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US polls worry markets; NZ shines amongst the gloom; China doubles down in investment-led growth; US Fed signals December rise; UST 10yr yield at 1.80%; oil down, gold up; NZ$1 = 73 US¢, TWI-5 = 76.7

US polls worry markets; NZ shines amongst the gloom; China doubles down in investment-led growth; US Fed signals December rise; UST 10yr yield at 1.80%; oil down, gold up; NZ$1 = 73 US¢, TWI-5 = 76.7

Here's my summary of the key events overnight that affect New Zealand, with news that a Trump stench is wafting over markets with less than a week to go in the US presidential elections.

Recent tight US election polls has sent shivers through financial markets today. The S&P500 is near a 4 month low. Trying to figure out what drives the stupidity of the Trump support is secondary to the fact of a tight race. Volatility is rising. If the unthinkable happens, everyone will be hurt, (especially those voting for Trump). Those that can are making plans. And that affects us directly. Our long term wholesale rates are rising while those for others are falling as fear sets in. Our currency is rising while those for others are falling. What used to be our Achilles heal - our geographic isolation - is now an advantage, and a suddenly large one. It doesn't hurt that our economy is doing very well too.

In China, strong September railway freight volumes underpin a resurgence in the Middle Kingdom. China has restarted its old growth engines of investment and export-led growth. October PMI data suggest this trend is set to continue. Both manufacturing PMI measures registered the highest reading since July 2014. However, Chinese policymakers' decision to 'double down' on investment will only worsen their existing debt problem and store up further problems for the future. According to the BIS, China's ratio of private debt-to-GDP is already over 209% and growing at an eye-popping rate. For perspective the same data shows New Zealand at almost 176%, but our's is stable and in a longer trend decline. Australia is at 208% and rising quite quickly too.

The latest US Fed meeting held their policy rates steady as expected, and they sent new hints they expect to raise rates in December at their final scheduled meeting of 2016.

In New York, the UST 10yr yield is down today by -2 bp today to 1.80%. These markets are signaling 'risk-off'.

The US benchmark oil price is down again - today by more than -US$1.50, and is now just over US$45 a barrel, while the Brent benchmark is under US$46.50 a barrel. The sharp drop came as weekly American inventory data revealed the largest weekly increase in crude-oil stockpiles in 34 years of data collected by the US EIA. This price drop will make Russia and other oil exporters very jittery and unstable.

The gold price higher however, up +US$17 and now at US$1,306/oz.

The New Zealand dollar is sharply higher this morning, now at 73 US¢. On the cross rates it is now up at 95.2 AU¢, and against the euro at 65.7 euro cents. The NZ TWI-5 index is at 76.7. This is a 55 day high.

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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37 Comments

the FED will not rise in December, as usual they have missed the right time and are painting themselves into a corner.
depending on what happens after the election they may head the other way another round of QE

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"Trying to figure out what drives the stupidity of the Trump support" - for many it's better than voting for the alternative.

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exactly - Clinton is likely to heat up the war rhetoric and offers the no change scenario domestically.
For many americans neither of these options is a vote winner

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It's a vote against the status quo rather than a vote for Trump. Since the GFC, Main St has suffered while Wall St is protected/enriched. The power of protest votes is getting bigger - see Brexit

I think Trump will be a horrible president but he will make people angry enough to vote in real change in the next cycle.

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Vote against status quo, that I understand, that it's manifesting in Trump I most certainly do not. It is just barmy stuff, and part of me wonders if it goes no further than the US right wing unable to accept a female president following a black one. In fact, I would hazard a guess and say much of Trump's vote comes from precisely that attitude.

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..it would have manifested in Bernie Sanders, but his own party gamed the system aginst him and towards Hillary. Another reason why some democrats hate Hillary so much. So to an extent if they get Trump, it's what the establishment deserves...serves them right some may think.

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@ kiwimm
The next cycle will be too late, its now or never. In fact now maybe too late... it needs a number of years to fully change direction if they leave it too late it will never happen, they will be too far gone. Trumps not ideal but its a freak an outsider got this far, its unlikely to happen (or be permitted to happen) again.

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.

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What might be stupid David is keeping head in the clouds and ignoring the real problems that drive the support for Trump. True, the man is a bozo, but folk don't want to politely ignore real problems any longer.

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But can the govt do much about the real problems. The naivity of the voters in thinking they can make it all better, is sad to me. Chances are Trump will be very bad for them.

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..for some it can get no worse...so making it worse for the establishment give them some comfort.

Exactly what will happen here unless this govt does not wake up to the fact its not here just to support farmers and landlords.

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"Government .... not just here to support farmers and landlords" errrr. Not farmers either actually.

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agreed. Michael Moore summed it up nicely in the program on TV the other night. Wonder how much traction he gets though.

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email I just got from family member living in the US ...

" Im just ready for it to be over! I cant handle the stupidity of the people here. X's friend went and voted the other day. X asked her who and she didn’t know. She said “I voted for the republic”….what the hell does that mean? X asked her about other candidates and she said “but they are democrats?”. Basically her mom told her to go vote republican and Trump. She is 25 "

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That is a perfect example of an anecdote. To be fair I am sure there is similar anecdotal evidence for Democrat voting.

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"Trying to figure out what drives the stupidity of the Trump support"

Is this a News article or an Opinion article?

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It is often an opinion piece!

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KH - folk don't want to politely ignore real problems any longer

That would make a good campaign slogan.

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Chinese hedge funds are providing margin finance for leveraged bets on the country’s booming commodity futures market, in an echo of the practices that led to last year's stock market boom and bust. Read more

I can only guess, but it is possible stored rehypothecated WMP collateral finds it's price subject to manipulation by duplicitous speculators.

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on the surface things in China look good..
http://exantedata.com/news/letter-china-cracks-under-the-surface

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Rich businessman who will pursue his own agenda to seize and maintain power, will ignore calls for laws and restrictions that are best interest in the long-term. He will create a mess then disappear and let others tidy it up. Sound like any leader you know?

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Could be Trump, Key, Clinton, Soros.

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Read the lead article on Bloomberg this am if you think the NZ $ is going down anytime soon.

We are the destination of choice for a lot of very fat cats with good reason and more and more are discovering the many wonderful attributes of our tiny little country.

Not perfect - just better than all the rest !

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Our currency is rising while those for others are falling.

Can the owners of bank liabilities (money) continue to ensure convertibility to cash (currency) or has financial intermingling of liabilities cast a veil of obfuscation in respect of what was once considered an inalienable personal property right? How else could the RBNZ enact OBR?

Only one class of payments was suspended, the conversion of deposits into currency, and this class was suspended in order to permit the maintenance of other classes of payments. Read more

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Great link, and regards an OBR event

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A bank that holds property is bound by the terms of constructive bailment; the same kind of arrangement as when you hand the keys for your automobile to a valet. Your car does not cease to belong to you, it is only transferred into the temporary custody of the valet company who has responsibilities for its safe keeping. Should the valet business declare bankruptcy while you attend whatever activity that brought you into this arrangement, they cannot sell your car to satisfy their creditors – by all property rights it remains your vehicle no matter what.

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Yes, but in an OBR event, you own the car but the valet can withhold your use of it until they become solvent again.

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This might be ideal but the fact is that putting your money in a bank is not a bailment, the simple fact is that it ceases to be your money, . As has been long established (from Foley vs Hill):
“Money, when paid into a bank, ceases altogether to be the money of the principal; it is by then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into a banker’s is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker’s money; he is known to deal with it as his own; he makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.

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Yes, very good point Stephen and exactly on note of my previously voiced concerns. The suspension and this class of payments prevents depositors removing their money from the bank (stopping a run) and exactly points to the power and privilege that banks hold over depositors, effectively using other people's money to prop up against their own risk business dealings. And in the end it is the banks who get bailed out not the depositors. This is, IMHO, criminal and is effectively legalised theft! It is also a fundamental removal of a basic democratic right, that of freedom of choice who you do business with, and the right to vote, even if it is with your feet!

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NZ sharemarket is not shining amongst the gloom, down around 10% recently

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Why are people voting for Trump?
Perhaps because they don't want to vote for a psychological, manipulating, self-serving, power hungry, special interest controlled, careless, incompetent, criminal, pathological lying, warmongering witch perhaps? (I'm just saying...).

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Or, they know that Trump is of the same cloth but believe he is the only option at changing the status quo.

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...and they know Trump will receive media scrutiny. Hillary couldn't even have a debate without cheating. Still waiting for someone in MSM as to why she even accepted the town hall questions in advance and didn't just do the honourable thing.

https://www.washingtonpost.com/lifestyle/style/cnn-drops-donna-brazile-…

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Mr Trumps child rape case hearing in December will be interesting.

May struggle to get off the hook on this one.

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Why you need a strong media - rather than to just rely on wikileaks. This is from the US senate minority leader:

" "Is there a line he wouldn’t cross when it comes to political warfare?

“I don’t know what that line would be,” [Reid] said.

That is the ultimate statement of political cynicism. What Reid is saying — if you consider the comments to Bash last year and those to Terris recently — is that the ends justify the means in all cases. It doesn't really matter if what he said about Romney's taxes is wrong. All that matters is that Romney lost. That Romney lost is justification enough for Reid to have made the false allegation.

I tend to not be a Pollyanna when it comes to politics. These are contests in which winning and losing are the only way success and failure are measured. Both parties like to claim the moral high road while often engaging in tactics that are decidedly low road."

https://www.washingtonpost.com/news/the-fix/wp/2016/09/15/harry-reid-li…

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People end up in jail for perverting the course of justice & perjury... it's looking like Trump now - democracy is the winner - rising inequality leads to change. Human nature is the only constant.

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