Here's our summary of key economic events overnight that affect New Zealand, with news of more evidence inflation is sticky and that rate cut prospects are fading.
The American PCE inflation index came in at 2.7% for the year to March, back to levels they last had in November. It has now risen, modest as it might seem to us, for the past three months. Their 'core' rate has held at 2.8%. The financial market takeaway is that American inflation is uncomfortably sticky and that the Federal Reserve is right to be cautious about signaling a cut in its benchmark policy rates. (Again, it seems the Fed has called this correctly, and market analysts got ahead of themselves.)
The same data shows American consumers spending normally with personal consumption spending +2.7% higher than a year ago while disposable personal incomes were only up +1.4%.
Although the final April University of Michigan sentiment survey results slipped slightly from the initial release, they essentially maintained the optimism gains that started in January and this index is still +21% higher than year ago levels.
Separately, the USDA is noting that one in five samples it took in a national milk survey showed the presence of the H5N1 bird-flu virus. That is indicating the infection in American dairy herds is much more widespread than previously assumed. But they also said there is no cause for alarm. "To date, the retail milk studies have shown no results that would change our assessment that the commercial milk supply is safe", they said. That is mainly because it is now clear that pasteurisation kills the virus in milk. American dairy farmers however might be noticing a dip in milk output from infected cows.
The Bank of Japan kept its policy unchanged on Friday, as expectations mount for central bank action to deter further selling of the embattled yen. It will guide overnight call rates between 0 and 0.1% with market actions, a new policy target adopted after the negative rate policy was ended on March 19. But the yen has continued to fall, primarily against the USD but even against the NZD. At today's 93.8 Yen to the NZD, that is now it's 'lowest' since May 1986, thirty-eight years ago. Against the USD, the yen has sunk to 158 to the USD, its 'lowest' since March 1986. Markets are betting that Tokyo is going to have to intervene very soon. While Japanese exports are suddenly much more competitive, a depreciation like this (-15% in the past year) could bring an inflationary shock with it.
And it is not only the Japanese who have a currency problem. The recent volatility of the yuan, depressed profits and unexpected shifts in external demand are combining to make some Chinese exporters less sure about their business prospects – and more likely to park their assets in anything but the yuan. The yuan's value has recovered somewhat since October but exports haven't, and business holders of the CNY are sensing a potential official depreciation is imminent.
Markets are also sensing a new official rate cut is imminent in China, and Chinese government 10 year bond yields dropped sharply today.
And staying in China, there are reports that property market sentiment is improving, and that has property-based equities rising sharply on the Hong Kong stock exchange - but oddly, not yet on the Shanghai exchange. One to watch.
And in a new stimulatory action, China is offering trade-in subsidies for new car buyers. ICE car owners can get a ¥10,000 subsidy (NZ$2325) to buy a new NEV, or they can get ¥7000 (NZ$1625) for a new ICE car with engines of 2 liters and smaller. The world's largest car market is about to get larger and have its profitability problems 'solved'.
In Australia there is headline talk that the "market bets the RBA will raise rates by August". The only problem is that this isn't actually what market pricing shows. A few outlier analysts are making the "raise by August" noise, but actual pricing shows no such thing. It shows no pricing of a rate hike (or cut) in 2024 and a partial pricing in of a -25 bps rate cut in mid 2025. But the headlines look interesting anyway.
The copper price rose another net +1.7% for the week, but that was enough to take it higher than its 2011 peak (remember spate of the copper thefts at that time?), but it still hasn't quite topped its all-time high in February 2022 although it is now close.
And a new food item is rising in price fast, olive oil. In Europe it is up +50% in a year. Production is being stunted by changes in climate in the regions that traditionally generate the main volumes. Expect other regions to step up plantings and production (and that might include New Zealand).
The UST 10yr yield is now at 4.67% and down -3 bps from this time yesterday, but up +4 bps for the week. The key 2-10 yield curve inversion is now at -32 bps. And their 1-5 curve inversion is marginally deeper at -52 bps. Their 3 mth-10yr curve inversion is now at -71 bps and also deeper. The Australian 10 year bond yield is now at 4.54% and down -3 bps. The China 10 year bond rate has taken a dramatic dive down to 2.21%, down a very unusual -7 bps. The NZ Government 10 year bond rate is now at 5.08% and up a sharp +10 bps from yesterday. A week ago it was at 4.92% so a net rise of +16 bps.
Wall Street is higher today with the S&P500 up +1.0% taking the weekly gain to +2.3%. Overnight European markets all rose. bookmarked by Frankfurt's +1.4% rise and London's trailing +0.7% gain.. Yesterday, Tokyo ended its Friday session up +0.8% for a weekly rise of +1.9%. Hong Kong ended up +2.1% for a spectacular weekly jump of +7.6%. And Shanghai rose +1.2% for no gain for the week. Singapore ended down -0.2% on the day. The ASX200 ended its Friday session down a sharp -1.4% for a modest weekly gain of +0.2%. The NZX50 fell -1.2% on Friday to limit the weekly gain to +0.4%.
The Fear & Greed index is still in the "fear" range as it was last week.
The price of gold will start today a little firmer, up +US$7 from this time yesterday at US$2340/oz. A week ago this price was US$2394/oz, so it has dropped -US$54 over the past seven days.
Oil prices are little-changed from yesterday at just under US$83.50/bbl in the US while the international Brent price is now just on US$88/bbl. A week ago these prices were US$82.50/bbl and US$86.50/bbl, so about +$1.50 up since then.
The Kiwi dollar starts today unchanged at just under 59.5 USc. For the week it has risen +½c. Against the Aussie we are softer at 91 AUc. Against the euro we are a little firmer at 55.6 euro cents. That all means our TWI-5 starts today just under 69.2 and also little-changed from yesterday but up +40 bps for the week.
The bitcoin price starts today at US$64,034 and down -1.1% from this time yesterday and for the whole week, down a ne of only -0.4%. Volatility over the past 24 hours has remained modest at just on +/- 1.5%.
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37 Comments
The American PCE inflation index came in at 2.7% for the year to March, back to levels they last had in November. It has now risen, modest as it might seem to us, for the past three months
3-month annualized change in core PCE inflation curling up strongly +4.4% in March…… Supercore inflation also curling up Link
And all this amid the fourth straight month of government handouts...
US Quarterly Refunding Announcement on Monday.
In a week everyone will be talking about Yellen and the Quarterly Refunding Announcement (QRA). Here is all you need to know so you are prepared. Thread. 1/ Link
Net zero rammed down our throats before the basics are sorted out. Climate change denying scientists at MIT unsettle the settled science.
"Evaporation is all around us, and humans have been observing it and making use of it for as long as we have existed.
And yet, it turns out, we've been missing a major part of the picture all along.
In a series of painstakingly precise experiments, a team of researchers at MIT has demonstrated that heat isn't alone in causing water to evaporate. Light, striking the water's surface where air and water meet, can break water molecules away and float them into the air, causing evaporation in the absence of any source of heat.
The astonishing new discovery could have a wide range of significant implications. It could help explain mysterious measurements over the years of how sunlight affects clouds, and therefore affect calculations of the effects of climate change on cloud cover and precipitation. It could also lead to new ways of designing industrial processes such as solar-powered desalination or drying of materials."
https://phys.org/news/2024-04-vaporize.html
"When contemporary models are given information about Earth's present condition — the size, shape and topography of the continents; the composition of the atmosphere; the amount of sunlight striking the globe — they create artificial climates that mathematically resemble the real one: their temperatures and winds are accurate to within about 5%, but their clouds and rainfall are only accurate to within about 25-35%. Such models can also accurately forecast the temperatures and winds of the weather many days ahead when given information about current conditions.
Unfortunately, such a margin of error is much too large for making a reliable forecast about climate changes, such as the global warming will result from increasing abundances of greenhouse gases in the atmosphere. A doubling in atmospheric carbon dioxide (CO2), predicted to take place in the next 50 to 100 years, is expected to change the radiation balance at the surface by only about 2 percent. Yet according to current climate models, such a small change could raise global mean surface temperatures by between 2-5°C (4-9°F), with potentially dramatic consequences. If a 2 percent change is that important, then a climate model to be useful must be accurate to something like 0.25%. Thus today's models must be improved by about a hundredfold in accuracy, a very challenging task. To develop a much better understanding of clouds, radiation and precipitation, as well as many other climate processes, we need much better observations."
"In a series of painstakingly precise experiments...."
Doesn't that statement put the consequences of this new found knowledge into perspective?
As an aside, I love the way you've joined to articles together based on the word "cloud" and implied the first article's discovery automatically explains why all climate models must be rubbish based upon an observation in the second. Awesome work, but totally lacking in scientific rigour.
""In a series of painstakingly precise experiments...." Doesn't that statement put the consequences of this new found knowledge into perspective?"
No, think the other sentences put it in to perspective - for example: "The astonishing new discovery could have a wide range of significant implications. It could help explain mysterious measurements over the years of how sunlight affects clouds, and therefore affect calculations of the effects of climate change on cloud cover and precipitation. It could also lead to new ways of designing industrial processes such as solar-powered desalination or drying of materials."
What would have chrisofnofame preferred? A series of hasty, sloppy experiments?
To back up you reckon you would need to demonstrate evaporation, clouds, climate models and net zero are not linked. Good luck with that.
"Predicting how much Earth’s climate will warm is vital to helping humankind prepare for the future. That in turn requires tackling a prime source of uncertainty in forecasting global warming: clouds."
They influence the structure of the atmosphere, impacting everything from temperature and humidity to atmospheric circulations.
Every time we manage to better understand one of the pieces, we decrease the uncertainty of the whole problem,’ said Bony, who coordinated the EU-funded EUREC4A project that ended last year.
And in turn the climate influences where and what types of clouds form, according to Bony, a lead author of the Nobel Peace Prize-winning assessment report in 2007 by the United Nations Intergovernmental Panel on Climate Change.
https://projects.research-and-innovation.ec.europa.eu/en/horizon-magazi…
It was always going to be an early winter for some people. Many people out there have had low interest rates for years that could have been used to pay down their existing debt but a few chose to spend like drunken sailors and buy peak priced property. Those that made the right decisions are going to coast through, higher rates are even better for those with investments.
Welcome to the present, and future, of this once great country:
https://www.nzherald.co.nz/nz/injured-man-gives-up-waiting-for-help-aft…
Wellington homeowner who paid $4000 in rates last year will be getting a $11,035 annual bill within the decade, Wellington City Council figures show
Mind you, all this will only ensure the city can stand still on basic amenities and not for some state-of-the-art infrastructure.
The stupidity is that our political classes believe low-skilled workers brought in droves from 3rd world nations will help maintain 1st world quality of life in NZ.
Another source of stupidity is some of the NIMBY locals insisting that there not be allowed more people on the same land. Sprawl means higher cost of shared infrastructure pet person, and higher maintenance costs.
They'll shoot themselves in the foot then demand others pay for the healthcare.
You're right. Wealth inequality is going to skyrocket in the years to come.
The previous govt effectively invited a massive underclass of low-skilled migrants into the country, most with up to 5 years of work visas. This means these 200k+ migrants will all be eligible for public healthcare but not to buy a house.
"state of the art infrastructure"...
https://www.thepost.co.nz/nz-news/350254777/wellingtons-12m-bus-stops-c…
Other peoples money...
The kids are not alright...
“Free speech vs hate speech: Victoria University postpones debate after student backlash”
https://www.rnz.co.nz/news/national/515322/free-speech-vs-hate-speech-v…
Jonathan Ayling FSU
“If students are not resilient enough or mature enough to be able to deal in ideas – even those that they find uncomfortable – then maybe they shouldn’t be at university.”
I couldn’t agree more
Some people are not interest in debate or truth or facts they just want notoriety, should we facilitate it?
An alternative take:
https://www.theguardian.com/commentisfree/2024/apr/24/everyone-laughed-…
Not even twenty years separating the right wing cancelling of the Dixie Chicks for free speech, and the attempted Trumpist insurrection followed by passing of over a hundred state laws aimed at reducing the ability of black people to vote.
With the rise in anti-intellectualism against "experts and their models" and against "mainstream media" and state ministries, we have some interesting rhymes with history.
Another US bank bites the dust (nothing to do with crypto either)
At today's 93.8 Yen to the NZD, that is now it's 'lowest' since May 1986, thirty-eight years ago. Against the USD, the yen has sunk to 158 to the USD, its 'lowest' since March 1986.
Gold price in respective currencies (NZD gold price for 86 not easily accessible but estimate reasonably conservative):
P1Y P5Y P10Y Since 1986
JPY: +40% +162% +180% +549%
NZD: +17% +102% +162% Approx +680% (could be higher)
Why does NZ keep supporting Pacific corruption in these cargo cult islands?
https://www.rnz.co.nz/international/pacific-news/515348/removal-of-kiri…
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