Kia ora,
Welcome to Wednesday's Economy Watch where we follow the economic events and trends that affect New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news markets are boxing on, pretending the global turmoil won't affect them, and normal is just around the corner.
First however, we should note that the New Zealand dollar is rising against all majors but especially the greenback. It has pushed up to a level we last had in early March, and since the recent pandemic-and-RBNZ-induced low on March 28, is rise of +13%.
And that is sharply affecting export returns. We had another dairy auction overnight and while prices overall were flat from the prior May 19 event, the Kiwi dollar has gained +5.2% since then and that has tipped the auction result down -3.9% in local currency terms.
Within the auction there was also sharp movement. Overall it might have been flat but butter prices fell -4.4% and cheese prices were down -5.3%. That was only balanced by the high-volume WMP price which rose +2.1%. Overall volumes sold were also higher at 22,000 tonnes, a ten percent rise from the same auction a year ago and a +30% rise from the prior auction.
In the rest of the world, American cities are in turmoil over anger about hardline policing tactics, and the President's threats to bring out troops against his own people. The unstable situation has added another dimension to their economic vulnerability. And the US's moral authority to stand up to China's own hardline tactics has now evaporated.
The US Administration has also moved to defend Facebook and Google from foreign 'digital taxes' claiming that their tax-dodging should be protected. It is the backstory for Facebook refusing to call out false political claims on the platform.
US retail sales took another retreat last week, both on a week-on-week basis and on a year-on-year basis. The riots in key cities this week won't turn anything around.
April airfreight trade was the expected disaster. No region was spared.
In China, local government bond issuance has boomed, hitting a new record high in May as they 'invest' to mitigate the impacts of the pandemic slowdown. They issued a record NZ$300 bln in bonds in May (¥1.3 tln), beating the April 2016 previous record.
Iron ore prices are the latest Chinese financial craze. They have surged more than +40% since April and the Chinese authorities are warning traders to act rationally amid a the frenzy.
The Australian central bank held its current policy settings late yesterday but said the economic outlook is highly uncertain and the pandemic will have long-lasting effects on their economy.
Wall Street is up +0.4% in late trade today. That contrasts with the more than +2% rise in Europe overnight, almost +4% in Frankfurt. Ever more stimulus is behind the jump. Yesterday Shanghai was up +0.2% but Hong Kong and Tokyo both ended with healthy gains, exceeding +1.1%. The ASX200 ended up +0.3% and the NZX50 was up +1.4%.
The latest compilation of Covid-19 data is here. The global tally is now 6,325,300 which is rising at a faster pace than recently.
Now, just under 29% of all cases globally are in the US, which is up +23,000 since this time yesterday to 1,820,500. This is a similar rate of increase and the spread isn't abating. US deaths are now exceed 106,000. British deaths have reached 40,000, the world's second highest. Global deaths now exceed 378,000.
In Australia, there have been 7221 cases (+17 since yesterday), 102 deaths (-1) and a recovery rate of just under 92% (unchanged). 26 people are in hospital there (+6) with 4 in ICU (+1). There are now 494 active cases in Australia (+12).
There were zero cases again yesterday in New Zealand, so now only one person is left with it in the whole country. We are now at eleven days with zero new cases.
The UST 10yr yield is up +2 bps today at 0.68%.
The gold price is lower today, down -US$10 to US$1,726/oz.
Oil prices are rising today. The US crude price is now just over US$36.50/bbl. The Brent price is just under US$39.50/bbl.
The Kiwi dollar has risen solidly overnight again. We are now just on 63.5 USc which is another +½c gain and an eleven week high. On the cross rates we have slipped back to 92.3 AUc. Against the euro we are also firmer too at 56.9 euro cents. That means our TWI-5 is up to just on 68.5.
Bitcoin is virtually unchanged from this time yesterday at US$9,532. But inbetween, it did rise to US$10,269 before traders thought better of it.
Finally, thank you to the huge number of new listeners who have joined the Economy Watch podcast recently.
You can find links to the articles mentioned today in our show notes.
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