Here's our summary of key events overnight that affect New Zealand, with news the rollback of GFC money printing has now reached Europe.
The ECB has announced it will stop its bond buying by the end of 2018. But it also said it will retain its negative interest rate policy by waiting “at least through the summer of 2019” before raising it from its current -0.4%. That stance is branding the ECB 'dovish' today. Bond rates fell.
Meanwhile in the US, May retail sales have come in far better than markets were expecting, recording their biggest monthly rise since November 2017.
However, the IMF is pointing out the economic boost from last year’s American tax cuts will fade in 2019 and 2020, and their economy will then slow considerably. This report, more than the retail sales jump, is weighing on market sentiment.
Canadian new home prices remained flat for the second month in a row in April as higher interest rates and tougher mortgage regulations, and local restrictions curbed buyer demand. Toronto prices are falling but Vancouver prices are holding and haven't budged all year.
On trade, earlier this year the EU and Canada agreed a deal, but one that is yet to be ratified by all EU members. However, the new Italian government is now threatening to kill it. The key issue seems to be around origin labeling.
And after getting China's essential help forcing North Korea to the nuclear bargaining table, the Americans are about to punish them with new tariffs, which will be announced tomorrow. Tariff retaliation from the EU is also about to be announced.
In China, some key data out of China has come in soft. Retail sales sagged far more than expected. And industrial production data also come in lower than expected.
China's central bank has kept its policy rates unchanged in the face of this softness. In the past they have followed the US Fed, but not thgis time.
On the climate front, an American agency is saying that El Niño is due to return in about six months.
The UST 10yr yield is down to 2.94% following the ECB statement, and probably more importantly, the IMF report. The Chinese 10yr is at 3.68% (down -3 bps) while the New Zealand equivalent is now at 2.99%, down -4 bps.
US crude oil prices are up a little again today and now just under US$67/bbl. The Brent benchmark has gone the other way falling to just over US$76/bbl.
Gold is up +US$7 at US$1,302/oz.
The Kiwi dollar has risen against all the majors today except the greenback. We will start today down at 69.8 USc. But on the cross rates we are firmer at 93.2 AUc, and 60.2 euro cents. That keeps the TWI-5 at 73.2 and still in its very tight June range.
Bitcoin has also risen and is now at US$6.650 which is +5.6% above the price at this time yesterday.
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61 Comments
It is a strange world out there.
In Canada, refugees now receive more benefits and welfare payments per capita from the government, sometimes for very long periods, than a retiree who has spent over 40 years working hard and providing for their family while paying massive chunks into the tax coffer.
The US spends $92 billion (5 percent of the federal budget) on corporate welfare, which is 50% more than their largest public assistance programme, food stamps. These figures do not include corporate welfare provided by state governments. FYI the state of Washington and a few of its local municipals provided $13.9 billion in tax credits and grants to Boeing in 2013. State and local governments have to bend over backwards in the US to keep companies from moving to other states. Look at the Amazon mess!
You end up with populist movements, like EDL and Tommy Robinson, and they are hard to put back once out.
Then you have to ask how UK prisons are %71 Muslim?
http://theduran.com/uk-government-decides-to-make-tommy-robinson-vanish…
The population of a UK prison may be 71% muslim, overall the population is 15%
https://www.huffingtonpost.co.uk/entry/lammy-review-muslim-prisoners_uk…
This behaviour will polarise people
WATCH: Member of European Parliament @Janice4Brexit attempts to raise safety of Tommy Robinson in EuroParl. Labour MEPs shout her down and EuroParl turns her mic off.
https://voiceofeurope.com/2018/06/british-meps-microphone-turned-off-in…
This might polarise people too
https://www.mirror.co.uk/news/politics/no-tommy-robinson-hasnt-been-127…
"We checked the religious breakdown of every prison in the Midlands, because that's our job. We even included Derbyshire, which isn't really the Midlands, for completeness sake.
The prison with the highest Muslim population in the Midlands is Onley, which is nowhere near Leicester. Some 30.4% of Olney prisoners are Muslim.
Second place goes to Lowdham Grange, which is also nowhere near Leicester, and has a 24.3% Muslim population.
In fact, no prison in the country has a 71% Muslim population."
edit: in essence, Tommy Robinson's entourage have made up a story, made up facts, and complained that noone takes them seriously. He has been to prison for violent offences several times before, I'm sure he'll cope this time too.
I don't know much about Tommy Robinson except that he got over 600k signatures on change.org, that a lot of white working class males turned up in Trafalgar and that most newspapers didn't even report it.
The spineless politicians had better wake up because they're not handling this well. They ignored warning of rape gangs operating in the North even after they were repeatedly informed, they now know it involves what could amount to thousands of helpless young girls, this will come to a boiling point unless politicians start dialog with people.
Wages in the Uk relative to cost of living are the lowest for 40 years.
You cannot ignore a problem like this and think it's going to go away.
I agree, it's always difficult to deal with a demagogue. Whether you ignore them or argue against them, they can turn it into a persecution complex. There are certainly some economic problems, most recently inflation picked up and got away from wages because the currency crashed with the Brexit vote, before that it was the GFC and the inflation and job cuts that came with that. Next up, if Brexit goes in a certain direction a lot of well paid jobs associated with the City will shift overseas and cause more pain.
This isn't economic, it's about groups of Pakistani men who deliberately set out to abuse and rape helpless young white girls, by the hundred, absolutely dispicable. Tommy Robinson is seen by what looks like many many people as the man to stand up to the establishment , an establishment that knew this was happening and choose to ignore it.
You want to pick your fights and this is not one to be seen as on the wrong side. Tommy Robinson is clever, they shouldn't underestimate him.
The US has this nasty habit of doing what is best for the American elite. Which is often not good for anyone else. Read Michael Hudson for more detail. Why are we always surprised by this?
http://michael-hudson.com/
Just to be clear, I find his analysis is brilliant and insightful. His recommendations are just too lefty for me. For me, Edmund Burke leads to a civilised society, Marx to bloodshed and suffering.
What I find most shocking was that I didn't know anything about him until I was in my fifties. Yet I had heard of Marx with his reductionist, authoritarian and socially destructive ideas when I was 11.
As the Americans say, the difference between Democrats and Republicans is that, if your car has a flat tire, a Democrat will stop to help, but end up setting your car on fire; wheareas a Republican knows how to fix your tire, but is too busy to stop.
Daniel Lacalle
Long Eurozone Bonds?
Good luck.
"ECB is backstop for bonds of entire Southern Euro Zone. Without ECB continued bond purchases, bonds of Span, Italy, Greece, Portugal will go no bid. Very difficult to unwind QE in Europe while keeping existing system intact at all.
#ECB signals end of QE and there is no evidence of real demand at these yields."
Meanwhile, governments continue to spend as if there is no tomorrow...
... while Eurozone slowdown is evident
"I Would Recommend You Panic" - Peso Pounded, Lira Lashed, & Rand Routed As EM Crashes
https://www.zerohedge.com/news/2018-06-14/i-would-recommend-you-panic-p…
My book of the week
On secret service East of Constantinople, by Peter Hopkirk
https://www.goodreads.com/book/show/1106089.On_Secret_Service_East_of_C…
Recovery?
Rolls-Royce slashes 4,600 jobs in sweeping overhaul
https://www.telegraph.co.uk/business/2018/06/14/rolls-royce-slashes-460…
https://www.bloomberg.com/news/articles/2018-06-05/hp-says-it-may-cut-u…
https://endpts.com/diabetes-giant-novo-said-to-consider-up-to-3000-layo…
"There is no doubt that online and virtual shopping is a key factor in the ongoing transformation. But I don’t believe it can account for the proportions that are being described. In all of 2017, according to CoreSight Research, there were 6,995 store closings announced (an imprecise and heterogeneous measure of distress, but an aggregate one nonetheless). That number surpassed even 2008’s previous record."
http://www.alhambrapartners.com/2018/06/12/a-different-look-behind-the-…
is inflation finally here? will that lead to a slow down in the NZ economy now so much is needed for housing
you can see some tighening the belt to get by
According to Retail NZ's latest Retail Radar survey, 32 per cent of retailers are expecting their prices to increase in the next three months.
"There are cost pressures across the board, it's pretty much everything that is likely to be impacted," Greg Harford, Retail NZ general manager of public affairs, said.
Fuel prices, and therefore freight and transport costs, the increase to minimum wage and rising property prices are expected to push up the cost of goods.
No, David, the US did not get 'China's essential help forcing North Korea to the nuclear bargaining table'. Together China and its client, North Korea, set an elephant trap for Trump to fall into. Xi Jinping took the measure of him in an instant , seeing just how wide and deep a hole needed to be to accommodate the ego of the man. China and North Korea dug the thing accordingly, and, as expected, into it he blundered.
UST 10 year minus 2 year yield spread smashed through 0.4% today. It's currently on 0.38%.
Where's Yvil? That US recession is on track to be right when you expect it :)
Oh and anyone looking for the crash to result from Italy, Indonesia, Turkey, Argentina, and dare I say China?
You can stop. The crash will be triggered by the USA.
Gap between US Treasury 10 and 30 year now down to 11 basis points. Its compelling evidence of whats coming. https://www.bloomberg.com/markets/rates-bonds/government-bonds/us
Now now Jock, there's no reason that they can't all share the title for causing the next crash! There seems to be a long queue of countries and issues threatening to be the first domino to go.
If anyone actually had verifiable data from China, who knows, maybe they are even closer to a recession than the US? We just don't know.
Investors are now about 90 per cent of the agency's market.
https://i.stuff.co.nz/business/104708118/how-a-real-estate-agent-gets-s…
I’m going to read that as 90% speculator. What could go wrong.
"We try to ascertain the motivation from a vendor to sell, without being impertinent and in a correcting market this can prove extremely helpful to the client.
If a client is selling an apartment to buy a house - obviously on the same market - we will suggest the house might appreciate faster than the apartment recovers its value and that moving on might be very much the right thing to do, even if expectations are not being met."
Zach... That's where all the first time buyers are mate... They don't have clue about interest.co.nz.... All they know is TV adverts of how ANZ will help them and the bullfish that Stuff feed them about how bad renting is and that the best thing they can do is buy... (which we all know isn't the case at this point in the cycle)...
So I try and spare them by posting a few comments to counter-balance the specu-vestor rubbish - I've found it interesting though as after a couple of comments that are not pro-property boom someone calls the guys at Stuff and they downgrade the article... I'm not saying that the media is rigged, because that would be against the democracy that we all know and love.. but if you look at most stuff article from the standpoint of the banks or real estate industry it can seem to come across as very myopic and indoctrinating.
There's my reason... That and I have 3 kids who I don't feel obliged to support into the 40's... I was out the door at 18, they aren't that old yet but they've already got in the way of me enjoying my house and exclusivity of the biscuit jar..
Only three out of eight climate models are predicting an En Nino according to,
http://www.bom.gov.au/climate/enso/
China’s Hatches Further Battened.
Worse, so far in 2018, the Chinese are in full withdrawal mode – leaving their economy to whatever fate awaits just over the near horizon. I wrote earlier this week with regard to inflation and the PBOC’s constrained monetary position:
http://www.alhambrapartners.com/2018/06/14/chinas-hatches-further-batte…
Confusedus, he say,
Never trust a man with his fingers in yer pocket, driving you to ruin with his eyes ..fully on the Road.
.A "Silk Road nonetheless", but that is just to entrap you, their simple friends and anyone who simply trusts their final desti-Nation.
(Anyone can buy a Destination, once you have pumped em, dumped and conned em).
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