Here's our summary of key events overnight that affect New Zealand, with news we are tenterhooks for this afternoon's RBNZ Monetary Policy decisions.
First up today however is the dairy auction. It was another tame affair with prices rising just +0.4% although that does make it the eleventh rise in a row and an overall gain over than time of +28%. But over the past year, the gain is only just +4%. However, yesterday the local currency slipped to near its lowest level in six months on the back of the RBA rate decision. And that means the dairy price rise was almost +3% since the last auction in New Zealand dollars, and it has been a more than +10% gain in a year. The volume offered and sold in this auction was not high.
US data showed a good rise in job openings in April, slightly more than expected. And consumer credit outstanding expanded to levels +4.9% higher than in March 2018. But consumer credit flows were up only +2.5% in March from the same month a year ago. US consumers are having real issues paying back the obligations they are taking on.
But this is detail. Markets are focused on the deteriorating trade situation much more.
The key Chinese trade negotiator says he will go to Washington for more trade talks on Friday and Saturday, setting up a last-ditch effort to avoid the sharp increase in tariffs on Chinese goods threatened on Twitter recently by President Trump. The US is accusing China of reneging, but more likely it is just the US not getting the outcome it wants through negotiation.
Equity markets aren't expecting any success however, with Wall Street slumping a grim -2.4% in trading so far today. In Europe large falls were also suffered in overnight trade. EU cuts to growth forecasts didn't help.
In Tokyo yesterday they were down -1.5% but Hong Kong and Shanghai recorded a +0.7% bounce following even sharper falls at the start of the week.
Slumping international trade growth is seen directly in international airfreight data out for March overnight. This data was essentially unchanged from the same month a year ago but is actually in reverse for Asia/Pacific international trade, being down -3.8% in a year.
In a bit of an historical release, the OECD reports that growth in real household income per capita, which provides a better picture of changes in households’ economic well-being than the equivalent GDP measure, picked up to +0.5% in the OECD in the fourth quarter of 2018, compared with +0.1% in the third quarter of 2018.
In Canada, their central bank is calling on banks to offer longer terms in their mortgage options. Like New Zealand, the currently longest option is about 5 years.
Malaysia cut its policy rate yesterday, for the first time in almost three years. The rate went down by -25 bps to 3.0%.
In Australia yesterday, their central bank did not cut interest rates as many had expected. Essentially they set a jobs test; if their unemployment rate keeps going down, there will be no change if inflation stays low, (as expected). But that could change if the "strong" current jobs situation reverses. It is telling that their eye is off inflation for now, for what drives their policy decisions. Analysts in New Zealand should also take note.
Stay tuned for today's RBNZ rate review at 2pm today. We will have a livestream of the press conference by Governor Orr. Remember, this decision is the first under their new committee structure where some of the voting members are outsiders. Markets are now expecting a -25 bps cut; but recall, markets expected a cut in Australia yesterday too, something that didn't happen.
The UST 10yr yield is now at 2.45%, and that is -5 bps lower in trading today so far. Their 2-10 curve is little-changed at +17 bps but their negative 1-5 curve is wider at -12 bps. The Aussie Govt 10yr is at 1.76% which unchanged since this time yesterday, the China Govt 10yr is at 3.36% and -2 bps lower, while the NZ Govt 10 yr is at 1.89% and unchanged overnight, after the RBA decision and before the RBNZ decision.
Gold is up +US$4 at US$1,285/oz.
US oil prices are down sharply today by more than -US$1, to just over US$61/bbl while the Brent benchmark is just over US$69.50/bbl.
The Kiwi dollar will start today a softer at 65.9 USc. On the cross rates we lower at 94.2 AUc. Against the euro we are at 59 euro cents. That puts the TWI-5 down at 70.7.
Bitcoin is +3% higher from this time yesterday at US$5,884. This rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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30 Comments
Trump sees negotiation as a competitive sport. He picks his fights, choosing to "negotiate" where his opponent can be put under time pressure to offer concessions. He doesn't care too much about the outcome, but waits to see what his opponents put on the table. When they eventually offer up something valuable at a fire sale price he will take it. Everyone takes his tweets far too seriously, they are just designed to work his opponents, getting their hopes up, and then dashing them down; again, and again, and again.
'Trade war' is only one of the many fronts that the US uses to contain China.
According to the party's think tank, trade war is the preferred form of any war because there would be no human life sacrificed. The party has prepared plans for a failed trade negotiation, and plans for the ongoing US containment from all fronts for the next decade or two.
To be able to compete with China in the next decade or two, the US should actually stop bombing other countries in the name of democracy, rebuild her own infrastructure, open up immigration to continue attract the brightest minds, improve race relationship, and any internal problems first.
The US was a great country....
Glad we have a commentator who has insights to that most opaque of bodies: the Chinese Communist Party.
I am fairly cofident the US will do just as he asks in the next decade or two. However when will China open up immigration to continue attract the brightest minds, improve race relationships in Tibet and Xinjiang provinces? Now or after the USA has spent two decades solving internal problems?
This explains Trump's problem.
Not a bad decade. "The National Institute for Economic and Social Research points out that with only a few months to go, world economic growth in the 2010s has averaged 3.8 per cent, only a smidgeon below its average of 3.9 per cent in the roaring 2000s. Growth in the 2010s has been better than the average in the 1980s, 3.2 per cent, and in the 1990s, 3.1 per cent."
https://www.thetimes.co.uk/edition/business/it-may-not-have-felt-like-i…
An organism can't live in its own shit. That exponential growth you worship is just measuring the rate at which the shit accumulates.
https://www.theautomaticearth.com/2019/05/renewables-are-dead/
Thanks to PDK for the link yesterday.
Yep, the bleeding obvious about renewable virtue signals. Growth is good. Without it life would still be nasty, brutish and short.
Just go nuclear if you're worried about waste. Bill Gates is working on a plan to clean it up. "If all the nuclear waste from U.S. power plants were put on a football field, it would stack up just 50 feet high. In comparison to the waste produced by every other kind of electricity production, that quantity is close to zero."
https://www.forbes.com/sites/michaelshellenberger/2018/06/19/stop-letti…
The Gustave Courbet painting in your link is rather apt for the doomster set.
Bill Gates is working on a plan to clean it up
What you are really saying is you like your shit disappearing before you see it. You are hoping a smart person will find a way to get rid of your shit so that it never accumulates in sufficient quantity for you to see it. ie: You see the wrong problem, can't solve the problem, but you are certain that the problem I can be solved by someone smarter than you. That is the typical stupid person fallacious reasoning. The people smarter than you are trying to get you to understand a problem that you clearly can't, that hiding your cumulative shit doesn't get rid of it.
Thanks for the lecture. "TerraPower envisions the use of natural uranium, depleted uranium, or uranium obtained from radioactive waste as fuel. Not only is there little residual waste associated with the reactor, it would not be subject to loss-of-coolant accidents. Another major advantage is that TerraPower’s reactor could in principle run for 50 years without a need to be opened for the addition of fresh fuel or the removal of radioactive waste."
https://blogs.scientificamerican.com/observations/bill-gates-in-search-…
https://www.businessinsider.com.au/bill-gates-terrapower-molten-salt-nu…
That was a silly comment - left yourself wide open.
If what we are doing is threatening the existence of our species, then 'doers' are the problem. The fact that he's one of the richest, leads us to presume that he's one of the biggest problem individuals. Of course he wants the system he's a 'winner' in, to keep going. Of course he engages in conscience-salving 'charity'.
We need to be beyond that nonsense by now.
"Charity" and "nonsense". I can only feel pity for you. The guy is spending millions on malaria vaccines that help the world's poorest and investing in low cost energy generation. I guess lower child mortality and cheap energy is an anathema to a Maltusian hand wringer.
So if we follow your logic we can label one of the greatest minds of the 20th century, in Erwin Schrödinger, as a Malthusian.
Who is right, Erwin Schrödinger or Profile? Who is the one with school yard rhetoric? Schrödinger or Profile? Be interesting to do an IQ comparison.
Cheers Scarfie, but we need to sure that renewables are what we will end up on, all else being draw-down.
And we have to go there using the oil - and an intact global trading system - before both of those leave us.
So we are already late doing renewables. It's just that our modern 'economy' can't be supported by them. But then, neither can it be supported by anything else. Like the Titanic, it's a goner. Renewables are the lifeboat.
More info on trade slump due to trade war, the BBC graphics help to put things in to perspective on the impact it's having on China.
BBC article: World markets slump amid US-China trade tensions
https://www.bbc.com/news/business-48190178
Doomsday analysts predicted US CPI to go through the roof and annihilate everything after Trump introduced the first few rounds of tariffs on Chinese imports into the country. Their stance on new tariffs appear to be softening. The scaremongering from advocates of globalisation appears to losing its effect on people.
New York Times, over a span of 10 months, went from predicting absolute mayhem for the US economy due to Trump's tariffs to dialing down their tone. Now they seem to be on the defensive by posting analyses headlined - The boost from trade in the first quarter looks like a blip and Tariff revenues aren’t stimulating economic activity.
No election considerations for Mr Orr to think about, so what will he do with the assistance of his merry band of men. The data is weaker, but not that bad yet - albeit data is always behind the curve. Pre-empt the fall in the dollar now or keep the powder dry for the big event?
I’m going to go with ‘Hold’
If I was a risk taking businessman and the cost of borrowing was dropping from say 20% to 15% I might well start the foundations of a new factory and start training more workers. When money is so cheap if I can't see opportunities then a small adjustent down would make no difference to my inactivity.
But I'm not a businessman - are there any other better informed commentators willing to announce investment plans based on a cut today?
Being as how it is nearly Gubmint Budget time again, time to revisit them Assumptions from last year to see how they fared:
TWI - 72.36, Treasury BEFU assumption 'The trade-weighted exchange rate is assumed to remain broadly stable around 75 over the forecast period'
Actual performance - it hasn't touched 75 all year.
WTI - 61.40 Treasury BEFU assumption 'West Texas Intermediate (WTI) oil prices fall from US$62.9 per barrel in the March 2018 quarter to US$60.0 by mid-2018 and remain stable thereafter'
Actual performance - it has moved around a lot but if the Bloomberg 1Y graph widget is selected and areas either side of a line eyed up, that line would sit around 62-63.
In both instances, Treasury's estimates were too optimistic IMHO.
T'will be Interesting to survey this year's assumptions, especially those concerning not only the Externals noted above, but the Internals re labour, productivity, and interest rates.
'Decade in the Red: Trump Tax Figures Show Over $1 Billion in Business Losses' https://www.nytimes.com/interactive/2019/05/07/us/politics/donald-trump-taxes.html
It's not his business acumen is the problem at this stage Gareth. It's the fact that enough are becoming disenfranchised, to put wild-card non-establishment people in such places. And to vote Brexit.
And the numbers of disenfranchised will only rise from here on - more people more angsty, faster. Whether they're just repressed like the Palestinians, or whether they fight back like ISIS, is an interesting question. I think they'll get angry at target 'others', and go to war over what's left. Whether the leader of one party is financially astute is as irrelevant as whether another such, was/was not a mediocre artist.
I thought he was a true blue capitalistic winer.., not a red sales in the sunset...kind of guy. ......and that is why America voted for him to make him and them grate again......for a spell.....
But what do we know.....when the troooff is hidden from view, plus any fool will believe the embellishment of all he purveys...usually to twits, via twitter..........
ie...totally unbelievable....hence why he hides behind a Presidency....(Almost untouchable...sad but true).
synonyms for purvey: sell, supply, provide, furnish, cater, retail, deal in, trade, carry, handle, stock, offer, auction, have for sale, put on the market, peddle, hawk, tout, traffic in; More
spread or promote (an idea, view, etc.)......
Oh sorry that should have been purvy
https://www.definition-of.com/purvy
purvy - Or: pervy , slang term for the anus. See anus for synonyms....(I do believe crap is in there somewhere...but what do I know?)...American Spelling is so different to English........ha ha, bludy ha....
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