Here's our summary of key economic events overnight that affect New Zealand, with news that most major regions are making good headway in their fight against inflation - and equity markets approve. But bond markets aren't quite so sure.
American personal incomes rose at a +6% rate in February from January, and their personal spending rose at a +2.5% rate. This is not a sign of growing household stress. The inflation measure in this latest data shows it receding, running at an annualised 3.6% in February from January, and +5.0% higher than year-ago levels. That is actually its lowest rate since August 2022 when it was on its steep rise.
Meanwhile the Chicago PMI remained very negative in March but unchanged from February, in this barometer of the American industrial heartland.
And the University of Michigan sentiment index slipped in March, but driven mainly by those who self-identify as 'Republican'.
Even in a long perspective the share market VIX index of stress isn't currently elevated. And the broader financial stress index maintained by the St Louis Fed isn't either, quickly retreating after a brief and relatively minor spike last week. Even the Fear & Greed index is currently running at Neutral, after running in Fear territory a week ago, and Greed territory a month ago.
Even though the battle isn't anywhere near over and the Fed still signals inflation is their top concern, markets are saying they like the PCE track.
Taiwan's factories held all their February recovery in March but couldn't quite break back to an expansion mode. The downturn in production continued to ease, while firms signaled only marginal drops in new orders and employment in the latest PMI update.
Yesterday we noted that China's recovering car industry is doing so because of steep discounts rolled out by manufacturers, and at a level that is unsustainable. Today we can note that China's airlines are riding higher passenger traffic but also booking huge losses at the same time. Neither industries seem to have a sustainable business plan.
And staying in China, their factory expansion extended to a third straight month, even if it didn't quite rise to the expected level. But according to the official data, their service sector is positively booming. But before accepting those conclusions it is probably best to await the private survey results which are due out on Monday.
Japan's stats are a different story, accepted as unvarnished. They reported a surprise rise in industrial production in February, far stronger than anticipated. And they reported far better retail sales for February than expected as well. If they keep this up, the world's third largest economy may become a driver of international trends.
German retail sales came in unexpectedly weaker for February.
French inflation eased in March to 5.6% and Italian inflation eased to 7.7%. Along with easing German inflation that we have previously reported, the EU says its overall bloc inflation was 6.9% in March, lower than the 7.1% expected and very much lower than February's 8.5% rate. They will count these declines as 'wins'. Falling energy prices are behind all these improvements, aided by the price caps imposed in Russian energy.
We often note that the American participation rate is much lower in their labour market than elsewhere. Now a NY Fed review shows that is largely due to a rapid ageing of their workforce and a propensity for baby boomers to quit working. It may also explain why public safety net programs Medicare, Medicaid, and Obamacare are all now untouchable even by Republican politicians who railed against them. In the end, pay-as-you-go systems involve a massive free lunch because you never contribute enough to cover what you take out in retirement. As such they are hugely popular - and in the end massively dangerous to social cohesion.
We should also note that the New Zealand carbon price seems to be in free-fall after the recent failed NZU tender. The price ended the week at NZ$54.50/NZU as investors flee for what they can get. For reference, the EU carbon price is currently at €96.13, about where it was in February 2022, or NZ$167/tonne.
The UST 10yr yield starts today at 3.48%, and down -8 bps from yesterday. The UST 2-10 rate curve is marginally more inverted at -57 bps. But their 1-5 curve inversion is greater again at -101 bps. And their 30 day-10yr curve is very much more inverted at -120 bps. The Australian ten year bond is down *12 bps at 3.24%. The China Govt ten year bond is little-changed at 2.87%. And the New Zealand Govt ten year is starting today unchanged at 4.25%. A week ago it was at 4.17% so an +8 bps rise since..
Wall Street ended up strongly, with the S&P500 booking a +1.4% rise in Friday trade. That means it has risen +3.2% for the week and +4% for the month. Its been a very good quarter for equity investors. Overnight, European markets were all positive and up another +0.7% except London which gained only +0.2%. Yesterday Tokyo ended its Friday session up +0.9% and up +2.0% for the week. Hong Kong was up +0.5% on the day and up +2.8% for the week, and Shanghai ended up +0.4% on Friday and up +0.3% for the week. The ASX200 ended up a +0.8% on Friday to be +3.2% higher for the week. And the NZX50 fell -0.47% in its Friday trade to end up +2.6% for the week.
The price of gold will open today at US$1972/oz and retreating -US$11 from this time yesterday. A week ago it was at US$1977/oz.
And oil prices start today up +US$1.50 from yesterday at just on US$75.50/bbl in the US. The international Brent price is now just on US$79.50/bbl. A week ago these prices were US$69 and US$74.50/bbl respectively.
The Kiwi dollar is little-changed against the USD and now at 62.5 USc. Against the Aussie we are firmish at 93.5 AUc. Against the euro we are firm at 57.6 euro cents. That means the TWI-5 is now at 70.5 with very little daily change. But it is up +40 bps from a week ago, and up +30 bps from this time last month.
The bitcoin price is very little-changed again today, now at US$28,325 and up a very minor +0.2% from this time yesterday. But it is up +2.2% from week-ago levels. Volatility over the past 24 hours has remained moderate at +/-2.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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63 Comments
I am heartened , very much so , that our PM has said the people staffing his office are not dishonest , they're merely incompetent ... whew ! ... dodged a bullet there , Chris ... thank goodness sleazy dishonest scumbags aren't responsible for the balls up over Stuart Nash's emails ... it wasnt a cover up ... no ulterior motive ... nothing to see here ...
I'm feeling so relieved this Saturday morning , sound in the knowledge that those who serve & lead us are only incompetent ... cheers Chippy , that's a great relief ... yay .
The most open & transparent government ever , my man ! ... would Jacinda BS us ? ... surely not ...
... this government , their minds are so open that their brains have flopped out & splattered onto the floor ...
Not to worry , theres not enough material there to warrant a cleaner with a mop & bucket ... I'll grab a tissue or two ...
Knowing you are a house of cards, should have then, locked all the fans away in a cupboard. Minister Robertson protests loudly in parliament that these two staff members of the PMO, that they themselves have sacrificed, have been denied any ability to defend themselves. Well damn well give them that ability by convening a Commission of Inquiry under the 1908 Act. Amongst all of parliament’s multitude of functions, the public of New Zealand deserve to be able to have both trust and confidence in the capability and integrity of the Prime Minister and associated staff. If the public cannot be given reassurance in this regard, then the government is resultantly obliged to go to the polls, a snap election.
OUCH! Charles Schwab stock is having its worst month since 1987 as depositors are pulling money from bank's account searching for higher yields, depriving Schwab of cheap funding and putting pressure on earnings. https://wsj.com/livecoverage/s Link
Very interesting thinking from David Chaston above.
"....In the end, pay-as-you-go systems involve a massive free lunch because you never contribute enough to cover what you take out in retirement. As such they are hugely popular - and in the end massively dangerous to social cohesion..."
Should we then wind out of National Super over 30-50 years and replace it with a universal Kiwisaver type system? I think so.
Also such would dampen the demands of those who advocate ever increasing population.
So, US income and spending is not a 'sign of growing household stress'? Why would the average household be stressed? Incomes have broadly adjusted to higher prices, mortgages are on 30-year fixed terms, employment is robust, and all the Fed hikes have done is crush financial institutions, slow house building, and wound commercial real estate.
Now, as supply chains unwind and fossil fuel prices subside, the Fed will soon be claiming 'victory' in its fight against inflation having shown nothing but impotence on prices and incompetence on financial stability (noting that the current rescue efforts are a competent response to a problem they caused).
Meanwhile, the market is fully confident that RBNZ will continue with its macho hiking of rates whilst other central banks come to their senses and pause. Shock and Orr must continue... "We know that rate hikes won't slow price increases, but it just feels so damn good to push poor people out of work."
The much hyped up Silicon Valley layoffs affected only a few hundred thousand mid to high skilled workers. Those professionals would've landed jobs easily albeit for realistic pay packets in non-tech sectors (financial servicees, public agencies, consulting, etc.).
My mate got laid off by a unicorn in San Jose in January, moved to Houston the following week to crunch large datasets for a major oilfield service provider. Loves his job!
A good quarter for equity investors? Only really thanks to the last couple of weeks. Getting bullish about that is silly. If we get to July and equities are up say 5-6% for the year then fair play.
But I for one am not ready to change my mind on shares on the basis of 2 good weeks. The quarter has been very volatile and that will continue.
Jeremy Grantham has interesting observations. He says the quarter just passed is always a good one for shares historically, because it’s a period in the elected term cycle when the USA government supports the economy to try to get employment looking better before the election. The historic data and trends seem to support his argument.
Albert
I agree, a widely held basic premise in investing in equities is that time in the market is the key thing and one accepts the volatility of the highs and lows . . . those that exited when Covid first struck lost heavily over the next couple of years (this was especially so for those that exited KiwiSaver growth funds). It is also well recognised that it is difficult to pick the bottom of a market, arguably even more so than the top of a market.
Rather than following the index - unless one is investing in an index fund - the more astute will be looking to choose the right stock. Yes, we are seemingly likely to be in for turbulent times; however, while some stocks will do very poorly (likely retailers) there will be others such as well managed essential or basic need industries may do well. But, even within either of these groups, one needs to look particularly carefully at the particular stock. At the moment if I had cash and was looking to invest in stocks, sure an important consideration is, in the short term is it likely to do better than the current interest rates.
I noted over the past few months that any slight daily drop in the NZX index had Housemouse - who talks about a portfolio - frothing at the mouth to post on "What happened today". Markets are volatile, a daily variation in the index is nothing to get overly excited about and has been shown is a poor indicator of even medium term trend. I now see Housemouse - the TA of interest.co - has now has to push this out to "lets see in six months".
Yes, we are most likely in for turbulent and uncertain times in the short term and stocks fit this. I'm being prudent and I'm certainly not heavily betting against RBNZ's view of a likely recession with it's consequences for the wider economy, stocks and housing.
As an aside, not that past performance is a basis for investing, over the past year while housing has seen significant falls the NZSX is down only 1.7% and up over 12% from its June low.
Whats your (granthams) take. I say just look at history to see what asset prices have done during periods of high inflation and low growth
Also follow what people do and not what they say. Wait a minute you are hunting for a development site priced cheaply.
Strange you quote Grantham... "He says the quarter just passed is always a good one for shares historically". In a recent YT video he goes further saying October to April is a short sellers graveyard. So I went back seven months ago (sept) to find out what he was saying then. "Retest June lows" In other words Sell Sell Sell. He is just a charlatan and he minces his words with could be and maybe
Along with easing German inflation that we have previously reported, the EU says its overall bloc inflation was 6.9% in March, lower than the 7.1% expected and very much lower than February's 8.5% rate. They will count these declines as 'wins'.
Eurozone #inflation cools significantly to 6.9% YoY in March, down from 8.5% in Feb and lowest level since Feb2022, AND lower than estimated 7.1% BBG poll. But core inflation, which excludes volatile items, quickened to 5.7%, a fresh ATH, showing inflation pressure remains high. Link
https://www.tabletmag.com/sections/news/articles/guide-understanding-ho…
And there are one or two commentators hereabouts, who closely resemble such peddlers of disinformation.
:)
Al sorts of problems in France as they try and lift the pension age from 62.
I’m actually starting to think the French have got it right. Their work life balance never seems to hurt them much economically. Maybe they could be more of an economic powerhouse if they tried harder, but I doubt their lives would be better.
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