Here's our summary of key economic events over the weekend that affect New Zealand, with news the ongoing rise in the world economy is shifting some key metals prices into a bull-run.
But first a look ahead. The American data to be updated this week will be their advance Q1-2024 GDP which is currently expected to come in at +2.5%. That will follow key updates to durable goods orders and new home sales - and advance April PMIs. It will be peak reporting for their earnings season this week too. April PMIs will also come for Australia, Japan and the EU, as will CPI updates in Australia. And there will be key central bank policy decisions for Japan, China, and Turkey this week.
In the dominant global economy, their central bank reported that sticky inflation and sticky high interest rates were cited as the key risks to financial stability in its survey of key contacts, with geopolitical troubles and the upcoming American presidential election also getting a strong mention. These heightened risks were reported in the US Fed's half-yearly Financial Stability Report.
The Fed itself is worried about a steady decline in the liquidity of life insurers’ assets and their use of nontraditional liabilities and other novel funding which would be hard to control in a crisis. They were less worried about American households. Vulnerabilities from household debt were judged as only moderate. Inflation and uncertainty surrounding the direction of federal policy on trade, and government spending are the banks' own top financial stability concerns.
Meanwhile in the financial world, yet another key voting Fed member is out dampening down prospects of rate cuts. The Atlanta Fed boss said US inflation is only coming down "very, very slowly" and "let's not be in a hurry" on interest rate cuts.
In China, and in all of March in all of the country, their incoming foreign direct investment was only +NZ$20.7 bln in March. But that was far better than the tiny +NZ$3 bln in March a year ago. Still the total for the first three months of the year was down a startling -26% compared to Q4-2023, up just +3.9% from the same quarter a year ago which was unusually weak. From Q1, 2022 the current levels are -28% lower. It will worry Beijing policymakers that these levels are bedding in so low.
China will review its two Loan Prime rates later this afternoon (NZT). No change is expected this month.
And we should note that the large southern Pearl River system is flooding, some of it severe.
Over in Germany, March data shows that their producer price deflationary impulse is easing. Their PPI was down -2.9% from the same month a year ago, but that was far less than the February equivalent of -4.1%. And those March producer prices actually rose +0.2% from the prior month and that was better than the no-change expected.
It is worth noting that the IMF and the World Bank have been having their annual talkfest Spring Meetings this past weekend.
In the real world, we should also note that it is not only the aluminium price that is rising at present (which is up +20% since the end of February), but the copper price is on the move higher too, up +16% in the same timeframe and actually approaching its all-time high set a year ago.
Other base metals like nickel, tin, and zinc, have all been rising sharply recently too. But not iron ore, lead, titanium or lithium - or the carbon price. (Even locally, here.)
The UST 10yr yield is now at 4.62% and down -3 bps from Saturday but up +10 bps over the past week. The key 2-10 yield curve inversion is holding at -37 bps. And their 1-5 curve inversion is little-changed at -50 bps. Their 3 mth-10yr curve inversion is still at -77 bps. The Australian 10 year bond yield is now at 4.35% and up +1 bp. The China 10 year bond rate is unchanged at 2.27% and still its lowest level since at least 2002. The NZ Government 10 year bond rate is now at 4.92% and unchanged from Saturday as well.
The price of gold will start today down -US$3 from this time Saturday at US$2391/oz.
Despite continuing Middle East tensions and uncertainties, oil prices have slipped lower to just over US$82/bbl in the US while the international Brent price is up slightly at just under US$87/bbl. Over the past week these prices have fallen -US$2.50 respectively.
The Kiwi dollar starts today little-changed at just under 58.9 USc. But that is down nearly -½c in a week. Against the Aussie we are up +10 bps at 91.8 AUc. Against the euro we are still at 55.3 euro cents. That all means our TWI-5 starts today just on 68.8 and unchanged from Saturday, -30 bps lower for the week.
The bitcoin price starts today firmer at US$64,854 and a minor +0.8% gain from Saturday. A week ago this price was US$67,601 so a -4.8% retreat from then. Volatility over the past 24 hours has been modest at just on +/- 1.1%.
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Meanwhile in the financial world, yet another key voting Fed member is out dampening down prospects of rate cuts. The Atlanta Fed boss said US inflation is only coming down "very, very slowly" and "let's not be in a hurry" on interest rate cuts.
Too true Audexes! - and here's my explanation as to why they don't - they never have, and they never will. this is one of the biggest hoaxes in the history of our species - as JFK would say, it's just another rich man's trick ...
https://globalsouth.co/2024/03/12/economics-part-iv-interest-rates-mani…
Cheers to all
Colin Maxwell
China will review its two Loan Prime rates later this afternoon (NZT). No change is expected this month.
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Blinken to warn China over weapons-related exports to Russia
Washington considers sanctions on Chinese financial institutions, according to people familiar with the situation
The President Refuses to Negotiate an End to the Carnage in Ukraine; It’s Now Up to Congress to Jump-Start the Peace Process by Taking a Radical First Step
Broadly speaking it seems somewhat naive that on one side with Ukraine recipient to $billions from “friends” in military armaments to expect that Russia on the other side, would not enlist similarly from its “friends.” Yes, yes the latter invaded the former but that don’t count for much on the battleground actually.
The reality is that Russia has been doing it for a long time now. they are getting at least artillery rounds from North Korea (enough to gift Kim with a limo, so that's got to be a lot!), and drones from Iran (and now they are building their own) at least.
The big concern is the Republicans stupid power games, where they clearly believe they are untouchable geographically, and economically if they choose to sacrifice Europe. There is clearly the implied belief that as politicians they can convince anyone to cooperate with them if they need it, despite the so clear evidence to the contrary.
Whether the situation is Ukraine can be recovered is yet to be seen, but the political turmoil in the US is clearly having big impacts across the world. Not sure what the rest of the world can do, but this is likely to get a whole lot uglier before it gets better.
Physically and mentally Trump has to cope with 30 odd days at least of early mornings and lengthy days sitting in Court. - and that's one trial.
We might yet see him crash and burn with this load on his system. Macs, coke, a golf cart and posting on his fake news site all night don't lead to physical and mental stamina.
Don't be fooled by the orange spray tan.
Trump voiced it best over the weekend when he pointed out that the NATO countries of Europe have contributed less than the US to the Ukraine war effort. He is right. Time for Europe to wean itself for the teat of US Defense Spending. That certainly resonates and makes sense to the average Joe in the US.
A large chunk of European funding has been through the EU, so he may be technically correct but at best confused, at worst deliberately deceptive. The EU itself as provided more support than the USA, with individual European country contributions on top of that.
The two charts at the bottom are instructive.
https://www.cfr.org/article/how-much-aid-has-us-sent-ukraine-here-are-s…
Congress passes bill that could unlock billions in frozen Russian assets for Ukraine
More than $6 billion of the $300 billion in frozen Russian assets are sitting in U.S. banks.
Funny guy? Putin feels it's his divine destiny to "liberate" Ukraine from its "Nazi" government, by bombing them into submission.
The only ways to end this war, are (a) to allow the little Kremin mafia man to butcher and thieve his way through eastern Europe, causing a massive wave of migration and a purge of anyone unable to move, or (b) slap Putin, and his brainwashed and compliant population of drones hard enough to make occupation physically untenable.
Problem seems to be that nobody knows what to do. The americans are scared that if Putin were to actually look like he will lose - we might be faced with a more dangerous regime overthrowing himm... or Russias actual use of Nukes or closer colaberation with China. However they have no choice but to back ukraine who otherwise will accelerate the destruction of russias oil facilities and cause massive global inflation.... i am sure there are a bunch of other considerations.. but either side winning is unfortunately not wise.
i suspect the solution is just to let things run their course and hope that a long term stalemate results in a negotiated solution. in the meantime the US can up its military manufacturing and arms sales and try to stay ahead of China... and push Europe to fund more of Ukraines needs (starting to happen)
somewhat muddled there OSE?
Russia and China already have some level of collaboration, as does North Korea and Iran at least. Ukraine has to win, otherwise European stability comes under threat with significant flow on consequences for the rest of the world. As to what follows Putin - yes the world will hold it's breath, but unless there is major world involvement there can be no control of it and we will have to deal with that when it comes.
China could easily get cold feet if their vassal state and best friend Russia is not winning and cannot take over Ukraine. At some point very soon it will become clear to President Xi that this war is no longer in his best interest. At that point it will become game over for Putin
America might promise money - but is the hardware really there any more?
Same with the EU - they did what NZ have done; assumed we are beyond war(s). Fukuyama was wrong too; same reason.
And how much US hardware, depends on offshore components?
He'll have worked that one out....
I said in the beginning that Europe, NATO and the US had a week to stop Putin in his tracks. Choosing not to has significant consequences for the whole world. The cost in human lives and terror has been huge. Some would say the cost in money has been too, but in the end it is only money. some other commenters suggest that some Russian hardliners are in control of their nukes. That raises the question that the world must face - what will it look like if Ukraine is demonstrably winning? The obverse question is also relevant.
Russia has created a level of hatred and fear that hasn't been seen on this scale since the Nazis, so what would the end of this war look like either way? I doubt that any form of negotiated peace would be acceptable to many people.
Wow the western media has really got into your head. The war would not have even started if NATO didn't poke the bear and kept trying to expand towards Russia's boarder. Now Ukraine keeps stoking fears that Russia somehow wants to take a the whole of Europe. Trump will put a sudden end to it if he gets in in November, Billions of dollars totally wasted when people in their own country are living on the streets.
Utter rubbish. You're just a Russian patsy. NATO did not actively recruit anyone. Those who chose to join NATO after the collapse of the USSR did so because they understood who the Russians were, from harsh experience. NATO had nothing to do with starting the war. Putin's aspiration to be a modern Tsar Peter the Great was the only driver. NATO didn't push Putin into invading Georgia in 2014, and then annexing Crimea. But in those things there were two proofs evident; NATO had largely become a paper tiger, and Putin had aspirations towards restoring the USSR. Ukraine had applied to join NATO twice and had been rejected on both occasions. But Putin's actions have driven Finland and Sweden, both previously staunchly independent, into NATO's fold. As a purely defensive arrangement NATO has been made stronger by Putin.
You say the western media has got into my head, but you have bought into Russian propaganda all the while pushing a 'promise' made by NATO that there is no agreement or record of.
Ukraine is going to lose the war, its just a total waste of men and money. You cannot beat anyone with nukes when you cannot even afford your own 155mm shells. Zelensky is responsible for the whole mess. This is what happens when the wrong asshole gets into power and is prepared to send other through the meat grinder so he can strut about on the world stage in his military outfit.
I think OSE is bang on the money and that’s how it will play out. No one wins wars these days, they eventually come to an agreement and we all move on. Unfortunately Ukraine’s situation is dragging on but that’s not unusual either. And how bout the Israel /Iran? What a joke. It’s as if they’ve taken Jacinda’s “be kind” advice. Fire off a few missiles at each other which achieve nothing. Disappointing. Those f wits need to harden up and get real. Oohhh, let’s launch a couple of $500 drones. Embarrassing. ‘Modern warfare”, it makes me sick.
Whoever holds Kharkov controls south east Ukraine and it as well the gateway to both Moscow & Kiev. This the Wehrmacht knew and this the Red Army knew which is why there were four major battle for possession. With Kharkov, Ukraine can supply down the funnel with the Dnieper securing their right flank coupled with aerial support from the west bank. Russia ignored its own history by attacking primarily in the Donetsk region. This would tend to confirm recent reports Russia is now building up for a major offensive with Kharkov now as the objective. If that transpires, the outcome of that may well determine Ukraines eventual status.
Some US military leaders are suggesting neither Russia or Ukraine has the capacity to go for a win. In that case we are likely to see this conflict drag on for some years. That also might suit US/West as it "bleeds" Russias manpower & resources - without shedding a drop of US/West blood
I posted over the weekend that CPI inflation has dropped to 1.1 percent over the last two quarters (0.5 dec and 0.6 march). Down from 2.9 percent the previous two quarters.
CPI now 4 percent, I wonder how long before CPI will be 3 percent or lower. IT GUY says it wont be for a "very very long time even at current settings" of OCR. Thats not specific advice but he could be right. I dont think so
I think that base inflation, with climate change / adaption and lack of infrastructure here, there and everywhere, means its going to be very hard to stay in the 3% band. I suspect that we will get into 3% and cut, but I think we will pop back above 3% as we enter a very tepid recovery.
Without DTI, the OCR will be lifted quickly. NZ needs to be forced into non speculative , more productive leading patterns.
NZ needs to be forced into non speculative , more productive leading patterns.
This seems to be the only way out. ... the idea to attract space related businesses here is a good one... would bring skilled staff, some growing tech export industries and we probably have the start up resources, room and location to do it... and it would attract other related businesses.
Need other ideas and focus industries.... where our location etc would be advantageous
..
Sorry yes lending.
Banks are biased due to the lower risk weightings, No issue there, if that is low risk just control it with DTI and you therefore limit lending growth to income growth.
Productive lending is so many things
- Agri lending
- IT and Info services
- AI and DC build
- Energy and alt energy
- Tourist ventures
We have traded houses to create wealth, time to move to more productive and establish better supper scheme system so we do not need to, 3% kiwi saver plus employers - 6% is not enough
Sure Ma and Pa cannot walk into a bank as easy and put up a business case like they can with a rental, but look where this has got us... unaffordable houses, kids leaving for offshore. the reality is that its been the availability of cheap credit that's pushed prices as high as they are. Demand is one thing but its got to be matched by availability of ever increasing DTI based credit...
Now is a great time to push hard on the DTI lever.
Unfortunately the green brigade will fight your agri business, energy/alt energy, tourist venture proposals. You might win the battle against them but lose the war where the cost for consenting, holding costs and delayed construction eat your capital.
Is lending against a commercial development productive lending. What about a resi development of 50 homes
I wonder why they'd do that?
No money in it.
Gotta be another reason - maybe what we bequeath to future human-kind?
Agri-business = the turning of fossil energy into food. Temporary, then.
Fossil energy = turning fossil energy into CO2. Temporary.
Alt energy - by all means, but will it be maintainable beyond finite fossil energy?
Tourism = the parasitic turning of fossil energy into digits. Temporary, in anything like current form.
There are none so blind, as those who doggedly choose not to see
They see more than you.. that earlier green warriors manipulated zoning rules to have less density. Thats just delayed the inevitable by 25 years with the results being the MDRS by labour and the current govt top-down instructions which still remain to be seen
What do you suggest I will find interesting in the reading homework. PDK you have no viable arguments to the problems you see, as we have needs for infrastructure and shelter and wants for comforts and vacations. You even question the viability of alternative energies
Why should truth align with your wish-list?
Yes, we need infrastructure - but any built NOW, has to be viable in a non-fossil fuel era.
Yes, we need shelter - but we also need to be sustainable in the real sense - as in: not unsustainable. So we need shelter for how many people. again?
I think you'll find, we already have enough housing, for a sustainable population.
You - like most of your style - conflate real stuff with emotive stuff. Trump isn't a cause, he's a result. The Green movement (albeit sometimes mis-directed - isn't a cause, it's a result.
Always ask: A result of what? You don't do that; you start from a predisposition; a short term self-justification - to which you attempt to fit everything else. No wonder you make no sense.
If they did, they were on the right track.
Ex fossil energy, we will be local. Very, very local. The issue will be solar acreage, per head. That cannot be solve by cramming; crammed people just need stuff brought to them, and wastes taken away. From solar acreage further away.
The GND types are wrong, in that regard. FH just want's to 'make money' (underlying: feel important) in the short term. Everything he writes, emanates from that POV.
Ignoring folk who suggest NZ could do its own O&G - which suggests a certain cranial incapacity to weigh Systems relatively...
The problem is that we - both globally and locally - are in a Catch-22 situation. Ultimate scarcity means that if we do REAL growth, inflation kills off the impetus. The fudge has been to issue ever-bigger debt numbers, in an attempt to continue an appearance of 'normal'. Either that debt gets jubilee-ed away, or it gets inflated away, or faith in the system collapses taking the system down with it.
Some pricing will reflect real scarcity, some will be flight to safety, and some will be betting/hedging. Much of that is being done by folk done in varying degrees of ignorance, and much of it client-driven (as in pension funds). So the indices are no indication of real remaining underwrite. 'The Markets' are as adrift from reality, as money is (totally unsurprising).
You can still get 30/1 on Michelle Obama, 70/1 or so on Kamala Harris and Gavin Newsom on Betfair if you want to put your money where your mouth is.
I see the Dems are clear favourites now, 50% chance of a Dem president vs 46% chance of a Republican. The remainder being Kennedy.
Link please. These polls show a different story.
Polls are different to betting markets for many reasons. I'd trust the weight of money on a large market myself, although things are still very narrow. Trump's odds have been gradually reducing and Biden's coming in.
I already referenced Betfair but here you go:
https://www.betfair.com.au/hub/sports/politics/us-election-betting-odds/
Yes, Trump is more likely to win than Biden, but the Dems are more likely to win than the Reps which is what I said in my post.
You can calculate the inferred odds with 1/x, so Trump has a ~44% chance of winning, and Biden a ~43% chance of winning. Add in ~3% for Obama, 1.5% each for Newsom and Harris and a few more bits and bobs and you can reconcile with the 'Winning Party' market down the page that gives the Dems a 50% chance of winning vs ~46% for the Republicans.
The market prefers Trump to Biden, but there is an implied reasonable probability of Biden stepping aside one way or another, and the replacement stands a good chance of beating Trump. The Republicans are all-in on Trump, next up is Hayley with 1% chance and DeSantis at ~0.3%.
For a few decades after WW2, middle-income America got enough to make it support the System. Sure, a self-enriching elite existed, and lobbied for its own advancement - but you could assemble Chevvys or Cleveland gearboxes, and 'earn' enough to pay off a house close enough to commute from; raise 3 children, run a car, consume.
So you voted for them. Felt you were part of them; of the up-and-up.
The trouble now, from those people's POV, is that both 'sides' are the same thing; an Elite who have removed their 'income'; removed their way of life. They went along with it, unwittingly (as did we) - choosing cheap goods from big-box stores over stuff they made themselves - thus hastening their own demise.
So now, a growing cohort - forced to work gig, loading shelves or flipping burgers - is pissed at both major Parties. Well surprise, surprise. So they will vote for a Trump. Or a Hitler (absolutely the same forcing). Or this trio of clowns, here and now. Don't be too hard on those folk - they were told a lie, life hasn't lived up to it, and now they'll vote for anyone promising them something different.
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