Here's our summary of key economic events overnight that affect New Zealand with news the Bank of Japan will grab the headlines later today.
But first up today, there was another dairy auction event overnight, the shorter Pulse event of SMP and WMP only. This one delivered results very little-changed from the prior event last week, essentially locking in those earlier price dips.
In the US retail sales at physical stores rose +4.5% last week from a year ago, the smallest rise since late March. But at least it is still well better than inflation.
Meanwhile, job openings in June were little-changed from the prior month - but that is better than it sounds because May was revised higher. Both levels are better than analysts had expected. And their quit rate fell to its lowest since November 2020.
Remember, we get the July non-farm payrolls data on Saturday (NZT) this week and markets now expect a +175,000 gain. There is nothing in the JOLTS data to suggest this is at risk - if anything perhaps an upside chance.
Perhaps supporting that is that the widely-watched Conference Board survey of consumer sentiment rose in July and by more than expected. However, this survey shows that consumers are less upbeat about the present than they are about the future. Election jitters are at play now. (But despite the overall gains, the levels in this survey are still quite low.)
And there was a follow-up from the US oil patch. The Dallas Fed services sector survey came in much less negative in July than June, and much less negative than their factory survey.
Later today we will get the Bank of Japan monetary policy decisions. Most analysts see them holding with a +0.1% policy rate. But a growing cohort see a rise to +0.25% today as wages and inflation rise there. Also of interest is what they do with their bond buying program. It would not be a surprise if they signal they will be reducing it from about NZ$65 bln per month to about half that.
And now we can report the June foreign direct investment data for China. And no wonder they held it back. It was terrible. They attracted only a net +¥1.6 mln in the June month from May. That is their worst level almost ever. In June 2023 it was a worryingly low +¥13.6 bln. In June 2022 it was ¥24.2 bln. In NZD the June inflow was virtually nothing - NZ$350,000 ! Even for New Zealand that would be very low. For the second largest economy in the world, it is a stunningly negative result. Beijing will be worried that these flows have dried up. Now their worry is that a net outflow by foreign investors beckons.
We have noted this recently, but it is worth updating again. The fall in Chinese steel rebar prices is turning into a rout with sharp daily drops now. They are now at eight-year lows. It is hard to know where tis will end.
In Europe, their Q2-2024 GDP expansion came in low again, but a +0.7% gain from the same period a year ago, similar to Q1-2024 but slightly better than expected. Expansions in Spain and France drove this result, but it was lagging in Germany.
Meanwhile German CPI inflation rose a very modest 2.3% in July (2.6% on an EU harmonised basis). This was little-changed from June.
In Australia, they are waiting for the Q2-2024 CPI data to be released later today (1:30 pm NZT). Markets expect that to come in at 3.8% and up from 3.6% in Q1. And they will release the June month inflation indicator at the same time where a 3.8% rate is expected, down from 4.0% in May. This data will go a long way to setting the RBA stance expectations for their Tuesday, August 6 MPS review.
Meanwhile, Australian building consent levels for June came in weak, led by low apartment and townhouse construction intentions. In fact, the levels for these dwellings that are not stand-alone houses are now down at levels last seen in 2011. Over the past 12 months, there have been a total of 162,892 dwellings approved, compared to 177,936 in the 12 months prior, representing a -8.5% decrease. This is the lowest number of dwellings approved on a June year basis since 2011/12.
The UST 10yr yield is now at just on 4.14% and down another -3 bps from yesterday. The key 2-10 yield curve inversion is still at -21 bps. Their 1-5 curve is still at -76 bps. But their 3 mth-10yr curve inversion is a little deeper at -124 bps. The Australian 10 year bond yield starts today at just under 4.29% and down -2 bps. The China 10 year bond rate is holding at its lows at 2.15%. The NZ Government 10 year bond rate is now just over 4.43%, and up +4 bps from yesterday.
Wall Street in Tuesday trade on the S&P500 is down -0.6%. Overnight European markets were mixed between a -0.2% dip in London and a +0.5% rise in Frankfurt. Yesterday Tokyo ended its Tuesday trade up a minor +0.1%. Hong Kong fell -1.4%. And Shanghai fell -0.4. Singapore dipped -0.1%. The ASX200 fell -0.5% but the NZX50 rose +0.6% and the best of the markets we follow.
The price of gold will start today up +US$28 from yesterday at US$2406/oz.
Oil prices are almost -US$1 lower at just over US$74.50/bbl in the US while the international Brent price is just under US$78.50/bbl.
The Kiwi dollar starts today +20 bps firmer at just on 59 USc. Against the Aussie we are +40 bps higher at 90.2 AUc. Against the euro we are up +30 bps at 54.6 euro cents. That all means our TWI-5 starts today at 68.1 and up +30 bps from yesterday.
The bitcoin price starts today at US$65,882 and down -US$1046 or -1.6% from this time yesterday. Volatility over the past 24 hours has been modest, at +/- 1.5%.
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59 Comments
That Chinese investment flow turnaround is stunning, its obvious that people are trying to diversify supply chains away from them. Not sure how this impacts NZ Trade flows, but I imagine they may struggle to grow. I assume some growth to whoever is currently benefiting from the missing China flow, if anyone is here.
"We spent hours talking about Hong Kong’s 16 percent tax rate, business-friendly regulatory environment, lack of state subsidies, tariff-free trade relations with the rest of the world and other policies he promoted while Financial Secretary. Of all the policies that we discussed, one stands out in my mind — if for no other reason than because it is so thoroughly counterintuitive. I asked him to name the one reform that he was most proud of. “I abolished the collection of statistics,” he replied. Sir John believed that statistics are dangerous, because they enable social engineers of all stripes to justify state intervention in the economy."
https://32d4fe53ef.nxcli.io/47447_sir-john-cowperthwaite-personal-tribu…
Absolute power cannot be shared. What’s in it for the former is the more telling though isn’t it. Russia through its expedition into Ukraine, and the resultant sanctions imposed on Russia, any way you look at it p, has been weakened, militarily, economically, socially and has now a burgeoning dependence on Chinese support. The two nations have not always been on good terms. China is becoming more and more the dominant partner. As such the “partnership” is well out of balance. Things and matters that are out of balance have a tendency to fall over.
Don't disagree, but "absolute power" is always defined within limits. In this case their own back yards. Their partnership is one of expediency. Russia has always considered China to be a threat and vice versa, and in this case they are keeping their enemies closest. But i think you are more right, in that Xi may be playing a complex hand with his eyes on Siberia if Russia weakens sufficiently. Lots of resources there, and if you can handle the winters, possibly more accessible and less 'public' than the South China Sea.
Appreciate I tend to dwell on history but the recent “agreement” between the two resonates remarkably well with the sort of deal accomplished by Ribbentrop & Molotov, the Non Aggression Pact, and designed by the former to cover their backs and to facilitate this, half of Poland was part of the prize along with purchasing of, and providing transit, for all the needs of a war machine.
not sure if you have read their trade numbers yet, 99Bln surplus, almost highest ever. If the west, by the west I meant US, are diverting their supply chains away from China, why would you see those trade numbers as is?
the reality is, China is having too much capital already, and desperately need to export those capital, not taken in more.
David, I think you have interpreted the wrong data or maybe calculation mistake. No wonder I have not seen such date making a big international noise. Please see link below: A net increase of 86 billion Yuan which is 20 billian NZD
The link you sent was Jan to June total of 498 billion https://www.mofcom.gov.cn/xwfb/sjfzrfb/art/2024/art_de077e9f8ff54ad68ee90d09b5cc05cb.html and the Jan-May release shows 412 billion https://www.gov.cn/lianbo/bumen/202406/content_6958803.htm an net increase of 86 billion Chinese Yuan in June.
Yes, the link to China's data only shows year-to-date. They never isolate the month's result. We derived it simply subtracting YTD May from YTD June. Here is a link to a chart of the ytd data. You can easily see that the change for June was tiny from May. Click on the 5Y tab to get a fuller perspective. (But note this chart is mislabeled as USD; it isn't, it is yuan which you can confirm from the MofCom press release.)
Extremely telling clip of how the US sees its "allies", which I am sure will go down well with the Dutch... This is Eric Schmidt (former CEO of Google and currently on an advisory board for the Department of Defense) congratulating Alan F. Estevez (U.S. Under Secretary of Industry and Security), telling him the "genius of your strategy [to ban semiconductors to China] is that you found a monopoly that exists in one company in the world that we had control over, which is ASML" ASML is a Dutch company... Link
I see Rex airlines in Australia has gone into administration. I have a couple of Aussie clients based out in the more remote areas of NSW who use their service regularly to travel to Sydney (as the alternative is hours of driving. I recall once flying from Chch to Sydney and catching the train out west to Penrith where their warehouse is based in less time than it took them to drive from some rural NSW where they actually have the HQ. I was at the office waiting with a tray of takeaway coffees before they arrived).
It seems like trying to take on the bigger airlines on main routes using jets - as opposed to sticking to their knitting of flying regional routes or regional to main centres using smaller aircraft - may have been a contributing factor.
Accurate assessment I would think. It’s all about market share. Competitors can reasonably comfortably share the market provided that each share stays more or less pro rata to their capacities. Another entrant capsizes the arrangement and usually invites a price war. Same sort of thing for instance in the NZ meat industry when Fortex outgrew itself and got stamped on by the big processors.
Funny thing about airlines, they don't seem to be able to collaborate to support each other while keeping it affordable for their customers. Air NZ is just as bad. They don't provide much service, if any to many regional towns and cities, but don't seem to want to tolerate some upstart to do it. An example being AirNZ would rather people from Whanganui spend an hour driving to Palmy to use their service from there, than fly Air Chathams from Whanganui. Stupid big city mentality imposed on the regions.
Politicians point finger at Qantas over regional carrier Rex Airlines' troubles
https://www.abc.net.au/news/2024-07-30/lambie-mckenzie-aim-at-qantas-ov…
Sagely advice from the Desert
Meanwhile German CPI inflation rose a very modest 2.3% in July (2.6% on an EU harmonised basis). This was little-changed from June.
Good morning from #Italy, where growth deteriorated slightly in Q2. Real GDP growth eased to 0.2% QoQ, down from 0.3% in 1Q. Net exports acted as a drag. Private investments slowed following the expiry of superbonus (tax incentives for housing renovations that have boosted residential spending in recent years). Consumer spending may have expanded at a similar pace as in 1Q. Despite the slowdown, Italy has grown significantly faster than #Germany, which shrank at 0.1% in Q2. Italy has outperformed Germany in terms of economic growth in 4 consecutive quarters. Link
"Microsoft plunges as Big Tech sell-off deepens... Shares in the company fell by more than 7pc in after-hours trading, wiping more than $200bn off the company’s value "
That's what happens when revaluations happen. That US$200,000,000,000 was never real, unless those who owned the shares had borrowed or spent against the market valuation. Hmmm.....sounds familiar....
Lol... its a mess at the mo. All big tech seems to have been riding the AI wave and investors valuing businesses with a heavy AI focus at multiples of their real valuation.
Now we realise that not only is AI not really delivering much but that the real valuations were already high in a downturn.
Tesla, MS, NVIDIA etc may lead a massive drop in the share market and that will spill over to the wider markets for sure
I don't think you can upload images here, but this meme from Reddit just about sums it up:
https://www.reddit.com/media?url=https%3A%2F%2Fi.redd.it%2Ftmjm4zfqwied…
OK. But they still have a 2050 target?
Yes. However, a 2050 target and no 2030 target is classic greenwashing. It’s like wanting to fly to the other side of the world and scrapping the midway refueling stop. Don’t worry, they’re deeply committed to reaching their final destination, because they said so. Even though it’s impossible without that crucial checkpoint along the way. Earth’s temperature doesn’t respond to strategies, it responds to meaningful climate action. Those setting 2050 targets without a 2030 target won’t be around professionally or politically to dance the accountability waltz. Following through on your commitment matters, especially on a planet that had its hottest day on record last week.
Morning David, I think you have interpreted the wrong data or maybe calculation mistake. No wonder I have not seen such date making a big international noise. Please see link below: A net increase of 86 billion Yuan which is 20 billian NZD
The link you sent was Jan to June total of 498 billion https://www.mofcom.gov.cn/xwfb/sjfzrfb/art/2024/art_de077e9f8ff54ad68ee90d09b5cc05cb.html and the Jan-May release shows 412 billion https://www.gov.cn/lianbo/bumen/202406/content_6958803.htm an net increase of 86 billion Chinese Yuan in June.
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