Commodity supercycle building


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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

Today we lead with news prices are jolting higher for both hard and soft commodities.

But first, new orders for US durable goods orders came in with a very disappointing result in March, up just +0.5% when a strong +2.5% result was expected. (They were +26% above the pandemic-affected March 2020.) Orders for non-defense capital goods fell a worrying +4.7%. These results are a little curious, given the strong PMIs and the upbeat regional Fed factory surveys.

In fact, the Dallas Fed reported results for its region for April, and that revealed very upbeat factory conditions, and with a strong outlook.

The latest UST 5yr Note auction for US$61 bln was very well supported with US$141 bln of bids. The resulting yield was 0.80% and little-changed from the prior auction of this maturity. Eurozone yields edged higher.

China's largest distressed debt manager, China Huarong, has announced it will miss another results disclosure deadline, further unsettling bond investors and raising fresh concerns over a potential default.

Singapore's industrial production in March also came in with a disappointing result, well below expectations. The year-on-year result was pandemic affected, but the gain from February wasn't flash at all and developing a softening trend. Without strong gains in their electronics industries, this would have been a terrible overall result.

The prices of hard commodities are rising, and actually approaching levels of the last commodity super cycle. Prices for iron ore, aluminium, and copper are at decade highs. Copper - a bellwether for the global economy - rose as much as +2.4% to US$9,780/MT, the highest since August 2011. And this trend may only just be starting, juiced along by global stimulus, and further by the transition to a de-carboned economy that will require vast amounts of copper.

Worldwide, crop prices are also soaring, with bad crop weather in key-producing regions the major culprit - especially in North America, South America, Russia and Europe. It comes as Chinese demand is high and getting higher. Jolting food inflation is on its way.

But in Australia, after good rainfalls this time last year, and even better conditions this year, growers are set to plant record crop acreages for their winter growing seasons. This is setting them up for another huge crop in 2021 right at the time prices are high and rising fast. Fortunately for them, this comes after huge 2020 crops, and the politicised trade punishment being meted out by China on Australia for standing up to their human rights record just does not seem to be hurting Australia at all.

The UST 10yr yield starts today at 1.57%, up +1 bps overnight.

The price of gold starts today at US$1780/oz and that is up +US$3 since this time yesterday.

Oil prices are little-changed at just over US$62/bbl in the US, while the international price is just under US$65.50/bbl. But they have been weaker in between.

The Kiwi dollar opens today at just under 72.4 USc and a gain of almost +½c since this time yesterday. Against the Australian dollar we are marginally softer at 92.8 AUc. Against the euro we are stronger as well at 59.9 euro cents. That means our TWI-5 is up to 74 and its strongest since mid-March.

The bitcoin price has made a strong recovery after falling to as low as US$47,079 in the past 24 hours. It is now at US$54,016 and up +8.5% since this time yesterday. Volatility in the past 24 hours has been extreme at +/- 7.8%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from

Kia ora. I'm David Chaston and we’ll do this again tomorrow.

535 episodes