Here's our summary of key economic events overnight that affect New Zealand with news there has been an international move overnight to try and quell raging inflation levels by tackling oil prices.
But first, the 'flash' November PMIs for the US shows that their expansion remains strong and that is despite it being held back by labour shortages and material delays. They factory expansion rose, their services expansion settled in at prior levels. However, the rate of input price inflation reached a new series high. Sharper increases in cost burdens at both manufacturers and service providers led to soaring prices, with a vast range of materials reported as having risen in cost. The pace of selling price inflation matched October’s series record high, as firms pushed to pass on these higher costs to their customers
The updated factory survey from the Richmond Fed pretty much tells the same story.
Today's well-supported UST 7yr bond auction brought higher median yields yet again.
In China, Aoyuan Group’s dollar bonds dropped sharply yesterday, with some on track for record lows. The property developer defaulted on part of a trust loan two weeks ago, it has emerged. And now a set of Kaisa Group offshore investors have hired advisers because that cash-strapped property developer also missed some dollar bond interest payments due earlier in the month. And the Hong Kong stock exchange is awash in Evergrande shares as the billionaire owner sells up in a bid to rescue his company. He is trying to raise US$3.8 bln to save Evergrande from default.
And their financial industry, burned by the defaults, is shunning the property development sector and adding to its woes.
Meanwhile Beijing is on high alert for mounting headwinds for the world’s second-biggest economy, after the central government promised a new round of supportive measures for smaller companies to protect jobs and growth.
Taiwan industrial production was little-changed in October from September, reporting strong output levels. But it was their retail sales that surprised, reporting a healthy improvement from a sector that has been ho-hum for most of the year.
In Europe, their 'flash' PMIs are holding at good expansions too despite the same cost pressures, and the rising pandemic spread. But Germany is holding the bloc back, and that will likely be an increasing drag as their new pandemic lockdowns bite harder.
The World Health Organization warned yesterday that Europe’s death toll from the pandemic will exceed 2 million by March, as cases have climbed to nearly 4,200 a day and the illness has become the main cause of death in the region. Russia and the UK top the regional case growth, but Germany is gaining fast.
In Turkey, their currency crashed as much as -15% yesterday to hit 13.45 against the USD, a new historic low. President Erdogan has defended his recent sharp interest rate cuts, and he declared Turkey is fighting an “economic war of independence”. He is clearly losing, badly and fast. Consumer confidence is diving. Earlier in the year, Turkey had the 20th largest economy in the world, in between Saudi Arabia and Taiwan. Probably not that now.
In Australia, they are coming to realise that their financial advice model is essentially broken. New laws following with the Hayne royal commission had the effect of driving up the cost of advice, with investors forced to pay $5000 for full-service advice. Most aren't paying that and doing it without proper advice. Only the wealthy can now afford professional advice there.
And CBA has released data to a Parliamentary Inquiry that it says shows customers who use buy now, pay later operators are more likely to overdraw their accounts and fall behind on repayments.
Staying in Australia, their private sector growth accelerated in November, according to Flash PMI data from Markit, supported by a further easing of COVID-19 restrictions which had caused a three-month contraction in activity from July to September. Their factories are expanding faster and their services are recovering quickly. Price pressures are persisting with input price inflation soaring to a survey record level.
Delta cases in Victoria have slipped to 827 cases reported there yesterday. There are now 9,420 active cases in the state - but there were another 19 deaths yesterday. Nineteen! In NSW there were another 173 new community cases reported yesterday, another drop, with 2,3626 active locally acquired cases, and they had two deaths yesterday. Queensland is reporting zero new cases again. The ACT has 19 new cases. Overall in Australia, just under 85% of eligible Aussies are fully vaccinated, plus a bit over 6% have now had one shot so far.
The UST 10yr yield opens today at 1.65% and up +5 bps since this time yesterday. The US 2-10 rate curve starts today steeper at +105 bps. And their 1-5 curve is steeper at +115 bps, while their 3m-10 year curve is much steeper at +160 bps. The Australian Govt ten year benchmark rate is +6 bps firmer at 1.91%. The China Govt ten year bond is still unchanged at 2.94%. The New Zealand Govt ten year is up a mere +1 bp at 2.58%.
In New York, the S&P500 started its Tuesday session down -0.4%. European markets all closed lower by about -1.0%, although London bucked that trend and ended up +0.2%. Yesterday, Tokyo was closed for a holiday, Hong Kong fell -1.1%, while Shanghai finished up +0.2%. The ASX200 rose +0.8% and the NZX50 rose +0.6% yesterday.
The price of gold will start today much softer at US$1782 and down another -US$31 since this time yesterday, and a three week low.
And oil prices are +US$2 firmer at just over US$78/bbl in the US, while the international Brent price is now just on US$81/bbl. The US said it is releasing of 50 million barrels of oil from its strategic reserve in an attempt to bring down energy prices. The move is being taken in parallel with other major energy consuming nations, including China, India, Japan, South Korea and the UK.
The Kiwi dollar opens today softer at just under 69.4 USc. Against the Australian dollar we are unchanged at 96.2 AUc. Against the euro we are lower at 61.6 euro cents. That means our TWI-5 starts today at 74.2 and its lowest since mid October.
The bitcoin price is marginally lower since this time yesterday, down to US$57,419 and down a mere -0.5%. Volatility over the past 24 hours has been moderate at just over +/-2.1%.
Join us at 2pm today when we cover the RBNZ's Monetary Policy Statement, and the very likely rise in the Official Cash rate - and the resulting rise in mortgage interest rates.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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44 Comments
I really believe that most people do not understand the importance of economics on even the most basic aspects of our lives. Yesterday I heard a lawyer come child abuse detective being interviewed on child abuse and its causes, and not one word of economics was mentioned. In the above article , in Australia it has been identified that those who use 'buy now, pay later' are the ones most likely to overdraw their accounts. And all the other news, much of it not good.
But economics drives every aspect of our lives, and when Governments allow wealthy organisations and individuals to influence policy that drives inequity, and enables the entrenchment of wealth, power and influence they create a great deal of problems in society. If they are too afraid of pissing of those with money, as Mike Moore advised David Lange, Richard Prebble and Roger Douglas against doing, then the harm they do, and the long term costs become extreme. When Governments delegate financial responsibility for creating money to private banks without the regulatory oversight to adequately govern such abilities, they create unbalanced economies, exacerbating the harm from their negligence.
No it is not about allowing people to justify their actions. It is about understanding how they got there. When people have limited opportunities, when living standards are driven down for all age groups, the levels of anxiety and frustration increase across large portions of the population. In today's world we are generally not very philosophical. We don't often discuss how to cope with failure, loss or even just being ordinary.
Young are having children when they don't have the emotional maturity to teach children themselves, but the anxiety, and frustration are still present. Economics means both parents in a house hold must work, unless you're very, very lucky, but there are many sole parents out there struggling. Coping with the day to day pressures adds to the toll, further increasing the anxiety and frustrations. These pressures also put strains on relationships.
When living standards are better, people generally have more time, and are more capable of putting effort into coping with the trials of life. Their emotional reserves are greater, and more robust.
For too long, probably over 100 years political elites have worked to drive down living standards.
Don't do things like that. But sometimes it is interesting to observe the depth of discussion that sometimes occurs here. It is often far too shallow and mindless with very limited thought put into it.
News and debate is about growing, learning and deepening understanding. A superficial discussion on just economics serves little purpose unless one is prepared to consider the consequences of economics. And these are far reaching indeed.
in Australia it has been identified that those who use 'buy now, pay later' are the ones most likely to overdraw their accounts
Not sure I get it. CBA wants to get all righteous about BNPL, while at the same time enjoying the privilege of lending money into existence to create the greatest bubble in history.
Turkey. The bulkhead of the Balkans, the bridge of Europe & Asia, gateway to the Crusades. Vital involvement WW1 & vital WW2 for not getting involved. Appears Erdogan considers himself as akin to an Ottoman ruler. Very large, diverse volatile population at best of times. Powder keg looking for a fuse?
Here’s what a 1970s inflation-fighting fiasco says about the battle against rising prices: https://on.mktw.net/30uDfNC
The Fed should raise interest rates now to stop inflation, instead of relying on tapering the balance sheet to do the job: https://on.mktw.net/3r3GdDZ
Wil be interesting to see what words RBNZ use to manipulate and justify their continuation of Wait and Watch policy despite data suggesting that house prices are still rising by 10% in a month.
DTI end of next year when the need is now - Blatantly misuse of power when the mandate is to protect FHB from over streching under FOMO. No experts and media has raised, why is Mr Orr using delaying tactics.
OCR to go up by 0.25% as is forced and will potray that are keeping a watch on the situation (Does their keeping a watch, helps if they do not want to act, when it comes to controlling the ponzi)
It looks like the RBNZ has finally sent in the bomb disposal squad.
Everyone knows the property market in New Zealand threatens the stability of our economy - everyone; even Tony Alexander, who tells us that 83% (?) of current inventors are now going to hold for 10 years or more. (Good luck with that! That first maintenance bills of $10k per dwelling will give many pause for thought)
All we can do is stand well back, and hope the technicians can defuse the device they constructed without blowing the whole place up. The major concern is that they aren't sure which wire to cut first, and have embarked on a consultation process to decide. The time taken to do that might just trigger what they hope to avoid.
(PS: The ideal result? They do defuse it; it stays, inert, motionless. But....the RBNZ MUST stop anyone from sneaking up to it, and re-arming it in the name of "The danger is passed. I know what we did wrong last time, and won't make the same mistakes again". This....is the RBNZ's very last chance. Don't blow it - literally)
Why is the ideal result stagnation?
With wages only rising in low single digits it will take a whole generation plus to get back to affordable. I had thought a 50% plus drop in prices was unrealistic but the last two months stats are pointing to that being the only way out.
Creative destruction?
I'm wondering whether the banks are thinking the same with the sudden restrictions on LVRs.
Stagnation isn't the ideal result - but faced with the alternatives, it's the least disruptive.
The other choices are :
(1) Yours (and given a choice, mine as well!) - a 50% fall in asset prices; make it 75% to be realistic, and a re-set.
(2) Everyone elses (read that as Current Property owners with associated Debt) - leave the status quo alone.
One of those last two is going to destroy the lifestyles of either future New Zealanders, or Existing New Zealanders. A property price collapse doesn't just affect those who go broke - it spills out across society. The RBNZ etc know that. That's why they've dithered. But time has run out on them.
Frankly, I don't see a happy ending; 'we've' let it run too far and too long for that. But being ever optimistic, one can only hope.
That first link is fun:
In his memoirs, Alan Greenspan, who was chairman of the White House Council of Economic Advisers at the time and would go on to serve five terms as chairman of the Federal Reserve, recalled Ford’s speechwriting team proposing the campaign at a senior staff meeting: “I was the only economist present, and I said to myself, ‘This is unbelievable stupidity. What am I doing here.'”
The price of gold will start today much softer at US$1782 and down another -US$31 since this time yesterday, and a three week low.
Stocks, TIPS Tumble As Fed Abandons Bond-Buying "Due To Technical Difficulties"
And CBA has released data to a Parliamentary Inquiry that it says shows customers who use buy now, pay later operators are more likely to overdraw their accounts and fall behind on repayments.
Remind me how much that sector is booming of late.
Spoke to realestate agent and he was informing me many flippers are using GEM cards at Bunnings etc to fund renovations on property on top of massive leveraged home loan and trying to sell before interest kicks in.
Will be interesting if time to sell property moves back to say 50-70 days range and interest rates are all moving against them and prices revert say 10percent.
What happened with Turkish Lira :
https://www.washingtonpost.com/world/2021/11/23/turkey-lira-inflation/
And oil prices are +US$2 firmer at just over US$78/bbl in the US, while the international Brent price is now just on US$81/bbl. The US said it is releasing of 50 million barrels of oil from its strategic reserve in an attempt to bring down energy prices. The move is being taken in parallel with other major energy consuming nations, including China, India, Japan, South Korea and the UK.
Russian fleet en route to US to help battle fuel crisis
Gas supplies to China over Power of Siberia 30% above contract — Gazprom
A work assignment in Russia in 2018 led me to reflect in some depth about the natural alignment of interest between China and Russia. Russia has the energy resources and considerable strength in the fundamental sciences. China has a shortage of energy but huge abilities relating to applied engineering technologies. The 'Power of Siberia' pipeline has the capacity to carry about eight times the current flows, and surely it has been built with that capacity for a reason.
KeithW
https://www.financialsense.com/video/20124/weekly-update-covid-outbreak…
please listen to twice
He is smart analyst
Shows that vaccination above age 40 in uk makes you MORE likely to be infected but less likely to die. Basically vaccine undermines natural immunity in certain age groups
Note also rate of hospitalisation for under 18 in uk for unvaccinated is 4 per 100,000. Deaths is nil. This is basis for vaccination of 5-18??? And mandating teachers?
The figs are from Public Heath England
Yes I am vaccinated but highly questioning
No Murray was right!!!
The kids are the problem!!! Quick.. and boosters all round while we're at it...
https://www.jpost.com/health-and-wellness/coronavirus/covid-daily-cases…
No worries...
https://www.ahajournals.org/doi/10.1161/circ.144.suppl_1.10712
Vaccinating the young as I understand it is about limiting the spread, not about extreme protections. It has always been clear that the extreme impacts of COVID are more likely on the elderly and vulnerable, but the vaccinations reduce the viral loadings and therefore the spread.
For the young and dumb though, they probably don't care.
I haven't checked, but is there any indication of new mutations in Europe?
Worth a watch. Was very interested in the stats being English. Basically my chances of death no vax is the same as throwing 5 dice and they all have to land on a 6. Being vaccinated doesn't really improve your odds a great deal. Sounds like the vax compromises your immune system so how is that going to play out for everything else that's trying to kill you from Cancer to who knows what. Booster every 3 to 6 months ? that's your natural immune system compromised for life. It could take a very very long time for the stats to start showing an increased death rate from other medical conditions. Watch it while you can, it will probably get pulled.
I've read three articles from three different sources on that in the past week. Your natural immune response to the flu is permanently lowered, suck it up as you were warned. When I say three, I don't mean 3 quoting the same source but three different analysts, one of whom is a sharp mind that used to post here but finds it dull now for the lack of robust intelligent discourse.
Plus vaxed people are a breeding ground for new varients, although that is an old prediction that is now playing out.
No one has explained Zambia to me. Over Covid with no vaccines. India pretty much the same but i put my boots on the ground in Zambia.
MikeKirk, that podcast is yet another guy who doesn't get it.
- True, vaccines don't protect from being infected
- True, vaccines don't prevent passing on the virus
- But the main point is vaccines protect the vast majority from ending in hospital, which allows hospitals to treat people sick with other problems. This means we can end lockdowns when enough people are vaccinated.
It's time to stop counting cases (= scaremongering) and time to start counting deaths (which is want matters)!
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