Information breakfast; Energy stress spreads
Here’s our roundup of key overnight economic events affecting New Zealand, with news that energy stress is spreading everywhere now.
Don’t forget that in the United States, it’s their Labor Day long weekend, essentially signaling the end of their summer holiday season. Markets will return to normal mode tomorrow when trading volumes are more regular.
But even though they are on vacation, the heat wave in the West is relentless, driving up demand for electricity and pushing their grid systems to the limit. The California network operator said an emergency today, advocating for users to turn off devices to avoid uncontrolled blackouts.
In China, their central bank reduce its foreign exchange reserve rate -200 basis points from 8% to 6% in an attempt to stem the losses of their plummeting currency which hit a 2-year low overnight. But these measures to protect the yuan are unlikely to stop its slide. Even their huge foreign exchange reserves cannot do this. Chinese financial institutions held $954 billion in foreign currency deposits in July, down from a record $1.1 billion in February, a decline of -13%.
Containment in Chengdu is tightening. Now this region has been hit by a great earthquake, adding to the misery. And another major western city, Guiyang, is also under lockdown orders.
The Caixin China PMI Services fell to 55.0 in August from July’s 15-month high of 55.5 amid the recent pandemic wave and the impact of adverse weather conditions. Still, the latest result was the third consecutive month of growth in services activity, as new orders rose solidly with the second-highest growth rate since October 2021, while broadly in line with average. from the Serie. Meanwhile, new export orders fell for the eighth consecutive month, at a faster rate than in July; while employment fell for the second consecutive month.
The slump in demand, particularly from China, has seen OPEC accept a small reduction in oil production around -100,000 bpd. This reverses their increase of the same size a month ago. Even though the practical impact is minimal – less than -0.1% – it is meant to show that OPEC will defend a price level around US$100/bbl. Prices rose after the news.
In Europe, there is a lot of planning, and an equal amount of angst after Russia cut off energy supplies. The price of coal hit a new all-time high. Oil and gas prices have also increased. But on the whole, Europeans seem stoic in the face of threats, pushing back against Russian actions. When this whole crisis subsides, Europe is unlikely to be a buyer of Russian energy again.
Turkey has published its CPI inflation rate in August and he ticked over 80%, a 40-year high for them. However, it seems to have reached its climax.
In Australia, corporate profits have increased +7.6% in Q2 vs. Q1, easily beating market expectations of a 4% gain. But that follows a downward revision to the 9.8% Q1 gain. The results of listed companies are very transparent, so I guess the downward drift is due to the fact that unlisted companies are not doing so well.
Australian job vacancies data was stronger than expected, up +2%. Given other recent weak Aussie data, this jobs metric was expected to have fallen – but not yet, at least.
All eyes are now on the Reserve Bank of Australia rate review which will take place at 4:30 p.m. this afternoon (NZT). They are widely expected to raise their cash rate target of 1.85% by +50 basis points to 2.35%. (The next RBNZ OCR review will not take place for 4 weeks, on October 5, 2022.)
The UST 10-year yield starts today at 3.20% and remains unchanged. The UST 2-10 yield curve is also unchanged at -20 bps. Their 1-5 curve is still at -16 bps. Their 30-day-10-year curve remains at +73 bps. The Australian 10-year bond is up +5 basis points to 3.70%. The ten-year Chinese government bond is little changed at 2.65%. And the 10-year New Zealand government index will start today at 4.02%, and up +1bp.
Wall Street is of course closed for its holiday weekend. S&P500 futures suggest it will open tomorrow +0.3%. European markets overnight London closed flat, Frankfurt however lost a net -2.2%, and the others fell around -1.4%. Tokyo closed yesterday down a minor -0.1%. Hong Kong fell -1.2%. Shanghai closed up +0.4%. All remained open as the typhoon mainly affects Korea. The ASX200 ended up +0.3% and the NZX50 down -0.1%.
The price of gold will open today at US$1711/oz and down -US$2 from the same time yesterday.
And oil prices today start firmer at +US$1.50 at just US$88.50/barrel in the US, while the international price of Brent is now slightly lower at US$95/barrel.
The Kiwi Dollar will open today just under 61 USc and little changed. Against the Australian dollar, we are rather moderate at 89.6 AUc. Against the euro, we are unchanged at 61.4 euro cents. All of this means that our TWI-5 starts today at 70.6 and very little different from this time yesterday.
The bitcoin price is now at US$19,826 and has changed very little since yesterday. Volatility over the past 24 hours has been modest at just +/- 1.0%.
The easiest place to stay on top of the risks associated with today’s events is to follow our Economic calendar here ».