Here's our summary of key economic events overnight that affect New Zealand, with news that Apple's tax tussle with the EU isn't going its way. And more than NZ$20 bln is at stake.
But first up, US jobless claims were reported lower in the seasonally adjusted data, but actually rose in the raw data, and by quite a bit. There are now 1.608 mln people on these benefits, a +2.1% increase in a week. This may be the very first actual sign of the long-awaited American labour market weakening - although to be fair these levels are only back to August levels and still far lower than most points in 2023.
The USDA WASDE update confirms earlier trends where American beef numbers are slipping and imports are rising. Prices are expected to rise well into 2024. American milk production is falling too and they raised their 2024 forecast milk price.
China slipped fully into deflation in October with consumer prices -0.1% lower than in September and -0.2% lower than in October a year ago. Neither levels are in themselves important, but the trend is.
Meanwhile, Chinese producer prices (PPI) remained -2.6% lower in October from a year ago, although these prices were unchanged from September. So perhaps the deflationary forces are running out of steam in China's factories. But they are not out of the woods yet. These pressures are still severe and perhaps one reason Beijing has reverted to imposing a fixed (to the USD) exchange rate. Even when goods from China are sold in CNY, they are priced first in USD, making the claims that the CNY/CNH is rising a bit hollow.
Yesterday we noted that Beijing had directed Ping An to rescue Country Garden. Well, investors weren't impressed and trashed the Ping An share price, it falling -10% or more than -US$5 bln in the days trading. Everyone outside of Beijing knows this is a bad idea.
In Europe, Apple has lost the latest skirmish over the huge fine a lower court imposed for avoiding taxes using its Irish domicile. At stake is €13 bln (NZ$23 bln). Apple won its first appeal but has now lost this more senior appeal. The loss has had no impact on its share price.
International air travel rose strongly in September, up +31% from a year ago with the Asia/Pacific region up +92%. Of course the base was very challenged. Compared with September 2019 however we still have some way to go to get back to those levels, but there is a recovery underway.
Also rising, and more sharply than in the prior week, container freight rates were up +7% last week. Rates out of China to both the US and Europe drove the increase. Bulk cargo rates have started rising again.
The UST 10yr yield is up from yesterday as bond prices fall, now at 4.62% and a rise of +9 bps. And their key 2-10 yield curve is still inverted by -39 bps. Their 1-5 curve is now inverted by -81 bps little-changed. Their 3 mth-10yr curve inversion is now -82 bps and that is a little less than yesterday. The Australian 10 year bond yield is now at 4.57% and up +5 bps from yesterday. The China 10 year bond rate is little-changed at 2.67%. The NZ Government 10 year bond rate is much lower at 5.11%, down another -10 bps.
Wall Street has opened modestly lower with the S&P500 down -0.3% in Thursday trade but still lacking direction. Overnight European markets closed +0.8% higher, except Paris which was up +1.1%. Yesterday Tokyo ended its Thursday session up +1.5%. Hong Kong ended down -0.3%, and Shanghai was little-changed. The ASX200 ended its Thursday session up +0.3%, while the NZX50 rose +0.4%.
The price of gold will start today at US$1963/oz and up +US$9/oz from this time yesterday.
Oil prices have recovered a minor +50 USc overnight, to be just under US$76/bbl in the US. The international Brent price is up more, now just on US$80/bbl.
The Kiwi dollar starts today at 59.4 USc and unchanged from this time yesterday. Against the Aussie we are up +¼c at 92.6 AUc. Against the euro we are a little firmer at 55.5 euro cents. That all means our TWI-5 starts today at just on at 69.3, and up +30 bps.
The bitcoin price starts today at US$36,490 and up a strong +3.0% from this time yesterday. That puts it over NZ$60,000 for more than one day for the first time since April 2022. Volatility over the past 24 hours has been high at just on +/- 3.9%.
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26 Comments
In Europe, Apple has lost the latest skirmish over the huge fine a lower court imposed for avoiding taxes using its Irish domicile. At stake is €13 bln (NZ$23 bln). Apple won its first appeal but has now lost this more senior appeal. The loss has had no impact on its share price.
I wonder if it'll impact companies' desires to rinse money through Ireland.
Everyone outside of Beijing knows this is a bad idea.
Commentators have been saying this pretty much every day for decades - during which China has grown into a superpower.
See also:
- The Bank of Japan will have to fall into line soon and do monetarism properly
- Govt debts are unsustainably high, grandchildren will have to pay the bill etc
- Demographic timebomb
- Etc etc
https://surplusenergyeconomics.wordpress.com/2023/10/31/264-the-souffle…
But these aggregate asset valuations are no more than notional. At the national level, the aggregate ‘value’ of a country’s housing stock is meaningless, because the only people to whom the entirety of that stock could ever be sold are the same people to whom it already belongs. Globally, the same principle applies to stocks, bonds and other asset classes. This principle is that we deceive ourselves when we apply marginal transaction prices to the aggregates of existing assets.
Doing this has put the value of money itself at hazard. We have thrown, first, the viability of the banking system and, second, the sustainability of our currencies themselves, under the wheels of an unstoppable juggernaut. The name painted on the side of that juggernaut is ‘inflexion’, meaning that the economic growth of the past is turning into the economic contraction of the present and future. Where this all ends is predictable, at least in part. The super-fast money creation scheme fails, asset prices plunge, and defaults rip through the system.
Re the comments in there on environmental / species issues, it's always struck me as slightly odd that the "climate change is all fake" folk miss that so many of the same fixes are critically needed to ensure ongoing viable ecosystems of flora and fauna (and thus, also medicine).
That is, even if we are to pretend that anthropogenic climate change (temperature issues) does not exist, we remain stuck with an urgent need to stop killing off our flora and fauna that supports our life. Bees, insects, soil, fish, and so many more areas...
And the question on everyone's mind currently, how can the books be tinkered with to allow a slower dispersion of the mass debt which has the least contagion and hence lessen the magnitude of damage that will inevitably come. Then brings in the psychology aspect, how can governments manage behaviour on a population level without panic ensuing and accelerating the process, this adding to the magnitude of defaults and longer term suffering by many.
With a tail of 5.3bp and dealers saddled with 24.7% of the issue, today's 30yr UST auction was nothing short of abysmal.
Goodbye Fed QT.
Treasury YCC incoming.
https://twitter.com/jameslavish/status/1722692297585029373?t=imNj8P_lOK…
The UST 10yr yield is up from yesterday as bond prices fall, now at 4.62% and a rise of +9 bps.
I think they will roughly align with the Fed, unless things deteriorate really quickly here in early 2024 - which I don’t think they will, as there will be a bit of support from domestic and international tourism over summer. I think the economy will grind slower quite gradually over the next six months, but accelerating its weakening come April.
So….. my best guess is the Fed may cut early 2024, then we follow in May
Ministers are set to lose their jobs tomorrow, but we are not ready - tick tock Mr Luxon
The caretaker government will continue on until Luxon is ready to take up the reins.
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