Here's our summary of key economic events overnight that affect New Zealand with news inflation from the global supply chain woes are taking the wind out of the global economic expansion.
The American economy grew at an annualised +2.0% in Q3-2021 according to initial estimates, well below market forecasts of +2.7% and slowing sharply from +6.7% in Q2. It is the weakest growth of the pandemic recovery. The levels of government stimulus continues to fade and a surge in COVID-19 cases, plus global supply constraints have weighted on both consumption and production. Still, economic activity was +4.9% larger than in Q3-2020 and +1.9% larger than Q3, 2019.
US jobless claims came in at 245,000 last week, lower than the prior week and lower than expected. There are now just under 2 mln people on these programs, and now almost back to pre-pandemic levels.
US pending home sales were down -2.3% in September, partially reversing from an +8.1% surge in August and much worse than market forecasts of a flat reading. It is being called a 'dip' by the industry, but that overlooks that this activity has 'dipped' in seven of the past twelve months and is now lower than a year ago. A retreating trend in sales activity is well set in this market.
Meanwhile the Kansas City Fed manufacturing survey is quite upbeat. All the key indicators were more positive in October than September and while cost and supply chain pressures are still hurting, two thirds of survey responders said they expected them to ease in the next 6-12 months.
There was another well supported US Treasury bond issue earlier today, for their 7 year maturity, and the same story as for previous recent auctions applies: yields are rising.
In China, central bank officials are admitting that they have underestimated the strength of the cost inflationary push in their economy. They have apparently lowered their sights on 2021 growth goals. And to ease the pressures on private firms, they are deferring some tax payment dates.
In Japan there are signs of improvement in their retail sector with sales up +2.7% in September from August which was an unexpected improvement.
Overnight there were two major central banks reviewing their monetary policy positions - the Bank of Japan, and the ECB. Neither announced any material changes.
EU business and consumer sentiment in October were at good levels (for them).
EU inflation expectations rose sharply in October and to a new ten year high. This is hardly surprising in the current environment when Germany's inflation rate has risen to 4.5% in October, and you have to go back to 1992 to find a higher rate.
But at least containerised shipping costs continue to ease, even rates out of China
In Australia, Westpac's respected Bill Evans is now saying the RBA will start raising their official policy rate in February 2023, a year earlier than the previously expected 2024 restart indicated by the RBA. Following Westpac, ANZ's analysts have joined him too. This has motivated a general shift higher in Aussie wholesale rates which were already on the firm side. And there are questions about how wholesale markets are functioning.
In Beijing, they are locking down as Delta cases start popping up in the capital, spread from northern provinces. This will have a chilling effect on travel in China, and depresses their faltering recovery further.
In Australia Delta cases in Victoria have risen to 1923 cases reported there yesterday, and going backwards. There are now 22,189 active cases in the state and there were another 25 deaths yesterday. In NSW there were another 293 new community cases reported yesterday with 4,058 active locally acquired cases which is lower, and they also had 2 deaths yesterday. Queensland is reporting zero new cases. The ACT has 10 new cases. Overall in Australia, more than 75% of eligible Aussies are now fully vaccinated, plus 13% have now had one shot so far.
On Wall Street, the S&P500 has started their Thursday session up +0.7% to a new record high. The good earnings reports just keep coming. Overnight, European markets were flat in Frankfurt and London, but rose +0.8% in Paris. Yesterday, Tokyo closed down -1.0%, Hong Kong ended down a sharper -1.2%, and Shanghai ended down -1.0%. The ASX200 ended down -0.3% while the NZX50 was down another -0.4%.
The UST 10yr yield opens today up +4 bps to 1.57%. The US 2-10 rate curve recovered some steepness today at +107 bps. Their 1-5 curve is also at +107 bps, while their 3m-10 year curve is unchanged at +149 bps. The Australian Govt ten year benchmark rate has taken off higher on the swap market woes, up +14 bps at 1.94%. The China Govt ten year bond is down -1 bp at 2.99%. The New Zealand Govt ten year is up another sharp +5 bps at 2.61%. See this.
The price of gold is having another rise today, up +US$7 to US$1802/oz.
And oil prices are down by -US$1 to just on US$81.50/bbl in the US, while the international Brent price is now just over US$82.50/bbl.
The Kiwi dollar opens today +30 bps firmer at 72.1 US. Against the Australian dollar we are little-changed at 95.4 AUc. Against the euro we are a fraction softer at 61.7 euro cents. That means our TWI-5 starts today unchanged at just on 75.3, still well over the top of the 72-74 range of the past eleven months, and possibly now resetting this range.
The bitcoin price has recovered by +3.9% since this time yesterday, and now at US$61,197. Volatility over the past 24 hours has been high at just over +/-3.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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But at least containerised shipping costs continue to ease, even rates out of China
Has any one else noticed there are apparently no Chinese logging ships lined up at both Napier and Wellington ports to reduce the building mounds of logs at each port?
Audaxes
Yes, Napier Port very quiet with one log ship in port today but eight due in next eleven days.
I posted a month or so ago that there were 12 log ships anchored off Gisborne and two or three off Napier was common so yes, relatively very quite.
Log trains from Wairoa beginning of month increased from two to five a week so stockpiling at Port not surprising.
In China, central bank officials are admitting that they have underestimated the strength of the cost inflationary push in their economy.
Chinese Coal Prices Plunge After Beijing Central Planners Impose Price Caps
Most likely putting a stop to the pledge repo market where the re-pledged assets (coal) themselves get re-pledged, and re-pledged again.
This is the collateral velocity, essentially the length of collateral chains. The longer they are, the more collateral has been re-pledged, the more fluid the repo system – on the collateral side. And that meant, at least before the crisis, plentiful monetary and funding resources for a whole lot of purposes, not all of them end up as being wise.
Singapore has seen a surge in positive covid cases, with 8756 new cases over the past two days, and 25 deaths , 24 deaths aged between 60-98, all but one had underlying medical conditions. Singapore's vaccination rate is 84 percent and 14 percent have now received booster shots.
People inoculated against Covid-19 are just as likely to spread the delta variant of the virus to contacts in their household as those who haven’t had shots...
According to research quoted by Bloomberg. So the vaccine won't reduce the spread, just reduce hospitalisations and deaths.
This means it's irrelevant if someone is vaccinated or not when they travel.
The benefits are only to the individual, there isn't any wider societal benefit (except maybe for preserving hospital capacity in the pandemic phase.) It just means that policies that exclude unvaccinated people from travel, events etc. aren't based in science but would just be punitive.
The problem is that it makes cases asymptomatic, which means people aren't getting tested and staying home. In that sense it may even increase transmission, which creates a perfect breeding ground for new and exciting variants, one would think.
But what would I know, I'm not a science-type.
Even among the unvaccinated about half of cases are asymptomatic.
Much as to say this has always been a disease of the elderly and immunologically compromised. The probability of a younger person dying is very low, vaccinated or not. In fact we're vaccinating children to "prevent the spread" but in fact vaccinating children is unlikely to prevent the spread of the disease based on what this research has indicated.
Similarly "no jab, no job" may now constitute constructive dismissal as there is no evidence that being vaccinated reduces transmission. In short we have made a policy error that needs to be corrected.
Have a look at any of the age related stats - healthy people under 50 are not going to overwhelm the healthcare system.
https://www.health.gov.au/sites/default/files/documents/2021/10/coronav…
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Re: "healthy people under 50 are not going to overwhelm the healthcare system"
Don't bank on it.
According to Bloomfield yesterday the average age for those currently in hospital is 45 years old.
Over the past fortnight the average age actually dropped to 38. Only 6 percent of the 372 hospital admissions in the latest outbreak were among the 65-and-over age group.
https://www.newshub.co.nz/home/new-zealand/2021/10/covid-19-average-age…
From a sample size of 37. What is the age range of the cases? What is the health status of the hospitalizations? Are they healthy or do they have comorbidities?
For Oz to date from link -
- The median age of all cases is 31 years (range: 0 to 106 years).
- The median age of deaths is 84 years (range: 15 to 106 years).
Singapore may not be New Zealand ,hospitalization and critically ill by age group October
https://data.gov.sg/dataset/covid-19-case-numbers?resource_id=9de30d8d-…
https://data.gov.sg/dataset/covid-19-case-numbers?view_id=35eda4bf-fcc7…
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Your original comment was making a point about hospitalisations and young not likely to be overwhelming. The data you subsequently put up has nothing to do with hospitalisation.
Your response has shifted tack and fudging things so you obviously concede on your original point. :)
Get over it; your thinking seems to be that Covid is about the elderly. It is widely acknowledged that Covid is not just about the elderly. Those young in hospital are there for a reason - and it is not about being a comfortable recuperation.
P.S. Maybe the relatively young age of incidences of hospitalisations could have something to do with vaccination rates - a message there.
Noncents
If you read the linked article you will note that vaccination rates among the younger is currently low. Yes, vaccination among the old was rolled out first but there has been ample time for the younger to get the jab recently.
Covid is not just about the old.
Think why it was rolled out to the old first? Possibly because they were more at risk?
"Covid is not just about the old. "
Not "just", but according to our own MoH data, and the combined health depts around the world, it is "Mainly"/"Mostly"/"Primarily" (You can choose the word) about the old and/or those that have underlying health issues.
Printer8 - my original point was about the young AND the healthy. You seemed to have glossed over the healthy bit. Do you have any data that the young and healthy are clogging up the hospital system with covid? I'm afraid covid deaths are about the old - median age of death in Oz is higher than average life expectancy! Protect the old and unhealthy at all costs - but let the young and healthy go about their business and education - to support the old and infirm.
Seems a bit like car safety.
I just bought a new car - one with as good of a safety rating as possible. I bought that to protect myself.
I also drive defensively, don't speed etc ... I take all of the sensible personal precautions to minimise risk (you cannot eliminate it).
I don't now demand that everyone else on the road has to have an equivalently-safe car in order to be able to share the roads with me.
If - after buying a safer car - I'm that s**t scared of other road users who might not have the same attitude as me towards road safety, then I can just stay at home.
If old mate down the road wants to drive his 95 Toyota Starlet with no airbags, that's his choice (or hideous increases in cost of living and inadequate Kiwi wages means he can't afford any better).
Maybe taking the vaccine will make people more complacent then - could wind up with all sorts of super spreading at summer "festies" etc (wouldn't surprise me, it's incredible how many people think it 100% stops all transmission forever and ever amen).
On a side note, how good is radar cruise control?
The report states -
Nonetheless, fully vaccinated individuals with breakthrough infections have peak viral load similar to unvaccinated cases and can efficiently transmit infection in household settings, including to fully vaccinated contacts. Host–virus interactions early in infection may shape the entire viral trajectory.
So perhaps the vaccine may reduce break through infections?
Quoting a short passage from a med journal and making a conclusion is something I'd rather leave to health professionals thanks.
and this paper. Vaccine passports are a political tool. Jacinda needs the 'anti-vaxxers' to blame for her healthcare failings so wants them marginalised. 'No Significant Difference in Viral Load Between Vaccinated and Unvaccinated, Asymptomatic and Symptomatic Groups Infected with SARS-CoV-2 Delta Variant'
https://www.medrxiv.org/content/10.1101/2021.09.28.21264262v1
The messenger to shoot -
https://www.nytimes.com/2021/06/03/magazine/metagenomic-sequencing.html
https://www.forbes.com/sites/stevevassallo/2021/03/08/missionary-misfit…
Koolaid with your bacon this morning PDK? How is Dunedin hospital coming along?
"New Zealand has had 18 months to prepare for endemic Covid-19, but many in the health sector feel their most important weapon has seemingly been left out of the equation. Both new and existing healthcare professionals are struggling to get into MIQ. Louisa Steyl reports."
https://www.stuff.co.nz/national/health/coronavirus/126608859/miqueue-h…
https://www.newshub.co.nz/home/new-zealand/2021/03/new-zealand-hospital…
Dunedin's replacement hospital was a stupid, ego-driven idea.
You can quote me. And I regard Hodgson as being deficient too; as an elder statesman with no need to pander to electors, he had an obligation to point out the Limits to Growth to the wide-eyed believer masquerading behind 'Doctor'.
He joined the gravy train, and not a mention of the LTG or sustainability. We needed depth, resilience, capacity, and we needed it now. We got tear-down replacement, the timeframe of which says it won't get completed before TSHTF.
We have yet to see a Minister of Energy, past or present, tell the truth about energy/entropy and the future. The ramifications for health are wide and many - not that we're being told.
For whatever reason the vaccine does seam to do a good job at stopping spread for about 4-6 months post vaccination. After this point however it does a relatively poor job. I imagine given our current vaccine roll out, we won't see surges in cases prior to & just after X-mas. We will however get slammed in March, April and May next year. Further as we have isolated ourselves from the rest of mankind we havn't had much flu/RSV exposure. So we will also get slammed by the latest flu & RSV variants at the same time.
While the rest of the world moves well and truly on from Covid in 2022 NZ will be getting absolutely hammered. We will go down in the history books as not what to do if faced with a novel respiratory virus.
Counting cases is becoming irrelevant now. As this article explains we are in a new era:
https://news.northeastern.edu/2021/09/02/do-covid-19-case-numbers-matte…
NSW has a double vaxxed rate of 86.5% and single at 93%, so are just getting on with business as usual in the main.
Most kids in the UK - 75% - have or have had COVID and are fine, & this spread in this demographic has probably run its course.
Not so much irrelevant as inconvenient. The case reports will stop shortly as the fully vaxed outnumber the unvaxed in care, because that would just confuse those who have placed so much hope in the strong leadership leading them to complete eradication. "Who you gonna call....?"
Non mRNA boosters are required. The government was waiting on Novavax (traditional vaccine) apparently due to arrive in NZ some time in the first quarter 2022. Australia was expecting supply in Nov 2021. Novavax share price has recently collapsed as they cannot meet production.
In the USA Pfizer boosters (ie 3rd dose) have been approved for the immunocompromised. With each mRNA vaccine the chance of auto-immune conditions increases exponentially eg pericarditis, myocarditis, and inflammation based thrombosis. So non-mRNA vaccines are required for boosters and it appears we are low down on the waiting list. So covid-19 could become endemic, when healthcare workers are likely to get infected and symptomatic. In this situation you will be looking at many healthcare workers being off work sick, when they are needed in hospital. This is why it is important to keep covid localised to the upper North island, while we await boosters. As in the case of a large localised outbreak, with a shortage of healthcare workers, workers can be flown from other parts of the country eg lower North Island or South Island.
I agree but it means that there are a raft of policies like "vaccine passports" and "no jab, no job" that have no scientific basis. The assumption, prior to research being published, was that vaccination would reduce transmission rates but as it does not these policies would now likely be found punitive if challenged. Similarly vaccination of children will not reduce transmission.
We are learning as we go and that means we now need to make a U-turn based on new science as it is published.
This also means there is no scientific or medical justification for vaccine passports this makes them entirely a political tool.
In fact if you think about this a music festival full of vaccinated people with a significant proportion believing them selves to be fully protected would make an awesome super spreader event!
Vaccine passports could actually increase the spread of covid-19.
Yes but how to you get mass hysteria to believe that?
Fauci What is Antibody Dependent Enhancement (ADE)? - YouTube
Still Fauci is another looney anti vaccer with no credibility?? Isn't he?
The article you link states:
"The analysis also found that 25% of vaccinated household contacts still contracted the disease from an index case, while 38% of those who hadn’t had shots became infected."
Doesn't this indicate vaccinated are less likely to contract, and therefore spread Covid?
That 30-year Mortgage you have (wasn't the norm 25 years ~10 years back?!) that's becoming a tad onerous with % rate rises? Just recalibrated it for 50 years, and if that's not enough, make it 100!
(NB: I think the Swiss banks have 100 years mortgages available, and perhaps the Japanese.
Not that many decades back, even with substantially higher nominal % rates, many average home-owners, if they so chose, could pay their 25-Year Loan off in ~7 years. Not by crushing spending to nil elsewhere, or even having two income in the family paying down the debt, but because......the principal of the loan was so much smaller - the very opposite of what we are currently staring at. )
A recent innovation in the Japanese real estate industry to promote home ownership is the creation of a 100-year mortgage term. The home, encumbered by the mortgage, becomes an ancestral property and is passed on from grandparent to grandchild in a multigenerational fashion. We analyze the implications of this innovative practice, contrast it with the conventional 30-year mortgage popular in Western nations and explore its unique benefits and limitations within the Japanese economic and cultural framework. Through the use of simulation, the conclusion is reached that the 100-year mortgage has failed to increase the affordability of homes. Instead, affluent homeowners are more likely to employ long-term mortgages as an estate-planning tool to reduce inheritance taxes. - Link
AUSTRALINA 2 YEAR BOND RATE DOUBLES FROM .25% to .5% AFTER RBA REFUSES TO BUY.
https://twitter.com/stephanlivera/status/1453562351588941825?s=20
No one wants their shit bonds at artificially low rates. If they lift yield curve control and it flows into the longer term bonds this could result in some massive losses.
Read the comment thread under Kafing Birds comment for a simple explanation, and the article is short and sweet.
Hmmmm..
A $2,000,000.00 deposit to save $10,000.00 per annum @ 0.50% versus
A $4,000,000.00deposit to save $10,000.00 per annum @ 0.25%.
The two year bond in question has a 5.5% coupon which attenuates the price action when the yield doubles for the 21/04/23 tenor.
https://www.reuters.com/business/global-debt-is-fast-approaching-record…
It'll never be repaid - not with meaningful valuations staying within cooee of where they are now.
"The rise in household debt has been in line with rising house prices in almost every major economy in the world," said the IIF's Tiftik.
Sure - but who are the buyers? The answer is: The sellers. There's nobody else - where's the floor?
"Total sustainable debt issuance meanwhile has surpassed $800 billion year to date, the IIF said, with global issuance projected to reach $1.2 trillion in 2021."
Good to see it's sustainable. Had me worried there........
Audaxes - any thoughts on the US 30 year yield falling below the 20 year?
https://finance.yahoo.com/news/treasury-curve-inverts-long-end-15331357…
These curves are even missing the more frequent suggestions of stagflation as this “growth scare” part becomes more difficult to ignore and dismiss.
The bond market moving in the direction of nominal growth and inflation would be more like it had been during 2013’s celebratory selloff; steepening curve with rapidly rising real rates. We’ve got serious flattening and further downward in real rates that haven’t once yet recovered from recession lows.
These actions are not some “policy error”, either, especially given the small effect from the deluge of cash management bills. In other words, put it all together, bonds (globally) are saying the current “inflation” is still going to be transitory, if painful in gasoline prices along the way, and this is enough (it always seems to be) to convince the FOMC to turn “hawkish” despite the fact the underlying economy is absolutely nothing like what the Fed is modeling and the media keeps saying.
On the contrary, the way (and the speed at which) the curves are contorting, there is more being priced into that growing “growth scare” as any of the other.
Talking about these same yield curve distortions in 2019, I wrote about the great lengths people will go to dismiss these relatively clear signals; forget inverted TIPS or the utterly disgusting potential of real rates, just look at the very simple message from the flat yield curve which proved (since all the way back into 2017) to end up spot on as to growth, inflation, and the predictable way in which Jay Powell’s Fed would get it all wrong:
It is absolutely amazing the lengths people will go to in order to deny the most straightforward and obvious explanation; to torture and twist plain evidence. That’s the thing about rationalizing, though. The narrative usually matters more than the facts…If the world hadn’t been fooled into blindly following central bankers, to rationalize and make excuses for simple and straightforward facts, all anyone would’ve needed this whole time to perfectly understand the situation was Treasury rates and the yield curve.
With short run TIPS breakevens running wild, how can anyone say there’s a dollar shortage and dramatically rising deflationary potential right now? Easy, actually. The mountain of data and the repeating behavior of the (bond) market and curves has already spotted you the first nineteen letters. Link
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