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US still hampered by supply-chain disruption; Allbirds and Hertz make news; Taiwan's strength continues; German confidence suffers; UST 10yr 1.64%, oil soft and gold firm; NZ$1 = 71.6 USc; TWI-5 = 75.1

Business / news
US still hampered by supply-chain disruption; Allbirds and Hertz make news; Taiwan's strength continues; German confidence suffers; UST 10yr 1.64%, oil soft and gold firm; NZ$1 = 71.6 USc; TWI-5 = 75.1

Here's our summary of key economic events over the long holiday weekend that affect New Zealand with news of some large, notable and strategic corporate deals underway.

But first we should note that the Chicago Fed's National Activity Index dropped to a seven month low, suggesting the American economic expansion lost momentum for a second consecutive month. Production-related indicators dragged suggesting the main reason was supply-chain issues, while sales, orders, and inventories and employment-related indicators all rose.

Meanwhile, the Dallas Fed factory survey was all positive in October, although the cost pressure being noted there is extreme.

In San Francisco, sneaker brand Allbirds is preparing an IPO worth NZ$375 mln and valuing the company at NZ$2.8 bln (and about the same size as Chorus). It's a major success story based on a Kiwi development of merino wool for running shoes.

And in other corporate news, rental car heavyweight Hertz has made the single-largest purchase ever for electric vehicles, ordering 100,000 Teslas, worth about US$4.2 bln of revenue for the carmaker.

In China, a data point to note. A quarter of all economic activity in the whole country happens in the Shanghai area and the Yangtze River Delta region. It is a strategic concentration that makes Beijing uncomfortable which is why they are promoting the expansion of the Pearl River Delta, where Hong Kong is located.

Taiwan's September industrial production hit yet another new record high, and the year-on-year growth remains very high. Their retail sales actually expanded (minimally though it might have been), reversing three months of quite sharp reductions.

In Germany, business confidence fell yet again in October, the lowest level since April and slightly below market expectations as supply bottlenecks continued to weigh on Europe's largest economy. Expectations for the coming months were significantly more pessimistic too.

(In Turkey, their president's outburst to kick out ten ambassadors has been reversed.)

On the weather front, we should note that it looks like the La Niña weather pattern is settling in for a longer stint this time. The pattern is getting strong about the time it usually turns to El Niño. The last time we had an extended La Niña pattern was in 2010 - 2012.

In Australia, their Government is tipping in NZ$2.2 bln of public money to 'encourage' Telstra to buy the Pacific operations of Digicel. The alternative is that Digicel will be owned by China. Digicel is the South Pacific's main cell phone network.

And staying in Australia, Delta cases in Victoria have reduced to 1461 reported there yesterday, and so a real improvement finally. There are now 24,831 active cases in the state and there were another 7 deaths yesterday. In NSW there were another 294 new community cases reported today with 4,515 active locally acquired cases which is slightly lower, and they had four deaths yesterday. Queensland is reporting zero new cases. The ACT has 9 new cases again. Overall in Australia, more than 73% of eligible Aussies are fully vaccinated, plus 14% have now had one shot so far.

On Wall Street, the S&P500 has started their Monday session +0.5% firmer and again touching record high levels. Overnight, European markets were mixed with the range being -0.3% in Paris and +0.4% in Frankfurt. Yesterday, Tokyo ended down -0.7%, but Hong Kong ended flat, while Shanghai had a good day, up +0.8%. There was obviously no trade in New Zealand, nut the ASX200 ended up +0.3%.

The UST 10yr yield opens today unchanged at 1.64%. The US 2-10 rate curve is little-changed today at +120 bps. Their 1-5 curve is flatter at +106 bps, while their 3m-10 year curve is also flatter at +158 bps. The Australian Govt ten year benchmark rate is lower by -1 bp at 1.76%. The China Govt ten year bond is unchanged at 3.00%. The New Zealand Govt ten year is holding its new higher level at 2.44%.

The price of gold will start today up +US$15 at US$1807/oz.

And oil prices are softish, down -50 USc to just under US$83.50/bbl in the US, while the international Brent price is unchanged at just on US$85/bbl.

The Kiwi dollar opens today marginally firmer at 71.6 US. Against the Australian dollar we are softer at 95.6 AUc. Against the euro we are firmer at 61.7 euro cents. That means our TWI-5 starts today at just under 75.1, and still well over the top of the 72-74 range of the past eleven months.

The bitcoin price is also up +5.6% since this time yesterday, and now at US$63,648. Volatility over the past 24 hours has been high at just over +/-3.3%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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33 Comments

I've had the weekend to mull over Jacinda's " Friday Funny " , the new traffic lights Covid system. ...

... now , if I'm unvaccinated  , I've got no incentive to get jabbed ... I've got more freedoms now under level 2 point something than I'll have under level Red point something ... I'll be face booking my mates & trolling strangers to stay away from needles ... I'll be spreading misinformation holus bolus ....

On the other hand , gimmee $ 200 on my second  jab & I'll be double jabbed by lunchtime ... cash is the universal incentive 

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You'd have to be a bit short sighted and very selfish to do that.

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Aye GBH vacs are critical but the 90% thingy is nothing but arbitrary. What in fact will rule the cause are hospitalisation numbers so watch those more closely than all the publicity surrounding  vac numbers. Note a welcome fall off in hospitalisations last day or so too, but assuming they will rise again and eventually hopefully, will peak and then decline, as is evidenced much overseas. When that actually happens in NZ then NZrs can begin to relax.

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...  correct ... but , lots of people are  .... so , waddya do to get them vaccinated   : issue threats , as Ardern has done ... or incentivise with a small cash bribe  ...

Which works : carrot or stick ?

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GBH take a look at Kraken’s post 12.47pm Brian Easton’s column on here today, and tell me what you think. One for the ages!

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"facbooking your mates?"

Better hurry up!

This call for regulation of said platform has to be a con, doesn't it? This current 'whistle-blower' is a well-placed plant?

Facebook has reached saturation point and those with equity need a patsy to buy them out at the top. What better patsy is there than The Government?! Get a few onerous 'controls' imposed by The Government, and get compensation for changing a proven successful model by making it a Public Utility, and not a Private Business.

Right up there with some theories on Covid, I reckon :)

 

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Facebook..never use it really - now deleted

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I tried!  (I'm not signed in, but still have an account)

"Messenger" is the preferred communication medium of most people I know, and they can't be bothered moving. Facebook used to offer that service free of entanglement (you could us it without a Facebook account) but now they don't. Once they took over their main competition, in 'WhatsApp", they added that to their dominance of that sector and added controls.

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Switch to signal..most of my contacts have

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I was entertained to discover a couple of anti-vaxers in my loose social circle. Both told me they've already caught COVID, but neither said they got tested, they just knew they had it because the illness was different. I discussed their view with them, trying to understand why they thought that, treating them respectfully. I noted others however who were not. The one who opened up showed me comment streams from twitter talking about deaths from the Vax. When I asked for details, there were none, just assumptions. When I asked about autopsies, nope! Not allowed. Got told kids are dying left right and centre from the vax, but the Government won't let this be published. No evidence just gossip! The biggest disappointment - this guy is normally highly intelligent, clued up. Still can't figure it out. 

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Yes, I met one recently too. Otherwise intelligent, just sucked down this giant rabbit-hole, and it seems the folk who go there self-reinforce. You can see how witch-hunts, religions, holocausts (and belief in infinite growth on a finite planet) can take hold.

Equally, the save-human-lives-at-all-costs brigade are being illogical too; it's too many people, travelling too often, too far and past too many others, which is the pandemic problem. Statistically, this can't be either the biggest, or the last pandemic. Yet we'll get right back to too many, too often, too far past too many......

Funny old world......

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mirrors recent conversations  with our ex neighbours in the States. They refer back constantly to the Spanish flu of 1918 probably because of family history, in which their parents/relations were well experienced. In those days it was about seven days to get from Europe to the USA for hundreds of travellers now it’s seven hours for thousands. Technology has so upped the tempo of human existence, beyond controls and barriers previously natural purely by the scope of geography.

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I have also experienced this, people can easily believe a very complicated lie yet struggle with a simple truth. It is more about validating their view or feelings. I have given up worrying, who knows who will turn out to be correct in the long run but I would not want to live in a world full of anti vaxxers anyway, it would feel like a zombie apocalypse. 

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Probably the same people who see that one of the most powerful people in the World (MBS) have one of his detractor kidnapped, dismembered and his parts remain unfound, still be one of the most powerful people in the World.

Is there any wonder there is doubt in what we are told?

 

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Maybe when he goes out for a walk one day he'll fall of the edge of our flat earth...

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In Australia, their Government is tipping in NZ$2.2 bln of public money to 'encourage' Telstra to buy the Pacific operations of Digicel. The alternative is that Digicel will be owned by China. Digicel is the South Pacific's main cell phone network.

Hmmmm..

Australia loses as China reportedly buys more US LNG

What Australia lost is not only LNG deals. A manager from the Shenyang Huayue Foreign Economic and Trade Co told the Global Times previously that the firm has been importing more US beef to replace Australian beef due to frayed China-Australia ties. 

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Thats a meaty order for Hertz.....

 

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Elon Musk will be rubbing his hands in glee. Watch the Tesla share price jump!

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massive jump this morning over 10% , i would have thought the next increase would be when the german factory started production not on this news, they would have got these cars for a huge discount so the profit per unit could be very very low

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https://www.eia.gov/tools/faqs/faq.php?id=427&t=3

The US grid is 60% fossil-fuel derived. It's better than it was (was 40+% coal, now mostly gas) but that's still a finite source and still underground carbon being released above ground.

So Hertz are 60% virtue-signalling. Which sort of reflects society at large

 

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The story was in error - they ordered 100,000 horses..

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all that methane!

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It's been dung before.....

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Fertiliser forever! Fight global warming - ride a horse!

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Sure is..big purchase for a company with $8.5b of debt. Great way to pump your stock. Smoke and mirrors.

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Meanwhile, the Dallas Fed factory survey was all positive in October, although the cost pressure being noted there is extreme.

Do Bonds Accurately Price Inflation? Since Before Any of Us Were Born

Low yields aren’t just expressing some cynical opinion that we can quantitatively measure, the implications have been repeatedly proven true because those prices are largely made by those inside the shadows doing all the money. Or not enough, as the case has been.

Inflation, real inflation which lasts, is always and everywhere a monetary phenomenon. There hasn’t been the money for a long time, therefore there hasn’t been inflation. Instead, consumer prices, at times, have increased even jumped if only due to other factors which uniformly get verified as transitory.

That’s why I (and a very few others) become remorseless about being obsessively specific and demand full accuracy as to whether or not to call something inflation. Without the money, it won’t be so whatever else has to be responsible for consumer prices can only ever be transitory.

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The UST 10yr yield opens today unchanged at 1.64%.

Yield of Netflix 2030 bond 1.363%.

#Netflix Rating raised to investment grade by S&P, outlook stable: We now view Netflix’s business more favorably b/c it continues to demonstrate mkt leadership despite increasingly competitivelandscape, incl its transition to a sustainably cash flow generative business, S&P says - Link

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Mastercard gearing up for the thousands of banks and millions of merchants on its payments network to integrate crypto into their products. Smart move but not as leftfield as one might think. 

https://www.cnbc.com/2021/10/25/mastercard-says-any-bank-or-merchant-on…

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take a breath....

Mastercard said it was only interested in dealing with cryptocurrencies that "operate in full compliance with all applicable laws and regulations, including those applicable to anti-money laundering." 

Mastercard says that by the end of the year, customers will be able to do this natively for some cryptocurrencies. The recipient will get the same digital asset the sender sent, without the need to convert to dollars and back.  However, it seems unlikely that bitcoin will make the cut, as the digital currency flunks several of Mastercard's criteria.

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Let me make a prediction Ratus..BTC will be the first one they adopt much to your gnarling and snarling.

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Hong Kong was something like 18% of China's GDP when it was handed back. Now it's <2%, not because HK has shrunk a lot, just that China has grown faster.

No surprise if China starts some large infrastructure projects both in Hong Kong and along the border to grow HK again. But yeah, we are meant to believe HK is now a disaster zone that will disappear under some tyrannical rule now, not grow hugely, so please ignore.

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The Global economic investor newsletter that comes out weekly is a great read, even just the summary email (below) is worth the free sign up https://www.globalnews.co.nz/

We discuss the resilience of the Bitcoin digital currency and the introduction of an exchange-traded fund – which suggests that the coin is becoming more acceptable.

Daily UK Covid-19 infections have surged to around 50,000 a day (increasing 15% last week), the highest level since the UK exited its most recent lockdown. The rising cases are dominated by young people.

Another virus variant is also emerging in the UK – the so-called “Delta-plus” variant – officially known as the AY.4.2 sub-variant – which is thought to be 10 to 15% more transmissible than the regular Delta.

Vaccine partners Pfizer and BioNTech have released the results of their latest 10,000-person study, indicating a third booster shot is 95.6% effective against symptomatic Covid 19.

Covid-19 is expanding at an aggressive rate in some of the lowly vaccinated parts of Europe, such as Romania, Bulgaria, Latvia, Slovenia, Russia and the Czech Republic.

The US share market rose through last week, on the back of solid corporate earnings reports, but reversed slightly on Friday - after the Federal Reserve Chairman Jerome Powell signalled concerns over inflation.

Although sentiment generally in US share markets has moved into positive territory, a survey by Bank of America indicates that this is not the case for professional fund managers.

Former US president Donald Trump has listed his Trump Media & Technology Group company via a special-purpose-acquisition-vehicle named Digital World Acquisition Corp.

The US bond market’s implied expectations for future inflation rates have surged to record levels as investors continue to re-evaluate the consensus opinion that inflationary forces will ultimately prove to be transitory.

In the UK, the Bank of England (BoE) has indicated it will likely begin the process of tightening money policy in the near-term, possibly as soon as December.

NZ consumer price inflation surged to 4.9% in the 12 months to September 2021, the highest annual rate of inflation since June 2011 (when it reached 5.3%).

The Japanese Yen has declined sharply against the US dollar because of rising energy costs, which Japan is vulnerable to… as it imports almost all of its energy sources.

US economic growth has slowed to a “modest to moderate rate”, according to a “Beige Book” informal survey by the US Federal Reserve.

Data from the Chinese National Bureau of Statistics has shown the economy slowed by more than expected in the third quarter, fuelling concerns of a knock-on effect on global economic growth.

Retail sales in the UK in September fell for the 5th month in a row, the longest continuous fall since records began in 1996 – an indication that the economy is running out of steam.

The dislocation in supply lines, combined with the energy crisis and rising inflation, is impacting on the global economy.  

As economies unlock around the world and consumers shift from buying goods online to spending their money on services (implying human-to-human contact) there is a surging demand for labour. A major problem is that many people stopped working during lockdowns and have not returned.

Carmaker Tesla is at last starting to generate financial figures that are making it the envy of the car industry.

Oil prices remain relatively strong, because of ongoing supply disruptions and rising demand - courtesy of the reopening of the global economy.

Industrial metal prices have defied predictions of softening demand by rallying strongly from the ongoing energy crisis that is pushing up the cost of production.

US construction companies have been running up against supply-chain problems and labour shortages that have been limiting how many homes they can start building… and lengthening the time it takes to complete them.

Real estate prices in China fell for the first time since April 2015, in September - declining by 0.5% on average. The National Bureau of Statistics said that prices dropped in more than half of the 70 cities surveyed.

A NAB Residential Property Survey in Australia indicates that the housing market there has peaked.

In NZ, the Labour and National parties have ignored bipartisan differences and collectively agreed to make changes to the Resource Management Act, in order to increase the pace of homebuilding.

 

It is what it is.

Take care out there.

John Ryder and Devon Ashby   

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