Here's our summary of key economic events overnight that affect New Zealand with news the IMF is highlighting 'downside risks' in the Chinese economy.
But first, we should note that the Biden Administration is about to decide whether to reappoint Jay Powell as head of the US Fed, or switch to one of his deputies Lael Brainard. There is a lot of lobbying underway at present and a decision is promised in the coming week, possibly this weekend. Brainard is viewed as more dovish than Powell, and the financial markets will price that in if she is chosen.
The global supply-chain issues seem to be easing. Not only are key freight rates retreating (slowly) on shipments out of China, but the backlog of ships waiting to unload at key US West Coast ports has halved. And Administration efforts to clear these ports seem to be working, even if there are a few rough edges. Efforts to recycle empty containers with sweeper ship voyages are helping too. The holiday season rush will naturally ease as well, so the worst may be behind us. But the effective closure of Vancouver is a complication, and holiday shopping miscues will still probably happen. These North American resolutions will quickly ease pressures elsewhere in the global chain.
In the US Congress, the House has approved a broad US$2.1 tln social support and climate measure that would, among other things, 'invest' US$500 bln in climate measures, and raise health case and child care support. It faces a difficult path through Senate approval.
Canada's retail sales fell in September from August, but not by as much as was expected. Car sales were the softest category, but that might be because of supply-chain restrictions. Analysts think overall retail sales recovered in October.
In China, Alibaba shares have slumped by more than -11% after the online retail giant warned of a slowdown in consumer spending. But it is still posting double-digit growth year-on-year of +10% in its quarterly results. The company also said it expects its annual revenue to grow by between 20% and 23%, but that is lower than analysts' forecasts.
And China’s fiscal revenue fell in October for the second straight month as their economic recovery slows, but fiscal spending returned to growth. In particular, the government’s revenue from land sales slid for the fourth consecutive month.
Meanwhile, the IMF is noting that "downside risks are accumulating" in China as it's economy slows.
That doesn't seem to be putting off investors however. Inbound FDI is rising, even if it is off a pandemic-affected base which makes it look better that it otherwise is.
Australia's coal industry is facing a challenge that is undermining its customer base and one that was thought to provide solid demand for decades. The Asian Development Bank (ADB), lender HSBC and the philanthropic foundations of Amazon founder Jeff Bezos and the late John D. Rockefeller, as a group, is offering substantial inducements to governments in south-east Asia to shut their relatively young coal-fired plants and replace them with low-emission alternatives. Coal customers in the Philippines, Vietnam, Indonesia and Pakistan are lining up to be part of the plan.
In Australia Delta cases in Victoria have risen to 1273 cases reported there yesterday. There are now 13,813 active cases in the state and there were another 8 deaths yesterday. In NSW there were another 216 new community cases reported yesterday, another drop, with 2,840 active locally acquired cases, and they had no deaths again yesterday. Queensland is reporting zero new cases again. The ACT has 17 new cases. Overall in Australia, just under 84% of eligible Aussies are fully vaccinated, plus 7% have now had one shot so far.
The UST 10yr yield opens today at 1.54% and -4 bps lower than this time yesterday. The US 2-10 rate curve starts today flatter at +105 bps. And their 1-5 curve is little-changed at +106 bps, while their 3m-10 year curve is a much flatter at +144 bps as short rates rise. The Australian Govt ten year benchmark rate is -4 bps lower at 1.77%. The China Govt ten year bond is still unchanged at 2.94%. The New Zealand Govt ten year is -1 bp softer at 2.59%.
In equity markets, the S&P500 is up another +0.2% on Wall Street in their afternoon Friday session and heading for a minor +0.5% gain for the week. Overnight, European markets were all down about -0.5%. For the week, Frankfurt was down -0.3%, Paris was down -0.3%, but London shed -1.7%. Yesterday the very large Tokyo market closed up +0.5%, to limit its weekly loss to -0.2%. Hong Kong closed down -1.1% to cap a weekly drop of -1.5%. Shanghai closed up +1.1% yesterday ensuring it had a weekly gain of +0.5%. The ASX200 ended with a minor +0.2% gain but a weekly loss of -0.6%. The NZX50 was down another -0.5% yesterday taking the weekly retreat to -1.3%.
The price of gold will start today down another -US$15 to US$1846/oz, an -0.8% dip for the day and almost a -1.0% fall for the week.
And oil prices are -US$2 lower at just under US$76/bbl in the US, while the international Brent price is now just over US$78/bbl. These represent a -4.5% or -US$3.50 fall for the week.
The North American rig count is keeping on its relentless recovery. It is now hack to April 2020 levels when it was starting its collapse. At the start of 2020 800 rigs were in operation. It fell to just 244 in August 2020. But since then it has risen consistently and is now back at 563.
The Kiwi dollar opens today marginally softer at just under 70.2 USc. That is little-changed in a week. Against the Australian dollar we are holding at just under 96.7 AUc. Against the euro we are at 62 euro cents, also little changed since yesterday but up +½c in a week. That means our TWI-5 starts today at 74.7 and very similar to week-ago levels. But it is -60 bps lower since the start of the month.
The bitcoin price has recovered somewhat since this time yesterday, up +1.5% to US$58,337. A week ago however, it was US$64,037, so a -9% net fall since then. Volatility over the past 24 hours has been moderate at just over +/-2.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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53 Comments
Personally, I'd be going long plywood window panels this weekend if I lived in The States, but...
"Brainard is viewed as more doveish than Powell"
(An opinion - CH Smith)
Anyone who doesn't max out borrowing and leverage is a loser. But let’s remember, risk isn't extinguished, it's only transferred. The question is: Where did all the risk end up? If net worth had tracked GDP growth since the peak of the dot-com bubble in 2000, it would be about $107 trillion; 53 trillion below current levels. This can be understood as the $53 trillion in phantom ‘wealth’ generated by leveraging up the Federal Reserve's balance sheet since 2008. If $53 trillion of phantom collateral evaporates, the pyramid of debt and leverage will collapse, endangering the entire financial system. Predicting the bottom is difficult when any system collapses. Historically, 400% of disposable personal income /net worth could be a reasonable guess. If disposable income craters, net worth will adjust accordingly. (Currently the ratio is over 800% so a halving of asset values does not seem unreasonable)
I was thinking on this recently,
How little economic sense is made in a “zero” risk free rate environment. Pensioners expecting fixed income investments in retirement have been let down. Those trying to establish themselves through the income of their labour. Etc…..
Excessive risk taking has had to step into the gap. Crypto wouldn’t be a meme with a 5% TD rate.
The only way to unwind this will be for asset holders to take a haircut to rebalance the reward of production. It’s going to be painful and their will be losers but it’s a necessity, lest we march on to corporate feudalism.
First reflex response: Why should I take the haircut so people can get better TD returns on the cash they made by scaling back the state and going hog-wild on migration pressures and untaxed property gains?
Measured response: I think if my house value dropped by 40% it would still only be getting close to what I paid for it two and a half years ago.
Unfortunately this would be another situation where those unfortunate enough to be a certain age are left holding the bag when the music stops. There would have to be some fairly hefty consideration given to this, unless you want to try running an economy where the biggest spending cohort is replaced by one that acts like they're living through the Great Depression over time.
I wrote this in a rush, so it’s not perfect. My point was less about TD than the zero rate.
It creates perverse outcomes, I.e rewards speculation rather than productivity.
My point is that the best way to get the economy moving again is through people producing value and not continuous injections of debt. In doing that it’s going to swing the pendulum of advantage from the rentier to the productive.
Certainly is a bit perverse. We've had too many in charge who seemed to view the "wealth effect" of rising house prices (rising debt) as a good thing. Rather than consumption powered by creating value and being productive, we've used more and more debt and kept celebrating that.
If we'd just run up government debt and handed out lots of direct welfare to the already wealthy it would've been more obviously recognised as foolish. Because we've put houses and banks in the middle we seem to have had more success pretending it is sensible. All the while we've been ramping up more and more debt handed on to the next generations.
Not so much being productive and living within one's means.
The problem is we're so far down this road that the problem has been shifted from the people who caused it (and who have since cashed out) to those who were younger who just needed to get on with their lives. They're now the ones who will be taking the haircut in both wealth and lifestyle, and the economy needs that big chunk of people to keep spending like they do now. If it goes south, wallets will slam shut as people find themselves trapped in either negative equity or unable to finance a move to another house should they need to for families, schools, etc.
There's no easy answer here, unfortunately.
Interesting to see Australian coal customers at risk ultimately this is often the case when an industry is unacceptable that they are left isolated other industries should take note if your product is unacceptable to your customers no amount of bluster will change that you need to change your product or exit the market . Some agricultural producers should take note .
Coal is not going anywhere if we are still using electricity and making steel. Its simply never going to be replaced for decades. The problem is to many people on the planet ripping through resources that will ultimately try and kill us in the long run. Its an unavoidable train smash, the only question is when. If were were truly a smart civilization the world population would be a quarter of what it is now and the current resources could be made to last 10 times as long giving us time to evolve the technology to survive for a 1000 years, but that's not going to happen.
Carlos67
I agree that overpopulation is the worst contributor to climate change, exactly as David Attenborough thinks. David Attenborugh is the new Edmond Hillary. He's the only person in the world I would trust on climate change.
The Brazilians are clearing the Amazon rain forest at an ever increasing pace, just as the pre-Europeon Maori burnt all the East coast of the South Island native forest to hunt Moa
While I agree with most of what you say, I do not like how you've set out to paint Maori as somehow comparative to modern Brazilians burning the Amazon (it's definitely not the inhabitants of that forest doing it) and completely leaving off the incredible destruction by Europeans in NZ, who are far more like the modern Brazilians than pre European Maori.
It will become a very niche product. Check out the RethinkX report on Food and Agriculture http://bit.ly/rethinkag
We have already discussed RethinkX's absurd predictions here at Interest.co.
From Wikipedia:
....critics argued that RethinkX's motivations were tainted by greed. North Dakota State University livestock economist Tim Petry noted in the Australian beef industry magazine Beef Central that RethinkX's report "was written by Silicon Valley hi-tech people who want to lure billionaire investors to invest in their companies. That's the case with anything. When you have something very dramatic, it's easier to get it in the papers than a report that says meat production is going to increase 1pc a year".
A spokesman for the US's National Milk Producers Federation told FoodNavigator that "This report would have you believe that in 11 short years we will be living in The Jetsons, with consumers massively adopting industrially-developed, untested food-like products on their way to vegan fantasyland." Martin Cohen and Frédéric Leroy noted "We should recall Marx's warnings against allowing the interests of corporations and private profit to decide what we should eat"
People aren't going to eat that rubbish. The trend is more toward unprocessed food and pasture fed meat is a big part of that.
Yes I agree strange that conversation around population is so unacceptable put it down to religion and woke issues but it definitely needs addressing look at our own government and its reluctance to discuss immigration. The time has come when each country needs to have a look at its carrying capacity and not rely on exporting its overpopulation problems to others .
It's not the population. It's the human greed mate. It's the feeling that it's mine and i own it. But a foolish human doesn't know that he doesn't own nothing. Hands were empty and nude when born. Well have empty hands when will be burned or buried. No one says at the time that wait I will also die with you. They even remove anything of importance from the body.
So our greed and love of things is the main problem.
Reality check, greed or others prefer to call it ambition is human nature and your never going to get rid of it. What you can control however is the population of New Zealand to quite a large extent. You set dates and limits and just control immigration. We are pretty hard to get to and have no land boarders so a reasonable level of control could be maintained even if the world went to hell and the illegal immigrants started trying to get here.
"We are pretty hard to get to and have no land boarders ..."
Very true, but........
If push come to shove, and someone BIG wants our Land, and turns up en masse, how are we going to stop them landing; taking over? We don't even have the capacity to shoot more than 1 plane of the air at a time, never mind about stop them disembarking!
The days of isolation and distance being part of our defences are long gone.
That’s when the phone goes in Washington & Canberra. Hey remember us. Distance still helps. Moving troops by sea, slow easy targets. By air not much better, refuelling difficulties. No Pearl Harbour these days with all those satellites & 68 nuke powered subs still counting, Uncle Sam ain’t likely to miss much.
Ah, yes. Activate AUKUS.... Now. Let me think....
It doesn't have to be troop ships, either. What are we going to do if 10 'refugee' ships head our way? Bomb them? Protect all of our ports and repel all boarders? I know! Ship em' off The Chathams - make them our Christmas Island!
Think the Polish/Belarus border, but with real intent... maybe even Mexico/ USA?
As I suggested, isolation isn't going to be much protection if anyone wants in. Our mechanisms of protection are theoretical, at best.
As per the previous commenter. Polish/Belarus, Mexico/USA are are hard, land borders. The ocean is something else. Do believe NZ & NZrs are at least up to repelling 10 freighters worth of refugees actually masquerading an invasion force. Australia is vital to the western alliance and therefore so is the security of its eastern seaboard. An extreme stretch to speculate that NZ could be overwhelmed in its entirety by a distant invasion force without any intervention by those powers that would have a negative and disinterested attitude to that result.
And yet we've already been 'invaded'?
Did we see the threat that China posed 20, 10, years ago? Nope.
Go to Queenstown and ask Jim Boult if he'd' prefer to have 1,000 fellow Kiwis as guests or 10,000 members of the CCP in his hotels.
Did we see how reliant we are on modern communications? One flick of a switch, and then what do we do?
Did we see what reliance we've placed on foreign supply chains? Nope.
Did we see how reliant we are on the power of Debt Creation to sustain our economy? No.
And my suggestion is that we are just as naive to think that a patch of water about our border is going to be any barrier to future change.
That's19th Century confidence; 20th at best. 20 years ago, you needed a boat of some capacity to even cross The Tasman. Today you can do it on a jet ski.
And I'll restate my view - anyone with intent; someone with, say, hypersonic weaponry, that wants to come in, will.
Boots on the ground is an entirely different arena. That hypersonic technology would have much greater targets as a priority. No intelligent administration embarks on a far flung campaign to the far south east of the world without creating and securing salients along the way. Could it be that an invasion force could bypass unnoticed, Taiwan, Japan, Hawaii, Guam, Midway, & launch a surprise attack on NZ and quickly subjugate the population and leave those bases fully operational in your rear. And then what precisely. What the hell would that add up to strategically in terms of global power. A supply of milk, meat and a gateway to Antartica.
In 1949 the Government of the Republic of China embarked on a defensive manoeuvre to relocate to Taiwan. Why? Because it was an island, protected by the sea, that made it improbable that it could be invaded by its enemies of the time. It worked. Do we think that still applies today?
'The Sea' enabled all sorts of developments to occur that wouldn't be possible today.
Times have changed. No one even sees a stealth bomber on the radar screen today. And even that is 'yesterday's technology'.
Boots aren't needed on any ground - none. And why would they want to come here? Ask Shania Twain or Mutt Lange or Peter Thiel etc. - because they can.
The location escapes me at the moment, but didn't we read recently about a large Taiwanese campus in rural New Zealand, lying empty and in pristine condition, just waiting for resident to arrive? It's there for a reason.
Oh, you have been meaning invasion by infiltration and subversion? Well yes. Imagine for a start such forces are reforming, strengthening right now in Afghanistan. Very true. Just a handful of pre loaded virus laden individuals jetting to any part of the world. And yes the Chinese did inherit Unit 731 from the Japanese in 1945. Hard to sleep at night isn’t it.
This conversation started with 'immigration" and "our borders making it hard to get to" and has gotten slightly off track!
One of my previous fathers-in-law was OIC of the RNZAF; fighter pilot during the Malayan Emergency - stationed at Butterworth and ended up at the top behind a desk in Wellington, and many a conversation over beers at his BBQ have given me a different perspective to many on what NZ can and can't do if it gets sticky. So, perhaps I've wandered too far away from topic. Cheers.
Actually BW always enjoy your comment &dialogue. Yes we are speculating. Bit before you though my father was WW2 RNZAF and at a time, seconded to US General Thompson’s intelligence unit in Fiji. By the end an acting Group Captain, but then gave up flying full stop. Unfortunately probably never disclosed all he had experienced/learnt but one thing he excelled at was in regard to information, knowing what was important and where to find it. Every point of the compass is there for a reason.
Yes. Ship anybody who attempts illegal entry into New Zealand offshore immediately. Manaus?
Australia did this and immediately stopped the boats. 2000 people died in the Indian Ocean up to then, but not after. Yes 2000 died.
Meanwhile our clueless Labour governments and assorted woke attempt to undermine the Australian approach. Apparently they want the drownings to recommence.
Bottom line for me. No more population growth in New Zealand.
Bloody shame that sort of attitude didn't prevail a few hundred years ago, then Europeans would have understood how wrong it was to invade other countries and just take them over as if they had a born duty to do so.
Settlers who came here (and went to America, Africa and Australia) were doing exactly what refugees from other countries are doing now, looking to escape whatever hell their own country is, in search of something better.
Apparently they want the drownings to recommence.
It's not a matter of wanting people to drown. They will say anything that is politically expedient at the time. I imagine Machiavelli would advise modern politicians to be "woke" when it suits even if it means more casualties. That would be Machiavellian.
It is all to do with money not distance.
In August 1511 the Portuguese conquered the city-state of Malacca (the spice islands). In 1497-1499: Vasco da Gama was the first European to reach India by sailing from the Atlantic to the Indian Ocean. So only 12 years from total ignorance to invasion of a place literally half a world away. Malacca is a trivial distance from the island of New Guinea - that only became European colonies reluctantly and centuries later.
Papua ""In 1883, the Government of Queensland annexed this territory for the British Empire. The United Kingdom Government refused to ratify the annexation but in 1884 a Protectorate was proclaimed over the territory, then called "British New Guinea". There is a certain ambiguity about the exact date on which the entire territory was annexed by the British. The Papua Act 1905 recites that this happened "on or about" 4 September 1888.""
I hear what you're saying. But my father retired at 65, and he's 90 now. He's been living on Social Security (U.S. super) for 25 years, it doesn't cover the rent plus expenses so I help him out the best I can. My mother is 75 and still working. My grandparents had to give up their nice apartment and move across the U.S. to find somewhere affordable to live, both were dead within the year. I see similar outcomes here. It's very sad and undignified. So why wouldn't I or anyone try to build up a nest egg for those later years or a buffer against misfortune or misguided monetary policy? Not to mention helping our children out in getting in their own homes?
Human greed. Goes back to King Midas through to Scrooge McDuck. Embedded won’t ever vanish. Take Rhodesia. The greed of founder Rhodes. The even greater greed of the great redeemer Mugabe. In between times the greed of exploiters such as Lonrho, Tiny Rowlands. At any level, wherever there is gain on any scale, greed rides close alongside. Fact of life long before history was ever recorded.
Agreed. Most people have little desire to be wealthier than their family and friends but they do want to be appreciated for being better at doing things - it is just natural to be competitive. Greed certainly exists and is powerful but if it was the only motivation then all charities would have to shutdown.
Deluded Crypto fans who think that they are really the world's future must had been sorely disappointed.
Premium required over fanatics, PoF = $3.2M.
Well done Griffin!
The US rig count is certainly looking healthy for the industry but you've also got huge orders going into aircraft manufacturers for commercial and private aircraft, strong automotive manufacturing orders etc. All signs of a rapid recovery in fossil fuel demand.
Much as to say that "build back better" seems to have really just mean "build back much the same if not more so."
https://i.stuff.co.nz/business/money/300458544/bnz-stops-lending-to-low…
If banks are themselves bringing in tighter LVR and DTI, what is preventing RBNZ to bring in policies officially.
Why the delay. November 24th will come and go with only a warning from rbnz that are keeping an eye...
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