Here's our summary of key economic events over the weekend that affect New Zealand with news the Russians and Chinese are coming.
But first, it is a public holiday in the US, Independence Day, with everything there essentially closed until Wednesday (NZT).
China is also essentially 'closed' as they take time out to celebrate the anniversary of the CCP, and fawning over Chairman Xi.
Taking advantage of the holidays have been a ransomware group, who launched a massive strike over the weekend, affecting thousands of organisations worldwide, including in New Zealand. No-one actually knows where this threat originates from, but they are thought to be based in Russia because the group does not target Russian organisations, nor those in former Soviet-bloc countries. Nor China.
We can use this break to note that our investment portfolios are likely to have a growing portion of Chinese debt investments in them as China gets more comfortable about its financial market opening-up. Benchmark Chinese debt still has relatively high yields (their Govt 10 yr yields 3.11% today), giving it an attraction to many fund managers, with the added prospect of large capital gains ahead as it reverts to much lower global yields. At the same time, China is keen for its domestic investors to go international. That is because without a two-way flow their currency would very likely strengthen sharply. Sharper funds outflows from China may be a feature of the post-COVID investment scene.
In the US, non-farm payrolls beat most expectations, rising +850,000 in June from May when a +700,000 rise was expected and the May rise was a revised-up +583,000. But as regular readers will know, these are seasonally adjusted numbers. The raw number has been far more favourable in the prior two months, basically gaining +1 mln each month with payrolls rising from 143.3 mln in March to 144.4 mln in April to 145.4 mln in May. In June they actually rose to 146.5 mln, another gain of +1.1 mln. These are all far better than the statistically adjusted levels. In a year, US non farm payrolls have risen more than +8 mln. However, compared to June 2019 they are still more than -5 mln lower. So while recent trends may actually be better than generally reported, they still have a very long way to go to recover the pandemic losses. It is this overall gap that has bond investors thinking the US Fed is probably a long way off raising their policy rate, further away than what analysts had previously assumed.
US factory orders in May also came in better than expected with a +1.7% rise vs a -0.1% slip in April.
Canadian building permit data wasn't so positive. After four consecutive months of reaching new highs, the total value of building permits dropped an unexpected -15% in May. Every component was down, with multi-family dwellings in Toronto accounting for almost 60% of the overall national decline.
Internationally, we got CPI data from South Korea and India late last week. The South Korean index was essentially unchanged in June but remains well above their central bank's 2% target at 2.4% pa. In India, price data was for May and it was up over +6% pa with the drivers being much more than lockdown-related.
In Australia, bank mortgage lending to investors hit a six year high in May, up a startling +13% from April, and up +90% above May 2019 (May 2020 was pandemic affected). This is its strongest rise in six years. Falling vacancy rates and improvements in their labour market (which generally leads to more demand for rental property) are both green-light signs for investors. Overall housing lending was up +4.9% in May from April, and up +97% from May 2019.
Staying in Australia, their energy regulator reported that wholesale electricity prices fell below zero a record 3662 times last year as solar power generation surged, threatening the profitability of coal power plants. (see page 9) This situation also drove fast-tracked new rules to prevent wind and solar generators deciding to switch off to curb losses.
The Baltic Dry index ended last week at 3285 and its highest weekly close since May 2010. The iron ore price continues to defy Beijing, holding its high level this week. Ditto metallurgical coal. However, Beijing is successful depressing the prices of other semi-precious metals. Corn prices are remaining high but prices for rice and soybean are slipping.
The UST 10yr yield starts today at 1.43% and down -11 bps in a week. The US 2-10 rate curve is flatter at +1.19 bps. Their 1-5 curve is also also flatter at +79 bps, while their 3m-10 year curve is a lot flatter at +138 bps. The Australian Govt ten year benchmark rate starts today at 1.43%. The China Govt ten year bond is at 3.11%. And the New Zealand Govt ten year is now lower at 1.71%.
The price of gold is now at US$1787/oz which is down -US$4/oz from this time Saturday and unchanged in a week.
Oil prices unchanged. In the US they are still at just under US$75/bbl, while the international Brent price is still just on US$76/bbl. However at these levels they now exceed the 2018 peak and are back to 2014 levels.
The Kiwi dollar opens today just on 70.3 USc and holding its Saturday rise. But compared with this time last week this is still -40 bps lower. Against the Australian dollar we are little-changed at 93.5 AUc. Against the euro we are unchanged at 59.3 euro cents. That means our TWI-5 starts today unchanged at 73 but -50 bps lower than this time last week.
The bitcoin price is now at US$35,546 and up a sharp +6.4% from this time Saturday. Volatility in the past 24 hours has been a moderate +/- 2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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64 Comments
As can be seen in Oz, when you have a glut of power at times when people just don't need it, it hurts all power companies not just coal. Thats why its best to not have so much intermittent supply. Batteries just aren't as cost effective as gas backup generators.
NZ's hydro is good to fill in the dips but govts/greenies over the last 30 yrs banning new hydro, this effect will get eroded away over time and NZ will be in the same boat as Oz.
It’s interesting. Lately watched a couple of rugby matches, Super Tasman final,Maori All Blacks vs Samoa and came to the view that the referees involved seemed to consider themselves more important than the players, even more so, than the play or the match itself. Then thought that is the same scenario and attitude for much of our members of parliament & high level bureaucrats, they are more important than the people, any priority of duty to the people. Not isolated to them at all, but the last National government was in the end a good example indeed.
Hmmmmm....The Dynamics of Nuclear Power Diplomacy: Russia and China vs the Neo-Malthusians
As soon as a Malthusian attains a position of economic or scientific policy influence, these ideologues loose no time in sabotaging government support for all energy programs which would render their abiding faith in “human overpopulation” irrelevant and wrong.
Whats to over come?
Our world needs more low-carbon power than ever. So we’re leading a UK consortium to develop an affordable power plant that generates electricity using a small modular reactor - an intelligent way to meet our future energy needs.
https://www.rolls-royce.com/innovation/small-modular-reactors.aspx#/
Thanks Audaxes
Relevant worthwhile read:
https://www.penguinrandomhouse.com/books/220698/the-wizard-and-the-prop…
Franz, The volume of batteries needed for 3 days supply is mega gigantic. To store a mere three days worth of energy, to be prepared for weeks (let alone seasons) with lower-than-usual sunlight, takes 1330 terawatt-hours in batteries. Costing 400 Trillion Dollars.
Following on from yesterday & your albatross & plastic. The plastic helps the albatross
Unlike mammals, birds have no teeth and don’t chew their food. Instead, birds have two stomachs: a “glandular” stomach (the technical name is Proventriculus), and a “muscular” stomach
(Ventriculus) which is commonly known as the “gizzard”.
The glandular stomach is a bit like the human stomach in that it adds digestive juices and
enzymes to the broken down food. Meanwhile, the other stomach, the gizzard, grinds the food
down into small particles. That is, it replaces the chewing mechanism of mammals.
To help this grinding process, birds will often ingest small stones and other indigestible hard
materials. This seems to be why seabirds are ingesting plastic particles. Before plastics came
onto the scene in the 1960s, seabirds were relying on naturally occurring floating (and solid) materials like squid beaks, pumice, bits of wood, sand, etc. As we discussed earlier, they still are mostly using these materials. But, now they also seem to be supplementing these materials with plastic particles.
Not only are adult seabirds seeking out these small, indigestible particles as digestive aids, but in
some species (such as the albatrosses), the parents also seem to be intentionally giving these
particles to their chicks along with their food. In fact, as we mentioned earlier, the average mass of plastic particles in the stomachs of albatross chicks is more than ten times those of an adult.
The reason seems to be that the more indigestible material the chicks have in their stomach, the easier the digestive processes are. That is, the extra particles allow the chicks to grind up their
food better. However, the extra weight also weighs the chicks down, which makes it harder for
them to fly. Therefore, once the chicks have grown and are preparing to leave the nest, they regurgitate out most of their stomach contents as “a waste bolus”. Then, they learn to fly and start adult life.
Be well.
Having seen dead juvenile albatross skeletons in nests, having been fed plastic (left there amongst the bones) by their parents who thought a toothbrush handle was a fish -
I've reported the HT post. As complete bullshit, which has no place here. And it not the first of his, nor will it be the last. meguesses.
David Chaston - you might need to have a chat about spin-doctors, fact, and free speech; and what you allow?
I think you're in the wrong country, as usual. NZ electricity demand over 3 days would be about 350 gwh. Current prices would be about $100/kwh for li ion storage, so 35 billion dollars. Not that I'm necessarily advocating that particular strategy, but you appear to have your figures out by, oh, four orders of magnitude.
Other countries have to do their own solutions, different country and conditions different solution, large parts of Australia for example have the opposite problem, they want to run the heatpumps in cooling mode in the middle of the day to stop them from melting in summer, Solar panels generating and the power being consumed locally are excellent for this, if they had pumped hydro or some other storage system for taking the shoulder load as they go from daytime to evening that would mostly solve the problem. We have to sort our own emissions out, can't bury head in bum and expect the rest of the world to do our homework.
Please explain why a glut in power is a problem? It provides an opportunity for the fossil fuelled power stations to shut down for a while and reduce their emissions. Stage the shut down and maintenance can be down to avoid other shutdowns. One thing that would be certain is that there will be times when the wind and solar won't be generating and the other sources will be needed.
Murray have a think about how dispatch operates. Every 5 minutes or so the operators looks at demand, and then schedules dispatch from each generation source over the next periods, its grouped together in half hour blocks.
As renewables are unreliables, wind and solar can be scheduled for dispatch and then fail within minutes.
This means unreliables need more network support and ancillary services.
Gas peaking turn it on in a minute + -
Coal, hours to days (days for brown coal).
Hydro is like peaking, but water levels (strategic reserve) stop them being drained all the time.
Thats dispatch.
Then you got the hv and lv transmission issues, the network issues with unreliables.
Note most greens do not count hydro as renewable. They look at the concrete, the dam. You see in Europe with wilding rivers, the cranks are advocating removing dams....
If we did that half the South Island tourist photos would dissappear...
Technically it is mainly a matter of voltage regulation. The power coming off residential roofs is the problem as this is unable to be turned off without brownouts. When the voltage gets out of phase it trips protections that cause a brownout and all the roof PV inverters turn to operating in "island mode" (not exporting to the grid). Then the grid gets re-set and we are off again.
Rode the Old Ghost Road two years ago, down the Mokihinui and lived beside the Motu for a number of years. The idea that these and other rivers should be damned to try and satisfy a patently insatiable demand is horrific. Bad enough the water systems we have changed to date. Enough is enough.
Yep, also done the same and thought exactly the same. These are pristine environments down there, full of huge amounts of life adapted to the rivers.
If we want more dams, look at places like the Tararuas and denuded areas. Geez, I could almost throw a dart at a map of NZ and find a heap of places to dam which wouldn't result in huge environmental destruction (and in some places significantly enhance the environment creating wetlands upstream of the dam). Try the Acheron/Clarence at the top of the South Island, the Wairau before it flows into the Rainbow, the Tauherenikau/Waiohine/Otaki all in the Tararuas. All big rivers which could likely have a mini Clyde dam built on them. Was also looking at the only existing hydro in the Tararuas the other day - the Mangahao outside of Shannon. Great spot for pumped hydro to exist, near the unreliable renewables, the upper dams are small and could be built significantly higher storing significantly more water, you could easily move the station approach road south and create a lower dam to store water so you always have water on hand, the station likely needs to have a makeover... lots of reasons. And with 400m of head it's the reason they have dams there now.
Absolutely no reason for us to dam some of the most beautiful and rich in biodiversity areas when we have heaps of these types of areas with no damns.
Yes this would be an excellent development as hydro is need in the North Island and pumped hydro similarly.
Castlepoint is often the windiest place in the country but the network costs to build out the transmission network for the wind farm/hydro/pumped hydro might be sizeable.
US non farm payrolls have risen more than +8 mln. However, compared to June 2019 they are still more than -5 mln lower. So while recent trends may actually be better than generally reported, they still have a very long way to go to recover the pandemic losses. It is this overall gap that has bond investors thinking the US Fed is probably a long way off raising their policy rate, further away than what analysts had previously assumed.
Indeed - No Inflation In These Payrolls
Perhaps even more concerning still, despite the clear boost in retail sales and goods spending due to Uncle Sam along the way, there’s barely any change in the employment trends dating back to last summer’s slowdown. Graphic evidence
Some smart entrepreneurs should set up Bitcoin mining in Australia to use the excess cheap power,
China are currently flushing out the last miners - China's biggest cryptocurrency mining machine-maker Bitmain announced that the company has suspended selling machines in the spot market globally as selling pressure piles up in the secondary market. The move comes after approximately 90 percent of China's Bitcoin mining capacity was shut down following a widespread government's ban. (thanks China ..you did BTC a big favour)
fawning over Chairman Xi
Isn't Xi the President of the People's Republic of China ?
https://en.wikipedia.org/wiki/President_of_the_People%27s_Republic_of_C…
Using the term "Chairman" is a Western technique to make the Chinese leader seem more scary like Chairman Mao. Is Interest.co working for the CIA?
That time Robbo borrowed $100 Bill off the children during a respiratory pandemic - then didn't bother to spend a red cent of it on respiratory health capacity.
'Hospitals across the country are overrun with sick kids this winter.
The spike in illness is being linked to outbreaks of various bugs, including a respiratory virus pushing emergency departments to the brink. '
https://www.newshub.co.nz/home/new-zealand/2021/07/hospital-across-new-…
Is that time related to the time the actually allocated $438.3 million in Budget 2018 and 2019 for building and refurbishing mental health facilities and then spent a sum total of $24.9m across that time period?
Or is it that time they were not sure how much they are spending with third-party social services? "which one “working estimate” put at $7.8b, or around 7 per cent of all Government spending"? Yeah we are spending heaps :) on what? yeah... stuff :(.
One thing they have got nailed is spending on motels, this is going up about $25million a quarter...
https://www.stuff.co.nz/national/politics/300344864/mental-health-just-…
https://www.stuff.co.nz/national/politics/300215631/government-not-sure…
https://www.stuff.co.nz/national/politics/122265644/government-spending…
Don't be evil. 'A human rights group that attracted millions of views on YouTube to testimonies from people who say their families have disappeared in China's Xinjiang region is moving its videos to little-known service Odysee after some were taken down by the Google-owned (GOOGL.O) streaming giant, two sources told Reuters.'
https://www.reuters.com/technology/exclusive-youtube-takes-down-xinjian…
Keep in mind Megan Woods is watching the lake levels. Checking the power prices and being advised by the EA. Once she's garnered all these facts she'll conclude it's necessary to keep burning coal at Huntly for the next few months or so. Alternatively praying to some higher being for rain in the catchment ares to fill up the lakes. Maybe she has even asked the Greens whether its preferable to emit lots of CO2 from Huntly burning coal rather than shut Huntly down and have rolling blackouts. What a bunch of muppets.
Not arguing the muppets call at all. Lake levels are fine at the moment, there is no need to worry this year about them being geared down. Huntly is in play due to some planned generation maintenance and it being the winter. The grid had its biggest ever day last week. Importing coal from Thailand is a heart-breaker tho not just for it's kamikaze emissions profile (dirty and transported here) but also for the fine folk of the west coast.
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