Here's our summary of key economic events overnight with news the OECD says we may be heading for a war-induced global slowdown (rather than a war-induced global spending spree). But financial markets have turned risk-on now they know where the US Fed is headed.
But first, last week's initial jobless claims data in the US came in lower than expected at 203,000 and there are now 1.8 mln people on these benefits a multi-generational (52 year) low.
US industrial production data for February came in exactly as expected with a modest rise. But it was held back by mining data. The factory production data was really rather strong, especially for business equipment. Construction data helped too.
Also moving up is the factory survey responses from the Philly Fed's industrial heartland region. It is expanding in March with new orders and production higher, but cost increases became more widespread, they say.
That bullishness was also reflected in their new housing starts data for February, which came in way above expectations. But there was a fall in their new building permits which at first blush seems counterintuitive until you realise it was only slightly off a record high.
Elsewhere there have been a set of central bank rate echoes of yesterday's Fed move. Hong Kong raised their policy rate by +25 bps to 0.75% in direct response to the US Fed move. Taiwan did the same, increasing theirs by +25 bps to 1.375% (and which frankly was a bit of a surprise). Indonesia left theirs unchanged at 3.50%. And the English central bank raised theirs by +25 bps to 0.75%, also mirroring the US Fed change.
The immediate threat of a Russian default on its debt seems to have passed for now. Banks seem to have processed a US$114 mln interest payment over the past day or so. But some large Russian firms don't seem to have been able to make their own payments, even if a handful have.
In Ukraine, China seems to be shifting to support their government, at the expense of Russia. Their ambassador has "praised the strength and unity demonstrated by the Ukrainian people", in an apparent reference to their efforts to resist Russia’s invasion. China's long-avowed respect for sovereignty appears to be resurfacing.
The war in Ukraine could cut global economic growth by more than one percentage point in the next year, the OECD says. It unsurprisingly sees a "deep recession" in Russia ahead. It also warned that the conflict could push up prices globally by about 2.5%.
Container shipping costs fell rather sharply last week as demand seems to be easing in the outbound China trade. There was a -7% fall in rates to Los Angeles, a -5% fall to New York. This is the largest fall we have seen since late 2021. Bulk cargo rate rises seem to have petered out too.
In Australia they added +77,400 jobs in February and their jobless rate fell from 4.2% to 4.0%. (In February 2021 it was 5.9%.) Better, full-time jobs rose +122,000 while part-time jobs fell -45,000. With our borders open, the sucking sound might be louder.
The UST 10yr yield opens today at 2.18% and reversing much of yesterday's Fed-induced initial rise, down -6 bps from this time yesterday. The UST 2-10 rate curve starts today sharply flatter at +23 bps. Their 1-5 curve is steeper however at +92 bps and their 30 day-10yr curve is steeper as well at +199 bps. The Australian ten year bond is up +1 bp at 2.52%. The China Govt ten year bond is unchanged at 2.82%. And the New Zealand Govt ten year is unchanged at just on 3.18%.
Wall Street is up +0.5% on the S&P500 in Thursday afternoon trade. Overnight, European markets were very mixed with Frankfurt lower and London higher to bookend their shifts. Yesterday, Tokyo gained +3.5, but Hong Kong's spectacular recovery continued, gaining another +7.0%. And Shanghai also had a good gain, up +1.4%. The ASX200 rose +1.1% while the NZX50 was also up 1.1%.
The price of gold starts today at US$1944/oz recovering all of yesterday's sharpish fall and up +US$46/oz from this time yesterday.
And oil prices are sharply higher too today, up +US$7/bbl. In the US they are now just under US$101.50/bbl. The international price is just on US$104.50/bbl.
The Kiwi dollar will open today more than +1c firmer, now at just over 68.9 USc as commodity currencies move up again. But against the Australian dollar we are almost -¾c lower at 93.3 AUc. Against the euro we are just over 62 euro cents. That all means our TWI-5 starts today at just under 73.9 and +50 bps higher.
The bitcoin price was up +1.2% from this time yesterday to US$40,794. Volatility over the past 24 hours has been moderate at +/- 2.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
76 Comments
China backs Ukraine(?) Yes & no. More likely China lessening support for Russia. Playing a subtle game. Why not, China is in the box seat. China was already much stronger & larger economically than Russia and now China can be reassured they are now militarily so too. QED.
It may open the Russian people's eyes to his madness, but it's hard to say - fear will keep many down. Putin's been in charge for a long time. A military coup might work, but military coups aren't generally done by civic minded patriots who relinquish power after democratic elections.
There's a saying
You get the leader you deserve.
Which, while it seems harsh, really means most people just want to live their lives as undisturbed as they can with the least amount of risk possible. This means they accept tyrants in exchange for what little pleasure they can wring out of life as opposed to the possibility of freedom and greater pleasure for someone else at the expense of their own.
Sadly there are two large groups in the Russian population - older Soviet-era generation who see nothing wrong with Putin or his actions or what's happening in Ukraine, and younger less educated Russians who have neither the skills nor education to think things through and act. They are governed by a very small elite.
Post the USSR, education levels have dropped (typical Russians would have minimum high school education, and either move on to university or to apprenticeships which ensured a large skilled workforce). Probably explains Russia's performance so far in Ukraine.
Since then, the apprenticeship scheme have been cancelled (much like what happened here in NZ some years ago *alarm bell), education was not a priority, birth rates dropped and death rates increased.
Post the Ukraine war and coming recession, Russians who have any skill, talent and education will flee to the west, and what will that leave Russia?
Yes the Russian culture, the older ones you refer to, have a history of preferring 'strongman' leaders. It's how Putin first came to power. He has then re-written the law to dilute the ability of later generations to remove him.
Makes you wonder how he can be removed from power short of a military coup, and that just might mean they will replace one tyrant with another tyranny.
Is it a preference for strongmen or evolution? If you spoke out against the stongman you were sent to the work camps for elimination, and that was a significant chunk of the population. You learned to emigrate if you wanted it the other way. So I don't believe it's an intrinsic cultural preference for strongmen, rather those that want it the other way have been supressed or eliminated.
Valid point, and Putin is continuing with that, except that many have left and the newer generations who were born post USSR will not know of it so should/will be more ready to question their Government/leaders. The quashing of dissent late will be a flawed process which means many will be missed.
Makes you wonder how he can be removed from power short of a military coup, and that just might mean they will replace one tyrant with another tyranny.
Sadly there doesn't seem to be any strong rival of Putin's who could take him out and end this war. And yeah, we may end up with another tyrant or a worse one, who knows...
I read a military-fiction novel in the style of Tom Clancy (can't remember the name or author) but it was fascinating because in that world, China was the aggressor and Vietnam the invaded.
How America (of course) got the war to end was by hacking into China's telecommunications and displaying satellite footage on Chinese national television and websites of Chinese forces decimated by (western supplied) "Vietnamese" drones and artillery. Showing the Chinese people their fathers, sons and brothers senselessly dying on a battlefield (as opposed to the propaganda claiming victories by the CCP) sparked rebellion and the CCP (or at least the elites who started the war) were overthrown.
Similar methods could be employed for Russia...
"Information war" is certainly a valid approach and would already be happening. I note the news yesterday of a 'deep fake' video of Zelensky surrendering to the Russians. I certainly think that western powers should really work on upping their game when reaching out to the people of aggressive nations, to create change from within. Certainly media has a role to play too.
Not 100% sure but I think the deep fake technology started in Russia years ago.
Started out as a fun Tik-Tok-ish thing but there were concerns already then that it'd give Russians access to data and your face for them to misuse and manipulate. Looks like that may be coming true!
Sorry, Murray, but in this one issue you have a bias one could drive a truck through. Too long in the military?
https://consortiumnews.com/2022/03/15/chris-hedges-waltzing-to-armagedd…
The dominant hegemonic power is ALWAYS the biggest problem. Have a read of Buckminster Fuller; the in-pirates vs the out-pirates: https://www.tekgnostics.com/bucky.HTM
cheers
PDK the first article ignores the Communist goal identified in the 1950's of world domination. I agree that the US was paranoid about Communism and McCarthy's 'red under every bed' was an indicator.
But really here, are you saying that tribalism, in all its forms is the desired state? That inevitably leads to conflict. I don't necessarily agree with those who are anti a unified world Government, and historic attempts towards that tend to favour autocracies run by capitalists, where as I am firmly for a democratic Government where it is accountable to the people, indeed encapsulating Lincoln's Gettysburg address statement of "A government of the people, for the people, and by the the people".
But Putin while waging a physical war is also waging an information war, and both must be won at the same time. Putin may claim victory on the ground but losing the information war would lead to him losing not only control of his country, but be forced into an unending guerrilla war as well as the west perpetually supporting resistance. A free media is vital to functioning democracies and government and one of the west's, and even the US for all it's flaws, strong points is a free media. True there are many forces trying to influence it, but in the end it remains free. I don't advocate the west producing fake news, I advocate the west bombarding the Russian networks with verifiable, factual accounts of what is really happening, as well as developing means to quickly identify manufactured images.
Then again you could say the same thing about the likes of Napoleon (or any other invader) and he's still celebrated 200 years later by the French. Many other examples throughout history.
Its just that we've lived through 75 years of relative stability that we assume one country invading a neighbour is unusual when if you look back far enough, its not really - its actually quite normal.
In Ukraine, China seems to be shifting to support their government, at the expense of Russia. Their ambassador has "praised the strength and unity demonstrated by the Ukrainian people", in an apparent reference to their efforts to resist Russia’s invasion. China's long-avowed respect for sovereignty appears to be resurfacing.
Indeed: Unreasonable, sinister for NATO to push China to condemn Russia
Who are the Global times Audaxes?
The paragraph in your referenced article; "NATO is a puppet of the US, a Cold War military bloc manipulated by the US. The obsolete military organization has launched many ruthless military aggressions and triggered corresponding disasters in which local people underwent great suffering. NATO's aerial bombing campaign against the Federal Republic of Yugoslavia in 1999 during the Kosovo War is one example. " is indicative of a degree of bias. no mention of the genocide and ethnic cleansing that was taking place in Yugoslavia at the time.
The US has being promoting trouble in the Ukraine for years. As a proxy against Russia.
Why? It's nonsense of course but they do it. As they have done around the world for decades at the cost of millions of lives. They usually have two or three agitations / inteventions going on.
They seem to be spending themselves broke maintaining the military outreach. The chinese must smile to themselrs to see it.
Yeah, nah. Biden (edit) shows no interest in reducing European reliance on Russian gas. Everybody knows Russian gas changes the climate differently than US gas. It is all about intermittent energy, green feelz ...and selling weapons.
WASHINGTON, March 10 (Reuters) - White House efforts to boost U.S. liquefied natural gas exports and cut Europe's reliance on Russian gas after the invasion of Ukraine are proceeding slowly, because of concerns about the impact on climate change, government and industry sources said.
Last January, the US informed Israel, Greece and Cyprus that they no longer supported the proposed EastMed natural-gas pipeline from Israel to Europe citing the need to “(allow) for future exports of electricity produced by renewable energy sources, benefiting nations in the region.”
The US has been telling Europe for years that Nord Stream 2 could undermine their energy security. Europe responded that they should find out that on their own. They took the decision and their companies invested billions of euros. The Americans were claiming that this was contrary to the EU’s interests. They offered to sell them their liquefied gas. If there are no gas terminals, they should be built. The Germans told me this a few years ago. It was during President Trump’s administration. Europe was complaining that this would considerably increase gas prices for their consumers. Donald Trump replied that they were rich guys and will compensate the difference from the German budget. That’s their approach.
Today, Europe was shown its place. Germany eventually said that its regulator was taking a break, and this precisely defines the FRG’s place in the arrangements that the Americans are making on the world scene. Link
While it is easy to criticise the US as peddling it's own interests, and here it certainly looks that it is what they are doing, but one has to admit that they were right too. The EU has been wilfully blind to Putin's excess's. They might have argued need, including that of Russia to try to stop it from becoming too aggressive to it's neighbours, but Putin's actions belie any benevolent perspective, and have done for quite some time. Those who tried to point out Putin's character including Mich Romney, and even myself on this blog recently get accused of being 'war mongers'. But in the end how does one contain a tyrant?
Audaxes,
"The West has fallen into extreme insanity, and this is quite sick. This is also a symptom of the growing abnormality of the international community under the coercion of the US and its allies. Stoltenberg's rhetoric sounds like he attempted to label China as Russia's "accomplice."
Yet another link to a 'well balanced' article. Well balanced that is, as in having a chip on both shoulders.
Recently, there was a link to a Canadian 'expert' who asserted with total confidence that the armoured column outside Kiev had not moved for tactical reasons and would unleash its power within days. Where is it now?
Yes I agree - if I were Putin my plan now is to strangle all supply lines and starve the Ukrainians out over the coming months. Just surround the main cities, cut off the ports and other ground support lines and wait.
Rushing in will only destroy the cities, kill civilians and lose excess Russian troops.
Surrounding the cities and waiting while they have no supplies is the best method (if I were running the show).
Nothing the west can do to support that unless they start flying aircraft over Ukraine and dropping supplies...but that isn't going to happen unless we want to provoke WW3.
Yes and we seem to have developed a superiority complex in the west - where everything we do, say and believe, is better than anyone else on the planet.
I can understand why that is quite unappealing to other countries/cultures.
If you look at the history, in my opinion, it makes sense what Putin is doing from his perspective.
Is it right or wrong? Well that just depends upon your value system which has been educated in you (and your version of history and what is good and what is bad).
This was a dumb move, he miscalculated the strategic benefits he would gain, overestimated his own army's abilities, underestimated the Ukrainian resistance to invasion and more importantly the rest of the world's response to his invasion of a sovereign European nation. Hence his increasingly strident and angry lashing outs at the US (his supposed bogeyman) and anyone internally who questions his judgement or worldviews. Doesn't this type of behaviour ring any bells with anyone? It's the death knell of all dictators who are about to face their demise.
More than a few commenters on this blog seem extremely concerned of WW 3 coming and are prepared to blame anyone standing up to Putin as risking it. I posted this comment yesterday in response; "Biden told Putin there would be no military response if he invaded Ukraine. The political equivalent of "go for it!" Sanctions mean nothing to Putin. He clearly thinks he personally will not be affected by them. He must also have a lot of faith in his personal security and his sway over the Russian leadership. Would he have invaded if NATO and the EU told him he would meet the full force of their militaries and that he would personally be hunted down like Sadam was? Moot point really because it didn't happen, but unless he was prepared for an all or nothing war I think not. If he was prepared for an all or nothing war then he must still be."
His sabre (nuke) rattling is taken by many to be bluster, but if he really is prepared to risk an all out, all or nothing war, what are the west's next steps?
Let me see, he surrounded himself with yes-men. Encouraged systematic corruption, and then waged war on a neighbouring country.
Result: He now has a supposedly "Global Superpower" army that is being decimated in front of the world, can't move due to lack of fuel (even though he has oil galore), and an airforce that is barely in the air, all while conducting most offensives against civillians. Then you have the economic sanctions crippling the entire nation (except himself). There is clearly civil unrest starting to develop within Russia, and his only ally has now developed a crazed WTF look and is looking how to back away quietly without being seen.
Putin is supposedly an incredibly intelligent individual, but clearly has terrible judgment. Unless this is all a massive feint as part of a bigger plan, I am going to have to side with the "Dumb" camp.
Totally disagree. I think he's totally dumb.
Where is the smartness in what he's doing?
Putting to one side the awful damage and suffering being inflicted on Ukraine, he is:
- Impoverishing his own people
- Isolating his country
- Getting his countrymen killed
All for what? Some sense of a partial return to the geographic influence and power of the USSR?
That's not smart, it's dumb and deluded.
And any notion that what he's doing will defend Russia from NATO is also dumb and deluded. That NATO is a direct and real threat to Russia is a fantasy concocted in his imagination.
your 'expert' also thinks
- 2014 Russian annexation of Crimea
In 2014, after Russia annexed Crimea and was engaged in a conflict with Ukraine over its eastern parts, Macgregor appeared on Russian state-owned network RT where he called for the annexation of the Donbas and said residents of the region "are in fact Russians, not Ukrainians, and at the same time, you have Ukrainians in the west and in the north, who are not Russians."[19][34]
- 2022 Russian invasion of Ukraine
After Russia's invasion of Ukraine in February 2022, Macgregor appeared on three Fox News programs to speak in support of Russia's actions. Russian state television broadcast excerpts of Macgregor's appearances, which included a characterization of Ukrainian president Volodymyr Zelenskyy as a "puppet," that Russian forces had been "too gentle" in the early days of the invasion and that Russian president Vladimir Putin was being "demonized" by the United States and NATO. Macgregor said he believed Russia should be allowed to seize whatever parts of Ukraine it wanted.
The UST 2-10 rate curve starts today sharply flatter at +23 bps.
I highly doubt it, we've had some major impacts (covid, trade wars, Ukraine war) on globalisation which we have been establishing for years. Those cheap debts, cheap imports that we've enjoyed for many years got heavily effected by these disruptions. It might come back to normal, it might not for a while.
Those cheap debts, cheap imports that we've enjoyed for many years...
A lot of that facilitated by cheap Russian oil, gas, coal and rare metals, unfortunately.
Many of our high tech gadgets were made with Russian rare metals. So much shipping of goods and energy production is a result of Russian oil, gas and coal.
Things were bad as a result of covid, now it'll be worse... Or maybe not if we start growing our own vegetables, cycling to work, refrain from buying new gadgets every year, travel, etc.
TBH, I'm sure we've all got shelved projects we could probably and should pull out and start on anyway, instead of going to the cafe, pub, cinema, concert...
As uncomfortable as it is to accept the: wasteful eating habits, driving everywhere, buying gadgets every year and travelling a lot of recent decades was never sustainable and needed to come to an end. The sooner this shift comes about the easier the transition will be (although being guilty of all of those things I'm under no illusions it's not going to be painful)
The question is whether those impacts have led to a one-off shift in the prices of some important things, or whether we are seeing the start of a mutually reinforcing cycle of price / wage increases. I seriously doubt the latter. Feel free to call me an idiot in six months time (or now for that matter!)
A tale of two inflation responses. Brazil vs US
https://twitter.com/EMinflationista/status/1504211217602252804/photo/1
And oil prices are sharply higher too today, up +US$7/bbl. In the US they are now just under US$101.50/bbl. The international price is just on US$104.50/bbl.
When asked whether the kingdom would increase oil production, the UK premier said, "I think you'd need to talk to the Saudis about that.” Link
The Saudis Are Right to Leave Biden Out to Dry
UAE aims to diversify its cooperation with Russia — Foreign Minister
With this, 4 FMs from West Asia visited Moscow this week - Qatar, Iran, Turkey and UAE - to strengthen bilateral cooperation & discuss regional issues Link
For more than a decade, the Saudis have hinted they can open the taps and 'release' 2mbpd. But every day, they've extracted 8/9/10 m/b.
https://www.macrotrends.net/2564/saudi-arabia-crude-oil-production-chart
Here's a classic case of fudging figures:
https://www.worldometers.info/oil/saudi-arabia-oil/
SA consumption is roughly 1/4 of production, but: "This means that, without Net Exports, there would be about 221 years of oil left (at current consumption levels and excluding unproven reserves)."
Meantime net exports are north of 7mbpd; the process in non-linear (decreasing quality, decreasing quantity, more water-cutting required per barrel produced). So that screaming headline: 221 YEARS OF OIL LEFT - is bollocks. It looks to me like they've peaked production (bottom line, first link), as predicted. Open what spigots?
good backgrounder: https://www.resilience.org/stories/2004-10-10/saudi-arabia-bitter-over-…
I don't follow. You don't think they can produce 11 mb/d? Or that they don't have 266 bb proven reserves? I take your point about the "221 years" figure being somewhat misleading, but it does fairly clearly state "without net exports", even if that isn't what most of us would naturally assume. But it doesn't fundamentally change either of the first two things.
Water-cutting is like hosing down a path; you can go fast, miss a bit, but it's not worth going back for. Slow and thorough is the best way. So yes, they can force the pace for a short time - with retrograde repercussions unacceptable in the long run. That's the old fields (Ghawar peaked in 1980). They have other smaller fields with sour crudes - which need specialist refineries and result in less EROEI. All oils aren't the same.
Internal use increases, available-for export diminishes, overall volume depletes, quality always gets worse. Just saying I don't think SA is much of a swing producer any more. Venezuela (one of the two the US seem to suddenly want to befriend) is down to sour crudes - much of its refinery capacity was for light sweet. And Iran? (which is the old BP 'Fields'. https://www.cbsnews.com/news/bp-and-iran-the-forgotten-history/ ) I can't see that being a permanent marriage - or one at all.
All of which says we're now into permanent global energy-contention. A point many miss.
"The Saudis are right to leave Biden out to dry" made me laugh. The Saudi regime is propped up by US support. Without US/UK armaments the regime would be overthrown by the Wahhabist fundamentalists. US correctly assesses the Saudi Royals to be less of a threat than a truly fundamentalist regime but it's an uneasy alliance for obvious reasons.
Joe wins the war of words.
US will act if China aids Russia. Even the Chinese Foreign Ministry spokesperson could not give a strong response.
Joe calls Vlad P a war criminal. Russian spokesperson "unforgeavable and unacceptable"- a weak and passive response. Vlad P won't be safe when his victims are around.
Lotta armchair military analysts clogging up the thread this day.
Perhaps Dylan foresaw all this: 'Ain't Talking':
They say prayer has the power to heal
So pray for me, mother
In the human heart an evil spirit can dwell
I am trying to love my neighbor and do good unto others
But oh, mother, things ain't going well
Ain't talking, just walking
I'll burn that bridge before you can cross
Heart burning, still yearning
There'll be no mercy for you once you've lost
Now I'm all worn down by weeping
My eyes are filled with tears, my lips are dry
If I catch my opponents ever sleeping
I'll just slaughter them where they lie
Ain't talking, just walking
Through the world mysterious and vague
Heart burning, still yearning
Walking through the cities of the plague.
what would you do Waymad?
The world's and ours economies teeters on the balance during significant wars, and Russia's invasion of Ukraine is significant. Discussion of what is happening is also a nod to what might happen, and the relevant impacts of that on the world's and our economies. It is also a discussion of politics, the dominant force in economics. So what would you do?
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.