Here's our summary of key economic events overnight that affect New Zealand, with news China's fury with an independent Australia is a worrying development for New Zealand.
But first, American jobless claims came in at just over +1.3 mln in data for last week, a little less than was expected. That takes the total number of unemployed American on these benefits to just over 18 mln. A majority only have one month or so left with this support so markets are turning their attention to the impending social cliff. It's going to be tough.
Also facing a tough immediate outlook are investors. The Wall Street earnings season unofficially begins next week (Wednesday) with results from some of the biggest American banks. Analysts expect S&P500 companies overall to report a -40% drop in year-over-year earnings for the second quarter, when the coronavirus likely took its biggest toll on companies. Earnings fell -13% in the first quarter. The resurgence of the virus and the growing re-imposition of lockdowns and stay-at-home orders will have investors worried the trend will be extended and the expected and priced-in rebound won't actually come in 2020.
Not every sector is in stress however. Prices for forestry logs for products like sawn timber and plywood have soared because of booming demand from home builders making up for lost time, a DIY explosion sparked by stay-at-home orders, and a surge by restaurants and bars to install outdoor seating areas. Prices are back near their pre-lockdown highs and are taking competitive pressure of our logs to China.
The situation extends to Canada as well as housing starts are running faster than expected.
China's consumer inflation rate is rising again and ending a four month set of consecutively lower levels. It was up +2.5% in June from a year ago. In the food category, beef prices were up +18% in a year, lamb prices up +11%. This was a slower rate of increase for beef from May, but a faster one for lamb. For most other categories of consumer prices there was an easing.
And there are growing signs of excessive investment in China that is not matched by real demand. The office vacancy rate in Beijing climbed above 15% in the second quarter of the year, the highest in a decade as new construction far outpaced what could be leased. This is emblematic of China's "investment-driven" stimulus approach.
And we should note there is an election in Singapore today. It will no doubt be the usual 'fixed' affair with the ruling party stifling dissent for another easy win.
In Australia, May data shows that new loan commitments for housing fell sharply, down almost -12%. This was the largest fall in the history of the series, driven by strong falls in the value of loan commitments for housing in New South Wales and Victoria. The value of new loan commitments for owner occupier housing fell -10%, while investor housing fell more than -15%. The number of owner occupier first home buyer loan commitments fell -9.3%.
And Australia has announced that its citizens should avoid being in Hong Kong, over the fear of arbitrary detention and State hostage taking. At the same time, Australia is offering a welcome mat with skilled and graduate visas to be extended for people from Hong Kong. Australia has cancelled its extradition treaty with the once autonomous city. Beijing is reacting with fury. (We may need Jian Yang and Haymond Ho to earn their keep - and explain to Beijing that New Zealand is independent and won't be cowed either. They do represent New Zealand, right? What chance?)
Equity markets are lower in a general risk-off tone that pervades today. In New York, the S&P500 is down -0.2% in mid-afternoon trade. They follow Europe that was generally down a bit more, averaging -1% although London closed down -1.8%. Yesterday, Shanghai rose yet again, up another +1.4% and so far this week it is up a startling +9.4% on top of last week's +5.8%. Beijing came back from their Dragon Boat Festival with firm instructions to the 'home team' to juice up this market - and they have delivered. There is something of a 'rebound frenzy' underway in China now. Hong Kong was up a much more restrained +0.3% yesterday, and Tokyo was up +0.4%. The ASX200 chimed in with its own +0.6% rise, but definitely bring up the rear was the NZX50 Capital Index which was down -2.3% as the energy companies took a pounding on the Tiwai Point closure news.
The latest compilation of COVID-19 data is here. The global tally is 12,118,700 and that is up +226,000 since this time yesterday. Global deaths reported now exceed 551,000 (+6000). And there is a new virus to worry about.
A quarter of all reported cases globally are in the US, which is up +67,500 overnight to 3,188,000. US deaths now exceed 135,300. The number of active infections in the US is now up +32,300 to 1,645,400. Both infections and deaths are on the upswing again.
In Australia, there have been 9056 cases reported, another +173 since this time yesterday, and still concentrated in Melbourne which is now in lockdown. Their death count is unchanged at 106 and 10 people are now in ICU (+2). Their recovery rate has slipped back further to under 84%. There are now 1378 active cases in Australia (up +85 in a day).
The UST 10yr yield is a lot softer today, now just on 0.61% and falling. That is a -5 bps retreat on the market risk-off shift. Their 2-10 curve is down to +45 bps. Their 1-5 curve is also soft at +12 bps, and their 3m-10yr curve even softer at just under +50 bps. The Aussie Govt 10yr yield is down -2 bps at 0.87%. The China Govt 10yr is up again, up another +6 bps at 3.18%. And the NZ Govt 10 yr yield is also up, up by +4 bps to 1.02%.
The gold price has slipped by -US$10 today to US$1,801/oz.
Oil prices are also lower today, down by a bit more than -US$1. They are now just over US$39.50/bbl in the US and the international price is just over US$42/bbl.
But the Kiwi dollar is little-changed at just on 65.7 USc. On the cross rates we are firmer however at 94.4 AUc. Against the euro we are still hanging in at 58.1 euro cents. That means our TWI-5 is still at 70.3.
The bitcoin price softened overnight, down -2.1% to US$9,220. 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 ».
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.