Here's our summary of key economic events overnight that affect New Zealand with news markets have turned more cautious today even as some key commodity prices keep on rising.
And today, we start with a warning from the US Fed in their Financial Stability report. They say (page 60) China’s commercial real-estate sector bond market woes could spread around the world including to the US if the situation deteriorates there. China Evergrande Group’s grace period has now ended and it now faces its biggest payment test yet. (They need to make a US$148 interest payment this week, and it looks like they just sold a subsidiary for about US$140 mln to Tencent, another large Chinese company.)
In the same report, they also pointed to a worsening of the US's public health situation as a near-term risk.
Americans are, however, using their credit cards more, an updated report on total household debt showed. But credit card debt is tiny compared to mortgages, and lower than both car loans and student debt. Still credit card use is more volatile and a marker for consumer confidence. Overall total household debt now totals just over US$15 tln, and represents 66% of US GDP. That is marginally higher than the 65.5% level two years ago, and well below the 75% level ten years ago.
The US Fed was also active in today's 10 year Treasury bond auction. They took US$23 bln of $114 bln on offer, much more than the US$3 bln at the prior event. Today's auction had a median yield of just 1.37%, much lower than the 1.54% at the prior equivalent auction.
American producer prices came in +8.6% higher in October than a year ago, holding the same gain as in September. That is the fastest rise since just before th GFC. Perhaps the only 'silver lining' is that they didn't increase from September quite as fast as was expected, so perhaps these increases are topping out.
The latest USDA WASDE update to their agricultural forecasts has them exporting less wheat after smaller crop production. This will raise the world price further, but not too much as Russia, the EU, India and Ukraine are all shipping more wheat into export markets. Their corn production is up however, as are exports. Beef production is raised from the previous month on higher expected slaughter of feed cattle and heavier carcass weights. They expect to export more beef (especially to China), but also import more due to "robust domestic demand". They also report lower milk production, higher export demand, and higher prices.
In China, winter has arrived in their northern provinces. All eyes are on their coal reserves.
The size of the reversal in Chinese steel production is becoming apparent, and it is impressive - in a car-crash sort of way. The iron ore price has fallen more than -60% since its peak in May.
In something of a positive surprise, the German ZEW business sentiment indicator has risen sharply in November, ending a drift down from the recent high levels achieved in May and June.
In Australia, business conditions and confidence rose in October according to the widely-watched NAB survey, as lockdowns came to an end in both NSW and Victoria. Each of the trading conditions, profitability and employment subcomponents contributed to the improvement in conditions, which was driven by gains in NSW. Confidence also rose, and to a six month high.
And staying in Australia Delta cases in Victoria have leveled out at the 1069 cases reported there today. There are now 15,607 active cases in the state and there were another 10 deaths yesterday. In NSW there were another 223 new community cases reported today with 2,817 active locally acquired cases, and they had another 4 deaths yesterday. Queensland is reporting no new cases. The ACT has 18 new cases. Overall in Australia, just under 81% of eligible Aussies are fully vaccinated, plus 8% have now had one shot so far.
The UST 10yr yield opens today at 1.43% and down a sharp -7 bps since this time yesterday and retreating. The US 2-10 rate curve starts today flatter at +101 bps. And their 1-5 curve is also flatter at +93 bps, while their 3m-10 year curve is also flatter at +138 bps. The Australian Govt ten year benchmark rate is down -2 bps at 1.76%. The China Govt ten year bond is unchanged at 2.92%. The New Zealand Govt ten year is up +2 bps at 2.55%.
In equity markets, Wall Street has started their Tuesday session with a -0.3% fall in the S&P500. Overnight, European markets were down about -0.2%. Yesterday, Tokyo fell -0.8%, but both Hong Kong and Shanghai rose +0.2%. The ASX200 ended -0.2% lower, but the NZX50 ended up +0.4%.
The price of gold will start today at US$1829/oz and another +US$5 rise from this time yesterday.
And oil prices are firmer too at just over US$81.50/bbl in the US, while the international Brent price is now just under US$83.50/bbl. Both represent about a +50 USc rise.
The Kiwi dollar opens today giving up yesterday's ½c gain and is back to 71.2 US. Against the Australian dollar we are marginally firmer at 96.6 AUc. Against the euro we are lower at 61.5 euro cents. That means our TWI-5 starts today at just on 75.
The bitcoin price has stayed high and is now at US$66,719 and a +1.0% net firming. Volatility over the past 24 hours has moderate at just over +/-2.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
106 Comments
The bankers, ruling elite, and the sheeple think that the Aussie and NZ economy are largely immune from what's happening in China. Only time will tell.
JP Morgan estimated in a report last month that Evergrande’s net debt-to-equity ratio would be 177%, instead of 100% as reported, if all such de facto debt—including commercial paper, wealth-management products and JV guarantees—were included. And, in fact, the actual leverage ratio could be even higher since evidence of some off-balance sheet debts may not be publicly available, the bank said.
Fears of hidden debt have sent bonds of developers that were previously considered safer plunging too. Country Garden’s dollar bonds due in 2022 have fallen to 90 cents on the dollar, according to FactSet. They were trading around par two weeks ago. The surprise default of Fantasia last month caused a bond-market panic since the developer seemed capable of repaying—at least on paper.
https://www.wsj.com/articles/bad-news-chinese-property-debt-is-even-hig…
"it looks like (Evergrande) just sold a subsidiary for about US$140 mln to Tencent, another large Chinese company"
Not a surprise. That's' how China will handle any losses - the rich will absorb the debts of the insolvent. Besides, Pony Ma doesn't want to join his namesake on holiday in Mongolia - or wherever Jack is.
UBS has estimated that a slowdown in China’s property market is likely....to spark a contagion that could wipe $1 trillion off global growth....In the bank’s more severe downturn scenario, that figure could double...
https://www.telegraph.co.uk/business/2021/11/09/china-property-crash-ri…
Hmmmm...
It might be surprising to hear that, despite everything which has happened this year, including geopolitical tensions between the US and China, talk of potential war and the increasingly abysmal picture that the media has painted of China’s economy, the country is for the second consecutive year on course to be the world's highest recipient of foreign direct investment (FDI). Well, at least according to the Global Times, anyway, which states FDI into China for the year of 2021 has amounted to $160 billion. The statistic is credible, being around that of the previous year, when it received about $30 billion more than America. Link
BTC explained...pretty funny
https://www.reddit.com/r/Bitcoin/comments/qp3z2r/comedy_boomer_video_on…
Ha that was great!
Apple CEO Tim Cook has revealed that he personally owns both Bitcoin and Ethereum.
“I think it’s reasonable to own it as a part of a diversified portfolio.”
https://techcrunch.com/2021/11/09/apple-is-looking-into-cryptocurrency-says-ceo-tim-cook/
Coming to us all? (Translation: Central Banks are going to continue to 'manage' interest rates, and 'up' won't be it)
Britain's growth forecasts have been slashed...The economy will grow by 6.9pc this year before slowing sharply to 4.7pc next year, 1.7pc in 2023 and around 1.3pc per year after that....(economists) downgraded its predictions for every year from 2022 onwards....“If inflation were to rise quite sharply there would undoubtedly have to be a sharp rise in interest rates which would increase the household interest burden, shock consumption and might cause a recession. We definitely want to avoid that, so it is very important the central bank does manage the path towards lower inflation more proactively.”
https://consciousnessofsheep.co.uk/2021/11/08/beyond-the-green-false-de…
"The problem with the Green New Deal is that it promises to change everything while keeping everything the same. It promises to switch out the energetic basis of modern society as if one were changing the battery in a car. You still buy a new iPhone every two years, but zero emissions. The world of the Green New Deal is this world but better—this world but with zero emissions, universal health care, and free college. The appeal is obvious but the combination impossible. We can’t remain in this world.”
This is what we need to be discussing - rather than 'confidence surveys' of the uninformed (and they are).
“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. This very kindness stings with intolerable insult. To be "cured" against one's will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.”
― C.S. Lewis, God in the Dock: Essays on Theology (Making of Modern Theology)
We should have no expectations of teachers? Surely the minimum expectation is that they are educated, capable and law abiding, and that they aren't going to unnecessarily spread fatal diseases. Ideally they wouldn't have to force this, anyone in the education or health industries that doesn't want the vaccine should just quit on their own accord and find a job where they don't work with vulnerable people.
Maybe they should allow some robber baron schools too; but I will certainly be sending my kids to the omnipotent moral busybodies ones.
Kids are not vulnerable bro. The median age of covid death in Oz is higher than average life expectancy - the leading comorbidity is dementia not bed wetting.
"Sweden was one of the few countries that decided to keep preschools (generally caring for children 1 to 6 years of age) and schools (with children 7 to 16 years of age) open. Here, we present data from Sweden on Covid-19 among children 1 to 16 years of age and their teachers. In Sweden, Covid-19 was prevalent in the community during the spring of 2020.3 Social distancing was encouraged in Sweden, but wearing face masks was not.3
...The number of deaths from any cause among the 1,951,905 children in Sweden (as of December 31, 2019) who were 1 to 16 years of age was 65 during the pre–Covid-19 period of November 2019 through February 2020 and 69 during 4 months of exposure to Covid-19 (March through June 2020) (see the Supplementary Appendix). From March through June 2020, a total of 15 children with Covid-19 (including those with MIS-C) were admitted to an ICU (0.77 per 100,000 children in this age group) (Table 1), 4 of whom were 1 to 6 years of age (0.54 per 100,000) and 11 of whom were 7 to 16 years of age (0.90 per 100,000). Four of the children had an underlying chronic coexisting condition (cancer in 2, chronic kidney disease in 1, and hematologic disease in 1). No child with Covid-19 died."
https://www.nejm.org/doi/full/10.1056/NEJMc2026670
https://www.health.gov.au/resources/publications/coronavirus-covid-19-a…
Yeah OK I get that, and that is why we will send our kids back to school when we are allowed to do so. But I still have an expectation of their teachers, I don't think this is an unreasonable one.
If Ebola was spreading and there was a vaccine would you send your kid to school with an unvaccinated teacher because that is the teachers right?
Relax.
"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"
Really? Dying is not the only possible outcome of catching COVID. Studies are emerging that identify legacy impacts of catching but surviving. COVID is primarily identified as leaving blood clots through the body, especially the lungs, but other internal organs too. Autopsies show them in the brain. So if a kid catches COVID a possible outcome will be lifetime debilitating effects that may significantly impact their lives, even abbreviate it somewhat.
Think a little like polio. I knew a number who had had polio while growing up. It didn't kill them, but did cripple them, and they all died comparatively young. Not an outcome I want for my kids or grandchildren.
Must have been one of the lucky ones. One of the ladies I knew spent a while in an iron lung, and died in her late fifties, but lived with a tortured body. The others i knew all died before their mid 60's. all of them carried some form of debilitating impact of polio, but then other factors may have killed them too.
Just like covid affects individuals differently, so too did polio. I have an Aunty, 90yrs old, who had polio, still alive. I knew another lady who had a 'claw' hand who lived into her 80's. A farmer near here, arm/hand polio affected, is still able to work on farm, in his advanced years, with some help.
The stats from NSW actually showed the virus didn't move efficiently between the kids. 1.8% chance of an infected pre-schooler passing it on to another pre-schooler. Which is amazing when you consider the amount of communcal licking and chewing that goes on in a pre-school. An infected teacher was a much larger risk.
I think you need to disassociate their vaccine status from their competency and capability.
The science (and the DoH) have confirmed kids are incredibly low risk.
Would you rather have a great motivated, enthusiastic, passionate unvaccinated teacher educating your kids? or a vaccinated lifer just collecting their pay?
So you're more likely to transmit it to them asymptomatically if you are vaccinated, and as you say, the vaccine is not perfect so if they had it, say, 5 months ago, the chances of them catching it is increased And if they have underlying conditions like cardiovascular problems then you can whack on an extra 10% to the mortality rate. The real story is the coming tsunami of vaccinated superspreaders who don't even know they have it and go visit grandma.
I'd say the state of Israel would be exhibit A.
And this
That's a false dichotomy. Why would a motivated, enthusiastic, passionate teacher be unvaccinated? More likely the other way. Like that teacher on the news in the rural school that is going to stick with at home learning. 'Oh i want to get vaccinated, i'm just so busy i haven't had the time' yeah right.
https://www.rnz.co.nz/news/national/455243/covid-19-all-staff-at-small-…
JimboJ - in the UK only care home workers are required to be vaccinated. They are only now considering requiring front line health workers, and social care workers to be vaccinated. No mention of teachers.
https://www.reuters.com/business/healthcare-pharmaceuticals/countries-m…
If a very fatal Ebola was spreading and there was a vaccine would you send your kid to school with an unvaccinated teacher because that is the teachers right? Honestly?
During pandemics there will always be a trade off between rights and public health. In this case we have a virus that has caused the whole world to go into lockdowns (which seems very much against your right to free movement), so yes I expect a real leader to make the brave call to put public health ahead of rights at the moment.
So now Covid is the same level as Ebola? Give me a break, covid is many times closer to the flu (and people decry that comparison all the time).
Two years ago you would have no idea on the overall vaccination status of teachers. Let alone a specific vaccination. Did you ever keep your children home because the teacher didn't get the annual flu jab? Measles Jab? Chicken pox?
I think that is my very point, that there is a public health level where rights go out the window. For you Covid isn't at that level, its just a flu, we should just get on with it. But most health officials disagree, they call it a pandemic, and they think it is bad enough to lockdown entire countries to prevent it spreading and breaking the health system. So yes I think a vaccine against a pandemic is much more important. I probably wouldn't keep my kid home if it wasn't mandatory, but I can see why the government would want to make it mandatory because many others would.
Very important debate. Are you an anarchist Scarfie?
If the answer is no, where then do you place limits for societal safety? You've been in the military and Police, so you will have a pretty good understanding of these concepts.
Health is a component of societal safety. Someone careless of others health while they are infected with an infectious disease is no less a threat than the drunk driver. One is just a little more obvious than the other.
You are right about this being an important debate!
For societal safety to trump civil liberties, we should demand open debate!
But debate has been shut down by the Government and the media.
If you can not question, then it is not science, or health, it is dogma.
Health is a component of societal safety. Someone careless of others health while they are infected with an infectious disease is no less a threat than the drunk driver.
We are very selective with this though, I have yet to come across an employer keen on people taking sick days, but just the flu kills roughly 600 people a year in NZ, are they being careless of others health?
I agree we are selective. Indeed it is a point I have tried to make a number of times before. We have developed a cultural attitude towards the cold and flu that is not healthy, individually and well as societally.
Some years ago i ran a team of 23 staff, taking over it mid autumn. Very quickly I lost two thirds of the team to cold and flu, which seriously hampered my production targets. The cause was this attitude. Someone would be coming down with something, but would not be particularly sick so would still come to work. When they finally did get sick enough, they took time off. So coming to work while they were infectious - they spread it to everyone they worked with! When they finally took time off, instead of just a few days, because they were quite run down they took more than a week to get over it.
The following year, when i noted one of them looking like they might have something, maybe just a sniffle, or looking a little red around the face. i kicked them out, sent them home until they were over it. 99% came back withing three days. I lost less than 5% of my staff.
In numbers - sending one person home early meant I would lose maybe 24 man hours. Letting them infect the eight to 10 they worked with, and taking longer off to get over it meant the man hour loss potentially extended to potentially around 500 hours or more. I initially got some grief from my managers about it, but at the end of the season they all came to me to ask what i did to limit the lost time.
So I have a civil right to drive on the right, Scarfie?
I agree with a lot you say, but not on this one. Those who stay unvaxxed are going to clog our whittled-down-by-neoliberal-idiocy health system. Maybe overrun it. That's just a fact, and many in the profession are admitting they probably don't have the capacity. I know a lot of folk who have - and have had, thinking of a mutual acquaintance who recently passed away - a need for that system to be unclogged.
I'm one who tends to rely on my immunity - take reasonable care re diet, activity, health. But this is a social obligation; even if there is a minor risk of reactions to the jab, the gains outweigh the risks (and billions of people have had the jab - enough for negative stats to be appearing); it's just the right thing to do, as a member of society.
And, as you know, my views on the longevity of the current social construct are not particularly optimistic.......
"Those who stay unvaxxed are going to clog our whittled-down-by-neoliberal-idiocy health system. Maybe overrun it."
The DoH has already addressed that, and he was pretty clear. The health system will not be taken down by the remaining unvaccinated, as they don't fit the demographics that are prominent in Covid hospitalisations.
What do you mean by 'works'? It reduces your chance of a variety of negative consequences, including death, but about an order of magnitude, and seems to reduce your chance of spreading the disease after being exposed to it by maybe 50-75%. Both sound like it is working to me.
Is it the best vaccine we've ever developed? Absolutely not. Is it the best we have in the situation at the moment? Absolutely.
The risk/benefit ratio of the vaccine for adults in unquestionable. For children, I expect it's still positive but much skinnier.
Scotland data didn't include asymptomatic spread
Israel data was before Delta - how convenient
Dutch study preprint managed to massage 11% secondary attack rate to vaccinated household members from vaccinated index cases and 12% SAR to vaxxed household members from unvaccinated index cases into an astounding 40% effectiveness against transmission after jumping through age related adjustments. Which to me suggests if you are old, it counts way more than if you're vaccinated.
How about this:
https://www.scivisionpub.com/pdfs/us-covid19-vaccines-proven-to-cause-m…
Had a look at your link. Firstly, not a reputable looking journal (no impact factor rating I could find), but I had a quick dig regardless.
The paper itself is bordering on hysterical. I followed up the Moderna paper links and trial protocol. The majority of severe events we're talking about here are things like a painful arm lasting 2-3 days and requiring use of painkillers, and fatigue preventing daily activity, again lasting a few days. Over the 15,000 odd patients receiving the vaccine there were zero grade 4 events (requiring emergency room visit or hospitalisation).
This is just the side effects of the vaccine we all know about. I was tired for a day and had a sore arm for a day. My brother caught covid and was knocked out for a few days and exhausted for a month. These things are not comparable.
Compare these limited side effects are zero hospitalisations over 15k people to our current outbreak where unvaccinated cases have a near 10% hospitalisation rate.
Importantly - the Moderna trial only ran long enough to catch a couple of hundred covid cases in the control arm (vs 11 in the vaccine group) and covers a couple of months after the vaccine date. The mathematics would change drastically if you wait long enough for the majority of the unvaccinated to catch covid with all the associated nastiness, while the vaccinated forget about their sore arm and get on with their lives.
Thanks for the reply. I think in time you'll find, if we can find studies that we agree on methodology, especially now they will jab the kids, that the collateral damage from the vaccine is going to outweigh the damage from Covid. Just a hunch. Not scientific. I think if you're old, or have underlying conditions, get jabbed otherwise just live healthy like every other year.
I'm open to the possibility. As with most of the pandemic response we're all doing our best using the evidence we have. For now I'm happy to defer to the FDA regarding childhood vaccination but as I said elsewhere in the thread, I think the risk benefit ratio will be slim (at least on a per-patient rather than population basis).
I'd go a little broader - if you're an adult or have underlying conditions, getting jabbed is a clear winner.
Show me the death stats, or the hospitalisation ones or even ICU stats that show it "targets" the unvaccinated. I think you will find (and Dr Bloomfield has confirmed) it primarily targets the old and critically ill.
I can therefore see a bonafide health requirement for the need to vaccinate rest home workers, or those that come into contact with the elderly on a regular basis. I can even understand it in healthcare to a point (GPs maybe, but Physios? midwives?)
I see no real medical requirement why it would be required in Hospitality, Schools, and every other aspect of day to day life? How may 90 year olds are in school? at the local nightclub? or hanging out at an event like RnV?
Giving away such a fundamentally important right as a knee-jerk reaction to a single virus is just tragic. Destroying the future of countless young and middle aged people because they wouldn't get a jab is nothing short of a catastrophe.
No problem, here are the stats for the outbreak to date and the evidence is overwhelming.
Fully vaccinated cases in total are 396/4666.
Fully vaccinated people hospitalised total 9/305, and that number has been skewed higher by the outbreak in the rest home where some of the fully vaccinated but very frail have been hospitalised, as you would expect.
https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-no…
Jimbo
Re teachers not taking vaccine and losing jobs.
I wouldn’t be surprised if rhetoric and reality prove to be different.
Would be consistent with well practiced behaviour during numerous stands in past pay negotiations.
Will be interesting to see who backs down in this case as a compromise in a black and white situation would seem to be impossible.
the only problem i have with the argument for people to not being vaccinated is we have no alternate vaccine available that a GP could administer, we have two more approved in NZ, but would like to see novamax approved so then that part of the discussion disappears and only the true anti vax are left,
then the discussion becomes a whole lot different with if you want to not vax than you will need to test quite often to do certain things and you will have to pay for your own testing
https://www.nzherald.co.nz/nz/auckland-council-releases-images-of-labou…
"Labour and National are on the path to building slums, says Phil Goff.". The old slum argument eh. Makes you wonder why people are prepared to pay so much for these slums in Tokyo, London, New York, etc, would those places be better off with freestanding houses on quarter acres?
Americans are, however, using their credit cards more, an updated report on total household debt showed. But credit card debt is tiny compared to mortgages, and lower than both car loans and student debt. Still credit card use is more volatile and a marker for consumer confidence.
US Credit Card Debt Soars Back Over $1 Trillion As Pandemic "Excess Savings" Run Out
When looking at the latest debit and credit card spending data out of Bank of America two weeks ago, one thing stood out: usage of credit cards among the lower income cohort has spiked with a 23% growth rate over a 2-year period, up from the summer average of 15%. This surge in credit card usage came at the expense of debit card spending growth which has slowed notably over the last several weeks. In turn, this was the result of various emergency stimulus programs expiring at the start of September, which meant far less cash in various deposit/checking accounts, and also meant the go to funding source would be America's favorite: credit cards.
they are intertwined at the moment, the government has put a line in the sand and said unless this many people get the vaccine we will not allow the economy to reopen fully, costing people employment, some small business to fail other to take on debt , not to mention the debt the government is taking on.
so any discussion over the economic conditions in NZ has to include a vaccine component as that is depending where you sit the thing holding us back or the thing that will allow us to roar back into economic good times and growth.
my biggest bug bear is the millions they are wasting on MIQ hotels and they should have pivoted those funds to build two new hospitals each end of auckland to use for now to house positive covid patients that in the future would have reverted to hospitals to accommodate aucklands growth, a wasted opportunity and wasted taxpayer funds propping up private hotels
Agreed, its a veritable feast for purposefully argumentative troll-types. "oh don't shut down free speech" <even if I could educate myself if I tried>
I have however failed to stay out of it so I will look in the mirror and apologise for the way-off-topic malaise.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.