US eyes on upcoming CPI data; commodities for the green economy race higher; fusion gets big tick; Aussie mood stays dark; Aussie courts back gig contracts
Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news it is a great time to be a commodities producer, hard or soft.
Firstly, the latest USDA WASDE review continues it’s reporting of lower US milk output and higher prices. Beef prices are unchanged in this February report.
There was another US Treasury bond tender overnight, for their 10 year bond, and this one was very well supported too. And it brought a much higher median yield, at 1.85% pa, compared to the 1.65% a month ago.
Markets are waiting for tomorrow's US consumer price index number. They expect a headline January level of 7.3%, up from 7.0% in December (and a 'core' rate of 5.5%, up from 5.0% in December). Outside these expectations, expect some market repricing. Locally, financial markets are awaiting Friday's RBNZ inflation expectations survey results.
But today is all about commodities.
The Aluminium price has raced higher to record levels. It has doubled in price since mid-2020. It is likely to go much higher because China (and others) are shutting capacity to meet environmental standards. Those left are in a prime position because this metal is key to many new technology driven 'green' products (like Tesla cars). Also rising for similar reasons are cobalt, nickel, and tin. Zinc is getting up there too. Surprisingly, coal is also in hot demand and its price is near its record high as France decides to use it rather than Russian gas or oil.
The spot carbon price rose sharply yesterday locally to now be almost $81/NZU. That's an +8% rise - in just one week. The background here is that soaring gas prices encouraged more power companies (in Europe) to swap to carbon-heavy coal, resulting in higher emissions and much higher demand for these carbon-offset contracts
And speaking of commodities and energy, we should note that overnight a test site for the giant ITER fusion facility being built in the south of France, produced results that almost guarantee nuclear fusion is now a viable energy source. These results transform fusion from 'a possibility' to a viable future energy source.
In Australia, the apparent 'improvement' in their pandemic numbers was expected to improve the mood in the latest Westpac MI consumer sentiment survey. But it didn't. Opening up isn't a mood-changer, it seems. Australian consumers have moved on to worry about inflation and higher interest rates.
And there was a notable High Court decision in Australia out yesterday where they confirmed and earlier ruling: "The only kinds of rights with which courts of justice are concerned are legal rights. The employment relationship with which the common law is concerned must be a legal relationship. It is not a social or psychological concept like friendship." That means that judges can't set aside a contract just on some external social view. It also means that, in Australia, owner-operator, or contractor agreements will not be overturned to become employment agreements. The gig economy gets a boost from this ruling. And labour is confirmed as a contractable commodity.
The UST 10yr yield opens today at 1.91% and -5 bps lower.
The price of gold starts today at US$1833/oz and up another +US$6 from this time yesterday.
However oil prices are little-changed at just over US$88/bbl in the US, while the international Brent price is now just under US$90.50/bbl.
The Kiwi dollar will open today +½c firmer at 66.9 USc. Against the Australian dollar we are unchanged at our lower level of 93.1 AUc. Against the euro we are firmish at 58.5 euro cents. That means our TWI-5 starts today just over 71.2 as commodity currencies gain some favour.
The bitcoin price is +2.4% higher since this time yesterday and now at US$44,128. Volatility over the past 24 hours has been moderate at +/- 2.0%.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.