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American retail strong; ECB preps easing; China profits drop; PBoC adds more QE; China bond concerns; AU to slash card merchant fees; UST 10yr yield 2.22%; oil lower, gold slumps; NZ$1 = 65.4 US¢, TWI-5 = 71.2

American retail strong; ECB preps easing; China profits drop; PBoC adds more QE; China bond concerns; AU to slash card merchant fees; UST 10yr yield 2.22%; oil lower, gold slumps; NZ$1 = 65.4 US¢, TWI-5 = 71.2

Here's my summary of the key events over the weekend that affect New Zealand, with news of extended economic stresses coming out of China.

But first, it's been a big start to the holiday shopping season worldwide and in the US in particular. Sales at American brick-and-mortar stores on Thanksgiving Day and Black Friday were down slightly from last year, but the performance was still seen as strong in a holiday shopping season where discounts spread well beyond the weekend and many shoppers have moved to the web.

In Europe, all eyes are on the upcoming ECB review on Friday morning, our time. Some policy fireworks are widely expected.

In China, industrial profits sharply slumped by -4.6% year-on-year in October, widening the -0.1% drop in September, and adding to the corporate debt default risk. The sluggish data reported by the Chinese National Bureau of Statistics on Friday was mainly driven down by the energy-and commodity-intensive industries with problems of overcapacity, including oil, steel and coal. But high-tech manufacturing achieved +14% year-on-year profit growth. Profits by equipment manufacturing firms increased by +9%.

Chronic QE continues in China in the face of the extended slowdown. Their central bank injected another NZ$24 bln into their financial markets on Friday.

And just when it looked as if a relative calm was returning to Chinese markets, stocks nose-dived again on Friday. The main Shanghai share index lost -5.5%. There may be some technical influences, but the result was awful. And this comes as concerns grow over the sudden rise of corporate bond issuance in the September quarter. It was up to almost 30% of all new credit issues in China in the period, almost exploding out of nowhere.

Their financial markets may or may not be polluted, but the air in their capital certainly is. Embarrassing for China ahead of this week's UN Climate talks in Paris.

In Australia, banks and airlines are bracing for up to AU$800 million to be slashed from the estimated AU$3 bln they get from merchant credit card fees and surcharges.

Wall Street was on Thanksgiving holiday but there were some bond trades. The UST 10yr yield benchmark slipped again, slightly, to 2.22%.

The US benchmark oil price is lower as well, now under US$42/barrel, while the Brent benchmark is under US$45/barrel. Huge new Iranian supply is about to enter markets.

And the gold price sunk sharply over the weekend, now at just US$1,056/oz and a six year low.

The New Zealand dollar starts the week at 65.4 US¢, at 90.9 AU¢, and at 61.7 euro cents. The TWI-5 is at 71.2.

If you want to catch up with all the local changes on Friday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ». And don't forget to vote in the Flag Referendum

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8 Comments

Another Yuan devaluation can't be far away........

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'"Yuan set for IMF Reserve Status" http://www.bbc.com/news/business-34957580
Communist Despots and the International Banksters join hands.

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China stocks drop .... again !

And we feign surprise .....again?

Lest we forget , on this very site ( interest.co.nz) , we have for years , been reading of tell-tale signs of China ignoring basic economic fundamentals in misallocation of resources in development -for- development -sake projects, the stockpiling of Raw materials just for the sake of it , and running a Mercantilist economic model wrapped around a communist social system, all of which has never been tried before, and certainly not on the scale seen

The truth is , you simply cannot sustain the levels of growth that China has had for years without structural stresses emerging somewhere , at best , and the whole edifice crumbling , at worst .

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.....bet there'e some fingers crossed that referred vid doesn't go viral. Don't underestimate the power of social media.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=115…

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And with their stocks dropping in value the Chinese are not feeling too wealthy and therefore are less obvious in the US, Australian and NZ property markets. Just one factor changing the mood.

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err, no. Not in some key markets in the US at least ...

http://www.nytimes.com/2015/11/29/business/international/chinese-cash-f…

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A little compression breaking as we travel downward

Fonterra is putting the brakes on further development of its loss-making China dairy farming venture.
Chief executive Theo Spierings told the co-operative's annual meeting at Waitoa that no more development for fresh milk production would be undertaken at this point.
http://www.stuff.co.nz/business/farming/dairy/74472740/fonterra-turns-o…

however the business case at the time may have been slender...
Ferrier also said Fonterra was building farms in China, because the Chinese were asking it to do that.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=106…

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