Here's our summary of key economic events overnight with news all eyes are on the political situation, but the global economic indications are mostly positive.
On the global stage, it has been announced that there will be a face-to-face summit meeting between US President Biden and Russian President Putin, brokered by the French, to try for a Ukrainian resolution. It's an 'in principle' agreement. Russia seems lukewarm because it delays plans, and is signaling it will recognise Russian-speaking breakaway regions as independent countries. Both regions suffer from declining populations and economic stagnation.
A spillover consequence of these tensions is that a state-owned Belarusian potash miner that accounts for about 20% of global supply has declared force majeure because it is hit by sanctions, shaking up a market that’s already contending with soaring fertiliser prices.
To start, just a quick reminder that Wall Street is closed as the US is on a long weekend holiday.
Markit reported their preliminary PMIs for Japan for February yesterday. Both dipped. The factory one is still expanding however, but the services one took a large tumble as the country battles Omicron, and is now contracting. Still, companies remained optimistic that activity would improve in the year ahead.
Westpac says that with the Covid-affected New Year festival, and the sanitised Winter Olympics behind it, they expect "China's economic promise to shine bright in 2022". China kept its prime loan rates unchanged today after review.
China's house prices slipped in January. This was true for both sales of new units, and resales. The official data shows the declines widespread but small, except in Beijing and Shanghai where they held. But what the official data doesn't show is the volume of transactions and that seems to have fallen rather more widely.
And in Guangzhou, China's four big state-owned banks cut mortgage rates aimed at lending support to a property sector reeling from a severe cash crunch there.
Taiwanese export orders came in right at about the level expected, up +12% in January from a year ago, which was also the gain in December.
The acceleration rate of German producer prices fell back from the extreme levels in December, but they didn't fall back as much as was expected. They are up +2.2% from the prior month, and up +25% from January 2021. It is cost pressure driven by energy prices mainly.
But German, indeed all EU factory PMIs are expanding at an unusually solid clip. The EU factory PMIs retained their fast expansion and their services PMIs rose to a good expansion even if it isn't as fast as the factory sector. At these rates, business is expanding much faster than pre-pandemic levels. Much of these gains are on the back of new order growth, and the rebound is most in France and Germany, the EU's core economies. The British PMIs rose too.
The takeover offer of AGL we noted yesterday has gone from 'friendly' to 'hostile', with the bidders taking their campaign wider after the formal rejection. The Federal government is threatening to veto it if it succeeds to save the local coal industry.
Separately, a rail lockout in NSW is underway. Both this and the AGL saga are now part of the upcoming Federal election campaign as issues harden because the governing parties look like they are heading for a loss.
In Australia, Markit also issued their preliminary February PMIs. The factory one posted a good further expansion and its best level since mid 2021, and the services one jumped from a contraction to a solid expansion. Overall business sentiment in the Australian private sector is positive with the level of confidence rising to a two month high.
In NSW, there has been 4,916 new community cases reported yesterday, a big drop, now with 103,850 active locally-acquired cases, and another 7 daily deaths. There are now 1,288 in hospital there and continuing to fall away. In Victoria they reported 5,611 more new infections yesterday. There are now 44,278 active cases in that state - but there were only 3 deaths there. Queensland is reporting 4,144 new cases and 6 more deaths. In South Australia, new cases have fallen to 1118 yesterday and 3 more deaths. The ACT has 458 new cases and one death, and Tasmania 569 new cases and no deaths. Overall in Australia, more than 16,000 new cases have been reported so far although not all counts are in yet.
The UST 10yr yield opens today still at 1.93% as Wall Street remains closed. The UST 2-10 rate curve starts today unchanged at +46 bps. Their 1-5 curve is unchanged at +82 bps and their 30 day-10yr curve is also unchanged at +190 bps. The Australian ten year bond is up +2 bps at 2.20%. The China Govt ten year bond is up +3 bps at 2.85%. But the New Zealand Govt ten year is lower, down -5 bps at 2.76%.
With Wall Street closed, the equity indications come from other markets. But the S&P500 futures are down a sharp -1.2%.Overnight European markets fell by varying degrees. London was down -0.4%, Frankfurt by -2.1% and Paris by -2.2% on political risk aversion. But none of this was as sharp as the Moscow stock exchange which dived -9.5% yesterday, with a further dip afterhours to be -14% lower. Yesterday, Tokyo fell -0.8%, Hong Kong by -0.7%, and Shanghai was down similarly until the last minute when the home team came to the rescue and it closed unchanged. The ASX200 ended its Monday session up +0.2%, and the NZX50 ended up +0.1%.
The price of gold starts today at US$1896/oz and down -US$3 from this time yesterday. Gold is getting a boost in Japan on stagflation fears.
And oil prices are up another +50 USc at just under US$91/bbl in the US, while the international Brent price is just under US$93/bbl.
The Kiwi dollar will open today up +¼c at 67.2 USc. Against the Australian dollar we are down slightly at 93.2 AUc. Against the euro we are marginally firmer at 59.3 euro cents. That means our TWI-5 starts today at just on 71.6 with a marginal daily gain.
The bitcoin price has recovered +1.3% since this time yesterday and now at US$38,943. Volatility over the past 24 hours has high at +/- 3.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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69 Comments
Now Putin has recognised Donbas as a country, for sure a recession is coming and maybe a limited war. There will be a heap of new sanctions, oil and gas are going to go through the roof. Perfect timing seeing as most central banks are going into a tightening cycle.
Are you suggesting the US is driving this?
Ukrainians want independence. Russia wants a puppet state, like Belarus. NATO is not the US, it is a defensive agreement of European states, most of whom bordered on the old Soviet Union, backed by the US, and it is most definitely non-nuclear which is why France withdrew.
Putin's noise is just that noise, but he knows that even though Ukraine is not a member of NATO yet, there are still security guarantees. The former Soviet satellites that are gravitating to the west, and even joining NATO are doing so because of their experience under the Soviet dictatorship, and understanding the Russian mind. Putin is trying to regrow the Soviet Union but he has almost backed himself into an all or nothing corner.
I agree that the US has an appalling history of playing in the politics around the world. But I seriously doubt that they are doing so here. Especially as the former Soviet states don't need to look very far to find much richer, more stable democratic countries that are certainly comparatively freer than any thing sitting under Russia. Germany and France maybe, but I doubt the US.
That'll be why so many have left for a life in the west? Actually Russians are pretty keen to leave Russia too. I guess its because they have faith in Putin to provide a stable, prosperous future? Even the Russians that stay have to be bribed to breed. https://www.courthousenews.com/putin-extends-cash-payouts-for-babies-to…
Perhaps but if Putin is playing dominoes, he likely won’t be stopping at that point. Pushing on through to Odessa would create a land corridor to a strategic port rather than the vulnerable bridge to Sebastopol. Yet having ownership of the Black Sea is limited in itself, in that to sail out of there, the historical squeeze channel & trouble spot, the Bosphorus of course runs through Turkey a NATO country. There seems to be here some similar combined echoes pre 1939, the “annexation” of the Sudetenland, thence Czechoslovakia & the Danzig Corridor, all wrapped up together, as these developments have progressed.
The most notable part of this US propaganda cover is that Washington's NATO ally
@RTErdogan is one of the "bad guys" and Iran's Raisi is not. Does #Turkey know this yet?
No one knows what he is going to do ( which is just the way he likes it .. ).
What we do know is that he is driven by domestic politics - the geopolitical thing is means to the end of domestic popularity and control and not an end it itself. In that light I think he is likely to puff/huff , maintain tension , stage a big spectacle of a Donbass referendum to join mother Russia , milk it for all its worth and stop there - for a while at least .
Yes that’s been my thinking also - was reading some history on the build up to WW2 and you can see some similarities in the posturing. Although back then, Kennedy (JFKs father) as Ambassador in the UK was happy to more or less give the Germans what they wanted to avoid war - it’s almost as if Biden wants a war now to distract from the difficulties at home.
Kennedy senior was a real trick wasn’t he! Detested by Roosevelt. Made yet another fortune for himself playing the stocks with the inside knowledge as the ambassador. Get hold of John Costello’s “Ten Days to Destiny.” If you disregard the baloney about Hess the balance is a great account of that period, Churchill’s coming to power, the antics of the appeasers, the corruption of Kennedy. What is good too, is a much more understanding & balanced description of Chamberlain, who at this point, and until his approaching death, was extremely stalwart to Churchill.
Peacekeepers....perhaps we should add a shoulder to That wheel and send the Navy
Pepe Escobar nailed it months ago in an Asia Times article:
"But it’s fair to imagine that with “partners” like the US, NATO and the EU, Xi and Putin should conclude that China and Russia don’t even need enemies"....
Sanctions and Sanctions, mandates, lock downs, do as told. All of this in 21st century.
How foolish are our politicians when the real leaders in the world are bringing connectivity to everyone from space.
Some of us are planning to go to Mars, others have got horse eyes on Sanctions and mandates and lock downs.
Just listened to Marty Verry on RNZ trying to justify funding the "freedom" protests.
Basically, tourism trump's all, if tourism business hurts then it's ok to hurt wellington business and crap in the harbour environment.
Really need better business leaders with a bit more vision than rape and pilage.
Yes it is turning into a shitfest. They have achieved as much as they ever will so its time they packed up.
But go for a walk tonight down past all the motels on Fenton St in his home town of Rotorua. The exchange of tourists for the ex-homeless has turned that into a scary place.
Good to see the UK Government entirely remove Covid-19 restrictions: https://www.gov.uk/government/speeches/pm-statement-on-living-with-covi…
New Zealand is probably a 4 to 6 weeks behind the UK now.
That's only the virus trajectory, there is still some risk months of stoppage time could be added to the political football being played with Covid-19 policy.
After all I don't know if you noticed but the other government policies haven't actually been going well. They need a bit of dazzle to push some more through before Covid-19 ends and people notice.
Our dear leader is telling us that:
"We all want to go back to the way life was, and we will, I suspect sooner than you think. But when that happens it will be because easing restrictions won't compromise the life of thousands of people - not because you demand it."
I have 2 simple questions:
1. What about the thousands of lives affected by the mandates ?
2. What are the needed conditions to know that "easing restrictions" wont compromise the life of thousands of people?
How many thousands of lives is Dear Leader pontificating about?
Clinical outcomes among patients infected with Omicron (B.1.1.529) SARS-CoV-2 variant in southern California
52,297 cases with Omicron variant infections
Hospital admissions - 235
ICU - 7
Ventilated - 0
Deaths - 1
https://www.medrxiv.org/content/10.1101/2022.01.11.22269045v1.full
Has anyone stopped to consider, within the unmasked, unvaccinated, unwashed close quartered confines of the protestors for two weeks and still counting, has covid ripped through the ranks leaving a trail of decimated gasping patients. Thought by now ambulances would be regularly featuring.
On a related note, none of the "experts", Covid Modellers, or anyone else on full pay through out all of our lockdowns, has ever explained why Covid never swept through all of our Freezing Works and Dairy Factories, which were all going gangbusters through the whole thing. The aforementioned are either lying, or are believing other people's lies. The Any modelling done using these factories Covid figures would also fit the protest Covid figures. How ironic is that?
Thanks for this. Unlike the US our urban fringes are scarce arable land, so I hope the growth can be redirected to non-rare soils.
Still, I'm one of those fleeing the city for a small town lifestyle and all I can see is growth into flood plains, which should not be.
Population bombed. Nice ride for Ehrlich while it lasted.
https://www.rnz.co.nz/news/world/421284/fertility-rate-jaw-dropping-glo…
That's great news profile. Hopefully humans survive the biosphere collapse they have caused and benefit from the lower numbers living on a resource depleted planet. Seems the population curve in the Club of Rome "Limits" report is spot on.
https://damnthematrix.wordpress.com/2012/04/11/so-much-for-debunking-th…
Biosphere collapse? "We show a persistent and widespread increase of growing season integrated LAI (greening) over 25% to 50% of the global vegetated area, whereas less than 4% of the globe shows decreasing LAI (browning). Factorial simulations with multiple global ecosystem models suggest that CO2 fertilization effects explain 70% of the observed greening trend, followed by nitrogen deposition (9%), climate change (8%) and land cover change (LCC) (4%)."
Yeah, biosphere collapse. https://www.pnas.org/content/117/24/13596
Yes, but when you build on some of the most fertile land in the world you're building on your food production, and it's almost impossible to get back. Food producing land, especially arable land is the real infrastructure you should be worrying about because it is what feeds you.
Exactly, The irony with the compact city model is it makes housing so expensive it forces many people to the fringe and beyond looking for affordability, ie it encourages the very sprawl they are against.
And the use of productive land is a red herring. If farmers don't want their land use changed, then don't sell it to developers and take the extra millions. If councils don't want elite soils used then don't zone it for housing. It's all crocodile tears while they take the money.
And then remove restrictions on the non-elite soils which will on paper flood the market with potential developable properties and remove the incentive (and the need) to landbank, resulting in a very affordable fringe, which as land economic 101 tells us sets the price for all land back into the CDB, resulting in more affordable housing closer in so you are not forced to the fringe to get what you want. This is what affordable jurisdictions do.
It creates a self-reinforcing affordability loop, ie a truly free market, not as we are getting at present which is a self-reinforcing unaffordability loop that only lines the pockets of an elite few land bankers.
Yes, in trying to hinder the natural preference of people ALL they have accomplished is higher prices and reduced amenity, both on the fringe and right back into the CBD.
And a lot of that increase in price helped fatten the council bureaucracy.
Other jurisdictions can achieve cities that look just like Auckland et al, yet with housing of better quality and 1/2 the price.
The likes of Adam Smith, and more recently Alan Evans, and Alain Bertaud explain the theory of why this happens, all we have to do is look at those jurisdictions that are successful and apply the same policies, not get together with all other failures and compare who has the better bandaid.
Well, yes, we could unlock so much more land in the city - and especially on existing major infrastructure routes - simply by dropping authoritarian NIMBY restrictions and allowing people to intensify on their land. Would save a metric f-ton on new roading and infra further out too. As the Melbourne City Architect notes (forgotten his name), for every million of added population accommodated through intensifying along existing major infra they'll save an estimated $110 billion in added infrastructure costs.
Fringe is expensive in multiple ways. NIMBYs are causing massive costs.
Of course, it is expensive if you buy having to pay landbank prices, it's a lot cheaper otherwise and makes the land going into the CBD far cheaper too.
If you like living in high density in the middle of Dallas, or Houston, you get twice the house for half the price that you do in Auckland or Los Angeles.
The rules allow for easy up and out. It has to be both.
Share the cost of all infrastructure across all ratepayers and that'll help too. At the moment having NIMBYs force people further out then force them to fund the new infrastructure only to then start funding NIMBYs' infrastructure only exacerbates the problem.
Rates need to reflect and fund the real costs of authoritarian policy.
Enjoyed the article.
The EV is making the car the friend of suburban planning. Less than a decade ago we thought we'd have to build substantial suburban bus and rail services to decarbonise those areas but now we have better options as IC vehicles are phased out by 2035. The biggest hurdle now will be replacing aircraft for hub-to-hub travel and logistics, we'll have to build a high speed rail network or whatever. One cannot really overstate how much effort and financial resources not having to redesign cities for non-car commuting will save us.
Interesting article, yet consideration of access to healthcare and hospitals in the exurban diaspora, is disappointingly absent. I would like to see more data/discussion about the quality of healthcare/hospitals outside of urban environments and whether this is a factor in people's decisions about where they live.
Exactly - one wouldn't want to be in need of hospitalisation in Taupo. It inevitably means an ambulance trip to Rotorua or Hamilton. And expensive IC powered car trips back and forth to take grieving relatives to visit their ill loved ones. In recent years I have certainly earned the right to a taxi licence.
This 'starve the provinces' was all part of the plan to decentralize everything to a few main centers. The rail line that used to run from Dunedin to Cromwell, is now the Rail Trail, as is the conversion of many.
Wanaka's nearest small hospital is an hour's drive away. With many having to go to Dunedin 4 hours away.
It was all part of the plan for the population to be in a few compact cities.
If the grand plan is to depopulate Wanaka, then it has failed miserably.
Wanaka and surrounds population 1996: 3,750
Wanaka and surrounds population 2021: 16,250
https://ecoprofile.infometrics.co.nz/Wanaka%20and%20surrounds/Populatio…
What on earth are you on about? The Otago Central Railway was closed because no one used it after the highways were improved. Where is your evidence of a sinister plan to force people into cities? Why did they invest so much in highways if they didn't want anyone living there?
Excellent thought provoking analysis, thanks for the link.
And entirely the same mindless planning by ideology as NZ.
"What America needs—particularly for young families—is not policies driving them to ever-smaller accommodations, as is common among greens, but a commitment to making the building of sustainable peripheral communities a priority."
So it's bye-bye to certain card games? .
My full house Trumps your pair of 2's?
And Nasty Shooty Things have Triggers....very useful for Pest Eradication, I dined on Chamois from a friendly hunter's freezer coupla nights ago, yum.
Whoops, steering close to the Cancel Circuitry, quick, veer left..
Politics overshadows economics
The Ministry of Foreign Affairs of the Russian Federation list their grievances.
Wouldn't believe the US/EU or Russians. Public propaganda war in full swing on all sides.
I'm sure the majority of Ukrainians would like their bread buttered on the Western side. Real politic / Balance of power which is generally not of concern to the masses dictates Ukraine should butter its bread on the eastern side with a smattering on the Western side. In any event I don't see the US/EU jumping to Ukraine's help by committing forces to fight. The buck stops at Poland where they are part of Nato. Shades of pre-2nd WW and Czechoslovakia.
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