Here's our summary of key economic events overnight that affect New Zealand, with news inflation's rocky roads are smoothing out in some places but not everywhere you look
First in the US, PCE inflation steadied at 2.7% in April from the same month a year ago, and the monthly rate held at +0.3%. But the core PCE price index, the Fed’s preferred gauge to measure inflation, rose by +0.2% from the previous month in April after a +0.3% increase in March, the slowest increase so far in 2024, and below market expectations of a +0.3% rise. Even though these changes were actually tiny, the easing bias did move financial markets (and probably by more than they deserved).
The monthly rise in personal consumption expenditure was pretty tame in April, and was matched by an equally tame monthly rise in personal disposable incomes.
American petrol pump prices are now lower than a year ago, as weakness and oversupply spread in global oil markets. OPEC is about to meet. (The EU is getting the same lower price advantage.)
Meanwhile the Chicago PMI in its midwest heartland manufacturing zone sagged rather more than expected in an unexpected signal. It is now at a 4 year low.
Canada said its Q1-2024 GDP expansion was +0.4% to be +1.7% higher than year-ago levels. But a -25 bps rate cut to 4.75% is still expected on Thursday this coming week.
India's Q1-2024 GDP expansion came in larger than expected at +7.8% higher than year-ago levels. Analysts were expecting a +6.7% expansion, but it has maintained the "about +8%" rate they have delivered for four consecutive quarters now. Over the past year the expansion is +8.2%. Given India's rising heat and water stress levels, it is hard to be confident it can maintain that level of expansion for long.
India's gigantic nation election cycle is ending this weekend, and the nationalist BJP Party is expected to win again.
Japanese retail sales made good gains in April, up +2.4% from a year earlier and above the +1.9% rise expected. But some of this was catchup from the modest +1.1% rise in March. But Japanese industrial production was little-changed in April, a hesitation after their large +4.4% rise in March from February. Still, they have some more recovery required to peg back the prior declines.
After two months of small expansions, the official China factory PMI contracted in May. A small expansion was expected again in May, so this will be a disappointment. Meanwhile their official services PMI is still expanding, but at an unchanged and low rate.
The EU reported that Euro Area inflation rose to 2.6% in May, boosted by services (+4.1%) and restrained by low oil and energy prices (+0.3%). Their core inflation rate therefore is rising, up +2.9%.
The bromance between Europe and China seems to be be fading fast. Reports out today say that major carmaker Great Wall Motors has closed its EU headquarters and released all its employees in a major pullback from is European ambitions. Apparently product acceptance in these markets was surprisingly weak. And Chinese EV battery makers are reassessing their grand expansion plans there too.
In South America, it is becoming clear that a major Spanish bank, Santander, has been hacked and banking records of 30 mln customers are now available on the 'dark web'. The bank acknowledged the hack a couple of weeks ago, but the size of the breach is only now becoming apparent.
In Australia, announcements are expected this week on updating their minimum wage from July 1, 2024, currently AU$23.23/hour (NZ$25.15). Many expect the rise to be +4%. Given that CPI inflation is 3.6%, such a change may be seen to undermine their progress in getting inflation down there which may encourage the RBA to dig its toes in.
The UST 10yr yield is now at 4.50% and down -6 bps from yesterday. But that is up +5 bps for the week, but down -17 bps from the start of May. The key 2-10 yield curve inversion is little-changed at -38 bps. Their 1-5 curve is deeper at -66 bps. And their 3 mth-10yr curve inversion is also marginally deeper at -85 bps. The Australian 10 year bond yield is now at 4.46% and down -1 bp from yesterday. The China 10 year bond rate is little-changed at 2.33%. The NZ Government 10 year bond rate is down -9 bps bps at 4.87%. A week ago this rate was 4.84%, a month ago it was 4.96%.
Wall Street has ended today with a late surge on the S&P500, up +0.8%. That locks in a flat week, but also a strong +5.2% rise for the full month. Overnight European markets barely changed. Yesterday Tokyo ended its May with a +1.1% rise to limit is weekly drop to -0.7%. But it was up +0.6% for the month. Hong Kong ended its Friday down -0.8% on the day, down -2.8% for the week, but down a lesser -0.7% for the month. Shanghai was down -0.2% yesterday while Singapore rose +0.4%. The ASX200 ended its Friday trade up almost +1.0% to be down only -0.4% for the week, and up +1.7% for the month. The NZX50 ended its Friday trade up a spectacular +2.7% on the day to be up +0.7% for the week and taking it back to the same level it started the month.
The Fear & Greed index has moved back into the "fear" range as risk appetites ease further. This is where it was a month ago.
The price of gold will start today down -US$17 from yesterday at US$2326/oz. And that is -US$8 less than a week ago, but +US$32 higher than at the start of May.
Oil prices are down -50 USc at just under US$77/bbl in the US while the international Brent price is down -US$1, now just on US$81/bbl. These levels are -US$1 lower than where they were a week ago, down more than -US$4 from where we were at the start of May.
The Kiwi dollar starts today marginally firmer from yesterday at just under 61.4 USc. That is nearly +¼c higher that a week ago, +2½c higher than at the start of May. Against the Aussie we are nearly +¼c firmer at 92.4 AUc. Against the euro we are also marginally firmer at 56.6 euro cents. That all means our TWI-5 starts today at just under 70.7, up +10 bps from yesterday and a week ago, up +190 bos from this time last month.
The bitcoin price starts today at US$67,245 and down -3.2% from this time yesterday. From this time last week, this price is down -2.5%. From the start of May, up +11.6%. Volatility over the past 24 hours has been moderate at just on +/- 2.1%.
Also note, Monday is a public holiday in New Zealand.
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86 Comments
Not convinced we are there yet. Euro may see a slight drop in rates but then a long hold. US will wait to check the slowdown in spend is persistent and make sure its habitual... i reckon 2 months away.
For us it's 2025 maybe q1 (earliest) if Xmas retail is a disaster (likely). For sure they will want to see the impact of govt and business job cuts and tax cuts... they start August so we won't see anything soon (interestingly I reckon it we hadn't had the tax cuts then rates would drop sooner and most people would have saved the same amount on interest payments/rents and less inflation
I used to watch this guy, and some of his perspectives seem pretty accurate. But after a while he just comes across as another George Gammon, after a year or so, there's only so many "the charts show this JUST HAPPENED, things have changed and we're all screwed" videos you can watch before you can't take the hype seriously.
Seems to be the thing with economics, people are so much more interested in a “world is going to end” prediction than a “nothing to see here” or “things are looking up”. An economist the predicts “nothing to see here” all the time will be correct significantly more than one that predicts “world is going to end”, yet he will go unnoticed.
Indeed 2. I have been saying for some time that the next crash will come from the CRE market. What is uncertain, is when this will happen. At what point are the banks and financiers of CRE no longer willing to fund an over valued asset? Once a bank calls in the bad loans, the collapse will be sudden and fast
Where were they before this started,, in rentals which had no cause evictions and rentals without HH standards. Were the tenants happy paying cheap rents in a place they called home... hell yes. Are they happy bunged into compact motels that dont have HH standards, where their kids hang out with undesirables... hell no
Well done labour, you did great at managing rentals making up well-intentioned rules
"Are they happy bunged into compact motels that dont have HH standards, where their kids hang out with undesirables…"
A typical pre-conceived idea.
1) Most motels have good standards because otherwise guests and corporates would not stay in them
2) The "undesirables" as you put it, are the WINZ people who move from one place to the other because of their antisocial behaviour, not regular guests and corporates.
As expected Nicola Willis delivered a responsible Budget on Thursday. But I did not expect this on Friday.
".......The NZX50 ended its Friday trade up a spectacular +2.7% on the day to be up +0.7% for the week and taking it back to the same level it started the month...."
Looks like end of quarter rebalancing, big spikes on stocks at the close of play as the big boys sort out their positions. Plus a nice kick for the electricity companies thanks to the smelter agreement.
Will have to see if prices stay up on Tuesday or if we drop the spike.
That's an interesting observation, but it's not entirely accurate. While some countries with high longevity, like Japan and Italy, do have cultures where moderate alcohol consumption, particularly of wine, is common, it's not the sole factor contributing to their longevity. Other lifestyle factors such as diet, social support networks, physical activity, and healthcare systems also play significant roles. In fact, excessive alcohol consumption can have detrimental effects on health and longevity, so it's important to emphasize moderation and balance in all aspects of life.
Uh-oh - official leak?.
US to offer Ukraine security pact as tensions rise between allies
You can see a substantive shift in rhetoric around support for Ukraine in the last few months. Much of it not doing much short term, but it does seem like the US/Europe are slowly working out they can't afford to sit too idle while other countries flex expansionist muscles. Spreading wildfire effect and that sort of thing.
A lot of noise was made about the $61b support for Ukraine but not about the funds allocated in the same bill for Taiwan, which is trying to front run any expansionism from China. Cheaper in the long run to make an invasion untenable than to have to backfoot one once it happens.
Ukraine & its support from the West have realised that Russia has woken up to its history in that the logical route for invading Ukraine is bypassing the Dnieper River to the north. That puts Kharkiv squarely in the frame as it was in WW2, four major battles. It is even more surprising that Ukraine itself has been found wanting here with little defence works prepared. Given Russia’s immense difficulties in capturing smaller towns to the south it remains to be seen if they could succeed at Kharkiv, Ukraines second largest city . However the Baltic States and Poland know full well that if Russia does get through this doorway it is a much better prospect to fight them here rather than on their own borders.
I think Russia's complete ineptness in the initial stages of the war and wild unpredictability led the West to think they could get by using kid gloves and a minimal amount of input.
But they have adapted, and geared up their munitions supply significantly, that war machine is a much more serious threat than it was 2 years ago.
Kharkiv has been left relatively undefended, because Russia doesn't have the resources to take it while operating the front they have elsewhere. Fairly easy to stage operations somewhere unexpected (likewise with incursions into Russia from Ukraine), another thing entirely to develop it into a new front.
Tend to agree. Getting to mid summer and unlikely sufficient time to mount such an offensive even if Russia had the means. Thus another stalemate over winter. That likely could be problematic for Putin if questions are able to be raised as to exactly what he has achieved apart from thousands of casualties and depletion of Russian armaments and munitions.
Falling over quickly doesn't mean the length of time the regime exists, it's the speed at which they fall over, once they fall over.
Partially due to the ability of the regimes to obfuscate fissures and cracks, and also because of the fragility of power mostly wielded by gunpoint.
The west didn't really have a choice about adopting incrementalism. Tip toeing over Putin's red lines, and Medvedev's vodka soaked rants about nuking everything not bending before Tsar Putin the greatish, is expedient.
At some point the Kremlin will get the message. It's graveyards of rusting Soviet armour are nearly empty and those pretty white boys marching in red square can't be sacrificed, as they are the spawn of Moscow elites. Trawling the planet for the desperate willing to sign contracts with promises of riches and citizenship that will never be collected, are the only things keeping the Russian land grab afloat.
https://kyivindependent.com/russia-speeds-up-recruitment-of-mercenaries…
The second Yuan empire no doubt .Here comes the reclamation of the ancient legend of the Khans, Genghis & Kublai, to be exact. Makes sense when China’s massive military is understandably mostly geared to the wide ranging plains that lie westwards. Of course a great deal of that old empire is now Russian or only recently ex Russian. Who could possibly tell where the real ambition(s) of inscrutable China might be then. Nothing like a long winter weekend for idle speculation.
No, when they were running hot early on they should have seized Gibraltar and sealed off the Med supply lines. Except Franco wouldn’t provide the land bridge, stared ‘em down in fact. Hence the famous “having your teeth pulled” remark after said meeting between the two dictators. But no doubt you have absorbed by now V D Hanson - “The Second World Wars,” and leaving aside the opinion therein, the figures and stats detail explain just how much, despite their military skills, the Axis was industrially outclassed and outweighed. Replay of the American Civil War, in the same sense. Oh and leave Italy out of the Axis consideration as Field Marshall Milch exclaimed at a summit - the best way we can win this is to get the Italians to fight for the British.
Rather, the near 8,000-word joint China-Russia statement evokes the very elemental laws of nature itself in sketching the West’s usurpation of the fundamental principles of humanity, reality, and order – a critique which maddens the collective West.
Most valuable maybe. With over a couple million Russian testicles fleeing the country in 2022 and hundreds of thousands being ground up in Ukraine, the greatness is quickly diminishing. And with a really low birth rate, and fairly repellant to potential migrants, won't be returning anytime soon.
Light entertainment for fun loving testosterone. Just an average day in Flyshitski Russia. If only more of the planet could enjoy the sophisticated culture of Russki Mir?
https://www.reddit.com/r/UkraineWarVideoReport/comments/1d2zfxj/russia_…
PayPal launches PYUSD stablecoin on Solana blockchain
“PayPal USD was created with the intent to revolutionize commerce again by providing a fast, easy, and inexpensive payment method for the next evolution of the digital economy,” said Jose Fernandez da Ponte, SVP of the Blockchain, Cryptocurrency, and Digital Currency Group, PayPal. “Making PYUSD available on the Solana blockchain furthers our goal of enabling a digital currency with a stable value designed for commerce and payments.”
Who was it that said Biden cant string two sentences, was it the one who has just been convicted. Clear and powerful speech
The countries subject to American sanctions have formed a trading bloc that have a sufficiently developed economy to confront the United States.
- WSJ
Despite the restrictions imposed, Russia, China, Iran, Venezuela and North Korea continue to actively trade.
Western sanctions and export controls were meant to subdue America’s enemies, leveraging the power of the dollar to strong-arm governments into submission without the bloodshed of military force. They have inadvertently birthed a global shadow economy tying together democracy’s chief foes, with Washington’s primary adversary, China, at the center.
https://www.wsj.com/world/how-america-inadvertently-created-an-axis-of-…
That the outcasts of the system would collude should be a reasonable assumption, and not much of a surprise.
The real question is how solid the alliance is, given most of the members are a) fragile dictatorships, and b) not very good friends with one or more of the other alliance members.
No, it's implying one group has problems and another might have much worse problems.
It's fairly rare to have any relationship, state, company or individual being 100% stable, reliable and righteous, but there's also degrees of dysfunction.
Sorta like how many right wing types are Putin (or Trump) fans, on the basis they throw shade on much of the establishment, or act in opposition to it, whilst being far worse than that which they criticize.
I'd say you're probably right, but that doesn't really illustrate the complications of a Putin style regime vs an Australasian democracy. For a start, neither Australia or NZ are as likely to involve themselves in something that'd result in such widespread international condemnation. That Russia produces significant fossil fuels, which will always find some sort of market, is fortuitous for them, but not the result of any sort of leadership prowess. If not for that, they'd be another North Korea. If you can't distinguish how much worse a North Korea regime is from that in the Sth, pretty hard having much more of a conversation about lesser evils.
Don't have a WSJ sub so can't read the full article. We can call it an own goal, but the ability (or lack thereof) of certain governments to survive and thrive in the global rules based order is always on borrowed time. Enveloping these countries into that order was deemed preferential, because you're less likely to engage in hostilities with a trading partner.
Just let me know when global migration patterns start gravitating towards these places instead of the West.
Thoughts please ... Is this worthy of a press complaint?
"By NZAS agreeing to cut back production when the system is stretched, Tīwai - which consumes about 12 per cent of New Zealand’s power supply - has become its biggest battery."
Source: https://www.nzherald.co.nz/business/how-tiwai-point-aluminium-smelter-j…
(1) There is no "battery" involved. (2) The supply agreement is secret, so who is to say consumers don't get charged higher rates for electricity when the plant should have been shut down, but isn't?
"A capacitor takes energy and retains it, usually for rapid discharge."
Please do explain how an aluminum smelter takes in electrical energy "and retains it". (lol)
"Given most people don't know what a capacitor is, you'd dumb it down to be a battery for mass consumption."
(Wow. Just wow. A hitherto unreached level of pomposity, even for you, Pa1nter? But no. Occam's Razor suggests that comment comes from a darker place.)
Just an FYI ... Capacitors have been used for electrical backup supply, temporary electricity storage / buffering, i.e. batteries in common parlance, for decades.
The battery theory (and it's a theory adopted in several places around the world, including Norway), is that when energy (particularly renewables) are abundant, a smelter massively ramps production using all that surplus cheap energy. Then at times of peak grid demand/lower supply, it scales things down, freeing up power for the rest of the grid.
The "storage" in this instance is based on viewing the electricity requirements of a smelter over much longer timeframes than short term spikes.
The head dude at Mercury has made comments about this deal solidifying their plans for expansion of wind generation in NZ, so potentially it may involve financing wind generation - if Rio Tinto can make a case for being carbon free that works in their political favour.
It's more complex than what you can reasonably afford to involve in a headline article for a mass consumption newspaper.
Occam's Razor also doesn't work as well when you're seeing red.
I'll try and make it simpler for you:
- a smelter is neither a battery, nor a capacitor in the traditional sense.
- in the context of viewing a smelter as part of an electrical grid, and dialing down consumption along the lines mentioned, as there is no electrochemical process involved, a capacitor is a more apt metaphor than a battery.
My biggest blunder is attempting reasonable discourse with you. I get the feeling that the messenger ends up removing any sense of objectivity you may have.
The plot thickens. Europeans can now only place sell orders for Sprott’s PSLV & PHYS gold and silver funds. They can still buy GLD and SLV, which are subject to rumors that they don't actually have the underlying physical metals.
KWN says "this is what happens when the elites are on the wrong side of the trade, heavily short gold and silver while those markets have traded against them, they simply change the rules."
https://kingworldnews.com/wtf-europeans-can-now-only-place-sell-orders-…
There's another crowd who claim to hold allocated physical gold for you. Bullion Vault have "offices" in UK, Singapore and the US. Vaults holding the physical gold there as well. Why only Sprott's affected? Are any of these companies claiming to hold allocated physical gold audited?
Thanks but I still get the impression even though exchange traded funds they actually hold physical allocatedgold. From their website.
Goal. Provide a secure, convenient and exchange-traded investment alternative for investors who want to hold physical gold without the inconvenience that is typical of a direct investment in physical gold bullion.
My interpretation is you can only sell because if you bought they do not have the physical gold to allocate to you. loaned out to the short sellers? If you sell they can then get their books in order to match gold holdings to to those who thought they had physical gold but by some accounting chicanery you never had the physical gold.
If the big boys short they would have to borrow from somewhere, perhaps PHYS themselves and then buy back the gold at a higher price. Here I can see Sprott blocking any new purchases so they can favour the big boys. Not sure if that makes sense.
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