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Podcast: Economy Watch
Episode:

Half full? or half empty?
Category: Business
Duration: 00:03:51
Publish Date: 2021-08-03 01:03:21
Description:

Kia ora,

Welcome to Tuesday'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 some investors are focusing on the positive, others on the negative today.

Firstly the bond market is tanking today, even though the equity markets are holding high. Investors may be sensing that the best of the recovery is behind them and the rapid spread of the delta variant is a reminder that we’re going to have to learn to live with the virus for years to come. But despite this, there are still reasons to be optimistic. Firstly, most of the Q2 GDP reports have been quite good and when ours are released next month, it will likely be too.

Secondly, the US is going to get its big infrastructure deal.

And thirdly the US PMIs for July were really very strong - but not quite as strong as markets expected, which is why some investors are pulling back. However that doesn't alter the real expansions in manufacturing.

European factories are expanding fast too.

It is true that China is in a slowdown, and approaching a stall. But they are the weak one, the outlier. Beijing is eyeing a recovery that is "not solid" and "uneven", blaming global forces, with promises of more stimulus support on the way. It is an admission that is getting almost zero press attention inside China.

Japan, Taiwan and South Korea are all expanding at good rates. Even India is too.

It is Russia and ASEAN countries that are the laggards reporting shrinking factory output, mainly because the delta virus strain has them in a very unfriendly grip.

In Australian factories, there are signs the top is being taken off their factory expansions by the recent lockdowns, but both report good expansions in July.

But the new rolling lockdowns are taking a toll and quite quickly. The Aussie press may be enamored by the Afterpay deal, but in fact behind the scenes the RBA and the Australian Treasury are dusting off their crisis stimulus playbooks. Everything about the pandemic economic effects has happened fast; the approaching crisis, the official responses, and the V-shaped recovery. Not the impact of the delta strain is happening fast too so the regulatory response needs equal quickness.

The UST 10yr yield starts today sharply lower again at 1.17% and down another -6 bps overnight. 

The price of gold is now just under US$1816/oz and up another +US$2 from where we were yesterday.

Oil prices are sharply lower today and by about -US$2.50/bbl and in the US they are now just under US$71/bbl, while the international Brent price is down -US$3 at just over US$72.50/bbl.

The Kiwi dollar opens today just on 69.7 USc and unchanged since this time yesterday. Against the Australian dollar we are back lower at 94.7 AUc. Against the euro we are unchanged at 58.8 euro cents. That means our TWI-5 starts today at 72.5 and marginally lower.

The bitcoin price is now at US$39,766 and down -3.0% from this time yesterday. Volatility in the past 24 hours has been high at +/- 3.3%.

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 tomorrow.
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