Here's my summary of the key events overnight that affect New Zealand, with news of a positive dairy auction today.
This morning's dairy auction has brought overall prices +3.6% higher in US dollars than the last auction. And with the recent softness in the Kiwi dollar, prices are actually +5.2% higher in local currency. All this is driven by stronger WMP prices, which are now up to US$3,233/tonne and that is +7.8% higher than the US$2,998 at the previous auction. Overall prices are now their highest of the year. In fact, prices are +60% higher than this time last year when they were just coming off their lowest in recent memory.
Today's results, which are being reported by others as 'above expectations' were actually accurately signaled by the derivatives market in the past few days. They probably won't change any payout decisions, but at least they are rising, and this is the fourth consecutive increase, taking this run in total to a +10% gain.
Going the other way, the major American carmakers reported sales declines in new vehicle sales for April. It is another clear sign the long boom cycle that lifted the American car industry to record sales last year is losing steam. GM sold -6% less last month in their home market, Ford sold -7.2% less, FiatChryslyer sold -7% less and Toyota sold -4.4% less. Seasonality has something to do with it, but the lower trend is clear.
Also losing is the new President. His efforts to repeal is predecessor's healthcare plan, his effort to get his own in place, and his budget plan all look like they won't be supported by Congress. He is not happy today.
In Europe, Greece and the EU look like they might have a win. Greece has promised to further cut pensions, by -0.9% on average, and lower the tax threshold. That will produce savings worth 2% of GDP. Its creditors (the EU and the IMF) have agreed to make Greece's debt burden sustainable.
And staying in Europe, their jobless rate was reported overnight at 9.5% in March, stubbornly high and not slipping as markets had expected. But at least their factory sector is improving. In fact, that might be understating it; output, new orders and employment all rose at their quickest rates in six years. Even France, Spain and Italy are showing healthy expansions.
Late yesterday, the Reserve Bank of Australia held its policy rate unchanged at 1.50%, and as expected. But its underlying commentary was more positive. It sees the Aussie economy transitioning well in its shift away from mining and resources, although it wants to see higher levels of investment. A push in that direction is likely to come from the upcoming Australian Federal Budget, which promises to target big-ticket infrastructure spending.
In New York, the UST 10yr yield is lower today and now at 2.29%.
Oil prices are sharply lower today, down over -US$1 and now just over US$47.50 for the US benchmark, while the Brent benchmark is now just over US$50 a barrel.
The gold price is also down, slipping -US$3 today to US$1,253/oz.
The New Zealand dollar will open just a little higher at 69.3 USc. On the cross rates the Kiwi dollar is at 92.1 AU¢ and against the euro at 63.4 euro cents. The NZ TWI-5 index is now at 74.
And finally we should note that the bitcoin price is taking off again, racing higher to a new record and actually pushing on up through US$1,400.
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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9 Comments
the good thing (in hindsight ) about the dairy price drop is it refocused farmers on input costs, the farms I am invested in did just that and going forward on this year have a operating profit of 30%. Capital expenditure is budgeted longer term so as to not have to take on debt but instead to fund out of reserves.
I think in the past it (again in hindsight) it was easy to justify taking on more debt and just as easy to obtain it
While I agree the downturn has created a refocus on dairy farm inputs some of these inputs are things like grain and off farm winter feed which are produced locally. Dairy farmers now have us arable farmers conditioned to low prices and there appears to be no sign of any increase on this front for us producers of theses inputs. The wheat mills and small seed producers took advantage of the low prices as well and are now reaping the rewards of the dairy downturn. It might be time to convert more Canterbury arable land to dairy.
The Australian economy has not transitioned away from the resources boom at all. It has been fortunate to have a bounce in commodity prices due to Chinese stimulus over the past year or so and a continued boom in credit growth due to housing investors. It's all unwinding at the moment and will be looking pretty grim by the end of 2017. The next move by the RBA will be a cut.
Two to five million total population James. It's starting to look like the trend this century will be economic nationalism, borders going up, and holding citizenship becoming hugely important.
New Zealand has an impressive asset in it's democratic tradition, quality land and space. We must not give citizenship away for a few baubles.
Trumps little tanty shows how potentially dangerous he could be. Railing against the restraints placed on the executive office are there for good reason. As many commentators stated, his powers are quite limited. It is quite an education to observe that one must not only convince the nation to get elected, then be able to bring along the various houses as well. Convincing the great unwashed AND the educated with their snouts in the trough is a big ask and really does illustrate that no democratic system is simple.
How big is this bank in NZ? "The Bank of Mum and Dad has become the equivalent of the ninth-biggest mortgage lender in the UK, up from 10th place last year, making it bigger than Clydesdale Bank in the mortgage market.
"The intergenerational inequality that creates the demand for BoMaD funding continues to widen – younger people today don’t have the same opportunities that the baby-boomers had, including affordable housing, defined benefit pensions and free university education.
"Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market."
http://www.telegraph.co.uk/business/2017/05/01/bank-mum-dad-now-equival…
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