Here's our summary of key events overnight that affect New Zealand.
US stocks have plunged on concerns of a strengthening dollar, Turkey’s currency crisis and global trade tensions. The S&P 500 is down 0.69%, Dow 0.48% and Nasdaq 1.16%.
The Turkish lira gained overnight, with Turkey’s banking regulator publishing new rules to support the currency. These include limiting offshore access to Turkish liquidity by imposing stricter leverage ratios on swap transactions to stop foreigners shorting the lira (as explained by ANZ economists).
The regulator has also made it easier for lenders to be more flexible with Turkish companies struggling to repay debt. According to Bloomberg, Turkish companies have US$217 billion of foreign-currency debt outstanding.
Qatar has also announced it will invest US$15 billion in Turkey to help avert a financial crisis.
Meanwhile the Turkish President’s diplomatic feud with Donald Trump has intensified, with Turkey announcing it will impose a new spate of tariffs on US goods, in retaliation to US sanctions.
Turning to data now, US retail sales rose more than expected in July as households spent more on cars and clothing. Sales increased by 0.5% month-on-month, and 6.4% year-on-year. With unemployment low and the effects of tax cuts being felt, consumer confidence is elevated.
Turning to the US’s industrial production, the Federal Reserve’s latest data isn’t quite as upbeat. Industrial production edged up 0.1% in July after rising at an average pace of 0.5% over the previous five months. The rate of manufacturing production growth also slowed to 0.3%.
The annual inflation rate in the UK has picked up for the first time since November, in line with expectations. The Consumer Price Index (CPI) was up 2.5% in July, an uplift from 2.4% in the three months prior. Higher prices were largely driven by higher transport costs. The Bank of England expects inflation to settle to just above its 2% target in two years' as it gradually increases interest rates. Yet ANZ economists say that with underlying inflation near target and Brexit uncertainty lingering, the Bank doesn’t need to take action anytime soon.
House price growth in the UK has slowed off the back of prices falling in London. Average prices grew by 3% in the year to June, a slowdown from 3.5% in May. London prices fell by 0.7% year-on-year - the most dramatic rate in nine years. Nonetheless, month-on-month, average prices across the UK have been tracking up since March, having hovered at a similar level during the seven months prior.
The UST 10yr is down 4bps to 2.86%.
Gold has fallen to US$1,177/oz.
US crude oil is lower at US$65/bbl, while the Brent benchmark is at US$71/bbl.
The Kiwi dollar is slightly weaker at 65.7 USc, 90.7 AUc and 57.9 euro cents. The TWI-5 is down to 69.9.
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27 Comments
"There is a world of difference in the world in August 2018 when compared with even March 2018. In between, there is a whole lot more obvious risk – again. Those parts of the globe that were especially upset during the last “rising dollar” are again being destabilized by the current “rising dollar”, the one (via EUR) that’s on the other side of HKD’s fall.
Thus, it can hardly be said that the reverse of panic flows is still happening. If any of that was in any way true, HKD would be rising along with the US$, not as part of the eurodollar squeeze but as a renewed safety consequence of it.
Instead, HKD is dropping, and by falling I mean a possible breach. Several trading screens show it at 7.8502, which would be less than what’s allowed by HKMA. This isn’t the first time since April 11 when the currency met the boundary this is happened, though this is the farthest onto the wrong side I’ve seen it go.'
http://www.alhambrapartners.com/2018/08/15/on-which-side-is-hkd/
Interesting. The assumption is that the HKD peg to the USD cannot be broken. However, these currency collapses have a tendency to break whatever pegs they can find, formal or informal. I'm not expecting the HKD peg to break unless the Chinese do it deliberately like the Russian default in 1998. Something somewhere will break dramatically though, these things usually end with drama.
As they say, buy when there is blood in the streets. Speaking of which, where are the Paris riots this year? That's what I was expecting. I mean it's August, it's the 50th year anniversary of 1968, so where are the communist wrecking parties? Has the EU sapped the life out of the Paris mob? It's a poor show so far. Perhaps we have to wait for the 60th anniversary, or even the 120th, like 1848 to 1968? Sweden, at least, seems to having a small warm up car burning party though:
https://www.youtube.com/watch?v=iOGe02pjE-g
Just 100 cars it seems, I'm sure they can do better than that.
Brash on Key's legacy:
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12107737
Rating - zero out of ten!
It never ceases to amaze me that we get all these 'market forces' advocates, solemnly advocating the wisdom of the invisible hand.
Versus something as big and inertia-ridden as the real activity behind the Dow, increasing or decreasing daily by anything big enough to be a measurable percentage.
What that tells us is that it's not a valid measure - as indeed neither is GDP.
Yet multiple times daily, outlets as staid as National Radio dutifully report the Dow with bated breath. As if it means something other than that greed can turn to panic. How about just a 'G' vs 'P' graphs? And only bother showing long-term trends of the Dow itself? That would eliminate the lemming-squeaks.
I was looking for an excuse to post a link, this will do. The planets ability to underwrite human activity, and the associated financial system, is surely tied to the environment? When the total of all wild animals is now only 3% of the total biomass of mammals, and still falling, we are seriously out of kilter.
Go to the 9:27 mark for the relevant part of the TED talk. https://www.youtube.com/watch?v=7eUVD74ozQU&feature=youtu.be
Unfortunately his mission is deluded.
Trying to piss against the human population wave.
Everyone will do what they must for their 2000 calories a day. There is no morally superior position of going out saving a dolphin here and holding a crim to account here. Everyone including Pete is in the machine.
The only way out is human population collapse. And nature will see to that.
If that sounds harsh - notice how he mentions human biomass ... and then doesnt mention human population again in his whole talk.... He almost identifys the root cause, then avoids it.
One thing you will note from the talk is that Pete has let go of the money tokens. As least in that regard he isn't part of the problem.
TED are pretty strong about sticking to the theme. They ask their speakers to pick a single idea. He in part lets people off the hook, but he is saying there is some things more important than the money tokens.
He states frequently that the singe root cause of every single environmental problem he encounters is overpopulation.
Personally I see energy as more important, but he is an oil drilling engineer and did his MBA thesis on biofuel so is qualified to comment on the subject.. Who knows, maybe environmental collapse will precede peak oil. I don't think they are events that will be too far apart.
to a point he has - but obviously his missions "to make the world a slightly better place" rely on tokens (& BAU supply chains) courtesy of advertising / TV revenue so its a moot point what it is actually achieving... awareness is worthless in itself... the machine grinds on
Imagine if he was giving a TED talk about how he had come back from significantly removing a chunk of the "demand" problem that he dances around .... (eg) by wiping LA off the map
Do you think he would still receive a standing ovation? .
And after all that hassle ... the LA population would soon reappear somewhere...
Basically our debt system relies on future energy being available ... so at some point debt will fall over. But you can be sure we will push the environment to maximum before this happens.
I will repeat something he said this past weekend.
Everybody works for someone ( to get their tokens). It may be a boss, or it may be for clients, but somebody pays you, and everybody else. Animals, however, don't have any tokens with which to pay you.
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He also talks big about carbon footprints, so don't be too hasty to judge the man on what is really an entertainment event. He doesn't own a car, which is where most people fall down in this country. How about you ham n eggs? Are you still driving?
I dont doubt his motives come from á reasonable place but they are still misguided.
Because there is an inherent problem with the concept of "chasing the baddies" to protect wildlife (& telling the goodies? about it) ... WE ARE ALL the baddies. If you have debt, if you consume, if you have a footprint ... you are inherently part of the problem! Leverage on resources.
At the base of it, until you define the problem accurately you are not addressing anything.
https://medium.com/@End_of_More/an-infinity-of-futility-5fb525fc610c
Me - I choose to plant trees.
It is all the tragedy of the commons at work. We are at this point because yes, we are well into overshoot. But do you sit back an do nothing about it? In my view anything that intervenes in the tragedy is better than nothing. In most instances the issue is a redistribution of wealth from areas still with resources to those that have already raped and pillaged their own. That permits BAU at the destination. We let our wealth be taken via a crooked financial system, but ultimately it is the transfer of real goods, real resources, rather than the transfer of tokens, that matters.
News about the foreign buyer bill passing is conspicuous by it's absence on the NZ Herald website. Apart from a brief article last night, there's nothing featuring this morning. So unless you visited the website between say 7-10pm last night you wouldn't have seen it. There are heaps of click bait articles about "upsizing" and "smaller properties make more money" ra ra ra.
This is probably the biggest change to the property market since the LVR's were introduced.......and clearly they know it :)
Thanks for the great coverage interest.co.nz team.
Foreign Buyer Ban
Yep.. STUFF buried their coverage of the Foreign Buyer Ban as well. It was there at 19.58 last night but by the morning had disappeared into the ether, with the 'comments section' quickly closed. I know that we're not allowed to talk about conspiracy theories and vested interests controlling the media but it does appear to me that the only place to get unbiased news in New Zealand is Interest.co.nz . It's as if the mainstream think that the populous can't be trusted with the truth.
It has however made the front page of the BBC website. https://www.bbc.com/news
Turkey will be fine, Erdoğan is working with the man who has made more Millionaires than Tony Robbins, see link below.
http://www.thezimbabwean.co/2015/11/mugabe-struggles-to-walk-short-dist…
An imagined Fly-on-the-wall conversation: The PM and the FM.
PM: Granters, I've just come back from talking to those Teachers. Can't we shake that Money Tree you have, and give them a few raises? I mean, who's gonna edumicate little Neve if the teachers cannot afford houses in Auckland? And I'm sure as heck not gonna Buy in Wellers....
FM: Jace, Jace, Jace. I'm none too sure it was a brilliant move to munge your schedule and go talk to them in the first place. Neve, teaching, you've been reading those Signs, haven't you. You know a good chunk of them were painted by Children at Art period - I've already had Ian LG chewing my ear about Child Labour. And as for schoolkids being paraded about the streets with signs - I know it is supported by a few Parents but the optics - oh, dear, it really does seem like Child Abuse...You of all people have gotta parrot the Party Line - we cannot fix Nine Long Years of Neglect in a single term oops I mean year. And I've just had to spend a quarter of a billion on more freakin' Trees, to keep He Who Must Not Be Named away from our throats (golly, that man makes me Quake).
PM: But Granty-poo, if there's that much in kitty that we can shell out scads of it out to Vol - I mean, you know who - then everyone in the queue - Teachers, Tertiary, Police, Defence, and I'm told MBIE and IRD although I must confess not to have noticed - they went Out too, or something? - where was I, oh yes, everyone in the queue, which seems to be growing daily, can See the dosh getting spread around and I sense that they are getting that FOMO thing - they are worried that the cupboard might be bare soon, and so they wanna get in Now, and with Big Percentages. Oh, Grant, what are we gonna do?
FM: Well, we have got the Cullen Tax Grab - I mean, the TWG - working away in the background, and perhaps we could advance the pace a little there. Don't let this get outside the room, but the TWG is basically a Rich Prick's Squeeze, and all he, I mean They - haveta do is to get the definition of the RP's down low enough that we'll have a few more tens of billions. Let me have a quiet word. But please, for Financial Prudence' sake, don't keep addressing howling mobs of tax-funded employees. That's what Unions are for....
Talking Turkey: the benefactor is not gonna be Qatar, for a piddling 15 billions whatevs.
It's China.....
Actually, the sad thing about Turkey is its demonstration of how thin on the ground is good leadership.
Ataturk - even during the battle, empathised with the Anzacs, and was magnanimous afterwards. Big picture person. But it all fell over on his death. Same goes with elected Parties - one, maybe two good-un's, then it trails off into mediocrity. Seems to always be the way.
But Turkey is a forward pawn in a bigger game - the question is whether Turkey is big enough to be a domino which topples others.
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