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Here's our summary of key events overnight that affect New Zealand, with news of a bloodbath in equity markets worldwide.
In fact, we are witnessing a dangerous sell-off in all financial markets.
Wall Street is down a whopping -3.4% so far today and sinking fast. And that follows Europe being down about -2% overnight. And that followed steep declines in Asia. Shanghai was down -1.6% despite 'home team' support. Hong Kong was also thrashed -2.9%. And Tokyo was not much better, down -1.7%. Yesterday, the ASX200 lost -2% and the NZX50 lost -0.9%. This could well be the start of the Trump Recession. The tax-cut sugar rush has worn off and fast; the hangover starts.
Commodities are falling, with oil down -1.8%, copper down nearly -4%, iron ore dropping -6%. And we have our eyes on dairy prices at the Wednesday auction. Derivatives pricing suggests a small retreat. Gold on the other hand is up more than +1.7%.
Not helping is that benchmark interest rate yields are sharply lower too with the US Treasury 10yr down to 1.74%. The Australian Government 10yr yield fell to just 1.02% and may slip soon under 1% for the first time ever. Remember this is a rate that started 2019 at 2.3%.
Given that this market slump was triggered by US tariff action, most economic data precedes that trigger. But still, in the US, the closely watched ISM services PMI has disappointed for July. It has come in at its weakest level since August 2016. New orders dropped to a three year low.
China is releasing its peg on the yuan. The Americans are fixated on this, but they can hardly be surprised. The 7-to-the-dollar level is now breached. The trade war may now morph into what was always a likely outcome of a tariff war - a currency war. And an own-goal by Washington, given that the US can't really respond as its currency is the benchmark in trade.
China also halted crop buying from the US.
These market earthquakes are probably more than US Fed actions - or any central bank - can weigh against.
In China, their services PMI has come in at a five month low.
And in Australia, a similar survey has also weakened. But globally, the sevices sector was expanding moderately in July. However, that was before the ructions of this week.
Today UST 10yr yield is now at 1.74%, and -10 bps lower in a day. Their 2-10 curve is flatter at just +16 bps and their negative 1-5 curve is much wider at -26 bps. Their often-quoted 3m-10yr curve is now a negative -27 bps. The Aussie Govt 10yr is at 1.02%, down another -7 bps since this time yesterday. The China Govt 10yr is down -7 bps for the week to 3.07%, while the NZ Govt 10 yr is now at 1.33%, a -6 bps decline.
Gold has leapt higher today, up to US$1,467, a +US$27 gain overnight.
US oil prices are falling hard. They are now just on US$54.50/bbl which is a drop of more than -US$1. The Brent benchmark is even lower at US$59.50, a drop of more than -US$2.
The Kiwi dollar starts today firmer than intra-day trading yesterday but back to where it started the week at 65.4 USc. On the cross rates we are firmer at over 96.6 AUc and that is a 19 week high. Against the euro we are softer at 58.4 euro cents. That sets the TWI-5 at just on 70.7 and little-changed overnight.
Bitcoin is now at US$11,810 and another +8% from this time yesterday. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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48 Comments
Hey lonewolfnz
Why dont you come and join the rest of the pack and fixate on this..
coinfarm.online
It is becoming one of my favourite pastimes
It feels like a skyrocket but once 12.5k resistance has passed the afterburners will ignite and make what is now happening almost sedate in comparison.
Currency wars.... guess who is going to win....the little guy who buys btc before governments hedge their currencies.
Good on you for being a voice in the bitcoin community
President of Property..
Nonsense. It can be regulated out of any practical use overnight (as Trump has hinted). It has the integrity of a casino and it amuses me that this site legitimizes this scam with a chart - it will turn out to be embarrassing. Anyone with some mediocre internet research skills can uncover this ponzi criminal raquet in no time.
Easy. Regulate it to death. One way would be for gummit to consider any funds derived from BT as proceeds of crime. Sure you can still trade BT direct and buy porn with you buddies, but what use is it if you cannot move the value into mainstream and buy substantive assets?
penny dropped yet?
I've heard that people have these "Crypto Debit Cards" that allow them to make purchases, therefore they claim Cryptos have good liquidity.
So what happens if they go to make a purchase and their card declines? Is there a local branch they can pop into, a customer center they can phone or a regulatory/oversight body they can elevate their problems to?
A declining housing market will seriously impact the sharemarket if overseas forces don’t, especially the banks and anything related to construction, but it could come later after it’s very obvious what’s happening with the housing market. If the US stock market tanks before that, and a US recession, it’ll be earlier. Those are my thoughts anyway.
All time high was NZ$2307 /Oz in Nov 2011. We are not far off that at 2242, especially with the weak $NZ, but still some to go. Significant gains for gold in US$ Terms as well. Part of my current investment thesis is that it’ll go on a bull run over the next few years. Already over 20% up in the past year, it could double after languishing for years. Gold ETFs are now going in the opposite direction the the S&P500.
Markets are eating the world
https://www.ribbonfarm.com/2019/02/28/markets-are-eating-the-world/
Cripes!!!!
The problem is that if interest rates are low because growth is also low, then no valuation premium is “justified” at all. In that situation, rich valuations merely add insult to injury. Notably, our estimates for future S&P 500 market returns do not reflect any downward adjustment for lower growth rates, so my sense is that they may actually be a bit optimistic. Still, at the end of July, our estimate of prospective 12-year total returns for a conventional asset mix invested 60% in the S&P 500, 30% in Treasury bonds, and 10% in Treasury bills, reached the lowest level in history except for the single week of the August 1929 market top.
Moreover,
Our view is that no form of investment risk is always worth taking without regard to valuations, fundamentals, economic conditions, or market action. The strategy of buying and holding index funds for the long run is essentially a strategy that says that market risk is always worth taking. Yet the iron law of investing is that a security is nothing but a claim on a future stream of cash flows. Valuation is a crucial determinant of long-term returns. The higher the price an investor pays for those cash flows today, the lower the long-term rate of return earned on the investment..
The corollary is also true. The lower the long-term rate of return demanded by investors, the higher the price moves today. So clearly, changes in investors' attitudes toward risk will strongly affect short-term returns. If investors become more willing to take market risk, it is equivalent to saying that they are demanding a smaller risk premium on stocks (that is, a lower long-term rate of return). Prices rise as a result. Now, the fact that current stock prices are higher also implies that future long-term returns will be lower, but that's part of the deal.Link
Investors really need to avoid the traps that central banks lay when they cut interest rates in the vain hope of rescuing bank asset values.
> our estimate of prospective 12-year total returns for a conventional asset mix invested 60% in the S&P 500, 30% in Treasury bonds, and 10% in Treasury bills, reached the lowest level in history
Chart below is slow by four months, but sounds about right:
https://financial-charts.effingapp.com/
This is what "managed retreat" looks like - do nothing until there's no longer a need to do anything;
https://www.tvnz.co.nz/one-news/new-zealand/massive-swells-could-breach…
Interesting sidebar on Brexit under BoJo...from the goldbugs - cui bono - ymmv - future results may differ from predictions - don't get between a mother bear and her cubs - don't run with scissors - don't try to catch falling knives.....
I am not sure it will be a "Trump" recession , the risk has been there since the GFC and QE , it was always lurking out there like lions hiding in the grass near a waterhole , and crocs in the water .
Trump was the idiot who came along and upset the balance , sending everything into a maelstrom
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