Here's our summary of key economic events overnight that affect New Zealand with news of some improved data out of China, but it isn't all 'good'.
But first in the US, the factory survey for the New York region has maintained its strong situation. New orders and shipments posted substantial increases, and unfilled orders rose. Delivery times were significantly longer. Employment grew at its fastest pace on record, and the average work week increased. The prices paid index held near its record high, and the prices received index reached a new peak. Firms planned significant increases in capital and technology spending.
In Canada, with the re-election of the Trudeau Government, a campaign promise is about to be enacted with a special 3% increase in the tax on financial institutions who make more than C$1 bln in annual profits. They are also about to collect a special fee from them too, called the Canada Recovery Dividend. Both are expected to raise C$2.5 bln per year over the next four years with the monies going into a housing fund to ease affordability.
In Japan, the first look at their Q3 GDP data isn't flash, falling at a -3.0% annual rate after a +1.5% rise in Q2. And that poor result was matched by Japanese industrial production data for September. Since September, however, most Japanese data has improved however.
China's retail sales rose by +4.9% in October 2021, faster than a +4.4% increase in the previous month and beating market expectations of +3.5%. This was the strongest pace of growth in 3 months, as consumption strengthened after pandemic outbreaks in some regions eased. But in a longer perspective, this is ho-hum for China.
Industrial production also shifted slightly higher, and that also beat a tame expectation and the economic expansion remains quite tepid.
Electricity production fell again and has been falling since July. But at least it was +3.0% higher than the pandemic damaged month a year ago. Generation from coal was up +5.2%, from nuclear up +17%, but a big -12% decrease was reported for hydro power generation.
But easing back were Chinese house prices which rose +3.4% in October from a year ago, down from +3.8% in September. But that means they fell in October from September, something that hasn't happened there since 2015. And new construction starts in January to October also fell -7.7%, compared to a year earlier. So both supply and demand eased lower in October, quite unusual for this huge housing market.
Certainly, Chinese steel futures are trading very much lower and the wind goes out of the Chinese property market.
We should also note that farm fertiliser prices are rising and fast, now sitting at record high levels in North America. The same is happening everywhere, and may well spill over into food prices if high input costs curb supply.
In Australia Delta cases in Victoria have slipped to 860 cases reported there yesterday, and a noticeable easing. There are now 17,518 active cases in the state (an increase) and there were another 5 deaths yesterday. In NSW there were another 165 new community cases reported yesterday, another drop, with 2,906 active locally acquired cases (an increases), and they had another death yesterday. Queensland is reporting zero new cases. The ACT has 10 new cases. Overall in Australia, just over 81% of eligible Aussies 12+ are fully vaccinated, plus 8% have now had one shot so far.
The UST 10yr yield opens today at 1.62% and +5 bps higher than this time yesterday. The US 2-10 rate curve starts today +5 bps steeper at +110 bps. And their 1-5 curve is also steeper at +109 bps, while their 3m-10 year curve is steeper too at +156 bps. The Australian Govt ten year benchmark rate is +2 bps firmer at 1.82%. The China Govt ten year bond is little-changed at 2.94%. The New Zealand Govt ten year is -3 bps lower at 2.60%.
In equity markets, the S&P500 has started their Monday session down -0.1% on Wall Street. Overnight, European markets all rose +0.3% except London which dipped -0.1%. Yesterday the very large Tokyo market closed up +0.6%. Hong Kong closed up +0.3%, but Shanghai closed down -0.2%. The ASX200 ended with a +0.4% gain, and was matched by the NZX50.
The price of gold will start today down -US$2 to US$1863/oz.
And oil prices are lower at just under US$79/bbl in the US, while the international Brent price is now just under US$80.50/bbl and down -US$1 from yesterday.
The Kiwi dollar opens today a little firmer at 70.6 USc. Against the Australian dollar we are soft at 95.9 AUc. Against the euro we are firmish at 61.8 euro cents. That means our TWI-5 starts today at 74.8 and slightly higher than this time yesterday.
The bitcoin price has firmed slightly since this time yesterday, up +0.7% to US$64,116. Volatility over the past 24 hours has been moderate at just over +/-2.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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The UST 10yr yield opens today at 1.62% and +5 bps higher than this time yesterday.
The Market Is Signaling That A Scenario Of Sharply Rising Real Rates Is Untenable
We should also note that farm fertiliser prices are rising and fast, now sitting at record high levels in North America.
Green agenda: Now the organized takedown of global fertilizer supply by misled governments?
The global energy shortages which have driven prices for coal, oil and natural gas to explosive highs in the last months are a predictable consequence of the mad pursuit of “Zero Carbon” economic policies that have seen foolish governments subsidize a growing share of electricity from unreliable solar and wind generation. One consequence has been a five-fold rise in the price of natural gas or methane across the globe. That extends from China to the EU, USA and beyond. A follow-on consequence of that natural gas shortage and price explosion is a growing crisis in world agriculture fertilizer production.
No a fan of phosphates.
However, our phosphate based ag system imports this stuff from dubious sources with terrible enviro record and from across the other side of the world. Out of sight out of mind.
So interesting dilemma for the greens when we have a local source, much lower in cadmium - and approval awaits.
The global energy shortages which have driven prices for coal, oil and natural gas to explosive highs in the last months are a predictable consequence of the mad pursuit of “Zero Carbon” economic policies.
Lol what?! The rise in price is due to recent under-investment due to the collapse in price of fossil fuels due to Covid. Why would companies invest on with upstream development when prices are near historical lows? This is a perfect example of your source pushing a false agenda, presumably for their own gain. Don't buy this BS.
See:
Big Oil keeps brakes on spending even with crude rally windfall.
(https://www.reuters.com/business/energy/big-oil-keeps-brakes-spending-e…)
Also:
Where Has All The Capex Gone? E&P Investment Down Despite Rising Prices And Cash Flows
And:
Australia’s oil, gas capex at 12-year low in 2020-21
A legitimate member of the US Government.
In the Senate, the Republican Party briefly held the majority at the beginning of the term. On January 20, 2021, three new Democratic senators (Jon Ossoff and Raphael Warnock of Georgia and Alex Padilla of California) were sworn in, resulting in 50 seats held by Republicans, 48 seats held by Democrats, and two held by independents who caucus with the Democrats. Effectively, this created a 50–50 split, which had not occurred since the 107th Congress in 2001. This was only the third time in U.S. history that the Senate has been evenly split, the first being in the 47th Congress (1881–1883).[1] Link
He's not much worse than those who put up straw-man arguments to avoid the unpalatable.
The reality is that fossil energy is leaving us. As it was always going to. Yes, Climate is a real problem, but it time-lines into insignificance compared to de-powering the planet. Which is why I started here, perhaps 15 pears ago, with this pen-name.
Yes, it is convenient to blame Climate, and via that the dreaded 'greenies'. But we have to remember that a goodly number of 'greenies' still think we can live consumptive lives - just apparently blamelessly. Somehow. Perhaps indigenously rainbowly. Or something. Virtuous anyway, very virtuous....
We are watching the Limits to Growth beginning to impact - energy being the key element. Tainter's Collapse of Complex Systems is a must-read for anyone wanting to be informed; Emmott's 10 Billion is a good backup, and Catton's Overshoot is magisterial.
Contrast that with a lecture a certain economist is going to give Friday, arguing that Climate won't impact finance. Referenced and everything. Go figure.
Pluto you are pretty naive/duplicious to not know the left's agenda has been to make energy costs "sky rocket". Just ask Biden's handler - "Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket"
https://freebeacon.com/issues/flashback-obama-promised-electricity-cost…
Energy costs were always going to increase anyway given we're mostly running off finite energy sources which are getting more financially and energetically costly to extract every day. Even if the fossil fuel industry went 'all in' and developed every single resource, we'd still ongoing get a temporary reprieve in time before extraction costs / limits began to bite again.
Unless there's a big break-through in nuclear technology, less consumption, or a massive scale-up of renewables (which come with their own issues like intermittency) I don't personally don't see this trend changing.
Uranium can now be extracted from sea water at a similar cost to land mining - we are not going to run out of affordable energy no matter how many road blocks the Malthusians throw up.
"However, the oceans of the world contain 4.5 billion tons of uranium dissolved in seawater. That’s enough to last something on the order of 6,500 years.
...In addition, the technique can even use waste fibers for a greater cost savings and that analysis shows that seawater extraction could be competitive with land mining at present prices."
Profile - bollocks - bring back the 'report' key.
Energy underwrites money - 100%. The problem is that we've burnt the best; it's gone. So we're working our way down the worsening options.
One crowd is pretending we can use fossil fuels forever. They're lying.
Another crowd thinks we can morph seamlessly to renewables. They're fooling themselves.
We will indeed end up on renewables, we will indeed rue out Climate contributions, but neither crowd is 'right'. And Biden's agenda is largely entropy-parrying; repair of EXISTING infrastructure. Which was all constructed with fossil energy in mind, and will largely be useless beyond it.
The blue deckchairs are better. No, the green. No, the red. Blue, green red - yellow, FFS......
On seat of the pants Covid policy - "One of the (many) disillusioning aspects of the Covid response of the New Zealand government (politicians and public service) has been the apparent total absence of any use of cost-benefit analysis techniques to help inform thinking about policy responses. No cost-benefit analysis on any aspect of the policy response has ever been published ...– officials have had 22 months now to get toolkits in place. But they (and their political masters) seem to prefer seat-of-the-pants thinking, all with minimal transparency. (On that latter note, it is now three months since the current lockdowns began and not one piece of official advice, not one Cabinet paper has yet been released, despite the enormous economic and social costs of the choices the government has made.)"
https://croakingcassandra.com/2021/11/15/a-cost-benefit-approach-to-thi…
How can you estimate when your hospital will be overwhelmed without some form of analysis. Tighten the lockdown to making every Kiwi a prisoner in their home for sufficient time and covid will be wiped out. Until the prisoners are released and the border reopens. The current rules prevent me having a haircut - that is a small cost to the economy but is designed to reduce the chance of our hospitals being overwhelmed. That article is just asking for any examples of cost benefit analysis made by our govt before it imposes lockdowns, MIQ, vaccination passports, enforcing various professions to only employ vaccinated workers.
How Bad Are Weather Disasters for Banks?
"Abstract
Not very. We find that weather disasters over the last quarter century had insignificant or small
effects on U.S. banks’ performance. This stability seems endogenous rather than a mere reflection of
federal aid. Disasters increase loan demand, which offsets losses and actually boosts profits at larger
banks. Local banks tend to avoid mortgage lending where floods are more common than official
flood maps would predict, suggesting that local knowledge may also mitigate disaster impacts."
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr…
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