Here's our summary of key economic events over the weekend that affect New Zealand, with news the social consequences of the Chinese economic slowdown are just not going away.
But first, in the week ahead in the US, the focus will be on their non-farm payrolls report, expected to deliver +170,000 more jobs and a higher tempo than in October, probably after the ending of strikes at carmakers.. Before that we will get their ADP and JOLTS reports and the ISM Services PMI. Then there is the last monetary policy decision of the year from Australia, and similar central bank decisions from India and Canada. Meanwhile inflation rates will be closely watched in China, Turkey, Switzerland, South Korea, and the Philippines. GDP growth rates from South Korea, South Africa, Brazil, and Australia will also merit some attention.
There were a flurry of factory PMIs released over the weekend confirming a global manufacturing downturn remains, even it is minor.
But not minor is the widely-watched US ISM version as that reports a noticeable shrinkage across the board. The internationally benchmarked S&PGlobal (ex-Markit) version however records barely a drop. But it does confirm lower demand.
In a Friday speech, Fed boss Powell signaled that they are likely done raising rates, but his comments were laced with caution.
Canada's labour force grew at a faster pace than expected in November, faster than the good +24,900 increase in employment. Payrolls swelled much more, but the number of self-employed fell rather sharply. That meant that their jobless rate inched up to 5.8%. This wasn't unexpected.
In China the Caixin factory PMI diverged from the official NBS version again, and again was more positive. But to be fair it is just oscillating around a steady state with this an 'up' month. However this report does note "a sustained rise in new orders".
Meanwhile, Beijing has pledged to target ¥1 trillion in manufacturing and infrastructure development. Along with some supply knocks in Panama, this has helped jerk up the price of copper to US$8,615/tonne, it highest since August. (But still a long way below the US$9400/tonne it reached in January.)
Overall, China's economic performance remains problematic, and along with the implied criticism he received from Party elders during their summer retreat, it now looks like President Xi is delaying a major set-piece economic conference (the "third plenum"), one where Xi's new team (the one appointed at the "second plenum") releases its longer-term economic plans.
Meanwhile, Chinese borrowers are defaulting in record numbers as their economic troubles extend. More than 8.5 mln people are sharply downgraded in their 'social credit' which essentially means they are blacklisted, after missed payments on mortgages and business loans. That is about 1% of working-age Chinese adults, and is up from 5.7 mln defaulters in early 2020.
And another Chinese property developer is scrambling to save itself - Gemdale.
We should also note a sudden uptick in China's actions to take over the whole South China Sea, with a particular flashpoint in the Philippines.
In Australia, CoreLogic reported that in November the heat came out of their housing market as values across Melbourne dipped and Sydney slowed.
Australia faces its final RBA rate review for 2023 on Tuesday and markets don't expect their 4.35% rate to be changed. This is the last of their monthly reviews. In 2024 they change to a less frequent meeting schedule much like the RBNZ one.
The UST 10yr yield fell sharply on Saturday, now just under 4.21%. That is a massive -22 bps retreat for the week and is now at a 2½ year low. The key 2-10 yield curve is less inverted at -34 bps. (It was inverted by -48 bps last week.) Their 1-5 curve inversion is more inverted at -91 bps. And their 3 mth-10yr curve inversion is now -119 bps and also more inverted. The Australian 10 year bond yield is now at 4.40% and down -3 bps from Saturday. The China 10 year bond rate is unchanged at 2.70%. And the NZ Government 10 year bond rate is still at 5.10% exactly where it was a week ago.
The price of gold will start today just on US$2071/oz and up +US$11/oz from this time on Saturday after briefly touching its all-time high of US$2,089.70 intraday. A week ago it was at US$2000/oz, so a +3.6% gain since then.
Oil prices fell a sharpish -US$2.50 over the weekend to just on US$74/bbl in the US. The international Brent price also got a sudden shift and it is now down to US$79/bbl.
The Kiwi dollar starts today at 62.1 USc and up +10 bps from Saturday. A week ago it was at 60.7 so a +1½c gain from then. Against the Aussie we are still at 93 AUc. Against the euro we firm at 57.1 euro cents. That all means our TWI-5 starts today just on 70.8 and up +10 bps from this time Saturday, up more than +100 bps in a week.
The bitcoin price starts today at US$39,703 and up +2.4% from this time Saturday, and confirming the break out of its recent range. A week ago it was at US$37,928 so up +4.7% rise from then. Volatility over the past 24 hours has remained modest at just on +/- 1.4%.
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60 Comments
They're Hiding the Silent Depression That Did Happen
Can The Government Keep Spending Money Forever?!
Governments are out of control. This insanity can't go on much longer, can it? Understanding how it came to be this way, and why, that's the key to answering that question. Blackmail and myths. The problem isn't really govt debt, it's what the debt is being used to (try and) cover up.
This guy has been documenting the disconnect between the two economies (financial and physical) for years...
Prime Minister Christopher Luxon admitted on Sunday claims by the current Government that just one retailer would be selling tobacco in the whole of Northland under the smokefree policy was wrong.
Ministry of Health figures show there would have been 35.
Cant wait for the mini budget..should be a clanger?
Just listening to Simeon Brown, being interviewed on Morning Report, re Onslow.
'The Market' is an ideology past its use by date.
Which makes him a politician ditto.
By not accounting for real things, we are now forcing the habitat we need as a species. That says we needed to change our accounting system. The Wellbeing approach was an Overton Window move in that direction, and therefore correct as far as it goes. This mob are busy heading back to the Jurassic... a total waste of limited remaining time. We should have appraised Onslow in light of a wider picture - obviously Brown hasn't the intellectual capability to do that.
"You can’t have a liberal democracy if two babies born on the same day already are determined to have preexisting grievances against each other.”
Thomas Sowell
Lord Hannan speech (20 minutes)
This is a tired argument, that lacks any sort of nuance and relies on the idea that everyone is always going to act responsibly, which is clearly false. And when they don't, they and only they suffer the consequences because each individual is not a part of society.
Get a clue. It costs us all because mainly poor people smoke cigarettes and we have a public health care system that has to care for them. But I suppose we should go full libertarian and make every man an island, with no shared responsibility or community responsibility?
But a smoker paying taxes possibly does cover the cost of his end of life health treatment. I've never smoked, not even a single inhale but I've already cost NZ health services - maybe it would have been cheaper if I had smoked and then that heart attack would have killed me instead of needing a few stents.
Alcohol is worse. It cripples families with all but one being innocent. Keeping kids away from alcohol for as long as possible is a worthy aim for a govt.
Yes, a smoker does cover their own health costs, as long as they keep their addiction up for a very long time. However, they do not pay for the externalised costs, the encouragement of the next generation to continue smoking, the damage to the people they hang around, the passive smoking stuff, the lost potential productivity to the economy of them being generally unhealthy or dying early etc. Those are difficult to measure but modelling suggests there are massive benefits here, completely unrealised. Its the "what if things were different" case, difficult to quantify, but given in 2019 we had almost 5000 smoking related deaths, you can see how big of an impact it would have.
It is not about smoking,it's about integrity.Watch Chris Bishop being interviewed bt Jack Tame yesterday on Q&A.
Ex tobacco man Bishop when told that the publicly available figures stated that there would be around 35 stores in Northland,he just looked down the camera and said I'm not all over it.Jack re-iterated that the figures were there for everyone,Bishop,like a kid caught with his hand in the lolly jar,thought he would just keep repeating the lie hoping it would go away.Every time he was presented with the fact,he would repeat "as I understand it,there would be one store.." repeatedly throwing in trigger words of "ram raids" & "gangs".
The fact that it was rolled out by the PM at his very first post cabinet press conference,using the same words,one can't help but feel it wasn't just "expressed incorrectly" as Luxon said,rather a carefully worded "lie / statement"
Once "Mr Tobacco" & "Shayne Cigareti" have finished with the smoke free legislation,it will be the turn of "Mr Big Pharma" ,Todd Stephenson from Act to earn his corporate donation dollars.
The "productivity focus" will be an interesting watch.
https://www.1news.co.nz/2023/09/03/act-calls-for-productivity-focus-for…
https://www.1news.co.nz/2023/09/03/act-calls-for-productivity-focus-for…
“A lot of the treatments and the innovations being brought forward can actually deliver economic benefits because you’re treating people who can work longer or go back to work when that wasn’t possible.”
“It would be good to be able to take a more holistic approach to what these treatments are bringing.”
When asked if that meant more economically productive people should be prioritised for treatment, Stephenson said: “Not necessarily, but when you’re looking at the value of these treatments, that should be taken into consideration.”
“If your treatment can return someone to work faster, how does that benefit the whole of society? And then those bodies that are making those value judgements can decide whether that should be put into the equation.”
“Then you can make the case for investing in some of these treatments earlier.”
One week in and this is ex-tobacco lobbyist Chris Bishop straight up lying on live national tv.
https://www.nzherald.co.nz/nz/politics/smokefree-laws-pm-admits-he-got-…
It's not about the tobacco per se (which is a hideous policy position) it is more about the bare faced lie and willingness to continue with the lie in the face of evidence to the contrary.
"I haven't read that report"
"I'm by no means an expert"
But hey .. I'll just keep lying because my tobacco mates fund our party and the deal is I'll do everything I can when I get in power to help them even if that means it's terrible for the country. This is the current UK Tories writ large, it's straight up political sleaze.
This is not acceptable for our politicians. We are not the US/UK and I don't want to become them.
This is how you lose your country. Not co-governance or by empowering the imaginary Maori bogeymen. You lose your country by selling it to corporations that put profit before national interest.
I am sure the handwringing on this site will reach flamable levels but please try and remember that there are as many liberals as there are socialists and that your view might not be the only view.
Talk of losing the country might have been more appropriate when the ram-raids and general crime levels started to slide into the chaos that we are in today. This government was elected to address that in large part.
Replying to a comment that someone was trying to derail the conversation, with another attempted derailment of the conversation?
This government has done nothing but make us look foolish on the world stage, look incredible unstable, and their plans are based on lobby group and conspiracy theory wish lists, with no factual evidence that the changes will improve anything. That is why Luxon cannot answer the questions being put to him in interviews. Now his supporters are having to follow suit, by trying to talk around the issues.
JaO, this is entirely as to be expected as far as the partisanship that is revealed on this site. For instance early on, an equivalent outcry was vented concerning the cancellation by Labour of oil & gas exploration. In its own way the dialogue finds its own balance. Find it much easier though personally, to be cynically negative about either side politically.
The UST 10yr yield fell sharply on Saturday, now just under 4.21%. That is a massive -22 bps retreat for the week and is now at a 2½ year low.
The biggest whales in the bond market are banks, pension funds, asset managers, and insurance companies. Not the Fed or the BoJ or the PBOC. The big question is: why do these whales buy bonds in the first place? Link
It’s true that valuations have strong implications for long-term, full-cycle market outcomes, but it’s incorrect to view those outcomes as short-term forecasts. Instead, they provide context about where investors stand within the market cycle. Based on prevailing market valuations, we estimate that poor total returns are likely for the S&P 500 in the coming 10-12 years, that equity market returns, relative to bonds, are likely to be among the worst in history, and that a market loss on the order of -63% over the completion of this cycle would be consistent with prevailing valuations and a century of market history. Link
Why are US bond yields falling so fast? My understating was that the supply was going to massively increase as the Govt continues to run deficits and the Fed sells off its holdings while foreign investors like China, Japan and the UK are not looking to buy. Who is buying all these bonds and where is the money coming from?
Who is buying all these bonds and where is the money coming from?
Those seeking Return OF Money vs. Return ON Money - probably banks in the first instance.
Banks don't take deposits and they never lend money. They are in the business of purchasing securities. When one gets a bank loan, the loan contract is a promissory note. The bank purchases that contract from the borrower. Now the bank owes the borrower money and it creates a record of the money it owes, which we call deposits - source.
Also heading down from the top, that is the north, mycoplasma pneumonia breaking out as winter dawns. WHO appears unconcerned but for the Chinese themselves, not long escaped from under the covid regime being enforced, it cannot be less than worrying and depressing. Not exactly get up and go criteria and territory for a workforce.
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