Beijing overlooks climate goals to save economy now

Kia ora,

Welcome to Friday'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 markets are in a holding pattern today ahead of tomorrow's US non-farm payrolls report.

US jobless claims data came in pretty much as expected at 324,000 but this was lower than the prior week. And the total number of people on job support benefits fell to under 2.9 mln which was a substantial drop. Tomorrow we get the non-farm payrolls report and the expected July job gains are +870,000. A lot hangs on this level with recent evidence suggesting this may be an overly high expectation.

American vehicle sales in July ran at the annual rate of 14.8 mln rate which was a drop from a 15.2 mln rate in June. This is now a much smaller car market than what we see in China where the annual sales rate runs at over 20 mln.

Meanwhile, the Biden Administration and US carmakers seem set to announce that half of all cars and light trucks sold there by 2030 would be electric vehicles under voluntary targets. This caps a very fast shift to EVs across the world.

And in another regulatory change, the US SEC is getting ready to regulate crypto assets in the same way as stocks, bonds and commodity-related trading instruments.

Both the US and Canada released June goods and services trade data overnight. The Americans saw exports and imports grow, but imports slightly more so their deficit widened slightly. The Canadians reported a good export rise but a fall in imports, so they ended up reporting a surprise merchandise trade surplus.

And the latest July data is showing that the housing markets in both Toronto and Vancouver are taming down, and quite quickly.

In China, very high electricity demand is 'forcing' them to toss aside their recent environmental commitments. Fifteen shuttered coal mines are the latest to be re-opened, on top of 38 in Inner Mongolia last week. In Beijing, it seems environmental goals are for international media consumption and entirely fudgeable, whereas keeping the economy going is their main concern. The opening of their carbon market hasn't won plaudits either.

Meanwhile, the iron ore price keeps on falling, down another -6% yesterday taking the total drop in just three weeks to -23%.

There were a few central bank policy decisions released over the past 24 hours. In Brasilia, Brazil, they raised their policy rates by +1.0% to 5.25% in the face of sharply rising inflation. In London, England they did nothing. In Prague, Czechia (the Czech Republic), they raised their policy rate +25 bps to 0.75%

In Australia, their June trade surplus for both goods and services of AU$10.5 bln is a fresh record high for any month, eclipsing the previous peak of AU$9.9 bln in January. But almost off of this strength is due to higher prices - it is possible that the final data will show Aussie merchandise export volumes falling. And if prices start retracing, the combination could generate a rapid unwinding of their recent goldilocks run.

The UST 10yr yield starts today at 1.22% and up +4 bps overnight. 

The price of gold is now just on US$1805/oz and down -US$9 from where we were yesterday.

Oil prices have been active overnight but are now little-changed from this time yesterday so in the US they are under US$69/bbl, while the international Brent price is just on US$71/bbl.

The Kiwi dollar opens today just on 70.6 USc and up again since this time yesterday even if only slightly. Against the Australian dollar we are soft at 95.3 AUc. Against the euro we are unchanged at 59.6 euro cents. That means our TWI-5 starts today at 73.4 and unchanged.

The bitcoin price is now at US$40,293 and up +1.6% from this time yesterday. Volatility in the past 24 hours has been very high at +/- 4.3%.

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 on Monday.