Here's our summary of key economic events overnight that affect New Zealand, with news of falling wholesale rates in the US and rising equity risks in China.
First in the US, the one corner of their housing market that has been expanding - the sales of new homes - dipped in October. Sales of new single-family houses fell by 5.6% to an annualised rate of 679,000, well below expectations of a 723,000 rate. This is a sizable miss but in the context of the past eight months, it is just part of a developing yo-yo pattern. It will only be important if November doesn't bounce in that pattern.
There were two US Treasury bond auctions today. The two year was well supported with bids worth US$138 bln for the US$55 bln available. The median yield fell to 4.83% from the prior equivalent auction at 5.01% five weeks ago. The five year was also well supported with bids worth US$136 bln for the US$56 bln available. In this case the median yield fell to 4.37% from 4.82% at the prior equivalent event four weeks ago. The large and growing US budget deficits are not finding funding stress as demand is strong and yields are falling (prices bid up).
Perhaps driving these lower yields, 20 months after the US Fed began a campaign against inflation, investors now believe there is a greater chance that the central bank will cut rates.
And today is Cyber Monday in the US, the end of the retail sales push for the moment in the lead-up to the end of year holidays. There are no early indications to report.
Across the Pacific, Chinese industrial profits rose +2.6% in October from the same month a year ago. But that makes them -7.8% lower in the ten months of 2023 than the same period in 2022. The softer pace was evident in state-owned firms (-9.9% vs -11.5% in Jan-September) and the private sector (-1.9% vs -3.2%). Given the overall -10.6% slump from 2021, this is still a minor and fragile recovery.
In Beijing, stock market authorities have apparently moved to prevent major shareholders of listed companies from selling, apparently worried that this could kill off a market rally that they want to see occur. These shareholders are now trapped. Major shareholders in Shanghai, Shenzhen and Hong Kong will be nervous and the Beijing move could have unintended consequences.
Not only is the giant insolvency of Zhongzhi group causing immediate headaches for Beijing, now it appears that liquidity in Hong Kong is becoming a short-term issue. The one-month Hong Kong interbank offered rate, or Hibor, rose +15 basis points to 5.53% yesterday, the highest since October 2007. Demand for the local currency is on the rise as lenders stockpile cash for regulatory purposes, sucking capital from the interbank system. This year-end demand for cash is exacerbating an already-tight liquidity environment there.
Meanwhile, Hong Kong exports held up in October to both top the level of last year and the prior month.
The UST 10yr yield is down -7 bps from yesterday, now at 4.40%. The key 2-10 yield curve is still inverted by -49 bps however. Their 1-5 curve is marginally more inverted, by -82 bps. Their 3 mth-10yr curve inversion is now -99 bps and more inverted. The Australian 10 year bond yield is now at 4.50% and down -10 bps from yesterday. The China 10 year bond rate is down -1 bp at 2.72%. And the NZ Government 10 year bond rate is up +6 bps at 5.15%.
Wall Street has opened its week with the S&P500 little-changed, held back by the unusual low in the VIX. Overnight, European markets were all down by -0.4%. Yesterday, Tokyo ended its Monday session down -0.5%. Hong Kong ended down -0.2% and Shanghai doen -0.3%. The ASX200 ended its Monday session down -0.8% which the NZX50 was down -0.5% with a late retreat.
The VIX volatility measure had fallen to its lowest since January 2020, before the onset of the pandemic. But in today's trade it is just off that low. The VIX is often referred to the 'fear gauge". (It is a popular measure of the American stock market's expectation of volatility based on S&P 500 index options.)
The price of gold will start today just under US$2010/oz and up +US$7/oz from this time yesterday.
Oil prices have flatlined since yesterday at just over US$75/bbl in the US. The international Brent price is still just over US$80/bbl.
The Kiwi dollar starts today at 60.9 USc and a little-firmer from yesterday, but it is its highest since early August. Against the Aussie we are -20 bps lower at 92.3 AUc. Against the euro we are unchanged at 55.7 euro cents. That all means our TWI-5 starts today just on 69.8 and also unchanged from yesterday.
The bitcoin price starts today at US$37,006 and down -0.5% from this time yesterday. Volatility over the past 24 hours has also been modest at just on +/- 1.4%.
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65 Comments
The large and growing US budget deficits are not finding funding stress as demand is strong and yields are falling (prices bid up).
The world's central banks, like Brazil's Banco do Brasil and its neighbor in Chile, are gradually shifting to rate cuts, acknowledging the spreading economic weakness. And rate cuts are not stimulus, instead, they are confirmation from central bankers that even they can’t ignore the severity of the economic deterioration for all their focus on “inflation” risks. Central Banks: Lagging Indicators of Economic Health Rate policies are always lagging indicators of worsening global conditions. The recent shift from hawkish to dovish stances confirms what’s already happened in the world. Link
David - rather than the 'price' of oil, how about real quantities, better still net available energy?
https://www.worldometers.info/oil/
The top 3, of course, are low EROEI sources.
If they added this: https://euanmearns.com/eroei-for-beginners/
'However, in the real world, different currencies, interest rates, debts, taxes and subsidies exist that allow the thermodynamic rules of the energy world to be bent, albeit temporarily. We are at risk of exchanging gold for dirt.'
they might be a little more animated... So 47 minus.... increasingly... contestedly....
:)
That's 47 years from 2016, and oil consumption increasing...
so sweet, we'll just burn gas and coal???
https://www.fairplanet.org/story/when-will-we-run-out-of-fossil-fuels/
New Zealand has proven reserves equivalent to 1.1 times its annual consumption. This means that, without imports, there would be about 1 years of oil left (at current consumption levels and excluding unproven reserves).
https://www.worldometers.info/oil/new-zealand-oil/#oil-reserves
Kinda puts the arguments about whether to drill here or not in to context.
We?
There is no refining in NZ, therefore exporting. And there never will be again - this is a trend, not a dither.
And the whole resource - both global and local - is finite.
Which makes building ANYTHING - including more roads - based on fossil supply, stupid. All infrastructure has a life longer than the supply of the energy-source it was designed around. Stranded asset time here we come. Nuts.
I'm fairly certain the local govt funding authority will still be in existence - so borrowing by local authorities will still be at 'same/similar' costs.
NZ fossil fuel exploration is but a rounding error to the world's resource extraction issues. The world may be frying but it isn't because of NZ cows and NZO.NZX
No, the local government funding authority will have to borrow at higher rates as they get downgraded due to the additional liabilities they have to now take on.
https://www.interest.co.nz/public-policy/125323/international-credit-ra…
First two lines of your linked article. 'may downgrade' does not mean 'credit watch negative' (higher int rates) nor is it a 'negative change' (higher int rates). It is a statement of potential intent if there is no follow up change. Let's see how it plays out, but it is fair to say some of these councils need to have a little attitudinal readjustment in terms of their capital expenditure.
S&P Global Ratings says it may downgrade local councils’ credit ratings if the incoming Government repeals Labour’s water reforms without putting in place a workable alternative.
Maybe enforce the rules we already have? Excessive speeding and stupid driving needs to be punished.
I actually like the road to zero initiative however if it is going to be removed then make traffic enforcement more robust.
The greatest danger healthy people face are careless and idiotic drivers who cause the great majority of deaths and injuries. Even when poor roads or weather conditions are factored in it still comes down to poor driving.
Traffic injuries are the leading cause of death among children and youth aged 5–29
Agreed and very much so, unfortunately the driving habits of NZr’s are appalling and entrenched as such. As you say a bad driver on a good road is a far greater risk than a good driver on a bad road. Only suggestion is start the reform with the young by insisting that license applicants complete intensive defensive driving instruction. Maybe enough of that might stick, hopefully.
Mandatory Defensive Driving Course Certification has for over 60 years been mandatory for American teenagers to obtain a license-but that doesn't go far enough. The real game changer is also requiring as part of annual car registration proof of 3rd Party Liability Insurance. In America reckless drivers (speeders etc soon pay for their carelessness with sky high Insurance premiums. Knowing the cost that comes with violating the rules is a great moderator on driving behavior. New Zealand is long missing out on that known governor which results in the vast difference between drivers in the two countries. Drivers staring down $150 monthly insurance premiums for driving violations soon get religion.
US is a terrible example to use as a way to get deaths and serious injuries down. Their road trauma is terrible.
We need to copy countries that have had successful policies in reducing road trauma. Scandinavian countries, European countries including UK and Scotland. They have succeeded because they have use evidence based research to achieve reductions. Most of them have based their policies on Vision Zero principles which is exactly what Road to Zero is.
Unfortunately Kiwis are f***ING stupid when it comes to cars and roads. Like Americans are with guns. INZID is diffrunt
NZ death rate/billion km =7.2, US 8.3
Per million people NZ=7.8, US 12.9
Some horrifying stats below
https://en.wikipedia.org/wiki/List_of_countries_by_traffic-related_deat…
As you say a bad driver on a good road is a far greater risk than a good driver on a bad road.
No, the evidence doesn't back this up. Remember everyone thinks they are great drivers. When they surveyed this question something like 85% though they were better drivers that the average driver.
An interesting angle perhaps but that in itself is a contribution to the problem. It’s not how they think they drive it’s how they actually do drive. You couldn’t trust that sort of thinking anyway simply because if you drive around a bit you will likely conclude there is not much thinking going on around you. It is a mentality problem imbued in our society afraid to say. Many don’t consider going for a drive needs any more mental application than going for a walk.
It is an infamous statistic: 80% of drivers think they are safer than the average driver. But where does it come from? And does it actually impact how often car accidents happen?
Most Drivers Rate Themselves Better Than Average
Back in 1980, a Swedish psychologist named Ola Svenson conducted a study: In two different sessions, he asked 81 American college students and 80 Swedish graduate students to rank their driving ability among their peers. The results were striking: 88% of the Americans and 77% of the Swedes ranked themselves in the top half when it came to driving safely. When they were asked to rank their driving skill, 93% of the Americans said they were better than average, compared to 69% of the Swedish students.
The study was one of several others that proved the same thing – people have a tendency to overestimate their own abilities. One of them showed that 90% of college professors thought they were above average teachers, while another found that, out of 800,000 high school students, only 1% thought their social skills were below average.
The Lake Wobegon Effect
In the world of psychology, this is known as illusory superiority. However, it is better known as the Lake Wobegon Effect. This name comes from the radio variety show A Prairie Home Companion, which is set in a fictional town in Minnesota called Lake Wobegon, where “all the women are strong, all the men are good looking, and all the children are above average.”
Impact on Car Accidents
Obviously, not everyone can be above average. Exactly half of all drivers have to be in the bottom half when it comes to driving skills and safety. Therefore, there are many people who are convinced that they are far better on the roads than they really are.
This has an impact on the number of car accidents that we see across the country and in St. Joseph, Missouri, through the number of people who think they can still drive well while they are distracted. Distracted driving is one of the major causes of car crashes in the U.S., today. However, 60% of drivers use their cell phones while behind the wheel, even though 91% know it is unsafe. They seem to be convinced that it is dangerous, but only for other people who are not as good at driving as they are. The results, though, speak for themselves: Fatal car accidents are climbing at an alarming rate, even when adjusting for the numbers of miles driven.
Driver education does not work well, better cars and roads do; and public transport
https://dogandlemon.com/sites/default/files/The%20doubtful%20benefits%2…
And
Yes and no Zachary
"The greatest danger healthy people face are careless and idiotic drivers who cause the great majority of deaths and injuries."
Yes it is drivers who cause the deaths and injuries, but they are not careless or idiotic in most cases, they are ordinary people who make mistakes which is completely normal. Inattention when driving isn't an anomaly, it's the norm.
My colleague did her PhD on driver attention and most of the time people driving are not focused on what is occuring around them, they are on autopilot. The issue is the way our roading system has been designed, which was done based on the assumption that drivers were perfect and didn't make mistakes. Things have moved on since the 60s in most of the world and in NZ.
Things like speed tables bring death and serious injury down because drivers become accustomed to seeing them and understand how to respond, they slow down automatically when they are on autopilot. If someone steps out onto the road and the driver doesn't notice them they driving slowly enough that a crash is unlikely to result in death or serious injury.
I don't understand how the right and left wing fringe lunatics have managed to equate speed tables (a very basic proven road design response) with wokeness.
When I was young I spent time with Stirling Moss. He tried to teach me water skiing. He had a huge sense of humour and I gave that plenty of feed. Overheard him though talking to others that he had found, as far as out of all the men that he had met, only one or two admitted to being bad drivers and none at all at being bad at sex. He himself though on the public road had a not so good record . Interesting that the first Grand Prix champion to die peacefully in his bed was Fangio. All the ability imaginable is worthless if the brain goes awol.
Twitter buzz has it that the institutions have lost control of open interest in the silver markets. That effectively means a short squeeze. I'm still trying to work out whether or not it's humor.
A Gamestop event on the silver markets would be wild. Remember the idea was floated some time ago.
"Previous Government let people drive on unsafe roads but didn't ban driving" - David Seymour on scrapping smokefree legislation
Luxon was concerned that a 36 year old might be able to smoke and 35 year old couldn't.
That is the level of discussion by our new leaders.
What is an unsafe road? When will there be no unsafe roads in NZ?
If there was no driving allowed starting tomorrow, society would fall apart and many would die. If cigarettes disappeared tomorrow, what would be the downside? Less cancer? Poor people would have more money left over for feeding their kids?
Is there concern about 17yo not being able to drink, but an 18yo can? What about 64yo don't get a pension, but a 65yo can? How discriminatory!
Is there any concern about safer drugs than alcohol or tobacco remaining illegal? Or is it only the ones that are making money that we are concerned about? Political donations seem to be able to generate concern quite quickly.
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