Here's my summary of the key events over the weekend that affect New Zealand, with news of a warning for Australia from S&P.
But first, sales in the US of newly built single-family homes sank in June, although other recent housing data suggests underlying demand has picked up. They were -7% below the revised May rate, but +18% above the June 2014 level. The median sales price of new houses sold in June 2015 was US$281,800 (NZ$430,000, and about the same as our $450,000).
Factory data out of the US for July has come in slightly better than the strong result expected.
But the latest gauge of Chinese manufacturing unexpectedly fell to the lowest in 15 months, reinforcing the need for further policy support in an economy that had seen signs of stabilisation recently. This was a surprise weak result for what has been known as the HSBC PMI, now known as the Caixin PMI.
And Singapore’s export-dependent economy faltered in the last quarter, recording its sharpest quarterly decline in growth in nearly three years, as its manufacturing sector took a sharp hit from falling overseas demand.
Standard & Poor's said in a report out over the weekend that Australia could lose its AAA credit rating if it fails to narrow its budget deficit because of political wrangling or external shocks such as the extended slump in commodity prices.
The final step in the TPP negotiations are here. Trade ministers from the 12 Pacific Rim countries - including New Zealand - are on the brink of striking a deal when they meet in Hawaii over the next week.
In New York, the UST 10yr yield benchmark is noticeably lower at 2.26%. Watch out for lower swap rates here when markets open today.
Oil markets are again lower too. The US benchmark price is now well below US$48/barrel, and Brent crude is below US$55/barrel. Maybe the lower prices are as a result of rising rig counts in the US and Canada, helped perhaps by Saudi oil companies opening shale operations in the US.
The gold price made a small gain on Friday but is still at only US$1,098/oz.
The Kiwi dollar starts the week at 65.7 US¢, at 90.4 AU¢, and at 59.9 euro cents. The TWI-5 is at 70.7.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »
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17 Comments
Excellent NYT piece on Chinese overseas ambitions:
http://www.nytimes.com/2015/07/26/business/international/chinas-global-…
Interesting piece on Chinese foreign investment, thanks. Speaking to a recently retired dairy farmer (got out just in time) re milk prices. He reckons the Chinese have a strategy to buy up resources on the cheap worldwide as per the NYT article. Says the mountainous stockpile of milk powder is part of that strategy and I must say it does strike me as very strange that they would do that. Apparently copper reserves are massive as well. The cunning plan is that you stop buying and force the prices down then pick up the distressed farms and mines for pennies on the dollar.
All sounds a bit conspiracy theory but does anyone have an alternative reasonable explanation? Why would they want to have mountains of WMP sitting in warehouses.
This was pointed out to our Bill English on his recent visit.
..and perhaps they are doing the same with housing? Force locals to take on more and more debt, vacate the market, watch the meltdown and back in you go. Can you imagine what will happen if housing drops 50%....which with respect to dairy was seen as far fetched only a short time ago. This is the scenario that worries me....I am confused as to why it doesnt seem to worry this Govt?
We'd best get any initiatives in to combat diabetes and rotting teeth in toddlers before the TPPA;
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=114…
The AFR thinks there is a significant dairy win in the TPP; that Japan, and presumably the US, have agreed to open their farming markets to a significant extent.
I guess we may know more in a week or so.
http://www.afr.com/news/world/asia/tpp-mining-and-energy-services-will-…
"Mr Robb said the farm opportunities looked to be "outstanding", reflecting soaring protein demand across Asia."
Beef, dairy and possibly sugar stand to win as Japan opens up hugely protected markets for the first time.
"I think beef's run of luck will continue," said Mr Robb; he said this reflected huge growth in protein demand in the Asian region.
"We've been fighting hard for dairy," he said. "We're down to the really difficult ones – like sugar."
We see this comment and its like so often but NZ gasoline is opportunity priced off Singapore gasoline with drivers of exchange rate, freight and the need to increase the very poor cash flows from continuing operations of existing players.
Add all these up and NZ gasoline prices should be higher !
Really? What was the price of a litre of petrol at the pump in the early 2000s when the price per barrel $was ata similar level and the Us -NZ exchange rate ditto? I agree we are being ripped off royally but no one has the balls to stand up to the oil companies.
It starts with the auctions of the raw product which are manipulated to manage the price (just like Fonterra has tried with milk powder) When the market is flooded the price falls. The structure of the market is designed to manipulate prices, not the amount available for exploitation or how much is left.
Take 2005 Brent crude $55 per barrel exchange rate 0.704 = NZ$ 77/bbl. Today same oil price exchange rate 0.657 = NZ$ 84/bbl. 2005 91 $1.32 /litre including 12.5% GST and 47 cents taxes = $0.70/litre net GST and taxes. Scale this by the NZ $ Brent crude price = $0.76 /litre net tax and GST. Add back 67 cents/ litre taxes + 15% gst = $1.64 /litre
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