Here's our summary of key events overnight that affect New Zealand, with news dairy prices are holding.
Today's dairy auction was a bit of a non-event as far as price signals are concerned with the overall index unchanged from the prior auction three weeks ago. WMP prices were marginally firmer, SMP prices were marginally weaker. Butter was down -3.2% while cheese was up +1.3%. At least today's auction brings to an end four consecutive drops. And volumes sold rose. The good news is that prices in NZ dollars are up +0.8%.
American job openings held near record highs in June amid a modest decline in hiring, pointing to further tightening in their labour market conditions, which economists hope will soon spur faster wage growth.
US consumer credit grew much more slowly in June than expected. It moved above US$3.9 tln for the first time, but the undershoot to market expectations was -US$5 bln, and that was -$15 bln lower growth than in the previous period.
In Canada, one of Fonterra's rivals - Saputo, the company that acquired Murray Goulburn in Australia - has reported lower earnings amid rising costs and lower prices in its ingredients business. Fonterra will report its final 2017/18 result in late September.
In Germany, their exports remained flat in June from May, held back by trade war actions, but they were +7.8% higher than the same month a year ago. Their industrial production declined more-than-expected in June from May. Meanwhile, the country's current account surplus grew +17% in June compared with the same month a year ago.
China's foreign currency reserves rose in July. Analysts had expected a small slip so this is a stronger result than expected. Later today we will get China's July trade balance data.
In Japan, they are reporting a rise in incomes, a development that will cheer their central bank. Household incomes were up +4.4% in the year to June, the largest rise since mid 2015. However, they also reported that this did not have any impact in household spending.
In Australia, funding has been approved to establish new intrusive regulatory teams from ASIC that go into banks looking for conflict-of-interest breaches. These new teams would park themselves inside a bank and conduct star-chamber inquiries. Bank executives are likely to be significantly diverted from managing their business - but so far there has been no investor reaction reflected in bank share prices.
The UST 10yr yield is rising and is now at 2.97%. Their 2-10 curve is back up to +30 bps. The Chinese 10yr is at 3.50% (up +3 bps) while the New Zealand equivalent is now just over 2.77%, down another -3 bps.
Gold is up +US$1 in New York and now a just on US$1,209/oz and holding at its eighteen month low.
US oil prices are little changed today and now still just over US$69/bbl. The Brent benchmark is now just over US$73.50/bbl.
The Kiwi dollar is starting today unchanged at 67.3 USc. On the cross rates we are also little changed at 91 AUc, and at 58.1 euro cents. That puts the TWI-5 at 70.9 and its lowest in more than a month.
Bitcoin is now at US$7,089 and up +2.5% from this time yesterday. We track this rate daily in the interactive chart below.
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9 Comments
Still waiting for dairy to turn the corner, maybe around the next one. We can do whatever it takes to hold back deflation, well we think we can.
"I’ve lost track of how many corners Japan has never turned. That’s actually the cruel irony of Japanification. Its lost decade, now three, was never about banks. For a good while in the late 1990’s and early 2000’s, there was intense effort to clean up Japan’s zombie banking system because they were all so sure that was what was holding everything back.
The real problem wasn’t bankers, however, it was central bankers. These are the men who time after time (after time) take any small bit of positive news and turn it into the greatest thing ever that cannot possibly mean anything other than full recovery…only to forget about the thing in very short order once it inevitably leads to the same old nowhere.
This is nothing other than corruption. It’s not the what most people think when confronted with the charge, meaning that these aren’t thieves pilfering Japan’s Treasury. They are worse, in that they have plundered Japan’s economy by never giving in and admitting they have no idea what they are doing."
"The increase in Japanese worker pay, however, comes with the same economic affliction attached. Total hours are again decreasing, meaning simply that Japanese employers are paying workers the same amount to do less. To an Economist, that might suggest an economic pickup, but to anyone who understands how a real economy (small “e”) functions this is not a good thing."
http://www.alhambrapartners.com/2018/08/07/false-japanese-dawns/
What a world.
Deflationary Decade(s)
The result has been a more than decade-long affliction that no one can identify. These molehills of calm are then turned into mountains of recovery that never pan out. Ben Bernanke even titled the 21st Chapter of his revisionist book, False Dawn. How appropriate for August 2008, or August 2010. Perhaps again in August 2018?
Complacency may be rampant again today, but CNY is dropping despite the now open presence of the PBOC to countermand that direction. Risk perceptions are rising, not falling (yield and eurodollar curves). And some key indications are right up against the edge of breaking out; the wrong way. Gold’s threatening to fall back into the $1,100’s, EUR is just about May 29 again, and DXY is already marginally higher.
http://www.alhambrapartners.com/2018/08/06/deflationary-decades/
As you inferred in your first comment above, it is denial. There is too much politics tied up in the economic management of countries and economics. Those at the top are control freaks and are intrinsically incapable of admitting that they are not in control. Too many of them and their advisers are too wed to economic theory that is predicated on some form of ideal that completely and utterly refuses to accept that human nature is fundamentally contrary. The wealthy will always seek to control the world so they can be richer and more powerful. If they are not the politicians then they try to buy the politicians, and the ordinary people just need to be kept in their place. Human history is rife with these examples, and those who would warn against them are sidelined as freaks and fringe. those in power with some ability to do something about it are buried somehow(Elliot Spitzer comes to mind), and worse if they don't stay buried, they are all too often buried for real! The politicians will try to become wealthy, (in countries like NZ, it is very subtle, but happens none the less) and preserve, protect and increase their power.
There is no easy answer, but history also reports on revolutions where the populations have fought back, and most are very bloody!
Daniel Lacalle
The Bank of International Settlements (BIS) has warned again of the collateral damages of extremely loose monetary policy. One of the biggest threats is the rise of “zombie companies.” Since the “recovery” started, zombie firms have increased from 7.5% to 10.5%. In Europe, Bof A estimates that about 9% of the largest companies could be categorized as “walking dead.”
https://mises.org/library/rise-zombie-companies-%E2%80%94-and-why-it-ma…
Hi David, we spoke of this idea in an earlier thread - interestingly, it's been trialed right here in NZ - and the interest in the study seems to be 'going global';
https://www.stuff.co.nz/business/105914576/the-fourday-working-week-bui…
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