Here's our summary of key economic events overnight with news that will all be overshadowed tomorrow by two key pieces of US data, their CPI and the Fed monetary policy decisions.
Today, the American Redbook retail indicator came in +5.5% higher than year-ago levels, continuing its track well above inflation and showing a positive retail impulse in the world's largest economy.
And the NFIB Small Business Optimism Index rose in May to its highest in five months. So again, no real stress signs there.
Canadian building consent levels came in much better than anyone expected in April. The total value of building permits increased by 20% month-on-month, the most since May 2020, after a -12% decline in March. Residential permits were up by 21%. That means they are +30% higher than year-ago levels, a surprisingly strong surge.
And staying in Canada, their government is proposing an effective hike in their capital gains tax (by raising the 'inclusion rate' from 50% to 66%), a move that business interests say would hurt investment. But the IMF is now saying that is probably just scaremongering. The IMF wants Canada to go further, also raising its 9% GST rate while raising a related tax credit to shield the poor.
In Japan, their machine tool orders were up +4.2 in May from a year ago. While this isn't spectacular, it looks like there is a trend reversal underway from the previous twenty-one months of declines.
In Hong Kong the dollar cost of China's security embrace of the once-great financial center is starting to become clear. They are coming up to five years of falling commercial real estate values as the shift out gathers pace. Bloomberg is reporting that those real-estate value losses now exceed -US$270 bln (-NZ$440 bln). Of course, no-one knows where it will settle, but the funk is deepening faster at present, not slowing down.
Values are being marked down over the past few days on their major stock exchanges too. Over the past month the Shanghai stock exchange has fallen -4%, the Hong Kong exchange is down -5%. Sentiment is certainly leaking away in China's investment community. And China-linked commodity prices are easing lower too, especially mineral prices. Copper, iron ore, and rebar steel are all lower, as are soybeans, for example. The imminent visit from the Chinese Premier (not President Xi) has the aura of representing a fading force in the international trading world.
Meanwhile, India, despite a projected slowdown this year, will continue to be the world's fastest-growing large economy, according to the World Bank's latest Global Economic Prospects report.
Australian business sentiment isn't improving either. In fact, business confidence there fell back into negative territory in May as conditions continued to gradually soften, suggesting the subdued economic activity seen in the Q1 GDP data has continued into Q2. Business conditions slipped just below average with trading conditions and profitability easing.
The overnight dairy Pulse auction had prices retreating somewhat from last week's good full GDT event. But the lower levels probably aren't significant at this stage.
The UST 10yr yield is now at 4.40% and down -7 bps from yesterday. The key 2-10 yield curve inversion is a little more at -43 bps. Their 1-5 curve is also more inverted at -76 bps. And their 3 mth-10yr curve inversion is more at -94 bps. The Australian 10 year bond yield is down -5 bps at 4.34%. The China 10 year bond rate is unchanged as usual at 2.32%. The NZ Government 10 year bond rate is now at 4.80% and also unchanged from this time yesterday.
Wall Street in its Tuesday session has the S&P500 little-changed. Overnight European markets were sharply lower with London down -1.0%, Frankfurt down -0.7% and Paris down -1.3% lower. Yesterday Tokyo ended up +0.3%. But Hong Kong was -1.0% lower and Shanghai were closed down -0.8%. Singapore ended down -0.4%. The ASX was down its own sharp -1.3%. But the NZX50 ended its day essentially unchanged.
The price of gold will start today back unchanged from yesterday at US$2313/oz.
Oil prices are still at yesterday's level of US$77.50/bbl in the US while the international Brent price is just over US$81.50/bbl. But they have been volatile in between.
The Kiwi dollar starts today at just on 61.4 USc and up about +20 bps from this time yesterday. Against the Aussie we are up more than +¼c at 93 AUc. Against the euro we are also another +¼c firmer at 57.2 euro cents. That all means our TWI-5 starts today at 71, and up +20 bps from yesterday.
The bitcoin price starts today at US$66,780 and down a rather large -4.7% from this time yesterday. Volatility over the past 24 hours has still been high at just on +/- 3.0%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
39 Comments
He inserted the brackets purposely.
Life is dissipative - the flipside being that overshoot is easier to enter, than to parry.
Make the time to watch/listen - at this juncture we could do with reasoned rebuttal, rather than the usual dodging. I look for it - have read everything Lomborg and Allenby have ever published (DC is - was? - a Lomborg fan) for that reason - but the arguments are deflective; sometimes outright falsehoods (a falsehood example is stating that Western nations are reducing their greenhouse gas emissions, without acknowledging offshoring). Deflections often identify themselves by altering metrics; avoiding comparisons of apples with apples.
"You too can become a word salad fear mongering robot like PDK"
Im not a scientist and neither is PDK, I know others who are proper scientists who look at all the facts and disagree strongly with the conclusions that PDK draws from his biased fixed standpoint
I'd like to know why so-called conservation minded politicians like James Off-shaw are so hypocritical doing the opposite of what an environment caring person would do. The video presenter clearly prefaces the impact of jetliners but James and his motly crew blundered ahead attending the COP conference in person. Along with Gretas clones
Interesting fact hidden half way in this FT article (https://ft.com/content/60c825be-b70a-4152-895f-f6127974570a) on the rule of law being "in danger" in Hong Kong: "[There's] a growing malaise in the Hong Kong judiciary. Hong Kong’s judges have been threatened with sanctions in the US, an idea that is crude, counterproductive and unjust." Is it respectful of the "rule of law" to threaten judges of another country with freezing their assets if they stay in their post? Link
The editorial tone on China seems to have changed a bit in the last year or two. I guess the data backs up the downcastness.
I have certainly been a China bear for a long time, and still am. But having visited there recently, I am not quite as pessimistic as I was. Everyday people show a lot of enterprise. That willl mean something. But certainly structural factors are not in the country’s favour.
But are they anywhere???
Chinese factories contribute 35% to global gross manufacturing. The country has placed itself in an indispensable position to benefit from the global push towards electrification and decarbonisation.
We're in no position to throw stones here. Read an article yesterday that ranked countries on their dependence on agricultural goods exports. Amongst mostly low-income nations like Ethiopia and Malawi was NZ at #11.
Chinese enterprise.
I was driving through Albany one Saturday morning. Went past some Chinese guys putting up a fence. Big fence, tanalised, kiwistyle.
My brother said "Chinese. That fence will be done by lunch time."
Went past again at lunchtime. Fence done, all tidy. Remarkable.
Yeah but they just pour that fast dry cement straight out of the bags into the holes and put the garden hose on it. I selectively buy Chinese stuff these days, most of it is good the stuff coming out of Taiwan can now be the best in the world. Generally speaking speed comes with compromise.
"Yeah but they just pour that fast dry cement straight out of the bags into the holes and put the garden hose on it."
LOL. Fast dry cement works fine. It will outlast the fencepost. And it is strong enough. It not supporting a 10 story building, or even a two story wooden house. (FYI: many kiwi fencing contractors use it too.) I don't know how much you know about 'concrete' but there are many different types & mixes for different purposes. Horses for courses.
Your attitude is symptomatic of why NZ's productivity is so low ... i.e. Stuck in the old ways of doing things.
Germany never fails to disappoint: Germany is becoming a developing market: The head of Germany’s stock exchange has claimed the nation is becoming a “developing country” and called his own market “a junk shop”. Theodor Weimer, chief executive of Deutsche Börse, said a “lack of leadership” by Chancellor Olaf Scholz’s ruling coalition was putting international investors off Germany. https://telegraph.co.uk/business/2024/ Link
Bloomberg dollar index, two years of LOWER highs. Yet every rally we hear the same crowd, most losing money, cheering away at the "almighty greenback." *Where is the USD without 5% T-Bills? **Five percent of T-Bills are breaking the regional banks. Pimco expects more regional bank failures in the US because of a “very high” concentration of troubled commercial real estate loans on their books. “The real wave of distress is just starting:” Pimco's John Murray. Links
HK "...China's security embrace..."
"A high-profile British judge who resigned from Hong Kong’s highest court last week has warned the city is “slowly becoming a totalitarian state” and judges are being compromised by an “impossible political environment created by China”.
https://bbc.com/news/articles/c722094n135o
The bitcoin price starts today at US$66,780 and down a rather large -4.7% from this time yesterday.
At the same time, BTC miner Iris Energy shrugged off the price woes and soared 19% - now up a whopping 225% since Feb. Still getting very little press at all. That's probably a good thing.
They are coming up to five years of falling commercial real estate values as the shift out gathers pace.
Hmmm. The Western CRE apocalypse is looking as bad if not worse. The sheeple largely ignore it because the media does its utmost to hide it from them. So much/many smoke, mirrors, dodgy valuations. Anyone trying to hide it is in denial.
It's possibly not a bad thing that we don't talk about the 'real' drop in prices that has happened and ongoing. Keeps the sheeple from stressing and thus adding emotion to the mix - which would really bomb the economy.
Trick probably is to do research, make money, adjust skills and not to worry too much about those that blindly follow what they are told..
There isn't really a lot anyone can do.
What can the "interest team" do, to show the CRE situation clearer in NZ?
Nu Zillun is a relatively small country with few CRE transactions that feed the DGM crowd and spook everyone else. My guess is that there are people around who have a fairly good read on the sentiment and health of our CRE sector.
Regardless, the 'can't go wrong with bricks and mortar' mentality definitely crosses over into the CRE space. People simply can't believe what's happening elsewhere could happen here.
The listed property sector is tracked here:
https://www.interest.co.nz/charts/investing/nzx50-property-sector
Great article by Thomas Coughlan, one of only 2-3 journos at Granny Herald that I rate, on the debacle that is Kainga Ora.
https://www.nzherald.co.nz/nz/politics/inside-kainga-ora-what-the-gover…
Indeed a good article. A few facts wrong but a fairish representation of what has happened, and what does happen when politicians intervene in markets.
As a general rule (IMNSHO) politicians should be setting the framework, standing back to see what happens, and tweaking the framework as required. The outcome is smaller government and more savvy / nimble businesses. The exception to my rule - being a NZ only rule due to low competition - being some things, e.g. energy prices, that need 'shock' smoothing. And in those instances (not unlike in other countries) the politicians should set up either 'filters' through which the market buys and sells, or 'players' (a.k.a. market makers) in those markets.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.