Here's our summary of key events overnight that affect New Zealand, with news the New Zealand dollar is now at a three year low.
The overnight dairy auction brought lower prices again, this time down by -0.7% and the fourth consecutive decline. Prices in USD are now down -18% since March, and down -10% since this time last year. But the exchange rate has fallen as well, so in New Zealand dollars, todays prices are actually up +1.5% from the previous auction. The dominant WMP product was down -2.2% in US dollars, but five of the other seven products actually achieved higher USD prices. Despite that, today's event will do nothing to reverse the downward trend in farmgate milk payout forecasts.
In the US, manufacturing activity either rose to more than a 14-year high in August in one report, boosted by a surge in new orders, or fell to a nine month low in another survey. But both see future rises and warn of rising supply chain stresses and new import tariffs have yet to bite. In construction, spending was up +5.8% year-on-year. Analysts see rising short-term growth ahead.
American car sales rose about +1% in the year to August, but the SUV market was very strong. This year's rise follows a -2% fall last year. Analysts expect car sales to plateau in the balance of 2018.
Inflation in the OECD area pushed up to +2.9% in July, pressed higher by rising energy costs. Underlying inflation also rose but is running at 2.1%.
Yesterday Chinese shares rose sharply after a subdued morning, amid speculation investors are buying companies seen as oversold. Financial and technology companies led the advance. That resulted in gains of more than +1% in both Shanghai and Hong Kong. But these gains haven't been reflected on Wall Street this morning where prices are lower in afternoon trade. This is despite the news that Amazon has now joined Apple as a US$1 tln listed company.
In Indonesia, their central bank has spent an eye-popping NZ$0.75 bln tln over the past few days defending their currency.
In China, consumer spending is rising at 'normal' levels, but due to restrictions in other areas, consumer borrowing is rising much faster. No one seems to know where that extra spending power is going and authorities are increasingly concerned it is being used to back-door other regulations designed to cool excesses. Propery investment and online investment may be where it is getting channeled. A bit like their peer-2-peer lending debacle, another painful crisis may be in the making.
Ratings agency Moody's says the outlook for the global reinsurance sector over the next 12 to 18 months remains stable on the back of strong balance sheets. They also note that climate change issues are a rising risk for them however.
In Australia, the Federal government is to propose a range of tax cuts for business.
The UST 10yr is up to 2.90% and their 2-10 curve is wider at +24 bps after the US holiday. The Aussie Govt 10yr is at 2.52% (unchanged), the China Govt 10yr is at 3.63% and up +2 bps, while the NZ Govt 10 yr is at 2.54%, down -1 bp.
Gold is down almost -US$10 at US$1,192/oz.
US oil prices are softer today and now just under US$69.50/bbl. The Brent benchmark is now just under US$78/bbl.
The Kiwi dollar is now at 65.5 USc and that is its lowest level since February 2016. On the cross rates we are lower at 91.3 AUc, and softer at 56.6 euro cents. That puts the TWI-5 at 69.5 and that's now a three year low.
Bitcoin is now at US$7,388 and +1.6% higher than this time yesterday. This price is tracked in the exchange rate chart below.
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19 Comments
Multimillion-dollar property values in the nation's glitziest postcodes are falling twice as fast as low-end housing, analysis by investment bank Morgan Stanley shows.
The nation's richest real estate has been sliding at an annual rate of about 8 per cent, compared to 4 per cent for properties in the bottom, or fourth quartile
ouch that gotta hurt
https://www.afr.com/real-estate/home-values-of-nations-richest-falling-…
SINGAPORE (Reuters Breakingviews) - Shanghai’s early success with its new oil market is beginning to threaten the duopoly of Brent and WTI. In four months, the yuan-denominated crude futures contract has built a 7 percent share of global crude turnover. Dealing in a state-managed currency remains an issue for investors, and Western traders have yet to really weigh in. But Beijing is on the way to building a credible benchmark.
https://www.reuters.com/article/us-china-oil-breakingviews/breakingview…
Chris Cook
Successful commodity futures contracts require liquid related forward commodity physical contracts. If Iran/Iraq etc participate in auctions of forward contracts priced vs benchmark then it gets interesting. Needs regional market-makers not scared of p..ing off US though
new name for the next crisis wont be gfc2
Great Liquidity Crisis GLC
https://www.cnbc.com/2018/09/04/jpmorgan-says-next-crisis-will-feature-…
"Therefore, the real insurance isn’t 2% inflation itself, rather it’s the idea that 2% is enough of a buffer for central bankers to recognize the problem, craft solutions to it, and then implement them. As with everything, the central bank is theorized as central. But what if central bankers don’t know there is a problem, or, once reluctantly forced to admit the mistake, aren’t able to adequately respond?
Deflation."
http://www.alhambrapartners.com/2018/09/04/unhappy-labor-day/
"Let this sink in for a second. The ONLY buyer of BTPs is the ECB!
Pray tell, how does Draghi begin tightening... as he's promised?
We believe that dog won't hunt.
Repercussions for the dollar will likely be... ahem... not insignificant.
Staying with Europe for a minute...
Fitch just downgraded Italy's outlook to "negative", and 10-year yields got out of bed.
https://capitalistexploits.at/2018/09/hahaha-that-dog-wont-hunt/
https://ci3.googleusercontent.com/proxy/zn7VRflptbEm1iI8a2E_Yd7wGjU7itq…
Exchange rates.....USA to Mexican...life is what you make it.
I read about a Harvard MBA graduate who went on a weekend vacation to one of the expensive Mexican resorts on the Baja peninsula. At the dock he saw a Mexican fisherman selling Yellowfin Tuna. He asked the fisherman how long it took him to catch those fish. “Only a couple of hours.” The fisherman said. “Why don’t you fish longer to catch more fish?” “This is all the fish I need to sell to support my family.” “What do you do with the rest of your time?” The man asked. “Oh, I’m a busy man, senior. I sleep late, fish awhile, and then I go home and have lunch with my wife, Maria. I take a siesta. Then I play with my children. After dinner I play my guitar with my amigos.” “I could tell you how to make more money. Tuna is a hot commodity now. Just fish longer and you could make enough profit to buy a new, bigger boat. Then you could buy a fleet of boats. Then with your profits you could open your own fishing processing plant to supply LA.” “How long will this take, senior?”
“Oh, probably, 20-30 years” replied the expert. “Then what?” The fisherman asked. “Then you could open your own office in LA and supply other cities. Eventually, you could open other offices. And when you’re going strong, then you announce an IPO and take your company public. You would make millions.” “Then what would I do?” The fisherman asked. “Then, my friend, you’d be set for life. You could retire to a coastal village sleep late, fish a little, have lunch with your wife, take a siesta, and play your guitar with your amigos.”
Go fish.
A very funny story retold well.The sad part is that even knowing the above is true we work in our businesses long hours 5,6 or even 7 days a week under constant financial stress, no time for the wife and little energy for our kids and we wake up one day and the kids are gone and the wife has her own life. And as we drive to work in the latest BMW we call this success.
..you don't have to you know? I have a very pleasant cruise home on my cycle along the Waikato River everyday, rowers rowing, ducks quaking, no cars, quiet as ...and barely a cyclist in site. I just can't understand it when i pop back up to cross the bridge to see kilometers of cars with stressed out looking drivers...going nowhere. WTF is wrong with people??? I don't get it.
I take it you see cycling as something enjoyable, something to aspire to. I just see a bruised bum and a sore back. Or as your name suggests you carry your own sedatives? Coming from Northland and having to live with our piss poor roading - trust me up here you need 4 wheels and decent suspension.
Another article on Indonesia.
https://www.bloomberg.com/news/articles/2018-08-31/why-pain-in-argentin…
That came via gold bug extraordinaire Jim Sinclair, who is claiming June 2019 as D-Day for catastrophe the worlds financial system. He doesn't explain what that date in particular though.
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