Here's my summary of the key events overnight that affect New Zealand, with news China is tightening the screws now it no longer fears an effective US policy in the region.
But first, the World Trade Organization has ruled that a local tax break to help Boeing develop its new 777X jetliner in the Seattle area was a prohibited subsidy. Airbus is also facing a parallel case which it will probably lose too.
The latest OECD forecasts are for rising growth in the US, back up to +3%. The OECD likes the Trump US$1 tln infrastructure spending plan. They also see continuing low growth in Europe, slowing growth in China, and rising growth in India. In Australia, The OECD essentially calls for higher interest rate settings from the RBA, and some fiscal loosening to help get their economy back on track. For New Zealand, they see growth above +3% next year before moderating in 2018, and they say the RBNZ has a 'mildly contractionary' policy in place.
And speaking of Australia's prospects, the spot price for iron ore is having a stunning rebound. Its price climbed to US$80.83 at its latest fix earlier today. That's the first time it has traded above US$80 since October 2014. The price has risen +26% this month alone and has risen +82% so far in 2016. By any measure, that is impressive and to a large extent not picked by any analyst. Actually, copper, zinc and lead are also rising in price.
In South East Asia, China is raising the temperature again, insisting Singapore toe the Beijing line, and impounding Singaporean military hardware in Hong Kong. That is the sort of action that may concern us, but China is more forceful on its own citizens, using its wide economic influence to impose social control on its people.
In New York, the UST 10yr yield is lower today, now at 2.32%.
The US benchmark oil price is up a bit today and now just above US$47 a barrel, while the Brent benchmark is now over US$48 a barrel. But OPEC looks in disarray and some see this trouble as a point where the oil price turns down sharply.
The gold price has recovered some of what it lost over the weekend, up +US$13 today so far and is now at US$1,191/oz.
The New Zealand dollar will start the week a little higher again at 70.6 US¢. On the cross rates it is also level pegging at 94.5 AU¢, and against the euro it is firm at 66.8 euro cents. The NZ TWI-5 index is still at 76.4 however.
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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16 Comments
"China is raising the temperature again"
It is clear that the current Chinese leadership is pulling the country back closer to the totalitarian regime that it used to be. Whether this is for his own political purposes, a reaction to internal political and economic pressures, who knows. What is clear is that it is a very large totalitarian state with a very poor history of respecting anybodies human rights even their own and seemingly without any moral foundation to their society. As I have said before anything could happen with them and the best thing to do is to politely distance ourselves and reduce our reliance on them.
Good observation - for Oil for example it looks like a glut - dig deeper and all the companies are pumping flatout to keep cashflow going on low prices, finding no new fields of any note and doing zero capex. The prices are low because the world economy can only afford low prices (demand at higher prices simply wouldnt be there) ... not because its cheap to produce - so this low price norm massively reduces viable reserves.
But you can take your pick of
- fresh water
- fisheries
- ag land
- minerals for high tech - see this .. https://www.youtube.com/watch?v=TFyTSiCXWEE
and Fish ! The seas around New Zealand are being plundered. If there was a wise investment we could make one would be to get rid of all the big factory fishing operations. (mostly a foreign effort anyway) and let that stock build to where it should be. 50 years from now we would be pretty happy about that decision.
This is a good example of how apparent abundance (of Oil in this case) turns quickly to scarcity ... or non viable.
"It’s a dramatic reversal of fortune for Venezuelans, who once went to Curaçao to spend money as tourists, not to plead for work."
http://www.nytimes.com/2016/11/25/world/americas/hungry-venezuelans-fle…
LOL No prostitution in China ?
Don't kid y'self , mate , prostitution is alive and well everywhere in China . There is hardly a westerner who has been out in the evening that has not been propositioned either by a pimp , and arranger or directly by a prosititute.
Gambling may not be legal , but within an hour of landing in Shanghai you can be seated in a "private " casino, along with some serious high-rollers
With Chris-M's comment it wasn't exactly clear if he was referring to a lack of morals of the government or the society. I assumed government as he referred to totalitarian regime. Officially gambling and prostitution is outlawed. People can also probably find ways to watch Big Bang Theory as well as gamble and pay for girls - always a few bad apples in every society!
I'm surprised his comment got through the censorship to be honest as he seemed to be implying that all of Chinese society had no morals.
The biggest chatter on the street this week is what to do about copper mining
stocks. Teck Resources for example, which is leveraged to coal, copper and
zinc, has been a '10 bagger' since February (up ten times!!) which is stunningly
fast for that kind of return.
BAML's European Metals & Mining analyst Jason Fairclough put out a BUY
report on several large mining shares this week even though they've already put
up such staggering performance this year.
BAML analyzed 10 large cap miners and assumed commodity prices go
nowhere from here over the next five years. Even with flat pricing like that,
these miners will still generate US$138 billion which is more than half of what
the companies are currently worth (market cap)!
Otterwood
It's a strong US $ causing chaos
http://finviz.com/futures_charts.ashx?t=DX&p=w1
Actually, RNZ could do better reporting than just repeating a political party press release. This "stat" very much depends on the period you choose. For example, that same October data is only up +1.4% in the past seven months. My stat there is equally misleading. It is always wise to look up the original data before you burst into print (memo to RNZ reporter).
Our reading of this data is that the main takeaway is the very fast decline in the number of borrowers Oct-16 from Oct-15. And of the fewer borrowers, it is only FHBs why are continuing to commit right up to their gills. You kind of hope they have assessed their own financial position and prospects properly.
In a contracting market, there will always be those who didn't get the memo and overshoot, thinking the future will be just like the recent past.
Given America's decline in many facets of diplomacy , trade , industry , and a decline in influence and general hegemony , which would be worse for us , a strong America or a stronger China ?
Somehow methinks a faulty democracy being in pole position in world affairs would be far better than a non-elected dictatorship than has little or no media freedom , little religious tolerance, widespread human rights abuses, and a general disdain for everyone else .
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