Here's our summary of key economic events over the weekend that affect New Zealand with news investors globally are having a re-think about the valuation rises that have gotten embedded since the pandemic. Warren Buffett is now cashed up.
But before that, although it will be a relatively quiet week for international economic data releases, it is a big week at home. The important Q2-2024 labour market report gets released on Wednesday and there will be more real estate market data early in the week. Plus there is a full dairy auction on Wednesday morning.
There will be living cost data released in Australia. And before that we will get the RBA's rate review decision late tomorrow. And inflation expectations survey results will be released this week across the ditch. China will update its CPI and PPI. Plus there will be slew of services PMIs out everywhere too. Wall Street will start to wrap up its Q2 earnings season reports with some big later reports. By the way, Warren Buffet's Berkshire Hathaway reported its Q2-2024 position late last week - and it has about US$270 bln/NZ$450 bln in cash (or cash equivalents) on hand. See page 3 here. That is actually more than the NZ$409 bln NZ GDP over the past year.
But basically it is the Northern Hemisphere holiday season, so financial market activity will be relatively light for the rest of the month. (In fact, it is a public holiday in Canada today.) This tends to accentuate any changes more than they would otherwise be.
In China, their central bank said it will be pushing commercial banks to "do more" for the "real economy". It wants to shift the financial sector’s focus to "benefiting people’s livelihoods and boosting consumption" over the coming months. This change in emphasis follows pressure from the CCP Third Plenum meeting chaired by President Xi earlier in the week. The practical impact? Perhaps more debt issued for projects that have immediate effects but little long-term gains.
There are calls for monetary authorities to allow higher inflation as some sort of spur to 'growth'. Meanwhile, commodity prices keep on sinking as the overall stall extends. None of this is coming at a good time for China and they take their summer break. That tends to be when the leaders 'relax' at their seaside compound at Beidaihe. If they don't return with better plans and actions, there will be some grumpy countrymen.
One initiative underway is to boost its urban living. In 2012, a bit over half of China's population lived in cities. In 2023 that had risen to two-thirds. Their new goal is to get it to 70% by 2029 thereby generating a surge in new economic activity. But there will be issues from this drive, not the least of which is food security.
Meanwhile, flooding pressures are not easing. And that too has implications for food security and agricultural output, especially for gains.
In India, lenders to near-bankrupt education and training giant Byju are seeking to block the company from making its sponsorship payments to the BCCI, India's cricket authority.
Singapore's widely-watched local PMI was modestly positive in July, but far less positive than the internationally-benchmarked version.
The US economy added only +114,000 jobs in July, well below a downwardly revised +179,000 in June and forecasts of 175,000. It is also the lowest level in three months, below the average monthly gain of 215,000 over the prior 12 months, signaling that their labour market is in fact cooling off. But most of the weakness was in the tech sector with almost all other sectors holding their own.
Pressure on wages is easing too, with weekly earnings up only +3.3%, again driven by their tech sector.
Their jobless rate rose marginally to 4.3%, up from 4.1% in June. (s.a.) There are now 162.0 mln people employed, a record high, in a 169.7 mln labour force. (not s.a.)
This weakish American report actually had little impact on global markets because they were mostly sharply lower before this release and there was no added change after. You can claim it was 'priced in' and perhaps it was. But there is a broader re-ranking going on with a settling back in risk appetites. We shouldn't be surprised - markets never go up forever. The US Q2 earnings season reporting has been strong, but it is the less-than-stellar outlooks that are influencing investors.
Meanwhile, US factory orders, which were expected to show a dip in June, did just that but the dip was larger at -3.3% than the -2.9% correction anticipated. The June fall comes after four consecutive rises however.
But American new vehicle sales rose more than expected in July to an annual rate of 15.8 mln, a good bounce back from the 15.2 mln vehicle sales rate in June.
The Bank of Canada's Q2-2024 market participants survey shows that these industry insiders see their central bank next cutting their 4.5% policy rate in October and then taking it all the way down to 3.0% by the start of 2026. This is on the back of lackluster economic expectations.
We should also note that the UN-based International Seabed Authority has just elected a Brazilian scientist to lead it, its first scientist Secretary-General. This is expected to sharply slow seabed-mining activity everywhere.
The UST 10yr yield is now at just on 3.79% and unchanged from Saturday. A week ago it was at 4.20% so down -40 bps since then. That is a very big move. The key 2-10 yield curve inversion is shallower at only -8 bps and also a big weekly move. Their 1-5 curve is holding at -75 bps. But their 3 mth-10yr curve inversion is staying deeper at -157 bps. The Australian 10 year bond yield starts today at just on 4.05% and up +6 bps ahead of tomorrow's RBA review. The China 10 year bond rate is staying down at 2.12% and their all-time low. The NZ Government 10 year bond rate is now just on 4.26%. A week ago this was at 4.41% so a net -15 bps drop.
Regular readers will know that we track the S&P500 as a guide to equity markets. What they may not know is that the S&P500 represents more than 36% of all equity markets globally, by capitalisation. It fell -1.8% on Friday following an overall rollercoaster July. But futures trade suggests it may not fall further when it opens in New York tomorrow.
The price of gold will start today up +US$9 from Saturday at US$2443/oz.
Oil prices are holding lower at just over US$73.50/bbl in the US while the international Brent price is just under US$77.50/bbl. A week ago these price were US$76.50 and US$80 respectively.
The Kiwi dollar starts today down -20 bps from Saturday at just on 59.4 USc. Against the Aussie we are holding at 91.5 AUc. Against the euro we are up +40 bps at 55 euro cents. That all means our TWI-5 starts today at 68.6 and up +20 bps. A rising Yen had influence on this too.
The bitcoin price starts today at US$58,163 and down an extreme -7.8% from where we left it on Saturday. That is a -US$9,330 drop in a week or an eye-watering -13.8%. Volatility over the past 24 hours has been moderate however, at +/- 2.5%.
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48 Comments
So the math-ignorant, are going to address math-ignorance?
(Anyone advocating exponential growth, at this late stage, has to be math-ignorant)
But the bigger point is that that was all they had. That was their big Kahuna - and they aren't set up to deliver, nor funded to. Ideology, meet hard place. Bluster, meet reality.
Now we need to look for real, future-appropriate leadership. Time NZ journalism asked some hard questions.
They sold the ladder.
Several times over..
https://scheerpost.com/2024/08/03/how-unelected-regulators-unleashed-th…
Can't not happen again.
Busy blocking housing developments while espousing "Going for Housing Growth".
The Quarterdeck application had been opposed by Christopher Luxon and other local residents, who worried it would impede their views, overloads the stormwaters and cause traffic snarl-ups.
“There are other parts of Auckland that make sense for us to put higher density dwellings into. This is an area that should always stay a single dwelling zone...
As usual, you are 100% incorrect.
As usual, you assume too much, before you even start.
I though you might have learned, given your recent stumble. But maybe you didn't realise it was one?
Hint - when you put people down who HAVE made a proactive effort at addressing the predicament (it's a collection of problems) facing humanity, you dissed the effort without appraising what it was.
You end up needing to lie, not to put too fine a point on it. There are better ways to think, to learn and to live.
What will Berkshire do with all that money? Perhaps move it through a couple of shelters to get into armaments? A few fliers on bio-tech research? Solid state batteries? Utilities to ride out the unrest?
One thing for sure is I would not be putting it anywhere near the UK, that car crash makes our woeful efforts look good.
The Olympics have been great though (French hosting aside).
Going to take a while, the last clown show went off the rails 5 years ago. Must be pretty frustrating, you get in and find everything is a mess, kind of like the wild party you never got invited to and you come home to find the mess to clean up after everyone just walked away.
If economic gravity does kick in we might have some way to fall to hit trend:
https://www.advisorperspectives.com/dshort/updates/2024/08/01/regressio…
Also on PE:
https://www.multpl.com/shiller-pe
Based on valuations:
https://www.currentmarketvaluation.com/models/buffett-indicator.php
I was thinking that as well.... Its a very ugly realty check. We are so used to oversized easy money returns and asset prices are so overextended compared with historical norms. Sure the QE caused some of it, but its also caused some of the inflation we have.
Asset prices back at long term trend would feel like a Depression to many.
We will have no banking system before the bottom.
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Chinese authorities and resolution experts have been managing down the real estate bubble for over four years. The IMF is frustrated that they can’t collapse China today as they collapsed Japan in 1990. Japan never recovered. China is avoiding that trap skilfully. Growth at 5% is stable. Link
This comment should be attached to Audaxes post below, with the link
what is even bigger is when politics and trade intertwine, and greed drives corporate strategic behaviour.
What I refer to is corporates seeking more and more profits and one of the tools to achieve this is by off-shoring manufacturing. That is to all intents giving your technological expertise to another country. Consider then what the potential risks are when that country is less than a friend politically to your own. China is to all extents essentially a friend to no one except China. What has happened should not be a surprise, unless of course you believed your wealth and influence could corrupt and co-opt the political processes between the two countries. It might occur for a short time, but could never last.
Obvious self interested greed is what drives those who control the IMF. As Dilbert's boss said about the " independent" consultant,"Why would we pay someone to give us the wrong answer?". My worry is that our government might actually listen to the IMF. Then we would all have to take advantage of all the opportunities that they provide for their mates, because if we don't, we get left behind in the financial dust with most of the interest.co.nz commenters.
Wow, this is huge: the Federal Reserve is essentially saying that the U.S. shot itself in the foot with its export controls on China (which was illustrated by Intel's recent staff layoffs): https://newyorkfed.org/research/staff_reports/sr1096 Link
:It fell -1.8% on Friday following an overall rollercoaster July. But futures trade suggests it may not fall further when it opens in New York tomorrow.:
Would love to know where to find this information. I'm not very good at checking futures and comparing it to opening prices.
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