Here's our summary of key economic events overnight that affect New Zealand with news there has been a risk sentiment improvement in markets, but most markets are shallow with light volumes during this northern hemisphere summer holiday period.
But first, we should note that the US Senate has now finally passed a US$1 tln infrastructure package that is a top priority for the US Administration, a bipartisan victory that could provide the nation's biggest investment in decades in roads, bridges, airports and waterways. The vote was 69-30 in the 100-seat chamber, with 19 Republicans voting 'yes'. (There is debate about how large the approved Plan actually is.) Immediately after that vote concluded, Senators pushed ahead with a follow-up US$3.5 tln spending package that Democrats plan to pass even without Republican votes.
American labour productivity improved in the June quarter according to official stats, but the gains were less than expected. It rose +2.3% as output increased +7.9% and hours worked increased +5.5%. A gain of +3.5% was expected and that was less than the actual Q1 gain of +4.3%. So in their terms, this is quite a miss.
There was another US Treasury 3yr bond auction overnight and this one brought a higher yield than the month-ago event. In both US$68 bln was available and the Fed took US$10 bln. The remaining US$58 bln got US$147 bln in bids which was slightly more than last time. The median yield this time was 0.42% pa for this 3year bond, up from +0.38% last time.
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In China, even though the country is on summer holidays, the iron ore price continues its downward track. Corn and rice prices are falling now too.
In Germany, economic sentiment fell again in August, continuing its fall away since May. Firms are actually quite bullish about their local situation but the threat from delta COVID, and the clear slowdown in China, have both cast a long shadow over how German firms view their future export prospects.
In Australia, business sentiment fell sharply in July, according to the widely-watched NAB survey. Both conditions and confidence deteriorated sharply in the month, with the latter now back in negative territory. Unsurprisingly, due to its size and the severity of the lockdown in the state, NSW drove much of the result this month. Both confidence and conditions fell sharply following a full month of lockdown in the state. That said, conditions fell in all mainland states, with SA in particular also seeing a very large fall.
There were 360 new community cases in NSW yesterday with another 209 not assigned to known clusters, so they are still not getting on top of their outbreak. Victoria reported 20 new cases yesterday. Queensland is reporting 3 new cases. Overall in Australia, more than 22% of Aussies are fully vaccinated, 44% have now had at least one shot.
Wall Street has firmed marginally lower in Tuesday trade, with the S&P500 up +0.2% so far. Overnight, European markets were up between +0.1% and +0.4%. Yesterday, Tokyo finished up +0.2%, Hong Kong ended its session up a very strong +1.2% and Shanghai again rose +1.0%, all with late flurries. The ASX200 ended up +0.3%. The NZX50 ended up +0.5% and making back the prior day's drop.
The UST 10yr yield starts today at 1.34% and up another +2 bps since yesterday. The US 2-10 rate curve is still just on +110 bps and unchanged. Their 1-5 curve is steeper at +74 bps, and their 3m-10 year curve is also a bit steeper at +129 bps. The Australian Govt ten year benchmark rate starts today at 1.22% and unchanged. The China Govt ten year bond is at 2.89% and also unchanged after yesterday's recovery. The New Zealand Govt ten year is now at 1.71% and up a rather large +8 bps overnight.
The price of gold is staying down, but at least it didn't fall further overnight. It rose +US$2 from this time yesterday to US$1732/oz.
Oil prices are back up +$2.50/bbl from this time yesterday, so in the US they are just over US$68.50/bbl, while the international Brent price is just over US$70.50/bbl.
The Kiwi dollar opens today still just on 70 USc. Against the Australian dollar we are little-changed at 95.3 AUc. Against the euro we are firm at 59.8 euro cents. That means our TWI-5 starts today still at 73.3 and still in the narrow range of between 72 and 74 we have been in for ten months now.
The bitcoin price has taken a step sideways today and is now at US$45,979 which is down -0.9% from this time yesterday. Volatility in the past 24 hours has been moderate at just over +/- 2.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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32 Comments
Covid is the new "Bread and Circuses". A great way to keep the ignorant masses distracted. Vaccines, Passports, Masks, Lockdown, all derivatives of the original play. No doubt we'll see a few more before it is done. If in fact it will ever be done, I have my doubts about that.
And he is not likely to be wrong about that!
But there is also a bigger implication behind his comment. COVID impacted the whole world at a time that another effect is making itself felt; climate change. The "Code Red" delivered by the IPCC should be a consistent talking point, and I noted some media discussions on the topic being disappointingly superficial. No where did I see or hear anyone question population size, or the concept of growth. So currently the overall understanding is seriously lacking, but ultimately i can see the world going to war over this, directly or indirectly as countries refuse to change.
Could it be that the covid reaction is in fact more to do with climate change action than the virus itself? After all, it is achieving what science has been arguing we desperately need to do - reduce energy use, restrict ravel and so on.
Humans respond to immediate events (disease), but events that they think might be decades away, not so.
Covid the perfect answer to get a lethargic world moving.
Rastus, the implication of your comment is stop vaccinating and let the virus run it's course! Problem is I don't think it is virulent enough!
Besides I would suggest that just one solution wouldn't cut it. So just reducing population size wouldn't be enough. True, it would reduce demand on resources, but in the end what we have to do it change the way we are living right across the board. National leaders like Bolsonaro who refuse to act to protect assets such as the Amazon, or the leadership in the US (the Presidential powers are limited to this has to include both houses) who refuse to act to reduce the impact on the environment need to under threat of being labelled international criminals. And yes we'd have our own who would be liable too. But the truth is the masses cannot change much until the leadership enables it, makes it affordable, or provides alternatives. Disinventing the wheel, like our Green Party seems to want, won't work. So we have to be smarter.
The total lack of effective global leadership is going to kill us all!
The AR6 draft didn't say anything about Code Reds. That was just UN and media hype to get some headlines. The extreme RCP8.5 scenarios hyped by the media, including Interest.co.nz, have been walked back from 'most likely' in AR5 to 'considered low' in AR6. So the AR6 is now less extreme than AR5. That good news should be the headline - not the Code Red BS.
'The likelihood of high emissions scenarios such as RCP8.5 is considered low in light of recent developments in the energy sector (Hausfather and Peters, 2020a, 2020b).'
Not really Murray. I have been vaccinated, however do feel the virus is being used for other purposes at the same time. Such as taking the blame for terrible financial management by govt over many years, opportunity to gain more control over the populace, digital tracking/loss of freedom issues...and throw climate in the mix as well.
Overall I am pleased to see - as finally we get an immigration slow down and some climate action.
Rastus, while on some measures only, our government has done well in reacting to the virus, I feel that in others it has very much exposed their incompetence and arrogance. I would suggest that that is why their popularity has fallen off a cliff. The big problem I see is that the Nats are the same or worse, and that unless Winnie puts his hand up again, there really is no one to keep them in check.
I don't believe that would happen. I've got a fair bit of exposure to the young adult demographic, and lots of children is definitely not part of their plans. I think that's global too - only very religious or agrarian communities are likely to reproduce at above replacement level.
Hmmmmm....
The short-term boost to growth will be relatively limited for two reasons, economists say. For one, the bill represents just $550 billion in new spending—compared with nearly $6 trillion that Congress has approved in the past year-and-a-half to battle the Covid-19 pandemic and its economic fallout.
Second, the infrastructure spending will take place over five to 10 years starting in 2022, a longer timeline than pandemic-era initiatives like stimulus checks, extra unemployment benefits and small-business support programs. That will make its direct effects on employment and demand less noticeable.
Alec Phillips, chief political economist for Goldman Sachs Research, said the infrastructure bill could add around 0.2 percentage point to gross domestic product growth next year, and 0.3 percentage point in 2023. Link
There isn't enough remaining planet, and there isn't enough remaining time. And they're trying to perpetuate the existing. The existing minority First-World, that is. No way the Third ever gets to that level, let alone gets to vote unrepayable debt to replace a never-bigger collection of infrastructure.
It's long-term resilience we need to aim for; whether charging-plugs on every street lamp fits that is yet to be discussed (my appraisal is: no). We can see the deficiency(ies) in the discussion, this last 24 hours; electricity is only 40% of our energy, and we're in trouble already; needing to use Fossil Fuels to back it up, even before it displaces said fossil energy. We need to stay rational at this point, which I suspect we won't.
Note the Audaxes link; a classic case of someone starting from a pre-held assumption (who cares about GDP? It doesn't count the counts which must be counted). We need to be past that.
If I can comment on one part, we are not actually in trouble with our electricity supply other than the trouble we have inserted through the crossed incentives of the market structure. Actual generation, most of it renewable, exists for our current requirements.
We can take on another 40% load for transport substitution if we move that load over the night period. The remaining 20% will need to be built and some of that is already in plan (solar) but more is needed.
Charging plugs on lamp-posts is another one that would be practical but our market structure makes it highly unlikely.
A lot of that will be fixing the concrete highways laid down after WW2. These need to be replaced as the concrete is past it's Use By Date and is crumbling badly. They are likely to replace them with new concrete, and that is not going to help the environment and climate change one bit!
Cement manufacturing is one of the biggest problems we have to solve in terms of emissions. No alternative exists for many of its use cases. There are some partial solutions e.g. structural manufactured timber for medium rise buildings. Steel production is the other which is solvable at a cost that people are not yet willing to pay.
The UST 10yr yield starts today at 1.34% and up another +2 bps since yesterday
Building a price concession ahead of tomorrow's 10 year auction?
Treasury Bill yields remain depressed and below the Fed's RRP 0.05% floor at today's 42 day Cash Management Bill auction
The zero covid plan needs a rethink.
'Herd immunity is "not a possibility" because the Delta variant is still spreading fast and infecting fully vaccinated people, the head of the Oxford Vaccine Group has said.
Professor Sir Andrew Pollard told MPs in the All-Party Parliamentary Group on coronavirus that although 95% vaccination would stop transmission of measles, the same was not true for COVID.'
https://news.sky.com/story/covid-19-herd-immunity-not-a-possibility-wit…
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