Here's my summary of the key events overnight that affect New Zealand, with news of accelerating money flows out of China.
Firstly however, a US court approved Volkswagen's record-setting $14.7 bln settlement with regulators and owners of 475,000 dirty diesel cars, and the German company said it would begin buying back vehicles in mid-November.
And Americans are taking a slightly dimmer view of their economy as their Presidential election nears, and their labour market expands at a slower rate. The latest consumer confidence survey shows a retreat in confidence that has surprised some analysts.
Meanwhile, the important but slightly lagging survey of US house prices shows price growth accelerated in August, as a lack of inventory and low interest rates helped push prices up to near-record levels. Across the entire nation they rose +5.3% in the 12 months ended in August, a small jump from a +5% increase reported in July.
New Zealand has topped a World Bank survey as the easiest place to do business. It ranked #1 overall, and #1 in six of eleven sub-categories, and was followed by Singapore, Denmark and Hong Kong.
New Zealand has also ranked high in another survey on people's generosity. We came in fourth after Australia (#3), the US (#2) and Myanmar who was in the top spot, again. The Europeans are well down the list. It is just another indicator of the gulf between perceptions built from "the news" and the real situation.
China announced its official unemployment rate was unchanged at 4.05%. It is a statistic that hardly ever changes. They also said they had created 10 mln new jobs in the first nine months of 2016, exactly on target.
And staying in China, they are having to start using desalinated seawater to cover for a severe shortage of fresh water. Obviously this is only an option along the coast, and a very expensive one.
And money is flowing out of China at a concerning rate. These flows are depressing their exchange rate and requiring their central bank to raise its interest rates. China's overnight money rate has climbed to its highest in 18 months. Against the USD, their exchange rate is now at a six year low.
In New York, the UST 10yr yield is unchanged at 1.76%.
The US benchmark oil price pretty much unchanged at just over US$50 a barrel, while the Brent benchmark is still just under US$51 a barrel. However, the International Energy Agency has released a report today saying that the world's capacity to generate electricity from renewable sources has now overtaken coal. The IEA says in a new report that last year, renewables accounted for more than half of the increase in electricity capacity. The report says half a million solar panels were installed every day last year around the world. In China, it says, there were two wind turbines set up every hour.
The gold price is up +US$9, now at US$1,271/oz.
The New Zealand dollar is a little higher too, at 71.6 US¢, and on the cross rates it is 93.7 AU¢, and the euro to 65.8 euro cents. The NZ TWI-5 index is now at 75.9.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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20 Comments
New Zealand has topped a World Bank survey as the easiest place to do business.
That plus generosity makes NZ Very attractive to immigrants. One thing we hardly ever discuss here is small business. A lot of battles between the property freaks and the equities freaks but the real drivers of the economy are the business owners.
Small business owners are the real risk takers and heroes.
residential property and small business are very much connected.
many small business owners guarantee their business lending facility against their personal residential property. if lending against this property was restricted - by way of reduced values, higher equity requirements or higher interest rates - that would then have a direct flow on effect to the associated business
and very much like (particularly akld) houses - the value (and transaction prices) of small businesses has risen on the back of easier lending and lower interest rates in recent years - so for the same reasons - it would nt take a significant rise in interest rates to really start hurting the cashflow of those businesses
Similar to Australia, house prices seems to be underwriting the economy. And as you indirectly refer to, the cost of and availability of credit is supporting prices of houses and businesses. It's also good to understand the psychological effects on well-being and consumer spending of the "feel good". It's greater than most people can understand.
Today, seven decades later, despite the broad global trend toward more flexibility in exchange-rate policy and freer movement of capital across national borders, a “dollar shortage” has reemerged. Indeed, in many developing countries, the only thriving market for the past two years or so has been the black market for foreign exchange. Parallel currency markets, mostly for dollars, are back. Read more
Africa has been a particularly friendly target for goods-for-finance trade. Chinese firms, especially state-owned companies, have lent billions to African nations (and their businesses) largely to obtain oil rights. This is, again, not free trade as China is not opening its domestic “demand” to anything more than one commodity even though for its part the country obtains growing trade ties for its own manufacturing. The comparative advantage is not productive but financial.
In effect, these nations have pledged their oil resources as collateral for those borrowed “dollars.” If the price of oil falls, more production has to be steered toward repayment of past currency lines, which has the doubly devastating effect of reducing the amount of oil available for open sale to further obtain “dollars” (at already reduced prices). It is a direct currency strangulation that if taken too far can lead to total “dollar” exorcise.
The Chinese are repaid in oil for their comparative financial advantage leaving the “host” nation drastically impoverished and facing both grave recession at the same time as monetary strangulation. There was already boiling shortages all across Africa last year, starting in Africa’s largest oil producer Angola Read more
Overnight China's customs data revealed that with imports from both Russia and Saudi Arabia posting modest declines in the past month, Angola once again became China's largest crude supplier for the second time in September, taking the top position from Russia. China imported 4.19 million tonnes of oil from the southern African nation last month, up 45.8% from a year ago. That meant Angolan shipments stood at 1.02 million barrels per day, below 1.11 million bpd seen in August, the last time the country was the top exporter to China. according to Reuters
China imported record volumes of crude oil last month, eclipsing the United States as the world's top buyer of foreign oil as Beijing's state reserves shipped in cheap crude to fill new storage tanks. China's Pivate "teapot" refiners boosted runs to a record 55.98% as of Sept. 29. Read more
Can we speculate "money is flowing out of China" in exchange for oil acting as collateral for money ($) lent offshore?
It prob wont end well for anyone...
Things are pretty bad right now in Venezuela. Grocery stores don't have enough food. Hospitals don't have basic supplies, like gauze. Child mortality is spiking. Businesses are shuttering.
It's one of the epic economic collapses of our time. And it was totally avoidable.
Venezuela used to be a relatively rich country. It has just about all the economic advantages a country could ask for: beautiful beaches and mountains ready for tourism, fertile land good for farming, an educated population, and oil, lots and lots of oil.
http://www.npr.org/sections/money/2016/10/21/498867764/episode-731-how-…
Or the planet.
Well; WW3 may be the ultimate "solution"
Endless growth on a finite planet is impossible.
If you did nothing about climate change then you end up with massive part of the planet unlivable.
Your only end game is to reduce the population.
... I am sure you can join the dots... I am sure the Elite will be fine... they usually are.
I am sure the Elite will be fine... they usually are.
Yes, indeed, but not all of the the children.
New Zealand's most shameful secret: 'We have normalised child poverty'
One-third of the country’s children, or 300,000, now live below the poverty line – 45,000 more than a year ago Read more
Endless growth on a finite planet, impossible - dead right, of course. Thing is, we actually do have it in our power to reduce our numbers thus our impact on the planet, without our usual massive cull of us. We do have the intelligence, our problem is we seem to struggle for the will preferring instead to keep our heads in the sand, pretending its not happening so we don't have to face changing our lifestyles in order to save our own bacon.
I wonder how many got through the cordon, with their money intact.
https://www.theguardian.com/world/2016/oct/17/chinese-official-who-had-…
I wonder how many came to Auckland.
Will it be the death of us, or will we allow the corruption to be imported, at any coast., sorry cost.
http://www.scmp.com/news/china/policies-politics/article/1936967/china-…
They even had to raise the penalty goal, to account for the excessive inflation.
Perhaps we should copy cat them.?
Now that is what I believe we should import, real costs for real crimes,not laundered and brought here in droves, by our illustrious benefactors. There is a limit, you know.
I think we have actually reached it.
not just money flowing out of china but people too looking for a better life
http://www.scmp.com/news/china/policies-politics/article/2039948/thousa…
Volkswagon's dirty vehicles. All of this is happening in the USA but it seems to me that New Zealand would have had the same vehicles. Maybe, maybe not ? But there is no fuss in New Zealand. Possibly an indicator of our placid consumer approach and laid back regulators ?
Self-fulfilling preservation of NZ's clean green uncorrupted image
The US authorities will extract a $10 billion fine out of Volkswagon which in turn will fund the next biffo litigation, whereas NZ authorities remain immobile, do nothing and remain stuck on their $9 miilion annual budgets. (FMA and SFO)
In NZ there is no corruption, there is no fraud, there is no money laundering, nothing to see, nothing to do, because it is not seen, it is not found, because the policemen who are responsible for such activities dont exist, We don't employ people to look and listen and pursue. Because there is no budget for it.
No need to have a budget when it isn't happening
Volkswagon has no case to answer in NZ because we dont have the laws to enforce compliance as the US does
The police are too busy catching farm more important things.. for their masters...
http://www.stuff.co.nz/national/crime/85752421/Police-admit-using-check…
And they have no one to police them either.
“The rights of every man are diminished when the rights of one man are threatened.”
― John F. Kennedy
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