

Canada also reported industrial production data and that too was better than analysts expected.

In Tokyo, Japan and the EU signed a new FTA, one that eliminates most bilateral tariffs. This is actually a big deal, even though today's event is largely ceremonial.

And for all the threats to trade, we should remind ourselves that airfreight volume growth is high and rising. And the traditional Baltic Dry shipping index is also rising, near its one year high and more than double where it was two years ago.

In China, and for the fourth month in a row, new home prices rose and are rising at an accelerating rate. They are now going up at their fasted pace in nearly two years.

The UST 10yr yield is at 2.86% and unchanged. But the 2 year is firmer, meaning the 2-10 curve has now shrunk below +25 bps. The Chinese 10yr is at 3.50% (down -1 bp overnight) while the New Zealand equivalent is now at 2.91%, up +5 bps.

Gold has been jolted lower by -US$11 and now at just on US$1,228/oz. That's its lowest in more than a year.

US oil prices are unchanged and have stabilised at their new lower level of US$68/bbl. The Brent benchmark is now just on US$72/bbl.

The Kiwi dollar is starting today a little firmer at 67.8 USc. On the cross rates however we are also marginally firmer at 91.8 AUc, and at 58.2 euro cents. That puts the TWI-5 up to 71.4. Yesterday's CPI data and today's dairy price slip are having no impact on our currency at all.

Bitcoin has taken off this morning and is now at US$7,338 which is a gain of US$670 in 24 hours or +10% since this time yesterday. No-one quite knows why. But ideas floated is that the person juts appointed today as the new CEO of Goldman Sachs has been positive about cryptos. And giant asset manager Blackrock has also taken a shine to this asset class. Today's surge has the price back of NZ$10,000 for the first time in more than a month.

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30 Comments

Canary in the coalmine?
"A significant change in the quarter was that impaired asset expenses increased 263 per cent, or $122m. ANZ, BNZ and Westpac reported the biggest increases."

https://www.stuff.co.nz/business/105548320/bank-profit-drop-a-pivot-poin...

...right on que. At this ripe stage of the credit cycle, banks are on a slippery slope from here on. I'd suggest expanding troublesome loan are far more expensive to administer than non.

Wow the spin being used here is spectacular. Debt defaults have become "impaired asset expenses". Because the average stuff.co.nz reader (if they even bother to read financial reports at all) will not recognise the phrase "impaired asset expenses" as debt defaults!!!

"John Kensington, head of banking and finance at KPMG, said profits had been at a good level and it had been expected that there would be an increase in impairment numbers at some point"

In layman's terms KPMG are expecting more debt defaults in the future. Quite the admission.

I suppose this means some debt is going to be repriced? Quite literally, an interesting new form of pressure.

It's not really "spin". Impaired assets has long been the term used and you'd expect someone from KPMG to be using the correct terminology.

So MSM outlets like stuff.co.nz should just reprint press releases verbatim without adding anything at all themselves for the average reader? stuff.co.nz is not a financially specialist news source and does not have a predominately financially literate readership. I think it's perfectly reasonable to expect them to use layman's terms in interpreting the quotes and press releases made by banks and financial institutions.

It's certainly reasonable to expect them to use layman's terms. My only point was that "impaired assets", being the correct terminology, isn't "spin".

mspace, sure, but within the context of my comment, I mention the average stuff.co.nz reader, so I am implicitly stating that by using exclusively "financial/banking community language", the article avoids bringing to the readers attention what is actually being said. Which is that there is an expectation of debt defaults increasing. Had the article mentioned what "impaired assets" meant, or the implication of that, it wouldn't be spin. Omission is every bit as much spin as the purposefully constructed language manipulation.

But what is an 'average stuff.co.nz reader'? Certainly a different average from an 'average interest.co.nz reader'.

Lapun,

You can find some fairly extensive stuff.co.nz demographics data on page 5 of their media kit;

https://static.stuff.co.nz/stuff/advertise-online/Media_Kit.pdf

Obviously, that isn't telling us necessarily how financially savvy their readership is, but if we agree with recent articles on this site (which I personally do) that NZ-ers are not sufficiently financially literate, then I think it's fair to make the assertion that most NZ-ers would not be familiar with all of the terminology used in the stuff article.

Re; Bitcoin, Coinbase (US cryptocurrency exchange) just received regulatory approval from U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to acquire several securities firms, which many are interpreting to mean that some tokens may be deemed as securities (while it expects others to be considered commodities and others currency). This got the cryptos markets pretty excited, so that might also be contributing to the value growth. Coinbase also recently expanded their crypto trading to include bitcoin, bitcoin cash, ethereum, litecoin and now ethereum classic.

Its crazy how some institutions are legitimizing cryptos, which in effect are totally worthless

When it all comes tumbling down only the crims will remain interested in trading them

It's only crazy if you have zero awareness of the history of currency.

Bitcoin bulls are back bois.

I could've sworn there were some mad ranting and raving comments here earlier. Nice moderating, thanks!

Ha-ha-ha-ha :)

I must have missed it. I need a laugh with my mid morning Scone and Earl Grey!

was it my post from MIsh Shadlock? He's a very mild mannered economist from the midwest somewhere. He's been around for years, middle of the road guy, likes his photography, lost his wife a couple of years back.

A bit like Daniel Lacalle, another middle of the road economist, who some on this site don't appear like, or find his views oppose theirs. Perhaps they all believe that some form of Orwellian future is ok as long as they get to be the pigs.

Daniel Lacalle is a PhD in Economy and fund manager. He holds the CIIA financial analyst title, with a post graduate degree in IESE and a master’s degree in economic investigation (UCV).(Wikipedia).

Chief Economist at Tressis SV
Fund Manager at Adriza International Opportunities.
Member of the advisory board of the Rafael del Pino foundation.
Commissioner of the Community of Madrid in London.
President of Instituto Mises Hispano.
Professor at IE business school, IEB and UNED.
Ranked Top 20 most influential economist in the world 2016 (Richto
Mr. Lacalle has presented and given keynote speeches at the most prestigious forums globally including the Federal Reserve in Houston, the Heritage Foundation in Washington, London School of Economics, Funds Society Forum in Miami, World Economic Forum, Forecast Summit in Peru, Mining Show in Dubai, Our Crowd in Jerusalem, Nordea Investor Summit in Oslo, and many others.

Mr Lacalle has more than 24 years of experience in the energy and finance sectors, including experience in North Africa, Latin America and the Middle East. He is currently a fund manager overseeing equities, bonds and commodities. He was voted Top 3 Generalist and Number 1 Pan-European Buyside Individual in Oil & Gas in Thomson Reuters’ Extel Survey in 2011, the leading survey among companies and financial institutions.

Criticism of the press is forbidden apparently. My financial patronage of Interest.co.nz is now under review.

I'm criticising the press in my comments above so it's not forbidden. It must be something else about what was being said that breached commenting T&C's.

No, please Dr Smith, this will be the end of them! Please continue to bankroll them.

Only if you say...pretty please..:(

.....with a Cherry on top

Gingers post was priceless, Zachary's - precious.......

I don't think you would expect anything less from either?

If the deleted post is the one that I think it was... I've decided to defer my patronage here. Went looking for a comment I saw this morning but could not find it.

I was going to become a patron, now I'll wait to see if an even-handed comment review starts occurring here.

There have been some rather outrageous posts that flagrantly violated some of the interest.co.nz posting rules, but were not edited or taken down. Removing a post because of bias, well... I had higher hopes for the people of interest.co.nz.

Trump is reading the tea leaves correctly - Russia has energy to burn and a useful ally; Europe is becoming a deadweight...
https://jancovici.com/en/energy-transition/oil/peak-oil-did-it-already-h...

..might be 'plenty' of oil, but you overlook the the energy cost of energy. All the easy cheap stuff is gone (at 1.7% EcoEs in 1980 heading for 10%+) and rising exponentially.