Here's our summary of key economic events overnight with news the bond market is over yesterday's retreat and yields are rising again today.
But first, new claims for jobless benefits in the US hit a new and impressive low last week, falling again so that they are now their lowest level since September, 1969. There are now 1.73 mln people on these benefits. Their insured jobless rate is now just 1.3% of their workforce, and that is a record all-time low. (The highest ever was during the Trump pandemic at just under 16%.) It also backs up the overall very low general jobless rate of 3.8% in February and strongly suggests it will be reported lower than this when the March data is released in about two weeks.
But it is not all good news in the world's largest economy. Core durable goods orders for February were expected to rise from January, but in fact they fell. It wasn't much, but is was a slip all the same. If you include aircraft and defense orders, the fall was more. But on a year-on-year basis they were up +12.5%, and capital goods orders were up +13.3% on that basis.
Orders might have slowed marginally, but activity is increasing. The latest March PMI data from the Markit surveys points to rising levels in factory activity and a six month high. Their services sector is expanding just as fast and now at an eight month high.
The regional Kansas City Fed factory survey is also reporting a growing expansion, in fact growing at a record pace.
In Japan, the Markit survey records a small contraction.
It is clearer now that container shipping rates from China are falling, and noticeably. Bulk cargo rates seemed to have topped out at a moderate level. Transpacific cargoes are still at high levels, although ship wait times in Los Angeles have eased further. One reason may be because Vancouver is picking up much more traffic.
Across the Atlantic, EU PMIs are suffering. These Markit PMIs for March report that growth is slowing, exports are falling, business sentiment is slumping and prices are rising at a record rate, all of course because of the Russian invasion of Ukraine. But they are still expanding despite this crisis. Output price inflation it a new record high in Germany.
In Russia, they re-opened the Moscow stock exchange and prices rose, up +4.4%. But it may not be all it seems. Foreigners were barred from selling. Short selling was banned. And their sovereign wealth fund flooded the market with 'buy' orders. And then when these effects were waning, the market was unexpectedly closed after only 4 hours of trading. The net effect was that oligarch wealth was preserved, on the surface at least.
In the South Pacific, leaked documents show that China is close to securing a naval base in the Solomon Islands. The proposal includes allowing Chinese police, armed police and the military to assist the Solomon Islands on "social order".
In Australia, their PMIs are expanding in both their manufacturing and services sectors and at a healthy clip. But this survey also notes record price pressures.
The UST 10yr yield opens today at 2.35% and a +4 bps rise from this time yesterday. The UST 2-10 rate curve starts today a little steeper at +22 bps. Their 1-5 curve is also a little steeper at +84 bps. Their 30 day-10yr curve is unchanged at +218 bps. The Australian ten year bond is back up +8 bps at 2.77%. The China Govt ten year bond is -2 bps lower at 2.85%. And the New Zealand Govt ten year is also lower by -4 bps at just on 3.32%.
On Wall Street, the S&P500 has opened up +0.8% in Thursday afternoon trade and is now +1.1% higher for the week so far. Overnight, European markets were mixed in the +0.2% / -0.2% range. Yesterday, Tokyo started sharply negative but ended positive, up +0.3%. Hong Kong fell -0.9% and Shanghai ended down -0.6%. The ASX200 ended its Thursday session up a minor +0.1% while the NZX50 dropped again, down -0.4%.
The price of gold starts today at US$1963/oz and up another +US$29/oz from this time yesterday.
And oil prices are down by -US$1 to US$112.50/bbl in the US. And the international Brent price is now just on US$117/bbl.
The Kiwi dollar will open today marginally softer, now at just on 69.5 USc. Against the Australian dollar we are down at 92.7 AUc. Against the euro we are soft at 63.2 euro cents. Only against the tumbling Japanese yen are we gaining. That all means our TWI-5 starts today at just at 74.8 and now off our four month high.
The bitcoin price is up +3.3% from this time yesterday at US$43,954. Volatility over the past 24 hours has been moderate at +/- 2.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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108 Comments
A succinct comment from Yves Smith, way down in the thread, sums everything up nicely re Russia and the US asset grab:
"IMHO the big self destructive move was the freezing of $300 billion of Russia’s central bank reserves (and if you think “freezing” does not mean “permanently expropriating” you are smoking something strong). That said Americans were willing to use their banking system abusively. No one who holds meaningful dollar assets (which you pretty much have to hold in US banks or foreign banks with big enough to have US banking licenses and therefore also subject to the reach of US regulators) is safe.
To put this in context, that $300 billion represents dollar payment for past Russian exports. This is the functional equivalent of selling $300 billon of oil, gas, wheat, platinum, nickel, copper, you name it, making delivery, and having the buyer stop the check and keep the stuff."
Agree, and that is why this could spell the end of the Petro-Dollar
The US are abusing their world reserve currency status.
Why do you think the Saudi's wont pick up the phone from Biden. They now know that if for some reason the US becomes unfriendly to them they could get all their US dollar reserves "frozen"
Gas will be turned off and no oil delivered in that case.
Expect more of this : Spain hit by yet another mass protest over rising prices
As Michael Every quips, 'contract, shmontract'. This is a fundamental shift to a multi-polar world. The mechanisms by which this occurs are incidental: the dominoes are falling now.
"Russia’s key Caspian oil pipeline is to be closed “for repairs” that will last two months, taking around 1mbpd out of circulation; but, eclipsing that, within a week Russia will demand payment in roubles for its gas from “hostile countries” – which means Europe.
Obviously, this is a breach of contract. Shock! Horror! Contracts might be broken! You think freezing FX reserves, sanctions, talking about naval blockades, proposing the introduction of letters of marque allowing privateers to seize Russian property at sea, as well as Russian forced nationalisations --to say nothing of blowing up civilians and threatening the use of nuclear weapons on state TV-- is business as usual? Contract, shmontract."
It will be interesting. The problem is Russia seams to be putting the "frozen 300 billion" in the too hard for now basket. This doesn't mean they will address the issue at some point in the future and have the capability of doing so. The problem is the methods at their disposal such as cutting undersea cables will probably trigger article 5 and then you are one move away from a nuclear war. The state of Russia's conventional forces means they will be in no position to fight anyone by conventional means.
China is close to securing a naval base in the Solomon Islands.
Now that's how you invade a country!
The Romans learnt pretty quickly it was cheaper to buy foreign control or to end a war than to fight for it. Of course the ability to use soft power is significantly increased when you have hard power behind it. Rome's enemies also learnt very quickly that it was much 'better' to receive a visit of gold and silver from Rome than the Roman army.
"The Republic of Fiji Military Forces (RFMF) is the military force of the Pacific island nation of Fiji. With a total manpower of 3,500 active soldiers and 6,000 reservists, it is one of the smallest militaries in the world, though most of its surrounding island nations have no militaries at all."
"The New Zealand Army (Māori: Ngāti Tūmatauenga, "Tribe of the God of War") is the land component of the New Zealand Defence Force and comprises around 9,500 Regular Force personnel, 2,900 Reserve Force personnel"
It honestly could go down to the wire...
The US navy is, and will be for decades, bigger and more powerful than every other nation combined.
Well, Russia supposedly has a strong blue water navy too. May need to re-assess that based on Russian performance in Ukraine.
e.g. that Russian ship that got the "F-you" response from Ukrainian troops stationed on Snake Island? That's been reportedly sunk. Got lured close to shore by Ukrainian boats and then hit by a land-based missile.
I'll say one thing for the US military (at least the Air Force and Army), they've had a lot of experience in the past few decades. Navy, not so much though. It'd be interesting to see how they'd actually perform... The Pacific fleet's not had a good track record the past decade, lot of accidents and an F-35 lost overboard in the South China Sea just last month!
"In the South Pacific, leaked documents show that China is close to securing a naval base in the Solomon Islands."
A growing military presence, and economic might. Did Chinese media say QUAD = NATO.
"re-opened the Moscow stock exchange and prices rose, up +4.4%"
Russian stockholders breathe a sigh of relief.
And the US State Department has made an assessment that Russia committed war crimes.
There is plenty of tribal unrest in the Solomons, I'm sure there be enough arms and advice given for a civil uprising to overthrow current government to retract that decision before they have the opportunity to get a foot hold. Watch that space, the poor people will be pawns in a much bigger game.
It's clear maori politicians will use power plays if they get control of our waters via Minister Mahuta's Three Waters plan.
This threat to democracy must be stopped. One person one vote is the way forward. Government via race based elites is not acceptable.
https://www.odt.co.nz/news/dunedin/dcc/mere-window-dressing-council%E2%…
More sustainable?
It already isn't sustainable. And will only become more unsustainable, with time. To understand this, you have to understand the Limits to Growth, and where we are on the trajectory. Also understand entropy.
We will end up patching local systems locally. This move is (was) the last heave of the 'growth' proponents, far too late, far too far. A little like Onslow - right idea, but out of build-time now.
To add some context to KH and the threat to democracy? (As the councils are doing such a good job with water at the moment)?
The government will put forward legislation mid-year for New Zealand's three water services - drinking water, wastewater, and stormwater - to be managed by four new publicly owned water entities, replacing the services currently managed by 67 councils.
Minister for Local Government Nanaia Mahuta said the reforms would ensure all New Zealanders could enjoy safe, affordable, and sustainable drinking water, wastewater, and stormwater services.
for even more context --- so far the government has failed to build 10,000 extra homes never mind the 100,000, has failed to even break ground on light railway -- far less have it operating last year, has failed miserably with our mental health sector- not reduced child poverty by most of the measures used -- has pushed over 70,000 people off the official jobless into hidden long term beneficiary status- despite its fanfare not extracted the remains of the miners at pike river - and has only been successful in creating three times as many spin doctor jobs in wellington, thousands more paper pushing jobs in government with no improvement in services, tripled the number of people on the housing waiting list, and massively increased inequity between asset rich and asset poor - despite all its virtue signaling to its core left vote.
The question is -- why for even one moment would we think that thy could suddenly deliver on something as important as our water infrastructure ?
PS -- i remember the promises of previous ministers above and that creating a super city would save Auckland a billion a year -- ha ha ha still waiting
So you expropriate hundreds of billions of dollars of LG assets because of a few rouge outliers.
Something needs to be done to help fund the renewals, if, when the LG cannot do so. This is where central government should step in and assist. But to think mass centralisation will fix it and lower cost to ultimate payer i.e. you and I - then I think not.
Baywatch. The care of the wellhead at Havelock was a screwup for sure. And people died from it. I have even been to look at the thing.
A huge government burraucracy will not fix those. Indeed such screwups will likely be more common in the Three Waters Organisations.
What about deciding to override Councils from the get-go while still pretending like Councils would get some say in what happened next? Or is local government suddenly not considered 'democratic'? Or the feedback report which said "hey these reforms are really unpopular" only for the recommendations to be "Don't change them, just change the messaging"?
So, in summary, councils don't want it, people don't want it, it polls badly, but none of that matters in a democratic context to the extent that it can't be over-ridden with a new comms strategy?
Local Authorities are there at the discretion of Central Government - that's the way it must be (I served on a couple).
But over-use of power, sans mandate, is the bigger sin.
It will be the one which bites them in the posterior.
The problem is that nobody is addressing the orders-of-magnitude retrenchment (almost a pun!) that society is beginning to experience.
""Nanaia Mahuta said the reforms would ensure all New Zealanders could enjoy safe, affordable, and sustainable drinking water"". If for any reason it is not ensured who carries the can? The buck stops where? Who is fined and/or sacked? What can I do about it?
I'll give Ms Mahuta the benefit of the doubt if she is willing to put her parliamentary pension in escrow as a guarantee. If she means what she says then that will not bother her.
Breakfast briefing; US winning the global economic competition
It’s easier to ignore front-end T-bills, much more difficult to pretend the yield curve isn’t inverted.
Therefore, why we keep harping on T-bills and collateral is that the one explains much about the other; what can only be severe collateral strains contributing to the deflationary potential upending the yield curve (like eurodollar futures) further down in the belly of the curved beast. Link
Trumpie was voted in, in spite of a pack of lies spread with the full knowledge of the media spreading them. He was "voted" out by the same method. As time goes by, and we forget his painful personality, history will remember the small number of US soldiers killed abroad during his tenure, and history will remember that his net worth actually went down during his presidency. Apparently the only US president to do this. Unlike Bill C, and Barak O.
sit23,
I think history will remember his lies, his assaults on women, his many business failures, his cosying up to Putin.
Sadly, I think it entirely possible that he will be the next President.
If you really believe that he was robbed of the last election, then you presumably also believe in Qanon and all the other conspiracy theories. In my view trump is a despicable human being and his supporters are no better.
There's a possibility of anarchy in the US at the next election....imagine if Trump runs and loses again in a tight contest. I keep in touch with friends living in the US after my time living there and they are so politically divided. People who were principled and reasoned no longer seem to be able to think critically.
Its like they've formed two tribes.....red or blue and its impossible to agree with anything the other side says, impossible to view any issue from a bi-partisan perspective, unable to considered being wrong or misinformed on any issue.
The world desperately needs a strong, principled leader from the US republican party who is able to bring the US back together internally. They will be unable to maintain world peace as the world power if they are falling apart internally. Biden is too old and frail to be doing what he is expected and needs to do. Trump will simply divide and conquer and create even bigger social unrest. Surely there are some stronger/better principled men in that generation in the US that can stand up and lead/unite their own people and then the world?
There are, but the US political contests are openly about who has the biggest donors. And donors demand favours. Hence you don't get the principled men into power as they won't get on board with being bought and sold. It's the old open secret that actually the US is run by corporations, rather than "by the people, for the people". It's writ clear on pretty much every decision coming out of the Senate etc.
This is why Bernie Sanders needs to get in and aggressively reform their democracy. There should be zero tolerance for anyone getting paid anything from outside parties. Most lobbying activity there should basically be outlawed as they end up turning politicians into greedy pigs. Politicians should be declaring all interests and there should be a very strong anti corruption department set up to drive the point home. But none of that will happen, it's more likely America will go down the same as any other empire, bought to it's knees internally through corruption and division.
Great post Blobbles.
some years ago work took me to US and I was fascinated to learn that the most common questions that you are asked is what church do you go to and which political party do you belong to? Got some interesting responses when I tried to explain that churches were effectively political parties, and that I was non-aligned. Explained to one chap who challenged me on it that it was the non-aligned voter, and I voted in every election, who generally decided who would govern. He also stated that because I didn't believe in God there were some interesting rewards coming my way. I also explained that because I didn't buy into a religion didn't mean i didn't believe in God. Don't think he could understand that one.
Ahhh America. Land of the free, the evangelical... and lots of big boom boom sticks.
My personal view is that they are bunch of homicidal brainwashed maniacs. But I'd still rather rather they built a navel base in the solomans rather than the Chinese...
Yeah, this is critical thought being thrown out the window, with a lot of Dunning-Kruger effect and plain ignorance/intolerance thrown in for good measure. IMO it goes back mostly to their education systems (the gutting of the public systems since the 70s/80s), their overtly "we are gods instruments" culture, plus their aggressive patriotism bordering on nationalism, often reflected in their popular culture. Throw it all together and you end up with a population of either laid back "who cares" types (who are often the nicest Americans), or the more obvious and loud, arrogant, small minded, highly belligerent, overly patriotic and gullible people. Except of course most of the people educated in their good universities, who end up being rather smart, if they can get through on their own merits while keeping an open mind. Unfortunately this is a very small percentage of their population who are often from the already wealthy families, furthering their divisive society so it echoes down the generations.
I have quite a few American friends who are brilliant people, but again they are educated in some of their top schools, so are benefits of the "cream of the crop". They know most of this too.
The bad thing is, NZ/Aus are almost down the same track, hopefully we can reform our education systems enough to avoid the US's likely fate.
red or blue and its impossible to agree with anything the other side says, impossible to view any issue from a bi-partisan perspective, unable to considered being wrong or misinformed on any issue.
Precisely right. It used to be that you can vote for someone of the other side so long as you agree with their policies. Now that's out of the question so long as they are from the other side.
Historian Stephen Kotkin put it very well: The problem isn't 'polarisation'. We've all had differing opinions on anything for the longest time, and yet we could discuss and debate without throwing the other person off a cliff. That's what the scientific process is, and why we've made such technological, medical and scientific progress. (And the lack of it in cultural and political discourse now explains why we've regressed, rather than progressed.)
The problem is 'demonisation' - the moment you demonise something or someone, you make it or that person an existential issue AND threat. They are not only wrong, but they threaten your existence and so you must get rid of them.
Being unaccepting of another person's point of view is as bad as what you believe of that person or their beliefs.
Quite remarkable that a man so driven by wealth failed to capitalise on being President, and has failed to capitalise on being an ex-President. His incompetence is truly staggering.
He did his best, for sure, pushing Presidential business through his hotels and resorts, but the light shone on his terrible character caused such harm to his brand value that it overpowered his attempts at corruption.
For anyone who doubts Trump's desperation to be wealthy, and to be seen to be wealth:
https://www.washingtonpost.com/outlook/trump-lied-to-me-about-his-wealt…
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