Europe scrambles for gas supplies. US talks itself down. China rolls out local boosts, eyes on bank stress. Coal shines.
Kia ora,
Welcome to Tuesday’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 markets are struggling to make sense of a global economy buffeted by many unusual forces.
First, Russia has formalised its shutdown of oil and gas supplies to Europe and that is diving a scramble to activate other sources.
Then in the US, Apple and Google say that they will slow their hiring intentions, signals that are more 'news' than 'substance', but ones that are reverberating in markets. Microsoft is making job adjustments too, but plans a new hiring increase.
And US home builders are glum, seeing demand leak away as house prices have to rise on rising costs, and buyers afraid of higher mortgage interest rates. This is despite new home sales running ahead of pre-pandemic levels - just not at the unusual level they enjoyed during the pandemic.
Canada's June housing starts came in slightly better than expected but slightly less than for May. And they were -1.6% lower than year ago levels.
In China, the city of Beijing is issuing NZ$25 bln of helicopter 'coupons' to try and lure diners back to restaurants. Beijing is just one of 20 cities attempting the restart move.
These are necessary because of a sharp turn to risk-off consumer sentiment. Banks have been told to limit trading in gold as customers rush for the safe haven.
And staying in China, it is easy to draw apocalyptic conclusions from the regional bank failures in Henan Province. But it turns out there are others going bad too, the most recent in Inner Mongolia. A series of failures could create a chain reaction that would be hard to stop, especially as their big banks are also highly leveraged, and their local government is heavily in debt. China has faced down these sorts of threats before, but the balances at risk are much higher now and harder to control - harder when the economy is misfiring. Respected observer/critic Minxin Pei says a debt reckoning might be imminent, one that will have global repercussions. Let's hope not.
Singapore delivered better than expected export results for June with a +9.0% gain over year-ago levels.
Here's something you don't see every day. A listed company posted a profit of $200 mln in 2021, and will post a profit of $3 bln in 2022, a more than 10x rise. The company is Whitehaven Coal (WHC) on the ASX. Record high prices and limited global supply for its product has seen its share price rise from US$2.12 a year ago to $5.90 today. To be fair, their share price was higher in 2011, but it seems to be countering the ESG pressures, making those who counter-invested at the start of the ESG move win outsized gains.
The States want in. Queensland has already instituted a windfall profits 'royalty' on such miners. NSW is now considering the same.
The UST 10yr yield starts today at 2.96% and up +3 bps from this time yesterday.
The price of gold will open today at US$1711/oz which is +US$2 firmer than this time yesterday.
And oil prices are up +US$3.50/bbl at just over US$98.50/bbl in the US, while the international Brent price is up even more at just over US$102.50/bbl.
The Kiwi dollar will open today back down to yesterday's level at 61.6 USc after a temporary spurt higher on the CPI news. Against the Australian dollar we are down to 90.3 AUc. Against the euro we are also down at 60.7 euro cents. That means our TWI-5 starts today at just under 70.6.
The bitcoin price rose from this time yesterday by +4.5% to US$22,033 and a one-month high. Volatility over the past 24 hours however has been very high at just under +/-4.8%.
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.