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Podcast: Economy Watch
Episode:

Investors shake off their fears
Category: Business
Duration: 00:04:03
Publish Date: 2021-08-24 19:38:42
Description:

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 the NZ currency is rising as commodity currencies are back in favour again. Bond yields are up, equity prices up. Risk is back 'on'.

The OECD is reporting that world trade in goods reached a new record high in Q2-2021 beating the previous record in Q1-2021. But a large part of this rise is price inflation in commodity prices, and demand stress due to shipping and supply issues around semiconductors. Trade was uneven however with most changes confused by the varying 2021 bases. Most advanced countries saw rising exports, but China was notable for its export shrinkage. And that is consistent with what Chinese officials are warning about the rest of 2021 and 2022.

In the US, new home sales were expected to dip in July, but in fact they rose. While they are running well below the pandemic-affected levels of a year ago, they remain +10% above the equivalent 2019 levels.

That may be a positive surprise, but the latest Richmond Fed factory survey in the mid-Atlantic states isn't. It is the first of these surveys to record a manufacturing slowdown in the US. All three component indexes, for shipments, new orders, and employment, decreased but remained positive even if only just. These may have turned lower but the cost and price measures haven't. In fact, factories are pushing through increases in the range of +10%. 

And staying in the US, the extreme hot weather is shrinking crop yields. That will have global implications, and we saw reversals in China's commodity markets for corn and soybean yesterday with prices jumping. There are also reports that the US is short of fresh milk, not so much because of supply but a surge in demand from re-opened schools.

Yesterday, prices for iron ore suddenly reversed and moved +7% higher in a surprise. Coal prices rise so sharply, market limit triggers were activated to prevent an even higher scramble. Fears of under-supply are back in China.

And just as the Ningbo container terminal re-opens fully after a pandemic shutdown, Shanghai's main airport is closing for the same pandemic-exposure reasons. This too will roil cargo freight to and from China, although there are plenty of alternatives. And there seems to be no end in sight for the cost of shipping.

In Japan, steel prices are on the move up.

The UST 10yr yield is up +4 bps today at 1.29%. 

The price of gold is just a touch firmer today, up +US$1/oz from this time yesterday, and now at US$1806/oz.

Oil prices have risen again, this time by another +US$2, so in the US they are now just over US$67.50/bbl, while the international Brent price is just under US$70.50/bbl.

The Kiwi dollar opens today firmer again, back up to 69.4 USc. Against the Australian dollar we are slightly firmer at 95.7 AUc. Against the euro we are also firmer at 59.1 euro cents. That means our TWI-5 starts today at just over 72.8 and back in the 72-74 range of the past ten months.

The bitcoin price has fallen back from this time yesterday with a -2.8% retreat to US$48,044. Volatility in the past 24 hours has been moderate at just under +/- 2.2%.

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.
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