Here's our summary of key economic events over the weekend that affect New Zealand with news that in the three elections held over the weekend, 'democracy' seems to be signaling a rejection of the hard-line and hard-right.
But first in the week ahead the main event will be Wednesday's RBNZ OCR review. But there will be other important global data released as well, including the American CPI and PPI results for June. China will release its versions of inflation monitoring as well, and the data on new yuan loans. India will release its June CPI data too, plus industrial production data for May. And from Australia we will get the NAB business sentiment results for June, and the Westpac consumer sentiment survey results.
First up however we should note that China's foreign exchange reserves in USD were little-changed in June from May, holding the level they have been since late 2023. But they are rising in yuan, mainly because the yuan is depreciating. Their gold reserves remained unchanged for the second straight month at 72.8 million troy ounces (2264 tonnes) and that ends a gain for 18 consecutive months.
Those reserves have been put to political use. First it was Sri Lanka, now Laos has succumbed to China's 'debt trap' diplomacy. China's 'encouragement' to develop their countries - with official Chinese loans - has plunged Laos into a financially unsustainable situation, and Beijing is now promising to 'help' them out of the mess. Easy money and a drive to 'catch up' is too much of an enticement for local leaders. In the end the price is subservience. Essentially, China now owns Laos.
In Japan, their huge Government Pension Investment Fund, one of the world's biggest institutional investors, booked a +NZ$462 bln gain in the past year (more than New Zealand's entire economic activity as measured by GDP). They need it however. As wages rise there and their workforce ages further, the claims on that will rise. That fund alone has reserves of almost NZ$2.5 tln.
On Saturday (NZT) the closely watched non-farm payrolls report for the US was released with a headline result of +206,000 larger employment in June, slightly more than the +190,000 expected. Their unemployment rate changed little at 4.1%.
But this seasonally-adjusted data masks an actual rise of +547,000 people on company payrolls, although that was lower than the +844,000 increase the prior month. It also masks some downward revisions to the prior month.
There are now 161.8 mil people employed in June in the US, including the unincorporated self employed, up +433,000 from May. So all the growth is in company payrolls and people are shifting out of self-employment to the more formal workforce.
And that is confirmed by pay rates. Average hourly pay hit US$30 for the first time ever in June, up +4.0% from a year ago (and rising faster than inflation). Average weekly earnings (which accounts for working hours), rose +3.7% (also more than inflation which is running at 3.3%). But these gains are now easing from earlier months.
Basically, this data changed their economic situation little but is has a sense of a slowing trend. US Treasury yields fell on the news, but Wall Street equities took it in its stride. The USD eased very slightly.
The Fed probably liked what it saw. New York Fed boss said the US economy was doing remarkably well and there had been significant progress towards inflation goals. Fed boss Powell will be testifying in Congress this coming week.
The next US Fed rate review is on August 1, 2024 NZT.
In Canada, their labour market report for June wasn't as positive. In fact their employed jobs fell a trivial -1,400 when a +22,500 rise was expected. They will be disappointed in that. This data probably advanced the case for a July rate cut when their central bank meets next on July 25, NZT. Their policy rate is currently 4.75%.
And staying in Canada, there was some more positive news. Their widely-watched local June PMI rebounded sharply back to April growth levels, consigning the lowish May result to outlier status. They have now had eleven consecutive month of economic growth, the second highest string since 2016 (the pandemic aftermath excepted).
France is voting in the second round of its most crucial legislative elections in recent years, with the early results suggest a sharp rejection of the far-right. Voter turnout however is being described as being unusually high - as are the stakes. In Iran, the more moderate of the two options for 'President' (a position subservient to the top cleric) won handily in a signal their population wants a less confrontational government and more focus on economic improvement. And the British election delivered an unusually large 'landslide' for its center-left Labour Party, with strong gains for its third-force LibDems as well. The hard-right Reform Party won only 5 seats, despite getting 14% of the votes. Such is FPP. In Tokyo, their first female governor secured a third term on Sunday in the capital's election. It was also a clear rejection of hard-right nationalist opponents.
The UST 10yr yield is now at 4.28% and unchanged from Saturday and down -12 bps from a week ago. The key 2-10 yield curve inversion is little-changed at -33 bps. Their 1-5 curve is now at -78 bps. And their 3 mth-10yr curve inversion is still at -109 bps. The Australian 10 year bond yield starts today at 4.41% and unchanged. The China 10 year bond rate is now at 2.27% and also unchanged. The NZ Government 10 year bond rate is now at 4.77% and up +4 bps from a week ago, but unchanged from Saturday.
On Wall Street this week we will get the early corporate results for Q2, led as usual by some big banks. These upcoming Q2 reports will be following an unusually strong Q1 set, one that generally gave upbeat forward guidance. There will be interest over whether those bullish views have continued.
The price of gold will start today down -US$1 from Saturday at US$2389/oz. A week ago this price was US$2326/oz.
Oil prices are marginally firmer at just on US$83/bbl in the US while the international Brent price is just under US$87/bbl.
The Kiwi dollar starts today +10 bps firmer from Saturday and now at 61.5 USc. A week ago it was under 61 USc so a +½c rise since. Against the Aussie we are at 91.1 AUc. Against the euro we are holding at 56.7 euro cents. That all means our TWI-5 starts today at 70.6 and little-changed.
The bitcoin price starts today at US$56,949 and up +0.7% from this time Saturday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
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52 Comments
100% this. It's a bad time to have been in power recently.
UK election seems to be a simple repudiation of the Tories. A bit like the election here ... was anybody that excited for NACT? It was more about kicking the last lot out. I'd argue Reform did well, but owing to the vagaries of FPP that results in bugger all seats (whereas Labour got about 65% of the seats with 35% of the votes). The interesting story will be whether Reform overtakes the Tories as the 'de facto' opposition in this term, seeing as they polled 2nd in best part of 100 seats.
Wasn't this result in France expected due to the multi-round voting system (which effectively acts like ranked preference voting) and the left parties agreeing to stand candidates aside to win. I don't follow French politics too closely, but I'm sure this will end up with some parts of France on fire somehow!
Yeah seems to be a real 'enemy of my enemy is my friend' scenario in France. As you say, every chance it could all fall to bits (and presumably RN would then be poised to pick up the pieces).
The most interesting aspect to me is that across the board, left/centre/moderate right parties could easily shut out the "far right" simply by restricting immigration. There's a cheat code to and they don't want to use it, so the issue will just continue to fester and worsen over time - particularly as younger voters seem to become more extreme.
If the threat of the Far Right is so significant to future stability, why not cut the head off the snake with the one thing that will work.
How does one label this debacle?
Right-wing conspiracy theories suddenly acknowledged as true: — Biden is senile. — Democrats engaged in a massive cover-up of this for months if not years. — The Biden presidency is run by an oligarchy. — Democrat mega donors, not primary voters, actually choose the nominee. Link
Most democrats and independents in the US have been saying for several years that Biden is too old and shouldn’t be running again, but they continued to support him if he was the only choice against Trump, and of course at the end of the day one is voting for policies rather than candidates - so most dems are always to vote for the dem polices (even if the candidate is growing senile), and most republicans are always going to vote for GOP polices (even if the candidate is a convicted criminal who proved a disaster the last time he was president). Right now the tipping point has been reached where actual elected democratic representatives are now calling for Biden to step aside, which has been met by a tidal wave of calls in agreement of course.
Biden is old rates as a conspiracy theory? The "Clinton was involved in ritual child sacrifice" is a conspiracy theory. Trump screwing a porn star while his wife was at home with his newborn, and making hush payments which he lied about wasn't a conspiracy, but evangelicals are okay with it.
It's all over. Political incumbents the world over do not seem to be able to undertake effective self analysis. The US still does not understand how Trump got in, in the first place nor how to deal with him. The corruption and greed is destroying them internally as the Republicans try to keep their death grip on power at any cost. In Europe the people have been protesting against the effects of the immigration policies, and the immigrants themselves against being treated like second class citizens. The UK it is very much the same but with their own flavours. No one seems to want to step back and take a good look at why.
It's all connected.
Yes, Canada slowdown to be expected given that they are in the pack chasing NZ for the title of most aggressive monetary policy maniac. Their interest rate is 4.75% and their private debt is about 125% of GDP so their monetary policy aggression score is 4.75% x 125% = 6. NZ is way ahead with 8 (5.5% x 140%).
The US has the maximum score of 10 but they basically exempt their existing mortgagors from any pain.
Bank of Canada released a paper in Dec 2023 stating that immigration patterns across the West over the last decade or so have shown migrant workers generally earn less, consume less and add more to demand for basic items such as housing than to supply.
On productivity, it states if firms raise investment alongside an increase in immigration, wages may not decline or even rise.
Worldbank and OECD data warehouse have that data. Worth using net financial worth for Govts (as well as net Govt debt) as the financial worth figures includes the cash / shares that Govts save up (eg for Super). These Govt 'savings' increase private sector liabilities. I had a look at something similar a few months ago when exploring why we have to keep our private debt so high.
Isn't this catalogue of aid part of the US 'essential' and 'indispensable' global doctrine?
Yes indeed.
https://strategic-culture.su/news/2024/07/05/from-arming-nazis-supporti…
Funny how the MSM never exposed the support for out lifestyles....
Ouch! Lots of nonsense there PDK. There's not much left of that opinion piece once BS is stripped out.
https://www.ohchr.org/en/press-releases/2016/07/un-report-2014-16-killi…
You are better than accepting the "flood the zone with shit" tactics of Kremlin propagandists!
Yes. Yes, a tedious Kremlin propaganda essay presented as fact. The 2014 war was triggered by notorious killer FSB Igor Girkin leading a band of Russian militants to capture Sloviansk, supported by Russian troops and weapons. That brutal political killings of Donbas citizens were carried out by both sides during this war is not in dispute but to portray it as a state sponsored campaign of 'murder' by Kyiv is nonsense.
You are closer to me than most here, but I don't mind reading - and reflecting on - what others think.
Indeed, I don't think one has a right to an opinion until one has.
The biggest thug on the planet, since WW2, has been the US. We have benefited from that at the expense of 'others'. Never forget that fact.
Otherising is a whole topic in itself.....
Depends what you mean by 'big' - if the scale of death and human misery the US is a boy scout compared with the list of blood soaked post 1945 despots, if political interference in other nations affairs by number of states and extent of manipulation then Uncle Sam is clearly meddler in chief.
The US is guilty of a lot of things, but the only reason Russia was not previously ahead of them on the thug list, is that Russia spent a sizable portion of their available psychological energy on self flagellation. Personally I try to avoid whataboutism. It is Russia that is butchering it's "brothers" in this pointless Tsar Putin land grab. The Nazi meme is nonsense although Putin is copying Hitler's Sudetenland playbook word for word.
This from your reference is just a blatant lie!
"The whitewashing of history, just as occurred with Ukraine, to downplay the neo-Nazi threat and murder of 14,000 civilians" 14000 is ALL deaths, and ALL ultimately caused by Kremlin backed russian separatists who started the violence!
chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://ukraine.un.org/sites/default/files/2022-02/Conflict-related%20c…
Done a fair bit of reading myself. And listening. Admittedly I'm pretty quickly bored by anything published by Kremlin apologists, mainly because I don't give a shit about the sensibilities of Putin, or any of the fascists supporting him. Ukraine has been under the Kremlin thumb for waaaaay too long.
Being married to a Russian also gives some insight.
The bigger picture is a resurgent Russian Empire, led by Putin and his mafia team, are the last thing human civilisation needs to drag itself through the coming bottleneck. Just because I suspect the future will be dominated by warlords, doesn't mean I believe it's the preferred option.
Interesting perspective that resonates with my reading too. The thing is ever since Peter the Great reclaimed the land to the east from the then Swedish empire, Russia has been a means unto itself. Napoleon, Wilhelm & Adolf fell short in thinking it was otherwise. The only influence that can change Russia is Russians. But there are other considerations and constraints. Bear in mind that in the USA 10 states individually have an economy larger than or equal to that of Russia and there are a few others not far behind. Industrial might will prevail in conflict. For example the North over the South in the American civil war, and the Allies over the Axis in WW2. At present Russia is wasting its resources on a let’s say expedition to the West. Yet to their east China strengthens as fast as Russia weakens. This is exactly why Putin and his yes sayers, repeatedly have to resort to reminding the world they have 5,000 or so nuke warheads in storage.
They can blame France, all the illegal immigrants are leaving from French beaches the second the weather is great, over 1200 a week in good conditions. How the hell are they even getting into France in the first place ? What sort of border control have they got ? yep they probably don't care as they are literally killing themselves to get to the UK. It will get to the point where things are going to get really ugly in the UK and the softly softly will end.
Interesting. When I was there last year for a spell they were quite anti-China as a general sentiment, and I was informed foreign ownership wasn't possible on land to ensure protection of it;s people. A quick google search indicates they changed this in 2022 perhaps.
I wonder if NZ political parties are looking at how the French Govt rigged the second round election voting process and are figuring out how to do the same in NZ. Imagine going to the polls and only having the choice of 2 candidates in your electorate - one Left, one Right.
Just like the Democrats were prepared to do anything to stop Trump in 2020 and coalesced around a compromise of Biden and Harris (who got 3% of the vote in the Primaries!), the opposition to Le Pen looks to have done the same. Now they will have to live with what they have created....
"A month ago, the New Popular Front (NFP) did not exist. It formed just days after President Emmanuel Macron called a snap parliamentary election, in the wake of his centrist party’s embarrassing defeat to Marine Le Pen. Now, it looks set to win the most seats in the Parliament. The hastily assembled coalition comprises disparate political parties that have not always played nice. And it has campaigned on a platform of high public spending that has spooked financial markets and could tip France into economic chaos."
Biden had packed up and gone home by the time of New Hampshire in 2020 because he was thought to be too old. Which he was. Then the Dems suddenly woke up that each of the remaining candidates were unelectable and Old Joe had a resurrection and he won it for them. Harris was one of those unelectables and still is. As you commented here, at that time, a case of “whatever it takes.” Incapable of thinking four years into the future, the Dems remain with two unelectables and have gifted Trump another presidency and the ability to wipe his record clean with certain vindictiveness. Mind boggling inanity, beyond belief.
es see
UK Labour currently center left? Since when has Starmer been center left? The guy is only a few clicks away from Marx. And remember, his Foreign Secretary thinks Marie Antoinette discovered radium, that Henry VII succeeded Henry VIII and that men can grow a cervix! lol.
On France the news is no better, Melenchon is as radical left as you can get without actually being Mao or Marx.
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