Here's our summary of key economic events overnight that affect New Zealand with news a quiet data week is bringing more focus to larger systemic issues.
Today, in the absence of key data releases, we should note that after the GFC, regulators moved aggressively to get banks out of holding riskier assets. But that space has been filled by non-bank financial institutions. In fact more than half the world's financial assets are held in these non-bank institutions. The risks from that sector are enormous. And the irony is that these non-banks are funded in large part by ... banks. It is a systemic risk catching the attention of bank regulators. If you want to scare yourself, read this analysis from the NY Fed.
That is not the only risk the Fed is watching. Now that they can see inflation returning to its policy range, a softer labour market could bring its own risks. Their labour market is not at that risk point yet they say, but they are watching.
Meanwhile, the US Dallas Fed factory survey in America's oil patch was little-changed and uninspiring in their June results. But if there is a change worth noting it is that expectations regarding future manufacturing activity pushed up notably this month. The future production index jumped 10 points, and the future general business activity index surged 16 points to its highest reading since early 2022.
Across the Pacific, the Chinese government plans to set up a rescue fund for struggling financial institutions, aiming to prevent a financial crisis triggered by the real estate market slump. Unlike similar funds that were created to protect customers, the purpose of the new fund is to prevent financial institutions from collapsing suddenly, given that bankruptcies of these huge enterprises could cause turmoil in their financial markets.
Taiwan said its retail sales rose a modest (but better) +2.4% in May, but their industrial production was up an impressive +16% from the same month in 2023.
In Europe, the Ifo Business Climate indicator for Germany unexpectedly declined in June from May, but remains higher than what it has been for most of the past year.
Perhaps we should also note that the price of lithium carbonate has fallen back to levels first reached in 2018.
The UST 10yr yield is now at 4.26% and unchanged from this time yesterday. The key 2-10 yield curve inversion is still at -48 bps. Their 1-5 curve is still inverted by -83 bps. And their 3 mth-10yr curve inversion is still inverted by -105 bps. The Australian 10 year bond yield is holding at 4.26%. The China 10 year bond rate is down -1 bp at 2.26%. The NZ Government 10 year bond rate is now at 4.65% and down -3 bps from yesterday.
On Wall Street, the S&P500 has started the week virtually unchanged from where it closed on Friday. But overnight, European markets closed mostly higher. London was up +0.5%, Frankfurt was up +0.9%, and Paris was up +1.0%. Yesterday Tokyo closed +0.5% higher. Hong Kong closed essentially unchanged after being in deficit for most of the session, but Tokyo closed down a sharpish -1.2%. Singapore ended up +0.2%. The ASX200 ended down -0.8% and the NZX50 was down -0.5%.
The price of gold will start today up +US$12 from yesterday at US$2332/oz.
Oil prices are up +$1 from yesterday at US$81.50/bbl in the US while the international Brent price is still just under US$85.50/bbl.
The Kiwi dollar starts today unchanged from yesterday at 61.2 USc. Against the Aussie we are down -20 bps at 92 AUc. Against the euro we are also -20 bps lower at 57.1 euro cents. That all means our TWI-5 starts today down -10 bps at 70.8.
The bitcoin price starts today at US$60,160 and down a very sharp -6.1% from this time yesterday. Volatility over the past 24 hours has high at just under +/- 3.6%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
22 Comments
The system requires the projection of exponential growth.
Permanent exponential growth is impossible.
Papering over the widening gap, was therefore the only game in town.
It takes heroic assumptions to think that pensions will continue to be paid, that 'investments' will all grow, that interest-charging can be justified. Just when it falls over, is moot. If it will fall over, is not. Just like housing, there will be an 'underwritten floor' - but whether we can get down there intact???
Yes the "doubling house prices every 10 years" requires both population increase and interest rate decreases. And I get the feeling that future predictions of these are already baked into current prices. If the government said "we are going to keep both our population and interest rates stable", house prices would not just stabilise, they would drop dramatically.
"The system requires the projection of exponential growth."
I wonder if you're selling this wrong PDK? If the system is preserving the power and privilege of the rich and powerful then you're correct. A part of that is feeding the masses a bunch of BS to keep them believing they're happy.
But as a functioning economy, then exponential growth is an impossible goal. Even the smartest of them must understand that whatever resources they are using has a finite cap to it. Business plans will have closure phases where they look at pulling out and moving to other things that are more profitable. In this they usually try to avoid the costs of 'closure'.
But they also artificially prop up the existing economy through sustaining population growth. The environmental reality in the US is that the evidence is pretty clear that there are too many people in places, but they have got very good at concealing that and selling the population a BS line. In the meantime wild fires ravage their wild lands ,in the summer, tornadoes demolish ever more houses and they now have to consider increasing the ratings of hurricanes and tornadoes because too many are far stronger than the rating suggests, and then there is the increasing numbers of devastating floods.
"even the smartest"? Nope, I don't think smarts has anything to do with it. Humans are not rational. Minds are easily controlled and once you disappear down the alternative reality rabbit hole only an extended period of deprogramming can rescue your brain. Look at all the motivated climate deniers posting on Interest for example. Nothing will convince them AGW is a thing, even as their house falls into the ocean after a metre of rain in 10 minutes. They would be posting climates always changed on the smart phone, from the refugee centre, a few minutes later.
What a sad cynical perspective, but unfortunately I think the evidence proves you correct for most of it.
But business plans do have phases of closure. Even the current government has considered what to require of a company exploring/drilling for oil when a well dries up. That in itself is an acknowledgement of the finite nature of the resource, except that the costs of the closure are not borne by the company that makes the most money from any oil found. Those companies have no loyalty to any country, land or people other than their own wallets and shareholders (in that order). Their history proves that they will leave behind poisoned land and waters for locals to clean up after they've raped the land. Not just oil companies but miner too. Rio Tinto outsourced the dealing with their waste products. How well did that go?
Perhaps we should also note that the price of lithium carbonate has fallen back to levels first reached in 2018.
Copper decided "ditching" part of the AI hype a few weeks ago, all outlined in our mid May note "Copper overheated...." . NVDA seems to be catching up...
Higher economic confidence among American consumers is clearly helping NZ food exporters.
I am cautiously optimistic about the US industrial economy having invested over a trillion in nearshoring and reshoring productive operations in the last few years.
The US is now our second biggest export market, with an annual value of $8.8 billion for the year ending May 2024
According to the latest report published by the non-partisan California Legislative Analyst's Office (LAO) which is an agency of the California government, is overseen by the Joint Legislative Budget Committee of the California State Legislature, and performs and publishes extensive analyses of the state's budget in addition to providing fiscal and policy advice to the California Legislature, contrary to prior reports of over substantial job gains in the deep blue state in 2023, the reality was far uglier.
In a report titled "Newest Early Jobs Revision Shows No Net Job Growth During 2023" we learn just that: the Early Revisions to state-level data flagged here previously, suggests that California actually lost jobs during the fourth quarter of last year. As the report details, "based on the most recent release of the early benchmarks, payroll jobs declined by 32,000 from September 2023 through December 2023. On the contrary, the preliminary monthly reports showed a solid increase in job growth (+117,000 jobs) at the time."
This, according to the LAO, means that "with the fourth quarter revision, calendar year 2023 saw essentially no net job growth (+9,000 jobs overall)."
Oops, I've been looking at immigration completely the wrong way, we could use it to increase GDP like the UK Courts have:
Immigration judge who fleeced taxpayer out of £1.8million jailed (msn.com)
Rasib Ghaffar, 54, of Essex, was paid more than £140,000 to represent a client at Bournemouth Crown Court in a case involving Indian restaurants employing illegal immigrants when he was not even there.
We've already got the requisite restaurants operating outside the law here in NZ, if we can get enough into the Court system then the sky's the limit for GDP growth. Taxpayer lead growth, what's not to like!
Last week I received and email advising that my Spark fibre plan was to increase by $5. Yesterday an email saying it was a mistake - "in error"
https://www.stuff.co.nz/money/350318661/spark-broadband-prices-are-goin…
I wish they could get their sh*t together.
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.