Here's our summary of key economic events overnight that affect New Zealand with news American data is improving in a steady way without deficit or labour market stresses, so conditions seem right for monetary policy 'normalisation' to be completed.
First, American mortgage applications rose an unusual +3.9% last week from a week ago to be -14% lower than the same week a year ago. Pushing things along was a drop of the benchmark mortgage interest rate to under 6.9% from just over 7%.
Meanwhile, US housing starts rose more than expected in June (from May) to be -4.4% lower than year ago levels. But this is still a lowish level. Completions in June were unusually strong, adding more availability.
And American industrial production beat estimates too, rising +1.6% from a year ago, the biggest gain since November 2022.
The US Fed's Beige Book surveys paints a picture of a modest expansion with some uneven variations across the Fed Districts. It also confirms cooling inflation - but little labour market stress yet.
There was a well-supported but relatively small US Treasury 20yr bond auction earlier today and that delivered a median yield of 4.41%. That is very little different to the 4.40% median yield at the prior equivalent event a month ago. Because US deficits are actually shrinking, and quite fast, the pressure is off this fundraising.
More Fed officials are signaling that they are moving closer to a rate cut, and markets are starting to price that in. They seem to have beaten inflation without crashing their labour market. 'Normalisation' can proceed now, it seems.
In Japan, the Reuters/Tankan sentiment index for the factory sector jumped to +11 points in July from +6 in June. It was the first rise in 4 months. Meanwhile, the index for the service sector cooled, reflecting a patchy economic outlook. The latest survey comes two weeks before the Bank of Japan’s July policy meeting where it could raise interest rates again and announce its bond purchase tapering plans. (The monthly Reuters/Tankan survey is a key indicator for the Bank of Japan's quarterly tankan survey.)
In China, which dominates the global rare-earth minerals processing industry with its state-owned enterprises, it is finding it hard-trading as prices sink sharply and losses pile up.
We should also note that China's rebar steel prices have slumped to 2017 levels, now just over half the level they were at the peak in 2021.
And the World Trade Organisation says China is backsliding on key reforms and lacks transparency on subsidies. (Para 23, page 12.) They say China's secret subsidies could top US$900 bln.
Homebuilding is at a low ebb in Australia - but the March results released yesterday suggest it picked up in Q1.
The UST 10yr yield is now at 4.14% and down -3 bps from yesterday. The key 2-10 yield curve inversion is little-changed at -29 bps. Their 1-5 curve is still at -78 bps. But their 3 mth-10yr curve inversion is also still at -119 bps. The Australian 10 year bond yield starts today at 4.28% and little-changed. The China 10 year bond rate is little-changed at -2.27%. The NZ Government 10 year bond rate is now at 4.44%, and up a mere +1 bp.
Wall Street is down -1.4% on the S&P500 in Wednesday trade and backing off its record high. Hits to tech prospects and the AI sector drove the reversal from Trump comments. Overnight, European markets closed mixed in their Wednesday trade with London up +0.3% and Frankfurt down -0.4%. Yesterday Tokyo also ended down -0.4%, Hong Kong ended little-changed and Shanghai was down -0.5%. Singapore was was little-changed. The ASX200 rose +0.7% and the NZX50 ended Wednesday up a better +0.7% and again the best of the markets we follow.
The price of gold will start today down -US$9 from yesterday at US$2453/oz and now off its all-time record high.
Oil prices are up +US$1 at just on US$81.50/bbl in the US while the international Brent price is just under US$84.50/bbl.
The Kiwi dollar starts today recovered somewhat at 60.7 USc and up +¼c. Against the Aussie we are up +½c at 90.3 AUc. Against the euro we are unchanged at 55.5 euro cents. That all means our TWI-5 starts today at 69.4 and up +10 bps from this time yesterday.
The bitcoin price starts today at US$64,350 and virtually unchanged (-0.1%) from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.7%.
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53 Comments
Fortescue will cut 700 jobs and slow its push into green hydrogen in a blow to the Albanese government’s plan to make Australia a hydrogen superpower supported by more than $8 billion of taxpayer-funded incentives.
Iron ore prices are predicted to slide over the next five years as new supply from Africa and Western Australia enters the market, but Dr Forrest said the job cuts were not driven by the direction of iron ore prices.
“We’re going to sadly lose around 4.5 per cent of our direct workforce, 3 per cent of our indirect workforce,” he said of the proposed cuts.
“It’s not a big number in percentage terms, but we still don’t like doing it. But it’s not to jam operating costs down, it is to streamline this organisation and keep the genius of simplicity.”
While the job cuts will affect Fortescue staff around the world, it will add to the thousands of job losses in the Australian resources sector this year at loss-making nickel mines, lithium mines and Alcoa’s Kwinana alumina refinery.
https://www.afr.com/companies/mining/fortescue-puts-hydrogen-on-backbur…
Nope just postulating on possibilities. It's long been understood that the Aussies have treated Kiwis way worse than any other foreign visitor/resident as to entitlements. I personally know a couple of people who moved to aussie, worked good paying jobs for quite a few years, kept their NZ citizenship, but then had a run of bad luck. Because they couldn't get support they were forced to come back to NZ. They were gutted about how they were treated.
The Special Category Visa allows New Zealand citizens to live, study, and work in Australia indefinitely, but it is technically a temporary visa. That's a big advantage to Kiwis. If you want to jump through the hoops immigrants from other countries have to to get Oz residency or citizenship invest a bit of time and effort.
There is nothing preventing a Kiwi from applying directly for permanent residency. Its those who can't qualify for it who benefit from the SCV visa. All the moaners who whinge about not getting benefits fail to realise that they normally wouldnt even have been allowed to work there in the first place. They should be grateful they got a couple of years out of it.
I looked into applying for PR when I was there but was 5 points short of qualifying. This was despite having three University degrees and a six figure income in Australia. The new pathway to citizenship only requires you to live there for four years now - it couldnt possibly be any easier.
HeavyG. Or you could just remain on the temp visa and only pay income tax on Aussie generated income. Any other income that is generated outside Aussie is not taxable. Ie rental income from house in NZ or anywhere else, no tax on capital gain, interest in term deposits etc. All other conditions remain the same till you settle permanently and buy a house. When you buy a house and show signals of settling you would not qualify as ‘temp’ for tax purposes.
Yep, but many Kiwis going there haven't done that, thinking they will be treated the same as we treat Aussies here. Turns out that is a naive position. The Aussies (politicians) don't like Kiwis, flat out. Perhaps we're the 'colonials' in that relationship? Brash upstarts who don't know our place? We are supposed to understand that we can't be good at sports and other areas. we can't be different, and we have to do as we are told. Pity so many of our politicians fold under that pressure.
What's your problem? Mining jobs being lost has an economic impact and many Kiwis went to Australia for them because they pay well. If any of those Kiwis lose their jobs, the reality is they may not be eligible for support from the Aussie government. If they are forced to return home because of that, it has an economic impact on NZ too. Positivity cannot deny the reality no matter how you paint it.
And the World Trade Organisation says China is backsliding on key reforms and lacks transparency on subsidies. (Para 23, page 12.) They say China's secret subsidies could top US$900 bln.
Federal farm subsidies: What the data says
CHIPS for America has announced up to $30.1 billion in proposed funding across thirteen preliminary memoranda of terms to revitalize America’s semiconductor industry.
I dare not check out the MIC subsidies other than to note this.
I guess China (like the USA) is just doing whatever it takes to keep their local (and the world) economy growing..... unrepayable debt, secret massive subsidies, wars, undoable climate damage...
Both US and China now have serious economic structural issues and the longer they wait to address them the more they will need to build their militaries to be able to defend their untenable positions. Until something gives
At some point we all will surely have to wake up and address the real underlying issues and accept we have to find an alternative way to run our economies. Including NZ.
those trash cans were for the 707, a plane that stopped being manufactured in the 70s. it's obviously no longer supported so anything extra is a bespoke request, and tooling no longer being maintained. tooling is not cheap especially when there is no scale to offset against and that's the cost of keeping aging infrastructure going. it's not to different to the banks that have to pay old programmers through the nose to maintain their decades old code because the newer generations don't understand the language.
the Biden-Harris announcement is the sort of thing the NZ government should be looking at. Investing in NZ to rebuild our industrial capacity and national resilience. It doesn't need to be to the degree that the US can do it, and it can be done in partnership with commercial concerns. But the cost-benefit will in the longer term be hugely positive.
Boeing trash cans, based on their current track record will likely leak, and fail after just a couple of years. That company's management attitude sucks big time.
Russian washing machines are surely off the agenda? - LOL.
Sox plunged 6.8% in semiconductor sector's worst selloff since March 2020 on the prospect of increased export restrictions on advanced semiconductor technology, and by Donald Trump's latest comments on Taiwan. Taiwan "did take about 100% of our chip business" and "should pay us for defense," Trump said in a Bloomberg Businessweek interview. Intel and GlobalFoundries bucked the trend as potential US domestic semi 'winners.' Link
'Risk of major financial fallout' as IMF sounds the alarm on persistent global inflation'
https://www.abc.net.au/news/2024-07-17/imf-global-inflation-roars-ahead…
"The culprit behind this warning is the persistent growth in the price of services, particularly across the developed world."
That sounds familiar.
And why are services 'costing' more?
Resource depletion/deterioration, coupled with relentless entropy.
Which means this Government's little moves (relative to the level of activity we're exponentially grown to) are incapable of cutting the mustard. The core problem simply isn't too many public servants, or too-slow traffic. You could argue it's partly to do with 'low productivity'- but only in the sense that productivity-increases are really energy-efficiencies.
its more likely because (whilst there is an oversupply of low skilled workers) there is an undersupply of skilled workers who deliver services, and it costs businesses a lot to lose those employees. thus likely the service based businesses are simply upping their prices (as their customers are sticky and cant easily leave) in order to pay their staff more. Also they are delivering services which typically improve ROI and productivity. Think bank, finance, consulting, IT, anything tech, power generation, environmental, manufacturing, space....
The OCR and interest rates are of little interest to high skilled businesses and employees. But it does impact the poor and lower middle class. So if inflation is persistant the wrong people will pay the price.
We cant really affect this scenario as whatever we do the same outcome will happen - its darwinism. The owness is on entities (people, businesses, countries...) to stay ahead to survive
Who will be the next US president? The financial markets have a bet placed firmly on one candidate
https://www.abc.net.au/news/2024-07-18/financial-markets-presidential-t…
"It's clear to many market participants that a Trump presidency will see more spending by consumers, businesses and government — all of which will add to aggregate, or total, demand in the economy and therefore inflation.
"The Trump Trade prompts (US) investors to increase exposure to domestic equities, favour shorter-duration bonds, implement hedging strategies against a strong USD, and diversify into safe-haven assets,"
"Further out, as in decades ahead, financial markets are pricing in an explosion of US debt due to a Trump presidency.
"The yield on 30-year Treasuries [this week] surpassed the rate on two-year [bonds] for the first time since January – the 30-year notes reflecting the exploding spending,"
The analysis I've been listening to is suggesting that the Trump shooting distraction has taken the heat off Biden and he is likely to stick as candidate. The betting seems to give him about a 50/50 chance, with Harris by far the second favourite. Michelle Obama and Newsom both given ~5% chance.
Republicans now given a ~70% chance of winning the Presidency. Dems are sleep walking into disaster.
Too late to change Biden now, he is going to lose anyway and so will anyone they replace him with. Why would you step up to take a guaranteed loss ? The replacement will wait until after the election and the Dems will have time to regroup. Trump will be lucky to live out another full term anyway so the Lions will lay in wait.
A week is a long time in politics, as the saying goes.
From the headlines I've seen, Biden says the only thing that will make him step down is a medical issue.
Lo and behold, a few hours later he suddenly has Covid. What's the betting he winds up having a particularly bad case?
I may be forced to go and dig out the tin foil from the kitchen cupboard at this rate.
A different perspective on the reason for high trades wages in Oz (cf the latest CFMEU corruption scandal)
Has the CFMEU made home building more expensive? Yes, but not how you think
https://www.abc.net.au/news/2024-07-18/has-cfmeu-union-increased-constr…
Powerful construction union boss John Setka has stood down amid a raft of explosive allegations of misconduct facing himself and his union.
A major investigation by The Australian Financial Review, The Age, The Sydney Morning Herald and 60 Minutes has found underworld figures and bikies have infiltrated major Victorian and NSW construction projects, with some securing jobs as CFMEU delegates and secret surveillance exposing the involvement of notorious gangsters in the industry.
https://www.afr.com/companies/infrastructure/bikies-underworld-figures-…
Casey Costello halving the excise tax on heated tobacco products, a few weeks ago and we just find out now.
I am struggling to remember a government in the pocket of lobbyists as much as this one. How much do policies cost these days? I hope she held out for a cushy retirement job in Philip Morris, and didn't just settle for a corporate box at the rugby match.
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