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US factories rise; BEPS gets supercharged; regional tensions fester; China inflation quandary; Singapore home sales fall; Vend wins in AU; UST 10yr yield at 2.30%; oil and gold up; NZ$1 = 71.8 US¢, TWI-5 = 74.4

US factories rise; BEPS gets supercharged; regional tensions fester; China inflation quandary; Singapore home sales fall; Vend wins in AU; UST 10yr yield at 2.30%; oil and gold up; NZ$1 = 71.8 US¢, TWI-5 = 74.4

Here's my summary of the key events overnight that affect New Zealand with news of some impressive action to protect the tax base in most countries.

Firstly, there is little data out in the US today, but one survey is worth a mention - the NY Fed's Empire State manufacturing survey. This is strongly positive, reaching levels not seen for at least three years, with optimism based on accellerating order and employment growth.

The OECD is reporting that there has been surprisingly quick and broad-based action by governments to protect their tax base. Governments have dismantled, or are in the process of amending, nearly 100 preferential tax regimes as part of the OECD/G20 BEPS standards "to improve the international tax framework". That is of 100 jurisdictions and 164 preferential tax agreements.

Regional tensions in both Spain and Iraq are festering. The Spanish authorities have given Catalonia until Friday to abandon their independence aspirations, which seems unlikely, so trouble is brewing there. And the Iraqi forces are moving into Kurdistan, which also has the potential to become a serious global flash-point in coming days.

China's consumer price inflation came in at a tame +1.6% for the year to September. But their producer prices are rising in a worrying way. Producer output prices rose by +6.9% in the year to September, but their input prices rose far faster, up +8.5% in the same period. This pattern has been going on for a year now and it is hard to see how it can be sustained. Capacity cuts, driven in part by a new zeal to tame pollution, may be behind the trend. However, in reaction, China's 10 yr bond yield is starting to rise, now up to over 3.70%, the highest it has been in more than 3 years. But at least their curve is steepening.

China has also announced that its grain output will be a "bumper" 600 mln tonnes in 2017. But that is spin, because it is lower than the 616 mln tonnes in 2016, itself lower than the 621 mln tonnes in 2015. China says it wants self-sufficiency in these core crops, but clearly it has issues. Consequently, China will be a an increasingly larger buyer on international markets

In Singapore, home sales fell in September as developers marketed fewer projects in a month. Developers sold 657 units last month, down from 1,246 in August, according to Urban Redevelopment Authority data released Monday. That’s the lowest sales since January. But there may also be cultural reasons why sales were unusually low in September.

Local star fintech Vend has pulled off a bit of a coup in Australia, getting its services integrated with CBA's Albert payments tablet.

In New York, the UST 10yr yield is now at 2.29%.

The price of crude oil is up again today and now just under US$52 / barrel, while the Brent benchmark is just under US$58. And there is a report that China is offering to buy 5% of Saudi Aramco, a move said to give Saudi Arabia more options in its planned float of the world's biggest oil producer on stock markets. It is a move India will be watching with some concerns.

The price of gold is also a little higher, now at US$1,303oz.

And the Kiwi dollar will start today pretty much unchanged at 71.8 US¢. On the cross rates we are higher at 91.4 AU¢, and at 60.8 euro cents. Our TWI-5 index is now at 74.4.

If you want to catch up with all the 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

Inflation in Europe, for instance, has behaved completely independent of the ECB’s much-discussed but still ongoing (at its stepped up rate) QE. Combined among its large-scale asset purchases (PSPP, CBPP3, CorpBPP), total purchases since 2014 add up to a stunning €2.1 trillion (as of latest daily data). And yet, Europe’s HICP or CPI consumer price indices register little or nothing from them.

That’s true in both viewing the EU as a combined entity, as well as broken down by individual economic constituents. The post-August 2007 pattern remains in greater force ten years later; national inflation rates in Europe act in very close proximity this past decade when compared to the decade before. There has been a unifying element to European inflation that isn’t the European central bank.

Core inflation rates in Europe are closer to 1% than 2%, and like US “core” measures are suggestive only of missing monetary and economic momentum. For September, Eurostat reported a core HICP rate of just 1.1%, and an overall HICP increase of 1.5% despite another (smaller) oil boost.

There is simply no channel between what the ECB does (and calls money) and what European banks do and were supposed to have done. Because effective monetary conditions in Europe remain very much like those in the rest of the world, including China and the US, liquidity preferences rule to the pointed exclusion of lending in the real economy. No matter how many corporate bonds Europe’s central bank owns and will own, banks refuse to lend to the corporate sector (or any other). Read more

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Can't argue with those facts Stephen so would a reasonable interpretation be the ECB in common with other Central Bankers are about as accurate as a stopped clock - 8.33%- of the time and in reality are as useful as tits on a bull

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So this was Alhambra commentary Stephen ?
Or your own

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Actually China is starting an Ethanol program to use up its excess grain stocks. Last year it's massive corn stock hung over the market and continues to do so.

At present they have warehouses stuffed with low quality grains. The government runs a min price for local growers, which means imported wheat goes into the food chain while local grains go into storage.

China has made a commitment to it's Marxist heritage and recently stated that there would be no private ownership of land, China's speculative housing market is built on 70 year leases.

It's going to be hard to double guess the market, when you main buyer is a Marxist State trying to pull levers and focused on internal disruption.

The world is full of grains, last month China had 900,000 tonnes of Brazilian Soy waiting in ports unable to be unloaded due to full warehouses.

We are ignoring this at our peril, we have costs 4x Brazil or the old eastern block, they are chasing us and closing in, we don't have lot of time left.

http://www.producer.com/2017/09/chinese-ethanol-plan-could-shake-up-mar…

http://www.reuters.com/article/us-usa-grains-storage-analysis/grains-pi…

https://www.theguardian.com/world/2017/oct/05/brazil-amazon-tapajos-hyd…

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China says it wants self-sufficiency in these core crops, but clearly it has issues. Consequently, China will be a an increasingly larger buyer on international markets.

Russia is well positioned to address the situation.

Crop projections are rising after rain spurred growth in European parts of Russia, contrasting with dry conditions that hurt crops in the U.S. and Canada. The gains cement Russia’s position as a top producer this year. It’s expected to be the biggest wheat exporter in the 2017-18 season, according to the U.S. Department of Agriculture. Read more

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Climate change is allowing more land to enter agriculture in Russia

Benefits in Russia from climate change

At the moment the global warming impact on Russian agriculture is currently assessed as favourable (5,25). It has already considerably reduced the number of winters with low air temperatures threatening winter crops. In many regions the vegetation period has increased by 5 – 10 days. The vegetation period for field crops has been lasting longer. For instance, in Stavropol territory due to climate change the rated grain crop capacity has increased by 30% (5).

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Special Report: Drowning in grain - How Big Ag sowed seeds of a profit-slashing glut

http://www.reuters.com/article/us-grains-supply-special-report/special-…

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Worth noting, from the New York Times 15th Oct, and unreported to my knowledge in NZ: 'A recent analysis by the cybersecurity firm Recorded Future found heavy North Korean internet activity in India, Malaysia, New Zealand, Nepal, Kenya, Mozambique, and Indonesia. In some cases, like that of New Zealand, North Korean hackers were simply routing their attacks through the country’s computers from abroad.'

https://www.nytimes.com/2017/10/15/world/asia/north-korea-hacking-cyber…

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Best you get a mirror for the toe of your boot, Gareth......

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and change your routine daily

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And watch out for farmers :-P After the Oklahoma bombing they are they are the only ones with easy access to the ingredients for explosives.

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"the financial economy is infinitely larger than the real economy and has been completely detached from the real economy by not producing anything of value."
"In the last 30 years it has become a huge casino in which money is simply pushed back and forth. Since the system is built on loans that need to be serviced, more and more money must be pumped into the system. The central banks, such as the IMF or the ECB, are the largest manipulators of the financial system. They are printing more and more money, which they now offer for zero or negative interest rates."
https://sputniknews.com/analysis/201710121058158469-financial-tsunami-g…

Pillaging the World. The History and Politics of the IMF
https://www.globalresearch.ca/pillaging-the-world-the-history-and-polit…

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The financial economy got greedy
It wasn’t satisfied lending and making investing in businesses
Why settle for mere commodity trades when you can create derivatives for anything
Make 500% profits on those derivatives trades and create nothing tangible just profits
When it all goes bust you claim too big to fail status and the govt bails you out
These same high finance people call welfare recipients bludgers
Hypocrites

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Just a warning folks
This winding back of quantitative easing will not go easy
These first timid steps are tiny steps because the FED fears they could trigger a catalyst somewhere out there in the economy that could trigger GFC2
Of course nobody wants to call an end to the party so this easing experiment better work

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