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Home > Economy Watch > Economic transition confuses commodities


	Podcast:		Economy Watch
	Episode:		Economic transition confuses commodities
	Category:		Business
	Duration:		00:03:38
	Publish Date:		2021-08-18 19:58:30
	Description:		Kia ora, Welcome to Thursday'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 commodity prices are bifurcating in a transitioning mix if public policy signals. The US Fed released the minutes of their last meeting earlier today and they now see their inflation target being hit. But they are debating the timing and mechanics of easing back their stimulus policies. Some want a speedy reset on the basis that continuing large bond purchases are inappropriate for where the US economy is now: stimulus does not address supply shortages and will just make inflation overshoot. There was a modest US Treasury bond auction overnight for their 20 year paper. It was for US$30 bln of which the Fed took US$3 bln. The remainder attracted US$66 bln in bids at a resulting median yield of 1.78%. That is marginally lower than the prior equivalent event's 1.80% median yield a month ago. US housing starts were expected to weaken in July, but they fell more than expected. However this was offset by a faster-than-expected rise in building permits for housing. Perhaps related, American mortgage application levels fell last week, in turn because all the key mortgage interest rates terms rose.US 20yr bond auction Canadian inflation came in well above what was expected at 3.7%, pushed up in July by rents, homeowner operating costs and the cost of durables. The iron ore price in China hasn't stopped falling sharply. It is now down a third in just five weeks in a very rapidly sinking situation, a crash that will test the big Aussie miners and likely wipe out much of the Australian trade surplus. Not all mineral commodities are falling in price. Tin is still climbing and is up +68% on the start of the year to a new all-time record high. Aluminium is recording year-to-date gains of +27%. And the Baltic Dry index hit a new recent high yesterday with a +5% daily jump. This index is up +160% since the start of the year. Separately, China is effectively nationalising of their tech industry by taking a more direct hand in managing its internet-content companies. It is buying equity stakes, filling board seats and sending dedicated regulators to police content at firms more frequently. The UST 10yr yield starts today at 1.28% and up +3 bps. The price of gold is up +US$4 from this time yesterday, and now at US$1790/oz. Oil prices are -US$1 lower from this time yesterday, so in the US they are just under US$65.50/bbl, while the international Brent price is just over US$68/bbl. The Kiwi dollar opens today lower again, down to 68.9 USc and it’s lowest since November 2020. Against the Australian dollar we are unchanged at 95.2 AUc. Against the euro we are also unchanged at 58.9 euro cents. That means our TWI-5 starts today at 72.3, and down just -10 bps because most of the change has been via a rising greenback. The bitcoin price has weakened slightly today and is now at US$45,860 and essentially unchanged from this time yesterday. 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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