Here's our summary of key economic events over the weekend that affect New Zealand with news senior Chinese officials are openly talking about stagflation risks.
A senior adviser to the Chinese central bank said at an online forum it is "very likely" that their economy will be in stagflation if producer prices stay high while demand stays weak, and they are alert to existing risks to their economy being "released too early".
Meanwhile, 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 its 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.
Somewhat related to China, the Global Fishing Index has rated most countries on their work to control wild fishing stocks, and it paints a grim picture. New Zealand ranks a "D" out of an A to F grading system, but only six of 142 countries were graded a "C", none better than that.
In the US, 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 today. 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 healthcare and childcare 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.
Tin, which is used in photovoltaic installations, electric vehicles, and electronics, has hit a new all-time high at US$39,750/tonne on the LME. Stocks of the key commodity are very low. Other commodities that will be key to adapting to climate change, like copper and lithium, are also at or near record highs. There is a 'gold rush' on among miners for these and other rare earth minerals.
But not all miners face positive futures, especially those for fossil fuels. 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.
And staying in Australia, lower auction clearance rates in Sydney and Melbourne at the weekend point to a softening of the housing market amid unrealistic vendor expectations.
In Australia Delta cases in Victoria have risen to 1275 cases reported there yesterday. There are now 9,632 active cases in the state and there were another 4 deaths yesterday. In NSW there were another 176 new community cases reported yesterday, another drop, with 2,732 active locally acquired cases, and they had two deaths yesterday. Queensland is reporting zero new cases again. The ACT has 16 new cases. Overall in Australia, just over 85% of eligible Aussies are fully vaccinated, plus 7% have now had one shot so far.
The UST 10yr yield opens today at 1.55% and up +1 bp since this time Saturday. The US 2-10 rate curve starts today marginally flatter at +104 bps. And their 1-5 curve is little-changed at +107 bps, while their 3m-10 year curve is not much changed at +143 bps as short rates rise. The Australian Govt ten year benchmark rate is +1 bp firmer at 1.78%. The China Govt ten year bond is still unchanged at 2.94%. The New Zealand Govt ten year is also unchanged at 2.59%.
The price of gold will start today marginally softer by -US$1 to US$1845/oz.
And oil prices are -50 USc lower at just over US$75.50/bbl in the US, while the international Brent price is still just under US$78/bbl.
The Kiwi dollar opens today softer at just under 69.9 USc. Against the Australian dollar we are firmish at just under 96.8 AUc. Against the euro we are at 62.1 euro cents, also a little firmer. That means our TWI-5 starts today at 74.6 and very similar to where we left it on Saturday.
We should note that if the RBNZ raises the OCR this week by more than +25 bps, there is widespread speculation that parity with the AUD could be tested in currency markets. Most analysts however are picking a +25 bps hike.
The bitcoin price is +2.4% firmer since this time Saturday, up to US$59,750. Volatility over the past 24 hours has been modest at just over +/-1.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».