Here's our summary of key economic events overnight that affect New Zealand with news expectations for a rate cut any time soon in Australia have faded significantly after the RBA's MPS yesterday.
But first, the overnight dairy auction brought slightly lower prices overall, down -0.5% although they were unchanged in NZD terms. WMP was sold in to weakish demand and ended down -2.5%. SMP fared better, rising a minor +0.7%. But the star of the show was demand for butter, up +6.2% to a new all-time record high in both USD and NZD. Volumes offered and sold at this event were quite low at 16,800 tonnes; in fact a four year low.
Moving on, in the US last week's retail sales at physical stores rose to be up +5.9% from year-ago levels, a rise from the prior week. But that was overshadowed by the May official retail sales data that was only up +2.3% from a year ago, up only +0.1% from April. And if it wasn't for good car sales it would have been less.
On the other hand, US industrial production rose more than expected in May, up +0.9% from April to end two months of weaker results.
US business inventory levels were reported for April, and while they rose slightly, they actually fell in relation to current sales to remain at unconcerning levels.
Today's relatively small but still well supported US Treasury 20 year bond auction brought a lower median yield, down to just under 4.40%, -19 bps lower than the prior equivalent event a month ago.
In China, the wealthy are shipping out, it seems. China saw the world's biggest outflow of high-net-worth individuals last year and is expected to see a record exodus of 15,200 in 2024, dealing a further blow to its economy.
And homeowners with mortgages in China are prioritising paying them off faster as values sink. Owning your own home is now perceived as a liability, not an asset.
In the EU, CPI for May was confirmed at +2.7%. However, we should note that the ZEW Indicator of Economic Sentiment for the Euro Area surged in June to its highest since July 2021, and firmly above what was expected. That has built into nine consecutive months of rising EU business sentiment.
Yesterday's RBA monetary policy review indicated that rate cuts are further away than anticipated. Markets no longer have any cut priced in until mid 2025 now.
And the OECD says high school students in Singapore, Korea, Canada, Australia, New Zealand, Estonia and Finland were in the highest-performing education systems in the first-ever creative thinking assessment under the OECD’s Programme for International Student Assessment (PISA). Results of the global 2022 assessment, to understand the skills of 15-year-old students in 64 countries and economies worldwide, show that students in high-performing education systems are not only succeeding in standardised mathematics, reading and science tests, but also in new creative thinking tests.
On the other hand we should note that New Zealand doesn't rank highly in the latest World Competitive Rankings, slipping one place in 2024 to 32nd (out of 67 in the survey).
The UST 10yr yield is now at 4.22% and down -6 bps from this time yesterday. The key 2-10 yield curve inversion is still at -49 bps. Their 1-5 curve is more inverted by -85 bps. But their 3 mth-10yr curve inversion is little-changed at -108 bps. The Australian 10 year bond yield is up +2 bps at 4.20%. The China 10 year bond rate is still down at 2.27%. The NZ Government 10 year bond rate is now at 4.66% and again unchanged from yesterday.
Wall Street's Tuesday trade has the S&P500 up +0.2%. Overnight, European markets were about +0.5% higher on average across all markets. Yesterday Tokyo ended its Tuesday session up +1.0%. Hong Kong was little-changed and down -0.1% but Shanghai rose +0.5%. Singapore was up +0.1%. The ASX200 ended +1.0% higher and the NZX50 rose +0.6%.
The price of gold will start today up +US$11 at US$2328/oz.
Oil prices are up +US$1 at US$80.50/bbl in the US while the international Brent price is now just under US$84.50/bbl.
The Kiwi dollar starts today a little firmer at just under 61.5 USc. Against the Aussie we are -¼c softer at 92.4 AUc. Against the euro we are marginally firmer at 57.2 euro cents. That all means our TWI-5 starts today essentially unchanged at just on 70.9.
The bitcoin price starts today at US$64,612 and down -2.6% from this time yesterday. Volatility over the past 24 hours has again been moderate at just on +/- 2.3%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
86 Comments
"Owning your own home is now perceived as a liability, not an asset." Weird sort of comment? Home ownership will always be an asset, the issue is how much you paid for it. If it was bought as an investment, then that is to all intents a business decision. It should be well understood when making investment decisions that one shouldn't buy at the peak of the market, nor sell in the trough.
While I feel for some FHBs, the reason for getting into owning a home needs to be well understood. With the attitude of the current government and Housing Minister any advice to FHB's should be DO NOT RUSH INTO IT! Desperation to get on the train has never led to good outcomes, when you have to borrow large to buy the ticket.
Funny you mention Nvidia stocks - mine are up 70% even though I was fairly late buying in. They're almost becoming a meme stock at this level but I'll ride that train the same way I did the BTC ETF IPO (TLAs FTW!).
It feels like with the ease of investment (specuvestment?) these days shares are becoming decoupled from fundamentals in much the same way housing did - if everyone else is buying something and it's in the news a lot then it must be a sure thing...right?
FWIW I have a modest but diverse portfolio overall, I'm not pinning my hopes on a handful of hype-driven bull runs.
Until recently you wouldn't count an Apartment as a "dwelling". I think the Chinese issue is now ownership of "houses"-its Apartments, and the issue with Apartments is that there is little rarity in the land value--instead one tower after another is constructed, and each new one depreciating the value of the many of the others-unless you have above average population growth.
My wife is Chinese and we visit her family regularly. And I've done work there and, with locals, set up businesses there. And I've a few legal eagles in the family that have worked in China's legal system around property ownership. I know a fair bit about it.
However, your comment ...
Pa1nter: "Not to mention these apartments are almost solely on leasehold land."
... is so authoritative I thought you could elaborate on it.
Many of us are keen to learn more.
Well now, given you're a proven expert on this, elighten me. What percentage of urban residential Chinese property is akin to our freehold/fee simple titles?
You can set the record straight, and dispel all the rumors. Or do you only give requests instead of take them?
LOL, did your Asian matrimonial relatives help bankroll your housing empire?
"LOL, did your Asian matrimonial relatives help bankroll your housing empire?"
No.
But to set the record straight - My immediate Chinese relatives are well educated but lowly paid public servants that have scrimped and saved all their lives and are now living on state pensions. They love their daughter and we feel honored when the send us $5,000 from time to time that they claim they don't need to help us.
You really are a nasty piece of work, aren't you Pa1nter.
houses have a life, they get to a point where the cost of a renovation is more than knocking it down and starting again, the land is obviously part of the equation, but WHERE that land is, is a very important part of the equation, and I suggest that this principle holds anywhere in the world ,
houses on flood prone land will gradually become worthless, houses too far from places of well paid work, will drift back to where they should be, houses where there are natural hazards like EQ in Wellington and insurance is an issue, will drift back
But, if the location is desirable and the land is not subject to natural hazards, property will always be in demand, Where are all the millionaires going to Switzerland going to live?, and Australia, and NZ, when you realise this is a record year for wealthy migration , and next year will be the same and so on, plus our week currency, I cant see NZ house prices on good land dropping at all.
Old houses are hard to heat, and when I talk about the economics of knocking something down and rebuilding it, I was factoring in heating costs over the life of the house in the South Island, perhaps it might be worth renovating old houses in Auckland but not down here
Agreed.
But even in Auckland renovating old houses to meet modern standards is expensive - and often when I've spent the money doing this I've regretted doing it. (No one ever checks whther the money spent actually delivers anything either. I have. 80/20 results.)
Why do I do it?
Simply because some people will pay a fortune for a traditional house that's expensive to heat for 3-6 months of the year. This isn't a criticism of the buyers either. I live in one too.
Generated recessions aren't about resetting asset prices, they're to cast off the most marginal lenders.
Which creates a vicious circle, if your survivors are the ones with the best ability to service credit, they're just going to buy up more assets in the aftermath.
"August rate increase now ‘live’" -
https://www.afr.com/policy/economy/rba-leaves-cash-rate-on-hold-warns-o…
"....And homeowners with mortgages in China are prioritising paying them off faster as values sink. Owning your own home is now perceived as a liability, not an asset......"
My take on this was different. Folk have suddenly realised the obvious. Having debt makes your position fragile.
Do you own your own home when you have a mortgage on it? I thought the bank owned it. You own your own home when you have no mortgage on it. Surely. We are paying down our mortgage quickly so there is no other party involved in us keeping it. Maybe we are doing it wrong.
You own the home, but you have pledged it as security for any loans that the finance provider has extended to you. The mortgage is the legal instrument recording that pledge. You can still have a mortgage on a property with no money owing (eg. line of credit that is undrawn).
When you live in a country with a social credit system that bars you from society, or you can go to jail for not paying your debts, then definitely a house is a liability.
https://www.dailymail.co.uk/news/article-6851279/Being-blacklisted-Chin…
And the OECD says high school students in Singapore, Korea, Canada, Australia, New Zealand, Estonia and Finland were in the highest-performing education systems in the first-ever creative thinking assessment under the OECD’s Programme for International Student Assessment (PISA).
There is a typo, New Zealand on the list with the likes of Singapore and Korea? Someone must be having a laugh.
Academic excellence is not a pre-requisite for excellence in creative thinking
Participating in school activities such as art, drama, creative writing or programming classes regularly
The methodology appears a bit flawed at a closer look. Singapore and SK have education systems that promote cutthroat competition from an early age, not exactly priming kids for creativity.
How do you measure creative thinking in school-age children anyways?
Creative thinking shows up early it's so easy to spot, you just give a kid a pile of Lego bricks. Someone with creativity or engineering skills will build something and then move through Lego to other hobbies that involve building things and also repairing and then modifying things. What also shows up is the destructive kids and all they want to do is smash what you have built. Always remember that when I was like 6, had a "Friend" that I ended up in a fist fight with after 10 minutes together as all he wanted to do was wreck everything.
"Higher for longer?"
Why does this come as some sort of surprise? Firing up the global economy with cheaper money has enormous geopolitical ramifications. In case commentators haven't noticed, there's a major war going on, the outcome of which will determine everyone on the planets future. Lower interest rates equals greater demand for energy, which pays for Vlad's war and results in a rapid escalation of prices and...... inflation!
The West can't admit Putin holds an enormous energy card with his reserves, and with global oil depletion about to really give energy blind economies a kick in the teeth, pigeons mustn't be scattered just yet
The China 10 year bond rate is still down at 2.27%.
Demand for China govt bonds continues to be strong driving yields lower and lower. PBOC is stepping its warnings telling investors they better not bet against Xi and his genius "stimulus" plans. Chinese are buying bonds anyway for obvious reasons. Link
And after China, the UK is seeing a record number of millionaires departing. As people move out due to higher taxes, and incoming Labour Govt with wealth tax proposals.
https://www.cnbc.com/2024/06/18/millionaires-are-abandoning-the-uk-in-t…
A record number of millionaires is expected to leave the United Kingdom this year, according to new research, with this year’s general election expected to further exacerbate the exodus.
The Henley Private Wealth Migration Report indicates that Britain will experience a net loss of 9,500 high-net-worth individuals in 2024 — more than double last year’s figure of 4,200 (which in itself was a record-high figure).
Dont worry, none of them will come here. What with not being able to buy a house or the threat of The Maori Party hanging over them.
From one perspective yes, but from another is is a sign that the politicians can not create an environment that encourages them to invest in their own country?
Take for example a suggestion i have made in the past for NZ; people get a tax break to set up companies in the regions (not major centres), another tax break for the number of people they hire, and one for the higher median wage in their company, and another if they create or generate exports etc. Build a package where a company can be essentially tax free but delivers a solid economic return for the economy. Political vision and will is required. (See Chris Trotter's article)
Probably nothing.
Veteran hedge fund manager Philip King has taken a short position in shares of Commonwealth Bank of Australia, citing one of the world’s most expensive valuations.
https://www.bloomberg.com/news/articles/2024-06-17/hedge-fund-regal-tak…
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.