Australians are watching Z Energy; Volvo steel green eyes; The United States sees a new boost in productivity; China envisions “common prosperity”; AU and NZ cornered by delta; 10-year UST 1.26%, slide in oil and gold; NZ $ 1 = 68.3 USc; TWI-5 = 72
Here’s our recap of the weekend’s key economic events affecting New Zealand with news that the long-awaited rise of robots and AI may now be happening and will lead to a further boost in productivity.
But first, let’s note that Australian gasoline retailer and distributor Ampol (formerly Caltex in Australia) is apparently in “advanced talks“to take over our listed Z Energy (ZEL, # 22). Z Energy also operates the Caltex brand in New Zealand. If this deal is successful, it will cost $ 1.6 billion on the NZX50, but local shareholders will end up with those funds of course, including many KiwiSaver funds.
And in various energy news, the Swedish car manufacturer Volvo (owned by the Chinese company Geely Motors) has taken delivery of fossil fuel free steel and plans to make cars, demonstrations to start with. The iron ore mines and steelmaking process were all powered by green hydrogen (hydrogen produced from hydropower).
The Jackson Hole Annual Central Bankers Meeting is set to be another “virtual” event in 2021, mirroring its 2020 edition. This year the focus will be on “the unequal economy” and will begin on Saturday NZT.
One aspect may well relate to the fact that jobs are not rebounding quite as expected. This may well be because the pandemic has allowed replacement robots to gain the upper hand. There was a lot of talk about such a move after the GFC, but it’s now clear that companies have done the job without deploying this technology on a large scale. But that work is now complete and large-scale deployments are underway. It is planned to inaugurate a “game-changing” productivity surge – more production for the same or less labor.
AI will also be at the heart of the new employment landscape and will not fail to raise many concerns.
As the United States nears the heart of its summer vacation season, the US currency is on the rise – and many say it is now above “fair value.” But its overvaluation is not extreme by historical standards. That probably won’t stop the greenback from rising a bit further over the next 6 to 12 months. When U.S. investors return after their Labor Day weekend, caution is likely to dominate their emotions and a tone of risk aversion persists amid an economic backdrop of slowing U.S. momentum and reversal in the economy. Chinese moose.
More immediately, the Canadiens got their solid rebound in retail sales in June, with them up + 4.2% as foreclosure restrictions were relaxed during the month. From a pre-pandemic base of June 2019, the latest data is almost + 10% higher, so they enter an election period there with a positive economic context. Canada is not under the unequal pressures of its neighbor to the south. (Gini = 0.33.)
Not like China. China has become one of the most unequal major economies with a huge gap between the haves and have-nots. Their Gini index is 0.39. The United States is at 0.41 while New Zealand is at 0.36. The higher these coefficients, the more unequal they are. Norway is 0.27 and Sweden 0.29.
Now, an article appeared in a major Chinese media outlet calling for wealth taxes and income redistribution to solve the Chinese problem. Since President Xi himself is a prince in the original CCP hierarchy, this would normally be a courageous and dangerous move. But it was likely sanctioned from above, indicating that Beijing has picked up on social signals that this is a point of tension in modern China. (It may also have advantages in taking out Xi’s rivals.) And this relates to the current campaign to master a tech industry which worked cavalierly. “Common Prosperity” is the new Chinese slogan.
Meanwhile, their central bank let their Prime loan rate pending for a 16th consecutive month today at 3.85%. But with China’s economy faltering, it won’t be long before the PBOC guides rates lower. Even so, another round of large-scale, credit-focused stimulus does not appear to be in the pipeline at this time. Another reduction in the reserve rate seems more likely to be their next action.
Taiwanese export orders are still growing strongly in July, up + 20% compared to a year ago and + 37% more than in July 2019. (Buyers completely rule out the risks of an invasion or a Chinese takeover.)
The unrest in Chinese container ports is also causing big problems for destinations. Buyers put in orders, making the problems worse. For example, at the two major ports of Los Angeles, which handle about a third of all U.S. maritime imports, nearly 40 ships are waiting to dock, almost as much as the last logistical stressful period in February. Normally, no ship is waiting to load or unload.
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There was another 830 new community cases of Covid-19 in New South Wales yesterday with 693 others not assigned to known clusters so they are still out of control and worse. Their confinement has been extended. They are now also under curfew. Victoria is report 65 other new cases yesterday, so it’s starting to increase there too and their lockdown is expanded for another two weeks, also with a curfew. Queensland is report zero new cases in a bright spot. ACT has 19 new cases. Overall in Australia, more than 30% of eligible Australians are fully vaccinated, and 21% have had only one injection so far. In New Zealand, 23% have now had two injections and 18% a first.
The selfishness of the Australian lockdown protests, ignorance and the spread of the virus in large groups make containment of the outbreak there very difficult, while vaccination rates remain well below the required 90%. The people most at risk are young people, especially children. All of this stems from a weak and slow initial response from NSW state authorities who responded to short-term economic claims for appropriate public health measures. The situation may not be reversible now, no matter what we desire. NSW now has over 10,000 locally acquired cases, Victoria has 440, Queensland 39, ACT has 121. New Zealand now has 72 active cases and all of us have been transferred to managed isolation.
The 10-year UST yield ended last week at 1.26%. The US 2-10 yield curve is little changed at +103 bps. Their 1-5 curve is a bit flatter at less than +72 bps, and their 3m-10 year curve is also slightly flatter at +121 bps. The benchmark ten-year Australian government rate starts today at 1.07% and -1bp lower. The ten-year Chinese government bond is 2.87% and unchanged. And the ten-year New Zealand government is now at 1.60% and also unchanged.
The price of gold is little changed from this time on Saturday, and now at US $ 1,781 / oz and down -1 US $.
Oil prices continue to fall, so that in the United States they are now just over US $ 61.50 / bbl, while the international price of Brent is slightly above US $ 64.50 / bbl .
The Kiwi dollar opens today unchanged at 68.3 USc and maintains its lowest level. Against the Aussie we are firmer at 95.8 AUc. Against the euro, we are also very slightly firmer at 58.5 euro cents. This means that our TWI-5 starts today at just under 72 and at the very bottom of the 72-74 range of the last ten months.
The price of bitcoin has practically maintained its new high level of US $ 48,669, up only + 0.7% from this hour on Saturday. Volatility over the past 24 hours has been low at just under +/- 1.7%.
The easiest way to stay on top of the risks of events today is to follow our Economic calendar here ».