Here's our summary of key economic events overnight that affect New Zealand, with news equity prices are falling and bond yields are rising today as markets back-track and accept that the US Fed will hike again on March 23 (NZT), and by +50 bps. Commodity prices are weakening.
But first we should note that the US is heading into another long holiday weekend, for Presidents Day on Monday. We won't see them again until Wednesday, our time.
Today in the US, the Conference Board leading economic index (LEI) fell again in January but not as much as it did in December. Deteriorating were new factory orders, consumers’ expectations of business conditions, and credit conditions, and they more than offset strengths in their labour markets. But equity prices rose +6.2% in the month (S&P500). The contribution of the yield spread component of the LEI also turned negative in the last two months, which is often a signal of recession to come. While the LEI continues to signal recession in the near term, indicators related to the labour market, including employment and personal income, remain strong so far, throwing doubt into the recession scenario this time.
And trucking companies say their retailer customers expect to resume restocking after their summer break after winding down inventories over recent months. Business inventories have been rising relative to sales, but not to excessive levels. Retailers however see their destocking efforts ending mid-year, so a rebuild is on for the latter half of the year. If it pans out like that, it will have been a soft landing - and no recession.
The rise in Canadian producer prices eased off in January, up +5.4% from a year ago and well back on the +7.7% riser in December. The shift from December to January however still has them rising at an annualised +5% rate which was higher than many expected. Most expected a decline.
Singapore's exports fell an eye-watering -25% in January from a year ago in an indication of how much Asian trade is suffering. Still, they rose slightly from December, so perhaps the worst is passed.
Germany is getting no relief yet from producer price hikes even if they have been falling consistently since August. They are up +17% from year-ago levels to January, but from December they fell although not by quite as much as expected. They seem on the right track however, just not fast enough for them.
UK retail sales were weak again, down -5.1% on a volume basis. French CPI inflation is stuck at +6.0% by their count, +7% (harmonised).
Globally, there is widespread weakness in commodity prices. We can observe big falls in natural gas and crude oil (see below). Precious metals are also weak, especially palladium. Coal prices are now also suddenly lower, now below year-ago levels. The wind has gone out of the recent rise in the aluminium price as well. Nickel, tin, lead and zinc have all also seen recent pullbacks. The exception maybe is the copper price, although that isn't exactly a shining light.
We should also note that the NZ carbon price has fallen to $70/NZU, and its lowest since December 2021. And this is in sharp contrast top the benchmark EU carbon price that has risen to a record high €100/tonne (NZ$171/tonne). This is the largest difference between these two prices ever.
The UST 10yr yield starts today at 3.83% and little-changed from yesterday. But it is up +10 bps for the week. The UST 2-10 rate curve is little-changed at -79 bps. But their 1-5 curve inversion is a little more inverted at -96 bps. Their 30 day-10yr curve is also little-changed at -76 bps. The Australian ten year bond is up +2 bps at 3.79%. The China Govt ten year bond is little-changed at 2.91%. The New Zealand Govt ten year is starting today at 4.41% and up +2 bps from yesterday. A week ago it was at 4.22%, so little-changed.
Wall Street has started its Friday session with the S&P500 down -0.5% near the close and heading for a -0.7% weekly loss. Overnight, European markets were all lower by between -0.1% and -0.3%. Paris recorded the strongest weekly gain of +2.8%, while Frankfurt the weakest at +1.0%. Yesterday Tokyo finished down -0.7% for a weekly dip of -0.1%. Hong Kong ended down -1.3% and a weekly retreat of -0.9%. Shanghai ended its Friday session down -0.8% for a full -1.0% weekly fall. The ASX200 ended down -0.9% and a -1.2% weekly loss. And the NZX50 ended dipping just -0.1% and a -0.3% weekly slip.
The price of gold will open today at US$1841/oz and unchanged from this time yesterday. But that is down -US$22 for the week.
And oil prices start today down -US$3 at just over US$76/bbl in the US. The international Brent price is now just over US$82.50/bbl. That is a -US$4 fall for the week.
The Kiwi dollar is at just over 62.4 USc and down nearly -½c in a day. A week ago it was at 63.1 USc. Against the Australian dollar we are softish again at 90.9 AUc. Against the euro we are also soft at 58.4 euro cents. That all means our TWI-5 starts today back at 70.2 and -30 bps lower. For the week we also just -30 bps lower.
The bitcoin price is now at US$24,409 and back -2.2%% from this time yesterday. It did get as high as US$25,018 but retreated sharply to US$23,383 immediately after. Recall, it was at US$21,698 a week ago so it is up +12.5% since then. Volatility over the past 24 hours has been high at +/- 3.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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Oil, volatility. It must have been a sedate world indeed before Henry Ford saved the day and made motor cars pay. Pre school granddaughter somewhat surprised me by asking “what lies underground and swears?” Answer, “crude oil.” So the young are on to it aren’t they!
And trucking companies say their retailer customers expect to resume restocking after their summer break after winding down inventories over recent months. Business inventories have been rising relative to sales, but not to excessive levels. Retailers however see their destocking efforts ending mid-year, so a rebuild is on for the latter half of the year. If it pans out like that, it will have been a soft landing - and no recession.
Japan exports to China stunningly terrible: -17.1% y/y value; -30.7% y/y by volume. But this wasn't October lockdowns. These #s are *for January* when China reopening was supposedly in full swing. Maybe collapsing shipping rates are telling us something? It isn't inflation. Link
Not that Japanese exports to US or Europe were much better, just less worst. Goods shipped to US continue falling by volume as inventory cycle kicks up a notch. Japan exports to EU also falling now, too. Trade recession has accelerated, not inflation. Link
What these comparisons show, when you ignore Alan Greenspan and Ben Bernanke, the only thing that changed last year in the bond market was the Fed's rate hikes. Not fundamental growth or inflation. https://youtube.com/watch?v=Fe2E4Y Link
Do QEs Fix Any Economy? The Question Is Rhetorical
Everyone wants to believe. We all wish there was some beckoning circle of enlightened philosophers sitting high up in the Citadel of Knowledge, the Ideal Technocrats who know just what to do and have developed all the tools to make it work.
This belief is so powerful, in with a bang, whatever their next Big Idea ends up being it is immediately given the full benefit of the doubt.
And it inevitably fails miserably, squeaking out with scarcely a whimper. That word aptly describes Mr. Kuroda’s impending retirement (sans parade), as the Wall Street Journal just this week writes:
“The next Bank of Japan governor is likely to find a challenge similar to the one that faced departing Gov. Haruhiko Kuroda when he arrived a decade ago: stubbornly low inflation and a sluggish economy to go with it. The difference is that Kazuo Ueda, expected to be nominated Tuesday to succeed Mr. Kuroda, will take office with less confidence that Japan’s central bank can fix those problems, which date to the 1990s.”
Ouch. Haruhiko Kuroda was no Peter Pan. Once celebrated, even feared, he leaves office having accomplished only one thing. Completely by accident, inadvertently he proved beyond a doubt the very method he championed and staked everything on was no more than a lie.
Having been exposed even in the mainstream media, why keep up the charade?
Wall Street Journal - Japan Says Sayonara to Idea of Central Banker as Rescue Hero
"Bao Fan: Billionaire tech banker in China reported missing"
Another successful businessman about to willingly give up control of his companies and hand control and equity back to those who made it all possible in the first place - the CCP, like Jack Ma has done?
And there doesn't appear to be the money is the residential property services sector that there used to be.
Purplebricks has put a new asset on the market: itself. It was once seen as one of the vanguard of companies that would shake up the property industry... It launched in 2014 and listed at a float price of 100p. By the summer of 2017 it had risen to more than £5 a share, valuing the company at £1.3bn. However, it had slumped to less than £25m on Friday (8p per share).
https://www.theguardian.com/business/2023/feb/17/purplebricks-issues-pr…
With the ribs yielding to the prevailing wind, the bridge is aligned to Mount Taranaki. The sacred mountain is framed within the skewed arch when viewed while leaving the sacred ground – promising what is eternal.
Yes beautiful structure. Not cheap to maintain at an annualized $100,000 per year for the painting alone. Presume there are inspections on top of that. Joys of being coastal.
https://www.npdc.govt.nz/planning-our-future/projects/current-projects/te-rewa-rewa-bridge-repaint/
People contacted me from Napier saying some schools were shut there,” broadcaster Kate Hawkesby said on her early morning show, after reading the message from Tauranga.
“I just wonder what’s happened to us as a country that we’ve become this paranoid and this soft.
This women I class as a witch..
A life question for all you wise people to give your opinion on:
A new defacto couple are buying their first home together. The 20% deposit is 25% from him, 75% her. Half of hers is a gift from her parents.
In the event they split up in the future, how would you expect any capital gains or losses to be shared?
Is the mortgage joint and several and monthly repayments shared 50/50 along with rates insurance maintenance
Is this for a prenup. Is the title joint ownership (Mr x and Ms y) or shares (example 49% plus 51%)
The wife and I started with pretty much nothing though she had consumer debt. Saved together and everything is 50/50.
Title is tenants in common pro rata to the respective percentage of each input. Ongoing expenditure split 50/50 or recorded if otherwise. Had similar in extended family. As that happened the lesser purchaser progressively invested into the property until about 50/50 ownership achieved and the title ownership adjusted accordingly along the way. Unfortunately a few years later they split. But all was divvied up amicably and accurately.
The law on this is set out in the Property (Relationships) Act 1976.
Basically, assuming they actually meet the criteria for a de-facto couple:
- the house was bought jointly, while they were a de-facto couple, which makes the house relationship property
- relationship property is almost always split 50/50, regardless of who put more money into it
- the exception to the rule above would be if there was a pre-nup agreement between the couples, then it is split according to the pre-nup and not according to the act
- however, if the pre-nup is unjustifiably harsh on one side (i.e. one side is clearly a big loser), the court can overrule the pre-nup and the act would apply
Is it just me, but when I see or hear of volunteers losing their lives, people doing amazing things for their community, etc, I can't help thinking that THEY are the people who deserve New Year's honours, not sportsman or people who are doing their jobs (which they are compensated for).
Did you read the missive from Napier’s deputy mayor? Good on her. Services and investment have been run down by successive governments, both red and blue. Just not good enough over the last 20 years.
It’s the whole fatally flawed neoliberal system at work.
National don’t spend enough and Labour spend too much in the wrong areas and not enough in the right areas.
by HW2 | 18th Feb 23, 10:55am
Thanks to the kind souls at rural support trust. I will be helping with some cash to assist you. This is bad and very tough on those affected.
No that's a stupid thing to say, now why would I want to do that /sarc. Since you asked, what are you doing apart from telling me Im not doing anything
Being the only person on int.co who commented on the good folk at rural support, am helping friends and relatives with free healthy food.
We will leave it to chippie and the gang to take the credit and shift the blame.
I'm on the ground in Hawkes Bay, the amount of mud everywhere around waterways is hard to convey. We're seeing the best and worst of humanity right now, between the huge number of people going door to door clearing properties, and the looters taking advantage of the disaster.
So far no one I've spoken to over a wheelbarrow and shovel has even mentioned the government response, we're all too busy just getting shit done.
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