Here's our summary of key economic events overnight that affect New Zealand with news global equity markets have essentially bounced back, consigning the Monday ructions to just a 'summer wobble'.
But first up, there was another full dairy auction earlier today. It was a much larger event with more than 35,000 tonnes sold. Overall prices rose +0.5% from the prior full event three weeks ago. More than a quarter of the volumes were for SMP which fell -2.7%. More than a half were for WMP which rose +2.4%. The rest of the products offered brought variable results too. Although the result was little-changed in USD, the much lower NZD brought a +1.9% rise in local currency.
Globally, world food prices are low and little-changed. If any category is changing, it is a slight uptick in meat prices.
In the US, the data released overnight was largely positive, assisting the financial market recoveries. The US Redbook index of retail sales at physical stores was up +5.1% last week from a year ago, rising from the prior week.
Their Logistics Managers Index (LMI) rose more than expected showing their logistics industry expanding more than expected in July and at a good clip.
The RCM/TIPP Economic Optimism Index for investors rose in August to its highest in seven months.
And US exports for both goods and services rose more in June than imports, allowing their trade deficit to ease back slightly. Those exports are now +5.9% higher than year-ago levels. As we have noted before, this deficit is just a rounding error for the giant US economy, even if it is a political football.
While none of these overnight data releases on their own are terribly important, the combination supported the sharp mood change. The earlier suggestion of imminent recession in the US may only have been from summer keyboard warriors.
Canadian exports also rose notably in June to be +10.6% higher than a year ago.
I know we have mentioned this before, along with the reasons, but the Chinese steel rebar price is turning into a bit of a rout, with extended sharp dives. It is now down almost -23% lower than year-ago levels. The copper price is wavering too.
In fact, aggressive price discounting in many Chinese sectors has become the norm there casting a pall over general business conditions. It probably can't go on like that without widespread enterprise failures.
Of course, irrational behaviour isn't just a Chinese thing. Overnight Elon Musk sued advertisers - for not supporting Twitter/X. That's weird.
Elsewhere EU retail sales volumes fell in June after the small rise in May. Most countries in the bloc struggled, but Spain, Portugal and Denmark were among the few that bucked the trend.
Yesterday the RBA left its policy rate unchanged at 4.35%. But its accompanying commentary was direct and specific; they haven't beaten inflation yet and the progress they may have made isn't sufficient. It was a hawkish hold. Markets bid up yields on benchmark bonds following the statement. The AUD rose. (And that pushed the NZD down.) It seems there will be no rate cuts in Australia in 2024. What will now be of interest is whether financial markets take the RBA guidance on board in its pricing.
Later this morning StatsNZ will release the June labour market report. Our unemployment rate is expected to come in at 4.7%, a rise from 4.3% in Q1. That would be an increase of +10,000 more people without jobs in the quarter. But it could be more than that. The rise of those on JobSeeker benefits was +8,450 in the same period but not everyone who is jobless claims for those benefits. But a notable rise above a 4.7% rate would probably be influential in the next week's RBNZ considerations (even if there is no longer a jobs mandate).
The UST 10yr yield is now at just on 3.88% and up +11 bps from yesterday. The key 2-10 yield curve inversion is much less at -10 bps. Their 1-5 curve is holding at -77 bps. But their 3 mth-10yr curve inversion is much less at -144 bps. The Australian 10 year bond yield starts today at just on 4.02% and up +13 bps after the RBA review. The China 10 year bond rate is up +3 bps at 2.15%. The NZ Government 10 year bond rate is now just on 4.25% and recovering +6 bps.
Wall Street has recovered +1.7% on the S&P500 in Tuesday trade, making back most of yesterday's drop. Overnight European markets were all little-changed. Yesterday Tokyo recovered most of Monday's very big fall, up +10.2%. Hong Kong was down -0.3%, Shanghai was up +0.2% but Singapore fell another -1.4% and the day's worst performer. The ASX200 recovery was weak, up just +0.4% and the NZX50 fell a minor -0.2% in Tuesday trade.
The price of gold will start today down -US$12 from yesterday at US$2391/oz.
Oil prices are +50 USc firmer at just under US$73/bbl in the US while the international Brent price is just over US$76.50/bbl.
The Kiwi dollar starts today up +¼c from this time yesterday at just on 59.6 USc. Against the Aussie we are down -20 bps at 91.1 AUc. Against the euro we are up +30 bps at 54.5 euro cents. That all means our TWI-5 starts today at 68.2 and up +20 bps.
The bitcoin price starts today at US$56,690 and up +3.9% from where we left it yesterday continuing the recent volatility. In fact, the volatility over the past 24 hours has been very high, at +/- 4.2%.
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89 Comments
Sentiment has changed will be a sell rallies market for a while.
Summer Wobble? Have we not learned anything?
"September 18, 2007: The Federal Open Market Committee began reducing the federal funds rate from its peak of 5.25% in response to worries about liquidity and confidence.
October 9, 2007: The DJIA hit its peak closing price of 14,164.53.
December 2007: Unemployment in the US hit 5%
March 18, 2008: In a contentious meeting, the Federal Reserve cut the federal funds rate by 75 basis points
Late June 2008: The U.S. stock market falls to a 20% drop off its highs
September 15, 2008: After the Federal Reserve declined to guarantee its loans as it did for Bear Stearns, the Bankruptcy of Lehman Brothers led to a 504.48-point (4.42%) drop in the DJIA, its worst decline in seven years."
And then, things got really bad. So the answer to the question appears to be - No
History doesn’t apply anymore. It’s a completely different (crazy) world now. It would appear that “they” just won’t let it crash. We’re back in the green all round, the party must never end. I’ve been picking a major crash since around 2013. It was ramping up after the GFC, and I thought this can’t go on. It’s still going on.
By "they", you mean trading algorithms?
Never under estimate the delusional power of the the collective human psyche. The system is run on faith and a support team of computing power. What we need is an orderly, but rapid, scale back of all human activity on our planet. A leak in the over inflated ballon.
What we will get, is "leadership" by the most yeasty human individuals, drunk with their evangalical euphoria for a system that has bequeathed vast wealth for them and selected mates, accelerating pedal to the metal off the cliff!
Peak oil and a lesson in what happens when you don't have Captain's calls.
"U.S. oil production is breaking records, but employment numbers have dropped in five out of six months this year as operational efficiencies allow operators to continue to boost production with fewer rigs and workers, the Texas Oil & Gas Association (TXOGA) said last week
...“Drilling and completion efficiency continues to improve via lower drilling costs and shorter drilling and completion times,” Grigsby said.
“This year, every stage of a well’s building cycle in the Permian was 20-50% faster than in 2019, with the total average time from rig to production decreasing by a third to 63 days.”
https://oilprice.com/Energy/Energy-General/US-Oil-Gas-Jobs-are-Disappea…
Spot the spin - always the case with Profile.
Fracking wells drop off their production at faster rates than conventional wells. That demands more to be drilled, to 'maintain' output (from the very few 'sweet spots' where it works). Naturally they've gotten faster, naturally they've reduced labour input.
Sigh
Better technology = more production, fewer wells, increased proven oil reserves. But I think you know that.
"U.S. crude oil production has increased to record highs since 2010 and has risen even more quickly in recent months. ...Recently, U.S. crude oil production has increased because of technological advancements and efficiency gains despite a 69% decrease in the number of active rigs since 2014. The number of new wells brought on line by drilling activity has historically been the key determinant of whether crude oil production increases or decreases. However, advances in horizontal drilling and hydraulic fracturing technologies have increased well productivity, enabling U.S. producers to extract more crude oil from new wells drilled while maintaining production from legacy wells."
https://www.eia.gov/todayinenergy/detail.php?id=61523
Lots of solutions out there, though it is very hard to keep a lifetime Chicken Little happy. Fracking tech advances spill over in to geothermal.
"For example, Fervo Energy uses precision directional drilling technology to drill horizontally in geothermal reservoirs.
“This enables us to drill multiple wells from a single location, dramatically lowering our surface footprint and reducing drilling risks. Horizontal drilling also facilitates greater access to geologies that were previously challenging to reach, increasing the total resource potential for geothermal energy,” the company says.
Fervo used horizontal drilling in a project to deliver clean energy to Google’s data centers in Nevada—a project that became operational in November.
Drilling costs for Fervo’s first four horizontal wells for the Utah project have halved to $4.8 million per well from $9.4 million per well drilled at its first commercial project in Nevada, executives have told The Wall Street Journal.
Fervo targets to lower its electricity costs to around $100 per MWh soon."
This is an interesting story -
Late Friday, The Washington Post produced a deeply reported story concerning a transfer of $10 million in small bills from the National Bank of Egypt that, through a bizarre chain of custody, wound up in service to the campaign of former president* Donald J. Trump.
Perhaps it's you that needs some time out Palmtree? No love for Trump but the I find that Libs are so quick to give Biden and his son a free pass shows willful ignorance. I saw a clip of Trumps grand daughter speak who apparently is also likelt to turn pro as a golfer was in stark contrast to the train wreck that is Hunter. She is very impressive.
I'm not "pro Biden". It's just the US has an outsized influence on every aspect of human existence on planet Earth. To have a clueless US proto fascist wannabe dictator doesn't bode well for any life form above single cell. I couldn't give a toss about Bidens sons computer, or his drug fuelled past! And now it IS the past!
https://en.wikipedia.org/wiki/List_of_Republicans_who_oppose_the_Donald…
I expect both Bidens to face criminal charges if Trump gets in.
You don't need to be a sleuth to know that some very dodgy stuff was going on with payments to the "big guy". Or was it Hunters deep governance experience that got him a seat on the board of Ukraines largest oil and gas producer?
Well, Trump does plan a purge for all those perceived to have wronged him and with SCOTUS packed with dodgy appointees, nothing would surprise me. #Trumpnightofthelongknives2
We'll see how quickly the States decends into violence? Guess it depends whether the yes men behind Trump are willing to sacrifice the "greatest country on Earth" status?
Musks bot farm must be a drain on the US power grid. There was a RNZ facebook story about the arrival of Musks twelfth child and I made a little comment about "Lebensborn", which was subsequently acknowledged by some sort of electronic representitive of the Musk world order.
"This is a numbers game, focused on producing the maximum number of heirs – not to inherit assets, but genes, outlook and worldview. And it’s being advocated by some of the most successful names in tech."
https://www.theguardian.com/lifeandstyle/article/2024/may/25/american-p…
The government removed the employment mandate and made it quite clear that they need to concentrate on inflation, so they will want to be absolutely certain inflation is under control. Personally I think they should have started cutting at the start of the year, but if I had their mandate I would do the same as them.
People that wanted the removal of the employment mandate are now accusing the RBNZ of causing unemployment!
Not looking great for one of our biggest companies:
https://www.nzherald.co.nz/business/grim-forecast-for-air-new-zealand-w…
They must be making a killing off regional flights at the moment, monopoly pricing. I don't pay for Herald - is it the international business making a loss?
Maybe they need to split it into two companies. It seems I'm paying high regional airfares so people can get cheap international holidays...
"Most Kiwis are not wealthy enough to pay the higher prices" - really, I reckon the types of people travelling have plenty of wealth compared to many other countries. Granted a lot of it is tied up in property...
https://www.interest.co.nz/personal-finance/123663/kiwis-mean-and-media….
NZ's mean wealth per adult for 2022 fell US$67,420 year-on-year to US$388,760, placing it sixth down from fifth. NZ's median wealth per adult for 2022 fell US$30,640 to US$193,060, placing the country fourth down from third.
there is always the top tier who will always travel and not have to worry about the cost. But I suggest they are far from the majority. It is interesting though that of those I know who are continuing to travel regularly and are not 'top tier', some of them are now prepared to pay for the premium economy perks. I ran a check on the differences and there is, to me at least, a big hike up for PE seats.
You are confusing wealth with income. The wealth reported in that article was for a large part made up of financial assets (Kiwisaver) and non-financial assets, i.e., the overpriced owner-occupier house. People don't cash into either of those to pay for their leisure trip to Bali or Queenstown.
That being said, when the value of those assets go up, people feel confident to go out and spend up. Hence why successive governments are more interested in stimulating the economy instead of growing it organically.
However, a little discussed fact is that the "reverse wealth effect" does more damage to confidence than what the wealth effect spruiks up.
RBNZ research in 2019 on the housing wealth effect suggested that for every $1 increase in house prices, households increase consumption by 2 cents. House price declines are estimated to have a larger impact, with consumption dropping 3 cents for every $1 decrease in house prices
Yes, the vast bulk of literature suggests that whenever an investor tries to outsmart the market their returns drop.
There will be a few exceptional individuals who buck the trend and it is human nature to think we're in that tiny segment of over-achievers despite evidence to the contrary, or more likely an unwillingness to actually look for evidence.
Happens every time there's a whoop.
The big boys with the fast computers out-flank Ma and Pa - every move the rich get richer and the poor, poorer (poor, in this relativity, is the upper end of what was once the middle class). The bottom has little left to give, the middle is fully-hocked - begging the question; How long? How long? (apols to Kipling)
There has to be a reconciliation; bets vs reality.
wholesale electricity rate hit $1.70 / kWh in Kikiwa/Nelson this morning.
Looking like another record day for solar. Not even 9am and i'm already at 1/3 of nameplate. I'm starting to think there might be something to PDKs comment about solar and hydro being the perfect partners. I used to think they were a bad mix, due to the seasonality. Demand highest in winter, but hydro inflows and solar lowest in winter.
Great post. It's a game where nature always bats, and we're always fielding. Some folk have trouble going there, ego-wise.
My set-up doesn't quite parallel the grid; I have batteries (the grid battery is the hydro-lakes) and I shift my peak load to fit the weather. (The washing machine only goes on when it's sunny; what's the point in hanging clothes to dry on other occasions anyway?).
Knocking the tops off the peaks would be a good start for NZ as a whole. My back-up generator is my Huntly - but I haven't needed it domestically for years.
I'd love a microhydro, but alas I live in a city so not possible without a move. For anyone looking to build one, youtuber MartyT (Kiwi) had a 3 part series in him building/wiring his own form an old washing machine and wiring up to a set of car batteries as storage which is a good watch. Naturally there are more efficient systems out there. What setup have you got PDK? Custom larger pelton wheel?
To mix metaphors, I've got a litre a second @ 80ft. :) It's not even a creek - it's a spring drain.
So no, I run the older GE metal-cage motor rather than the Smart-Drive, bonus is it has mounted bearings, and is the shaft. My rotor is one of a run die-cast by a now-dead fellow in Roxburgh (I have a spare) and my one originally drove his pack-house fan directly (it still had the fan-blades on it when I got it). It is 150mm across, fed by a 4mm nozzle (I'll add a second one @ 90deg someday, to use excess flow if needed). Oatley Electronics (Aust) do a kit rectifier board (mine was $67, back when); works for anything; windmills or whatever.
Peltons are the most efficient with high head/low flow. Perfected well over 100 years ago. Turgos and Kaplans are for higher flows/lesser head. Get in touch via the site, and I can elaborate if you want.
If we can get to the stage where our hydro schemes go in to winter with consistently full lakes that would go a long way to mitigating winter supply issues - so I think solar does have a large part to play in that regard, saving us using much water over the summer season. More wind would also help the dry year problem, again saving water for when we really need it.
Neither helps much (yet, with current storage technology) with the peaking problem however.
The peaking problem is just human arrogance - 'I have the right' nonsense (with an unfettered population within a bounded system, there are no absolute rights).
It can be conditioned by price - inducing different working hours, cooking-times, charging times.
But oh, I have a right (extrapolated: there are no limits).
Imagine ordering a Ferrari, then deciding it's too expensive so you cancel delivery then order a Toyota. And in the end you've paid for a Ferrari and a Toyota combined but only got the Toyota. And then your wife, who always has your back, says "Wow, amazing use of money honey! You're such an adult in this room."
They're all ideology - you can see it in Bishop's eyes (and he's one of their smarter!).
Dismantle anything Labour did.
Kick the bottom-end (as per Jim Crow in the US).
Utter platitudes (carefully spun, carefully polled first).
Bluster, smile uncomprehendingly into middle distance, chant two-word slogans when flustered.
Adult? Not. Petulant pre-teen, more like. But you have to feel sorry for them - who would want this poisoned chalice at this late stage in human overshoot?
I'm not sure who their donors are, but Mainfreight certainly aren't happy. This is from their annual results announcement:
"Our Transport business is a significant user of rail across the length and breadth of New Zealand. The current fiasco surrounding the future of both the rail ferry services across the Cook Strait and rail services south of the Waikato are unsettling. The loss of rail services between the North and South Island would see Mainfreight add 5,700 additional truck and trailer journeys per annum on the road, putting significant pressure on the already fragile roading network. New Zealand's roading infrastructure will not cope in the absence of rail."
One transport company has given $100,000 to National. Velocity Freight is owned by Mainstream Group. Recently the company was warned by the Commerce Commission for engaging in “cartel behaviour”. Velocity is a major competitor to Mainfreight, whose owner Bruce Plested has previously given big donations to National, but in recent elections been a major donor to the Māori Party (totalling $360,000).
Maritime businessman James Francis Speedy gave National a $101,000 donation last year. The Aucklander has owned various transport and harbour businesses.
The road transport lobby is a significant part , but National has also made a point of looking for and highlighting any "waste" they can pin on the previous Labour government.Willis is one of the worst at this. Clearly the Ferrari/Toyota comparision was not correct , the new ferries were actually a bargain , and have become even more so . I guess it will now be correct in reverse , we will pay a Ferrari price for a Toyota unfit for purpose.
It was also evident in the announcement (re announcement that they will match Labours spending for the 3rd time), of the new trains for the Wellington region. Brown had one point to make, that the new trains had to be value for money , and this mean't they may not be hybrid trains . he made this point 3 times , and added nothing else , though I do believe his I,q is only capable of one point at a time. The problem , which the wiser regional councillors choose not to point out , is that the hybrid option has likely become cheaper in the last couple of years since the original proposal , due to falling lithium prices , and becoming off the shelf , and they were not more expensive to start with . like wise with the electrcity where Willis blamed Labour's exploration ban. some simple research would show both points are not the case.
unfortunately the Greens seem distracted , they would have blasted them on both points in the past. Labour is doing so to a lesser degree.
"New Zealand's roading infrastructure will not cope in the absence of rail." We see that sort of self serving nonsense daily from the rail union guy
5700pa is an extra 15 trucks a day across Cook Strait (ie 8 each way). Not an obvious reason to spend billions on either rail capable ferrys or roads.
The earlier suggestion of imminent recession in the US may only have been from summer keyboard warriors.
Asking those who know (as I don’t know the answer). How much of the highly reported Berkshire move into cash this quarter was prompted by the group’s significant yen borrowing the past five years? How much of that yen was raised not just to invest in Japanese stocks but to de facto engage in the yen carry trade? Because to my simple brain that would explain the moves? If a sizeable chunk of Berkshire’s US stock positions were funded by yen borrowing then any fear that the carry trade is coming to an end might prompt some profit taking and stock liquidation? https://japantimes.co.jp/business/2024/ Link
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