Here's our summary of key economic events overnight that affect New Zealand with news the US is getting an optimism fillip, but that is not being matched in either China or the EU.
First in the US, the University of Michigan consumer sentiment survey increased for a 2nd month in September, to its highest level since May. This was above what was expected. Both current conditions and expectations improved, topping estimates. Meanwhile, inflation expectations for the year-ahead declined to 2.7%but those for the next five years rose marginally to 3.1%.
Next week on Thursday NZT the US Fed will decide on the level of its signalled rate cut. Financial markets are increasing betting on a -50 bps move. That expectation is a factor in the equity market rise.
In China, August data released overnight shows new loan growth remains very subdued in what is extending to be unusual difficult trading conditions. Chinese banks extended +¥900 bln in new yuan loans in August, above a fifteen-year low of ¥260 bln in July, but less than the expected bounceback. It is also the lowest value for an August month since 2015.
China's August retail and industrial production data is expected to be released later today, and both are expected to show slowing growth.
We have noted the trend before, but the weak Chinese economy is driving a bond rally there.Yields fell to a new record low earlier today, and state banks have been drafted in to sell some of their long-dated bonds to try and stem the rally. But until more confidence returns to the Chinese economy generally, it unlikely to work. If Beijing institutions don't have the firepower to move this market, it is unlikely the core SOE banks do either.
In a rare statement with the loan growth data release, the central bank indicated that new stimulus is on the way to shore up the economy. Only yesterday, President Xi exhorted his government to ensure the 5% growth target is reached this year. Xi's intervention came after widespread voices warned that the 5% target was probably out of reach.
Coming at a time that isn't convenient for their economy, China is going into an end-of-summer period of public holidays. First there is the upcoming Mid-Autumn Festival, September 15 to 17, a total of 3 days off - but where Saturday, September 14 has been declared a workday. That will be followed by the seven-day "National Day" holiday from October 1 to 7. But that is being offset by making it full workdays on September 29 (Sunday) and October 12 (Saturday). One consequence of all this time off is that foreign travel is expected to boom. Visa-free policies and lower air fares is seeing the number of Chinese booking holidays abroad surge.
In India, officials there are chaffing over creditor moves in the US to put Byjus into bankruptcy. Indian officials have arbitrarily removed the creditors who petitioned the US court that ruled on bankruptcy, from the creditor processes in India. It might get quite messy.
In Europe, July industrial production (real) was flat from June in the EU, but lower in the wider Euro Area. From a year ago the declines are -2.2% and -1.7% respectively.
The European Commission is expected to reveal its Summer economic Forecasts over the weekend, and they aren't expected to be very positive.
In Russia, their central bank increased its policy rate by +100 bps to 19% in a move markets did not expect. That are battling high inflation in a war economy that is distorting faster than their central bank is comfortable with.
The UST 10yr yield is now at just on 3.66% and down -2 bps from yesterday down -7 bps for the week. The key 2-10 yield curve is now +7 bps positive. Their 1-5 curve inversion has shifted less at -59 bps. But their 3 mth-10yr curve inversion is little-changed at -138 bps. The Australian 10 year bond yield starts today at 3.87% and down -1 bp. The China 10 year bond rate is at 2.10%, and up +3 bps but still historically low. The NZ Government 10 year bond rate is now just on 4.13% and and down -5 bps. A week ago it was 4.20% so a -7 bps fall since then.
Wall Street is up another +0.5% on the S&P500, from yesterday, up +3.4% for the week. Overnight, European markets rose +0.4% except Frankfurt which was up another consecutive +1.0%. Tokyo ended yesterday down -0.7% but ended its week up +2.2%. Hong Kong was up +0.7%, up a similar amount for the week. Shanghai was down again, down -0.5% and giving up -1.8% for the full week. Singapore rose another +0.2%. The ASX200 ended its Friday session up a good +0.3% to be up +1.1% for the week. The NZX50 ended up a mere +0.1% yesterday, to be up +1.7% for the full week.
The Fear & Greed Index ends the week in the 'neutral' range, from last week's 'fear' range. Overall market signals are "What, me worry?".
The price of gold will start today up another +US$28 from yesterday at US$2582/oz and a new all-time high. That makes it up +US$89 or +2.6% in a week. Gold bulls are now eyeing the US$3000 level. But that would require a +15% surge from here.
Oil prices are still just under US$69/bbl in the US while the international Brent price is now just under US$72/bbl. A week ago these levels were US$68/bbl and US$71.50/bbl respectively.
The Kiwi dollar starts today at 61.6 USc and unchanged from yesterday - and little-changed in a week. Against the Aussie we are similar at 91.9 AUc. Against the euro we are -20 bps softer at 55.6 euro cents. That all means our TWI-5 starts today at 69.3, and -20 bps lower from yesterday, and -40 bps lower than a week ago.
The bitcoin price starts today at US$59,737 and up almost +2.6% from this time yesterday. A week ago it was at US$53,516 so almost a +12% gain since then. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.
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26 Comments
Seems this government's actions have got so bad , nobody even bothers complaining about them Not much point , they are not listening to anyone , even experts.
Their only answer , "you voted for it ".
Clearly , the great CEO Luxon , got totally trumped by Seymour and , to a lesser extent Peters , in the coalition agreements.
Nicola Willis was a director of the NZ Initiative who are proud to be part of the Atlas network. Act have close ties with the Atlas network, but Seymour downplays it publically. Maybe Act getting so much power in the government is convenient? The government can do its dirty work and try to keep National's reputation clean enough that the centre can still vote for them. "They don't really want to do all this crazy Act stuff, it's just MMP's fault".
Luxon didn't show his business acumen when it came to Winston Peters and Foreign Affairs cuts. The Ministry cut 1% from its budget as opposed to other ministries who were asked to cut around 6.5%. Winston bypassed Nicola Willis and went to Luxon direct and Luxon obviously caved:
"Did you know that in 2006 the entire Labour Party caucus voted at first reading for a bill that would delete all references to the principles of the Treaty of Waitangi in legislation. They did this as part of a coalition agreement. Sound familiar?"
https://www.kiwiblog.co.nz/2024/09/history_repeats_but_hysteria_increas…
We have a feral cat problem here in North Canterbury ... anyone know if there's Haitians living in NZ who we can relocate to Waiau or Rotherham ? ... or we could just get them in from Springfield , Ohio ...
... unless Donald Trump was lying about that ... surely he wouldn't , would he ? ...
The price of gold will start today up another +US$28 from yesterday at US$2582/oz and a new all-time high. That makes it up +US$89 or +2.6% in a week.
Usually gold gets slapped down on Fridays by Jamie Dimon's underlings. USD is sinking on expectations of a panic 50bps rate cut. Also, the interest payments on US debt have crossed the $1 trillion threshold.
But this is interesting. China has devalued CNY vs gold by 60% in the past 2 years. But because China can buy oil & commodities in CNY, this is driving down the USD too. Most people don't consider these dynamics. Once better understood, gold may be much higher.
Daily USD100 moves would start to get attention at the cocktail parties.
Great stuff from Wolfie Richter. A must read to understand what's happening stateside.
Households’ money market fund & CD balances rise to a record $7.4 trillion; “savings” are far from depleted, they’re bigger than ever.
Americans hate, hate, hate inflation. But they like the higher yields on their cash that came with it, and they put a lot of cash to work by yanking it out of their bank checking accounts and near-0% savings accounts and putting it into much higher yielding money market funds and “brokered CDs” that they bought through their brokerage accounts, which forced banks to compete by raising their own interest rates they paid on deposits to keep deposits from fleeing, and to attract new deposits to replace those that had fled.
https://wolfstreet.com/2024/09/13/money-market-funds-large-cds-small-cd…
Project 2025’s policy guidebook, Mandate for Leadership, describes an America poisoned by “wokeness” and overtaken by lawlessness and chaos, where conservatives need to seize power immediately – and for as long as possible – to right a sinking ship.
Does this narrative remind you of any narratives being used in New Zealand?
Good insights of Project 2025 in this article, with a wise point
If you’re liberal, you should work to understand what the other side is doing. If you’re conservative, you should know what’s being said in your name.
https://www.theguardian.com/us-news/2024/sep/14/project-2025-election
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