Here's our summary of key economic events overnight that affect New Zealand with news of turmoil everywhere.
But first, you will probably know that New Zealand is suddenly back in a full Level 4 lockdown with one (presumably) delta case detected in the Auckland community. That has thrown financial markets a swift curve ball and the RBNZ Monetary Policy meeting outcomes will probably not be what markets were expecting this time yesterday. We will know at 2pm today. In the meantime our currency is sliding lower and wholesale interest rates are heading lower as well.
Overnight there was a dairy auction and surprisingly there was an unexpected, if small, overall price rise - and only the second rise in the past ten auctions, even if it was small. The dominant WMP price did fall -1.5% as expected, but SMP rose unexpectedly and both butter (-4.0%) and cheese (-2.8%) also rose. The overall result was a +0.3% gain in USD terms, but with the NZD falling sharply, the gain was magnified in local currency to +1.7%. Volumes offered and sold at the auction were modest for this time of year and almost -30% less than this time last year. But overall prices are +27% higher than this time last year.
Separately, international financial markets turned sour overnight mainly on a surprisingly poor American retail sales data for July. A minor dip was expected after a strong June, but a major dip was reported, more than wiping out June's gain. A sharp fall in car sales is behind this result but sales of general goods were weaker too. Sales in July 2021 may be well above those of July 2019 but this is still a perception of weakness.
Perhaps offsetting some of that gloom was a larger than expected rise in American industrial production in July. It is a strong rise versus the July 2020 result but that is just a base effect. The better-than-expected gain is the one from June.
In China, Beijing's moves to decapitate the leadership of its tech industry and exert strict controls over how it operates is sending messages to foreign investors about the risks of doing business in China. If they do that to their own, they will have no hesitancy effectively nationalising 'by other means' foreign holdings, is the fear. Not only are Chinese equity markets sharply retreating, foreign direct investment is turning away.
Meanwhile, China carried out assault drills near Taiwan on yesterday with warships and fighter jets exercising off the southwest and southeast of the island, in what the China's armed forces said was a response to "external interference" and "provocations".
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In Australia, one of the world's largest miners, BHP, has made some important strategic decisions overnight, quitting its petroleum businesses, betting on decarbonisation, and pivoting to businesses involved in food security. It is also dumping its London stock market listing. It also announced a bumper profit result.
And the RBA minutes of their last meeting shows the delta variant could be a game-changer for their monetary stimulus plans, with the central bank prepared to provide more support if there is a significant setback to the recovery. Any move to reverse a July decision to scale back weekly bond purchases would likely require the economic shock to flow into 2022, given the RBA believes that’s when further buying will have “maximum effect”, they said.
And the Canberra parliament has opened a formal inquiry into housing affordability in Australia.
The sudden surprise pandemic lockdown has thrown expectations for the RBNZ Monetary Policy changes into disarray. Join us at 2pm when they will update us on what they are doing. We will have full coverage.
There were another 454 new community cases in NSW yesterday with another 323 not assigned to known clusters, so they are still not getting on top of their outbreak. It has spread into regional NSW extensively. Victoria is reporting another 24 new cases yesterday, a growing number and their lockdown is extended for another two weeks, this time with a curfew. Queensland is reporting 2 new cases. NT has cases now. Overall in Australia, more than 27% of eligible Aussies are fully vaccinated, plus 22% have now had one shot so far.
After working from a loss to a gain yesterday, Wall Street has turned quite negative today and in early afternoon trade the S&P500 is down -1.3% so far. Overnight European markets generally stumbled to a -0.1% slip, but London was up and Frankfurt was flat. There was a much larger stumble in Asian markets with Tokyo down -0.4%, Hong Kong down -1.7% and Shanghai shedding -2.0%. Going with the trend, the ASX200 was down -0.9% yesterday and the NZX50 Capital Index was down -0.7% with the local market sharply selling off at the end from earlier gains.
The UST 10yr yield starts today at 1.25% and down -1 bp. The US 2-10 rate curve is unchanged today at +104 bps. Their 1-5 curve is slightly steeper at +69 bps, and their 3m-10 year curve is also a little steeper at +122 bps. The Australian Govt ten year benchmark rate starts today at 1.12% and another -4 bps lower. That is an -11 bps fall in four days. The China Govt ten year bond is at 2.91% and unchanged. The New Zealand Govt ten year is now at 1.64% and a sharp -8 bps retreat.
The price of gold is basically unchanged from this time yesterday, down just -US$1 at US$1786/oz.
Oil prices are -50 USc softer from this time yesterday, so in the US they are just under US$66.50/bbl, while the international Brent price is just under US$69/bbl.
The Kiwi dollar opens today sharply lower, down by more than -1c at just under 69.1 USc in a big retreat. Against the Australian dollar we are down -40 bps at 95.2 AUc. Against the euro we are down -70 bps at 58.9 euro cents. That means our TWI-5 starts today at just 72.4, down -80 bps but still in the narrow range of between 72 and 74 we have been in for eleven months now.
The bitcoin price has weakened slightly today and is now at US$45,892 and is down -1.3% from this time yesterday. Volatility in the past 24 hours has been moderate at just under +/- 2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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126 Comments
I disagree with 99.9% of what you usually say. But I actually value your input as your different mindset is representative of a lot more people than many here would believe.
Many may think the "West" are all powerful, but we haven't seen ultimately successful action by the West since WW2.
Russia and China know this very well and act accordingly. I doubt they would ever engage the US in direct action. But expanding their "Sphere" is entirely feasable.
Some perspective...
Crimea was part of Russia until relatively recently, with 67% of the current population being identified as Russian. Ukraine nationals make up 15% of the population. Only people outside crimea/Russia are outraged by this. No one is going to start a war over this.
Belarus is a dodgy Eastern European country, run by an evil dictator, shock and horror. Planes are hijacked all the time. No one died. What do u expect, tomahawk cruise missiles?
Whose going to challenge the USA and half the free world in a direct war. Lol. The US has been invading and screwing over 3rd World countries for the last 100 years. That's just BAU.
What are the spratlys. I don't even know were in the world that is.
You're forgetting history - under the Soviet Union there was a program for large numbers of ethnic Russians to emigrate to the Soviet republics to establish a firmer base of Russian control. While the correctness of population numbers is undisputed, what is is Russia's historic claim to the Crimea. As the Ukraine lies between the Crimea and Russia, how can Russia establish any credibility over it's claim? I believe there are a few history buffs on this forum who can explain all this?
How far do you want to back? In the 13th century Genghis Khan had got a grip as far as the Crimea peninsular and that was before his grandson Kublai swept up the rest of China and established the Yuan dynasty. So you could say China has historical claims too. Crimea was always part of Russia, strategic to the Black Sea. Much fighting by Russia over the territory. Obviously the 19th century Crimean war, and WW2 Field Marshall Von Manstein fought a brutally successful campaign but short lived tenure. All of that history is on the side of Russia regardless of exactly who lived where and when especially given the massive population relocations inflicted by Stalin and WW2. The disintegration of the Soviet Union didn’t overturn historical strategy of that magnitude. It just took Putin to put it right.
The original comment was suggesting a strong international response, so I think the point is No ones going to (or should) start a war over it. Lots of media posts and sabre rattling, but no one actually in charge of a military force actually cares about Russia taking back administrative control of a largely Russian ethnic population, living in an area that is strategically important to Russia and no one else (unless you are trying to start a war with Russia). Russia already had the dominant military position there anyway with its navel base.
Some perspective...
Crimea was part of Russia until relatively recently, with 67% of the current population being identified as Russian. Ukraine nationals make up 15% of the population. Only people outside crimea/Russia are outraged by this. No one is going to start a war over this.
Belarus is a dodgy Eastern European country, run by an evil dictator, shock and horror. Planes are hijacked all the time. No one died. What do u expect, tomahawk cruise missiles?
Whose going to challenge the USA and half the free world in a direct war. Lol. The US has been invading and screwing over 3rd World countries for the last 100 years. That's just BAU.
What are the spratlys. I don't even know were in the world that is.
Exactly. There would be huge boycotts which would devastate the Chinese economy, which would strongly destabilize their society.
It could also be quite a nasty battle, especially if the USA intervened.
I can't see it happening, unless Xi and his henchmen lose all rationality- which of course we have seen throughout history with power hungry autocrats....
Agree there never can be winners when there are millions of civilian casualties as a consequence of military action. In this case either side of the Taiwan Strait. International condemnation of the perpetrator naturally follows. China has enough inherent wisdom and restraint to understand that. It’s more a question as to whether the CCP does as well.
Xing the US is trying to ensure the sea lanes are remaining open and uncontested. China is doing the opposite. China is usurping other countries territorial interests by sheer weight of force. The US is not, it is supporting those countries in their claims. China is the belligerent who is seeking the war.
how many nations have the US boomed in the past 50 yrs and how many civilians have the US killed as collateral damages outside its border?
how many nations have the US invaded, overthrown, and turned from a rich country to ruins?
how can you tell sxxx under this day light and with such a brazen face?
Treacherous seas even more treacherous approaches, Islands & beaches, heavily fortified. No surprise attack these days with satellites up there.Seaboard landings high risk in themselves, just ask the US Marines still around from WW2. Seventy years worth of preparation. Reading Janes years ago, oil pipes laid to set the sea on fire, perhaps they are still there. Only chance Entebbe like landings. Secure airfields, establish perimeters, salients, but air transport troops are sitting ducks. There is about as much chance of China taking Taiwan as Spain Gibraltar, and that is a land border. As far as a decoy, they don’t need Russian involvement. Look instead to the Koreas where a state of war still exists. The Northern vassal can be prodded into crossing the border, threatening Seoul, China provides the big push. All on land, easy logistics.
I have had one jab. They book them in groups of ten. Only 4 turned up. The nurse said as it was raining a lot don't turn up. i said do they re book or do you ring them, she did not know. I asked was there a national register to report all those jabbed. She said no, however if you have a doctor they report back to them. Sigh..I don't think they have any idea of the numbers.
We have two nieces,one nephew in UK 20/30s plus many friends our vintage over 70s etc. All fully vaccinated all living virtually unrestricted, two of the young ones presently holidaying on the continent. Assumedly this is due to the successful vaccination program run by the much maligned UK NHS. NZ had only 5 million to attend in comparison. If these different scenarios are due to the affect of vaccines, then NZ must now be considered to be something of a failure.
Maybe you could pop over to Mississippi and Alabama and pick up some of their unused stocks - maybe you should forward your logistics plan to Pfizer and see if you can get us bumped up the supply chain. Or are you just imagining warehouses of vaccine just sitting around in South Auckland somewhere?
If that Nurse is the source that could be very positive in terms of providing the information required to isolate this cluster. Insanely lucky that trady bloke was too lazy to get vaccinated, if he had he may well have presented as asymptomatic
Gives me hope that I might be able to go back to Auckland in a few weeks.
I've complied with everything that's been asked of me and will continue to do so.
The government have told us how they'd approach lockdowns involving the Covid-19 Indian Delta variant so the public could be prepared. Although, judging by the TV reports on supermarkets, some where more prepared than others. When we saw the Prime Minister cancelling her appointments in Auckland and heading back to Wellington it should have been sufficient forewarning that a lockdown would go into effect in Auckland. I don't think anyone should have been surprised.
Your math is incorrect. That would be the case without a level 4 lockdown, however we can expect to see the case numbers increase much slower now. The bigger problem now is elimination and that's probably impossible without a crazy long lockdown which the public will no longer support. The final outcome may be the same as your math, once thousands are infected its game over.
Lockdown would probably slow case growth under that scenario buying slightly more time until hospitals overfilled. However R would likely stay positive.
Vaccination is the only way out, this will become endemic no matter what we do. Time to accelerate our vaccination program.
Turmoil everywhere but Mr Orr should not use as opportunity to further support and promote housing ponzi.
Should not repeat the same mistake as last year which proved to be blunder - self admitted in a subtle way by them. Instead should be extra careful and avoid same thinking as last year by increasing LVR and DTI (specially when interest rate will not be able to move as required) to avoid extra stimulus and reason for house price to jump from here.
No action on LVR and DTI will be as good as removing LVR in current situation.
His inaction is good enough and not doing anything will do the job that he intent that is supporting and promoting NZ Economy = Housing Economy.
They have turned NZ economy in to housing economy and are now cementing it in such a way that will not be able to break free for times to come.
How much more can the government print for the latest round of wage subsides they are going to have to put out, also have they learnt from the last time when big companies and a lot of smaller ones gouged the system. (I doubt it), The LD in AKL will be at least 4 weeks now there are 4 cases, so the printing presses will be working overtime.
Banks don't take deposits and they never lend money. They are in the business of purchasing securities. When one gets a bank loan, the loan contract is a promissory note. The bank purchases that contract from the borrower. Now the bank owes the borrower money and it creates a record of the money it owes, which we call deposits - source. Central banks do exactly the same - buy the bonds and record what they owe on their liability ledger. Money takes no part in these transactions.
Audaxes i think you are playing too fast and loose with language, actually the banks are and you're just citing their case. What a bank defines as "money", using your description, would likely be vastly different from what the ordinary man on the street defines as "money". Put it this way, in my view my bank does take deposits, it accepts my pay packet every week. I no longer have the ability or right to have it paid in cash to me, so the bank accepts it in my name and on my behalf. If I want to spend it I either go to the bank and get cash, or do an electronic transfer, either through a card, or by directly transferring that money. You can argue that it is just credit, but by any other perspective that 'credit' represents the means of trading our society uses today, in other words - money.
You are an unsecured bank creditor without a legal claim upon a bank liability transferred into your account from another bank which gets settled in the RBNZ inter-bank payments system.
Demand deposits referred to by the public as “cash in bank” is recorded and reported by monetary financial institutions (MFI) in units of account by double-entry bookkeeping in a process which the MFIs call “lending ” — but which is effectively a nullity — by debiting loans receivable and crediting demand deposits.
These so created units of account are then denominated at will in dollars, pound sterling, euros, etc., depending on the terms of the documentation or underlying promissory note, or whatever is the legal document giving rise to this type of “lending,” using whatever is the name of the currency in the jurisdiction in which it takes place, but legal tender the “demand deposits” are not.
Banks do not have pre-existing funds in the form of legal tender to lend, except in miniscule amounts relative to the size of their loan portfolios.1 In other words, banks create demand deposits out of nothing, and it therefore remains a nothing. The malpractice continues because public accountants as auditors sanctify the aforementioned practice by “certifying” the banks’ financial statements, provoking credit expansion, moral hazard, asset bubbles, liquidity-stressed financial markets, bank runs, and eventually global financial crises. Link-pdf
Check out this video primer and especially bank exemption from Client Money Rules @ 8mins.44secs.
The money is 'printed' when Govt spends it - LSAP is just an asset swap. It works like this:
FIRST: Govt creates money to buy real things in the economy (nurses wages, food for hospitals etc)
SECOND: The Govt money cycles through the economy and gathers in the settlement accounts that banks have at RBNZ
THIRD: Banks buy Govt bonds using cash from their RBNZ settlement accounts
FOURTH: Govt buys bonds back from banks by depositing cash back in their settlement accounts
How lucky Mr Orr has been for if pandemic has to happen, could not be at better time for RBNZ to change to Least Regret policy and go all out to whip the ponzi.
It is in public domain to which side Orr is so one should not be surprised by what he does or does not do today.
If he does not rein in the housing crisis, game over for FHB.
How could they miss the massive opportunity to support and promote housing ponzi and what better excuse, specially now as were under pressure to control it and now not only are saved from taking action to control but can use this to promote.
Wait and Watch and everything in name if supporting economy.
High chance we imported it when we let people come back from Australia before bubble closed.
Jacinda said if you go to Australia be prepared to be locked out but then backflipped.
Many rushed back with zero testing before closing bubble very expensive exercise now locking down entire country for a few to travel.
People may not look at this the same as last year as this time if proven to be failure of borders we may see many not following rules.
National/ACT now need to step up with viable plan B option and make some tough calls.
Don’t realistically think any party in power has much chance to influence the embedded intransigence of the MoH. Right from the outset these bureaucrats have been inconsistent and inefficient. Think failure to isolate rest homes. Think needing to bring in the military. Think disobeying the ministers direction on testing border staff but saying that they were. It must have been realised soon enough that vaccination offered the only pathway out. There was so much time available to commence planning, resources, locations, qualified staffing and the fact that wasn’t done until far too late is the reason NZ lags behind what our PM labels the UK “experiment.”
Rather different indeed. Compared to NZ, vastly greater population and density thereof, as well volume of transit, domestic & international. Number of infections & mortalities to date in the top bracket of all nations, but per head, not now. Life has reverted to a reasonable sense of normalcy. That suggests rather strongly that the percentage of vaccinations has worked sufficiently to arrive at this result. Vaccination, based on such data, at least indicates as providing a pathway. Revolving sets of lockdowns certainly doesn’t.
Bitcoin
Whose price is driven entirely by Tether
Which is magicked out of thin air by a couple of individuals who constitute the ‘market’ at present.
The fact that BC holders are sanguine about this shows they don’t believe in it as a currency at all; it’s just ‘gains’.
Check out where the flow into Bitcoin is from: https://coinlib.io/coin/BTC/Bitcoin
Overwhelmingly it's Tether, pushing up/maintaining the BC price. Not fiat.
Billions of Tether is being issued every few weeks -- every time, strangely enough, there's bad news about Tether the company. Up goes the price of Bitcoin, everyone's happy.
You might say that's because the vast majority of people who want to buy Bitcoin are doing it via Tether for some reason -- rather some using another system that is not under (several) criminal investigations, and has not been found guilty in court of persistently lying when it claims that its token is 100 backed by fiat? Implausible, but OK.
Except that Tether's bank, Deltec, is based in the Bahamas.
The entire banking system of the Bahamas is not receiving enough dollar inflow for this to be a possibility.
It's an enormous scandal, but financial journalists aren't confident enough yet in their knowledge of crypto to call it what it is: an enormous scam, and theft from everyone who ever invested in Bitcoin in good faith. It's fraud on a scale that goes unchallenged because it's *too huge* to seem plausible.
Do people really not get this? We have free travel all round the country, so without a harsh lockdown that 1 case turns into hundreds, into thousands, into millions.
We choose between going to level 4 for a short time and having a chance of going back to level 1 again in a couple of weeks, or we start at level 2/3 and don't leave until everyone is vaccinated in 4 months minimum.
Hell, even the Auckland Business Chamber support a sharp lockdown.
https://www.stuff.co.nz/business/126101518/covid-case-businesses-would-…
I've had the vaccine, no issues beyond being a little tired for a day. Just another in the long line of dozens of vaccines I've had to protect me from disease - what a time to be alive.
Meanwhile in Uganda, my brother and his family had Covid and were knocked out for a week. Lucky they're young.
Pick your poison I guess...
Of course it will - narratives tend to do that as situations change. This does not imply a conspiracy.
We want to keep it eliminated until vaccination is done and dusted, then I expect we'll open up to the world fairly freely. All depends on variants and circumstances of course.
In a nutshell all we have done is kick the covid can down the road. Want to know why....well Professor Gibson Waikato University explained this back in March at the NZ Economic Forum. Longish watch, but very relevant when wondering what the plan is in the longer term. I've posted this vid before.
https://events.waikato.ac.nz/events/2021-new-zealand-economics-forum/ev…
The current RBNZ OCR path and forecasts , was based on a mechanical TWI of 74.8, a target it has not reached since the last MPS . Although recent non RBNZ expectations were for an even higher OCR track, the weakness in the currency may be the hawkish signal that the RBNZ needs .
And the RBA minutes of their last meeting shows the delta variant could be a game-changer for their monetary stimulus plans, with the central bank prepared to provide more support if there is a significant setback to the recovery.
And the revealed preferred target of this so called "stimulus" is non-productive, non-GDP qualifying asset purchases. View the detail
The post-'Murkin' world - careful wotcha wish for.....https://pjmedia.com/spengler/2021/08/17/welcome-to-the-post-american-wo…
Re the nurse at Auckland hospital testing positive....werent some positive cases moved to hospital last week from MIQ? Could that be where it started from?
Edit: yep but it was on the 13th...
https://www.stuff.co.nz/national/health/coronavirus/126072868/covid19-p…
Great leadership here?how can we lose?
Thames-Coromandel District Mayor Sandra Goudie told RNZ’s Checkpoint programme she would not normally scan in when visiting locations.
She added the Covid-19 community case will "probably not" push her to scan more either. "It's very hit and miss for me," she said.
"I'm quite a believer in my credit card tracking everywhere I've been. It's not a habit I've got into."
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