Here's our summary of key economic events overnight that affect New Zealand, with news the ECB is warning investors aren't taking geopolitical risks into account nearly enough.
But first in China, we are getting reports that Beijing is developing a plan to save their housing markets and SOE developers by having the state buy huge numbers of unsold properties to boost demand. It is a sign of desperation. What wouldn't go wrong? Millions of properties partly occupied are surely likely to give an enhanced sense of rot in the sector, while enriching the developers. The future for such a policy looks bleak indeed.
Under the proposal, local state-owned enterprises would be asked to help purchase inventory from distressed developers at steep discounts using loans provided by state banks, Bloomberg reported on yesterday. Hong Kong shares of developers who will benefit from the "market clearing" zoomed again yesterday.
In the US, housing starts rose in April from March but are still lower than year-ago levels, and that year-ago standard is not high. Previously we have seen stronger residential building consent levels but they are falling on a prior month- and prior year-basis too. The new home construction sector is falling back into line with the general real estate resale market with tepid demand at best.
But that weakness is not reflected in their labour market. The actual number of jobless claims fell last week to 197,000 which was a slightly smaller fall than expected. It is interesting how expectations for rising labour pressure seemed to have turned around.
And the real state of retailing in the US can be tracked by the activity of their largest retailers - and the largest is Walmart. They said Q1-2024 sales levels were strong, growing far more than inflation.
Most serious analysts see the US economy expanding by +2% in 2024. But the AtlantaFed's GDPNow model reckons it is expanding nearly twice as fast as that, currently running at a 3.6% expansion, real.
In one region, the US Philly Fed factory survey turned from a minor positive to a minor negative in May, basically because of a pullback in new orders. But also intriguing is the holding high of survey perceptions of business conditions. They seem confident about the future, very confident.
Industrial production in the US was little changed in April, taking seven of the past twelve months as expansions, five as contractions. But most of the expansions, as small as they have been, are in the more recent half. And that has eaten into the year-on-year deficit, so it is now only -0.4%.
In its latest Financial Stability Review, the ECB says investors are likely to be jolted by negative election surprises in 2024 that will weigh on financial stability. They reckon investors are blind to the sudden shifts in sentiment that geopolitical tensions can drive. And the extra spending they are having to do on the security from is likely to put future strain on European public finances they noted.
In Australia, the April labour force data saw the jobless rate rise to 4.1% from 3.9% in March. (NZ was 4.3% in March.) That means 593,000 of their 14.9 mln labour force are without work. Full-time employment fell by -6100, part-time employment rose by +44,600. It was tougher in NSW where full-time employment fell -16,300 and part-time employment only rose +13,100.
We have previously noted that financial markets had started pricing in a chance of interest rate rises from the RBA. A lowish chance, admittedly. But now we can note that they seem to have abandoned those bets - even though the consensus seem to be that the short-term Aussie Budget won't be especially inflation-friendly.
More globally, the copper price has breached US$11,000 and an all-time high and now we are into the crazy world where short sellers are being squeezed, and having to buy their way out of the frenzy which bids up the price further.
You may recall we reported a sharp rise in bulk cargo freight rates last week. Well, it was temporary and they have now fallen back to the prior week's level now. But containerised cargo rates are still rising as fast as they did last week, up another +11% this week and are now double year-ago levels. All this is driven by outbound-from-China rates roiled by the persistent Canal and security problems.
The UST 10yr yield is now at 4.38% and up +2 bps from this time yesterday. The key 2-10 yield curve inversion is deeper at -42 bps. Their 1-5 curve is shallower at -73 bps. And their 3 mth-10yr curve inversion is shallower at -99 bps. The Australian 10 year bond yield is now at 4.26% and down another -7 bps. The China 10 year bond rate is up +2 bps at 2.32%. The NZ Government 10 year bond rate is now at 4.63% and down -9 bps from yesterday.
Wall Street is in its Thursday session unchanged on the S&P500 in late trade. Overnight European markets fell -0.7% except London which fell -0.1%. Yesterday Tokyo ended its Thursday session up a strong +1.4% and Hong Kong rose +1.6%, but Shanghai was only up +0.1%. Singapore ended up +0.5%. The ASX200 ended its Thursday session up +1.7%, and the NZX50 rose the most of all markets we follow, up +1.8%.
The price of gold will start today down -US$10 from yesterday at US$2379/oz.
Oil prices are up +US$1 today to just under US$79/bbl in the US while the international Brent price is up +50 USc, now just on US$83/bbl.
The Kiwi dollar starts today with a slight easing from yesterday at just on 61.2 USc. Against the Aussie we are up at 91.6 AUc and a new one month high. Against the euro we are unchanged at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2 and little-changed from yesterday.
The bitcoin price starts today at US$64,946 down a very minor -0.2% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.6%.
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60 Comments
UK farmers still whining for agricultural protection - who knew
"Morrisons has received backlash from angry farmers as it trials the sale of New Zealand lamb instead of 100% British lamb in 39 of its stores."
The National Farmers Union (NFU) said it was "disappointing" at a time the British livestock industry was under pressure and that New Zealand lamb is "produced to potentially lower standards".
https://bbc.com/news/articles/cjewewxzypro
UK is more or less self sufficient in sheep meat production. Brexit then meant that UK exports to the Continent would be tariffed, that was a stopper. NZ chilled fills a seasonal gap but otherwise it’s head on competition. Broadly speaking and in theory, NZ has then the opportunity to replace the UK lamb in the EU because it has a quota. Not as simple as that though.
I think years down the track these empty crumbling apartment towers in China will be looked on as art like the buried soldiers are today.
The Terracotta Army is a collection of terracotta sculptures depicting the armies of Qin Shi Huang, the first emperor of China. It is a form of funerary art buried with the emperor in 210–209 BCE with the purpose of protecting him in his afterlife.
That's an interesting idea you can sell to president Xi. If NZ with 5m inhabitants can process 100,000 immigrants per year for the last 20 years then China with over 1,000m population could search for 20m foreign immigrants each and every year. It would reduce their problem with demography and their economy would no longer be held back by a lack of diversity.
Burry changes his positions seemingly on a whim. He doesn't buy for the long so this isn't a sign of him putting confidence in chinese tech stocks but rather a short-term inefficiency. he makes some real howlers at times, but rather than double down dumps his positions and moves on
The version of the plan I read was to have the local government purchase those unsold properties at a discounted rate and use those purchases for social housing and social rental housing. Basically govn spending for social house while solving the current issue. TBH, could be a good way out.
I've been chatting to a friend who has been doing piling work down the coast of late. Still a few Aucklanders moving down there to retrofit old run down homes to live off grid with solar, the odd micro-hydro generation, and still have a large chunk of money to invest and live off of int he interim, while still working remotely on AKL salaries.
Since 2021, #ElSalvador has mined nearly 474 bitcoins using a volcano-powered geothermal plant. This has brought the government's total #bitcoin portfolio to around USD $354 million at current prices, with a total holding of 5,750 bitcoins.
Maybe Shane needs to go have look as he loves mining?
Jones' undeclared dinner had two more mining industry attendees
Why not? At least the performers can afford to buy houses.
https://www.realestate.com.au/news/ill-never-work-another-9-to-5-job-in…
Imagine telling someone even 30 years ago that they would be able to harness the power of a volcano to generate electricity, which would be used to do complex math problems, which would generate digital 1's and 0's that are worth real world money to a large-ish sum. Mindboggling
Please explain how this is 'wasting energy'. There is no demand for this electricity from anyone else. If there was then it wouldn't be economical to mine. The state-owned power plant runs on geothermal energy from the Tecapa volcano, it produces 102 megawatts of energy, out of which 1.5 megawatts are dedicated to Bitcoin mining.
If you want to talk wasted energy. The physical limits of the process of creating electricty (from all sources combined), means only 35% of the energy in the raw materials actually make it onto the grid in the form of electricity. That's when they are even trying to use it. Massive amounts of energy is wasted every day. Most of the natural gas byproduct from oil extration for instance is simply flared off, huge amounts of it. The same with gas created from landfills. BTC Miners are starting to be situated in both these places to actually use this energy. Then once all of this electricty is created, a further 6% is then wasted in the transmission and distribution process anyway. Things like solar or wind often produce most of their electricity during the day when demand is low. Since we can't store it effectively, much of it goes to waste. again having BTC miners to soak up unwanted (thus super cheap) electricity is incredibly valuable.
We have no shortage of electricity production worldwide, we have a shortage of demand. Like the solar / wind example above with a timing problem. There is also huge issues with stranded energy, where there is an oversupply, but its too far to transmit to where the demand is. This is usually from renewable sources due to where they are situated. And then places with no production (many places in Africa or rural America for instance) because of a lack of enough demand. It's simply uneconomical to justify producing it by building a power source. Bitcoin mining solves both of these problems in a highly effective manner. By situating miners at the source you get a baseload of demand that is always there. They can then voluntarily curtail when the demand from other users in the grid is there (more demand means higher prices = unprofitable and they instantly shut off). This is perhaps the only industry that can do this on demand.
"And the real state of retailing in the US can be tracked by the activity of their largest retailers - and the largest is Walmart. They said Q1-2024 sales levels were strong, growing far more than inflation."
Walmart has less than 10%. Would be like attributing retail spending strength in NZ to just the Warehouse or Farmers.
If you want to understand the economics, politics & geopolitics behind Biden’s imposition of 100% tariffs on Chinese EVs - & if China will retaliate or the EU will emulate, I recommend this chat with Michael Froman, pres of Council on Foreign Relations https://on.ft.com/4bpjvdR Link
Not sure that Beijing will notice that much. After all everything that Trump imposed has been contained and accommodated.Right now Putin is visiting and it is similar story for those sanctions etc too. The two leaders can discuss the gigantic sphere of interest and influence the two nations hold geographically, economically and politically. Putin can explain that plan B, being patience, perseverance and protraction, is now bearing fruit with a buffer to become a salient to become a front to attack in north east Ukraine, thence Kharkov now that Ukrainian resistance has been thinned and exhausted down in the south east. Watch this space.
FG. Suggest you might be calling Putins buffer plan as 'bearing fruit' a little soon. Credible military analysts note the significant slow down of Russia's advance over recent days in the face of stiff Ukrainian resistance. And this is before the latest western aid package arrives in meaningful volumes. RU armoured reserves have been reduced to critically low levels and while Putin is exploiting a massive advantage in dumb artillery, heavy aerial glide bombing capability and a willingness by his incompetent top brass to squander their soldiers lives, the imminent arrival of fresh UKR munitions and F16's with shoot and scoot air to air missile capability will rebalance the scales somewhat.
The buffer FG refers to is on the western border of the Donbass region which is part of Ukraine but which Russia partially invaded and is now attempting to widen its territorial occupation of. The Eastern border between the Donbass and Russia lies well to the west of this currently contested 'buffer' area so there are no restrictions on UKR bombarding Russian forces located across the 'border' between UKR and occupied Donbass.
Hardly.
Putin and Xi are holding a meeting, with their nuclear briefcases at the ready, while Biden is reportedly feeling anxious and uncertain elsewhere. This is a concerning development. #nucléaire Link
MM. As discussed some weeks back it remains to be seen what further mobilisation Russia might enlist, if they can and as well to what extent they have been holding back their good stuff while expending their not so good and old stuff down south. The Russian civil war and the world wars established the Dnieper and Kharkov as the keys to holding Sth East Ukraine because it is very difficult to attack through the built up Donetsk industrial and urban belt to the south. The Russians can skirmish away here as they see fit and as the Ukrainian counter offensive failed they have secure lines whereas the Ukrainians are open to any Russian advancement front the north.If the Ukrainians have not recognised this and not reinforced their defences up north , they will likely be in quite some trouble. The Russians have been slow here for sure but it won’t matter if the attrition is now taking its toll on Ukranian defences.
MM.Not sure about your theory RU has been holding back their 'good stuff '. If you mean the T14 Armarta tank which is supposed to be 'state of the art', yes they have but they have only relatively low numbers of them and early indications are that it's likely a fizzer with similar vulnerabilities as previous designs. Meantime RUs best T90 'breakthrough' tank has proved highly vulnerable and is being lost in unsustainable numbers. Its naval fleet is confined to port and while it currently has an aerial advantage in stand off bombing the looming threat of UKR achieving over the horizon capability on F16 platforms is likely to be a game changer in the air battle. The available international fleet of F16's hugely outstrips Russias ability to replace its aviation losses.
Your observations about the historic physical barriers to Russian eastward expansion are valid but I don't see the Ukrainian summer offensive as having been a strategic failure - in the sense that it failed to take back more of its territory yes but in a critical manpower and materiel loss sense no. UKR tactically held back its key resources rather than engage in an attritional struggle with RU which it couldn't win. They realised that without the required air cover a land recovery campaign was unwinnable.
Suggest Kharkiv is not the Russians target. They know they'd exhaust themselves trying to take it. A buffer zone to protect the Belgorod area is likely to be the limit of their ambition for now. Possibly why Kirby gave UKR a bit of rope this week - as a warning to the Kremlin mafia that a buffer zone won't save them because the US will now allow UKR to use its supplied ordinance across the (true) border with RU. Stormy Daniels Orangeman mate is now Putins best hope of achieving his ambition to grab its neighbours land.
Hey I’m FG you’re MM. Before Prigozhin went dog he made a the prediction that revealed an overall strategy in that it would be at least two years before the east bank of the Dnieper could be secured in a significant length. Just as much as Trump needs to win to pardon himself for what he has done, hasn’t done and is yet to do you are right his intervention in Ukraine likely would be a welcome game breaker for Putin. Given Prigozhin’s above comment the Dnieper offers a historical and significant hard border and Trump may well think to declare that as being Ukraine’s new eastern border. However to secure that vast region you also need to control the northern approaches, thus Kharkov the major vital juncture. That’s why the Wehrmacht and Red Army fought four major battles for the city. As expressed in earlier posts Putin will be in trouble if Russia does not achieve significant inroads this summer. And yes the orange man is certainly the proverbial in the woodpile.
Oh, yes. Tks. Biden moment. Agree with you that almost certainly the Northern Donbas east of the Dnipro is now Putins revised target and as you observe an easy Sudentenland/Alsace Lorraine style approach for western appeasers to settle on in the vain hope Putin will stop there. Crimea a rather different story where the Ukrainians will be be fiercely resistant to being forced to accept Putins thievery and due to geography it is less difficult for UKR to regain and hold. While Trump will be personally willing to throw Donbas to the Russian jackals, powerful European anti Russian sentiments have been aroused by the Kremlin thug's invasion so Orangeman is at risk of turning the EU against the US if he actions his facile reasoning on UKR.
I found the most important concession that Obama's chief China Negotiator has to say was basically how badly the Obama Administration tolerated and overlooked the crux of the problem, and even more profoundly that from the start of Clinton Administration's Free Trade openings with China they got it very badly wrong for the American worker, and caused massive declines to the earning of the American Middle Class, and it was because of that "looking the other way" that finally President Trump took on the Chinese. Here is what the President of the American Council of Foreign Relations finally admitted:
You know, if you go back as far as the postwar period, it helped Europe and Japan rebuild. I think all these have been very important contributions of the rules-based trading system. I think the challenge is that the rules that we put in place, including through the WTO, were not terribly well suited for an economy as big and important as China’s that follows a very different set of rules. So if you look at the WTO rules, they’re not very strong on subsidies. They’re not very strong on state-owned enterprise disciplines. And I think China was able to exploit the weaknesses in the global trading system and then just violate a number of the rules as well.
Years ago I read a column in one of John Mauldin's news letters in which he shed light on how this "overlooked" aspect of the China deal came about back in '99. He said the rumor was that Clinton had Commerce Dept officials working on the China deal but they could see what China was trying to get away with so the deal wasn't happening--but Politics usually trumps all-and so because he needed a win to take attention away from Monica Lewinsky he sent in the State Department to do the deal, and in no time at all Mrs Albright proceeded to give away the shop floor of American Manufacturing, and got the deal done,- and as they say the rest is history.
Such parallels a with the climate change industry and the and virus research industry.
David Morens' email to @PeterDaszak:
"I learned from our @NIH FOIA lady how to make emails disappear after I am FOIA'd but before the search starts so I think we are all safe. Plus, I deleted most of those earlier emails..."
"Mike,
Can you delete any emails you may have had with Keith re AR4? Keith will do likewise… Can you also email Gene [Wahl] and get him to do the same? I don’t have his new email address. We will be getting Caspar [Ammann] to do likewise.
Cheers, Phil"
https://www.theguardian.com/environment/2010/feb/09/freedom-of-informat…
LOL, funny how as the planet heats, those in denial keep scrounging around for irrelevant muck. The oil industry have zero doubts they are frying the planet.
https://m.youtube.com/watch?v=FGVW9vJ773k&pp=ygUfRXh4b25Nb2JpbCBzY2llbn…
But they keep funding their useful idiots anyway.
The Oil industry arent frying the planet... !!!!! FFS
You & I and all the other wanabee "greenies" out there are - We are the ones consuming stuff with a standard of living like kings of old. Stuff which ALL comes courtesy of Fossil fuel.
If you want green, walk.
If you really want green, close all your bank accounts.
That will show those nasty Oil salesmen forcing your standard of living on you ...
The gaping hole in your meme is that it's impossible to live on this planet without the effects of 8 billion others using the fossil industries planet frying excreta. It's all, or nothing. I could go bush and wear possum skins, eat fern roots and live in a rotted out tree, but some entitled fossil burning freak would soon push me out, because burners own the planet.
Nah, the oil industry prevents system change that would move us away from fossil fuels. They have to be reigned in as they have too much power for individuals on their own to resist them, just like the tobacco companies.
We don't need to all close out bank accounts or never drive a car again, etc...
It does mean we (the richest of the rich) need to change our lifestyles but it doesn't have to make us worse off. Material and resource overconsumption hasn't made the world a happier place.
Australia
That means 593,000 of their 14.9 mln labour force are without work.
Hmmm
Migration rose by one-third last year to lift Australia’s population by a record 659,000
www.theguardian.com/australia-news/2024/mar/21/migration-numbers-austra…
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