Here's our summary of key economic events overnight that affect New Zealand with news there has been a financial market bounce-back today after yesterday's Omicron drop. But you have to say today's reaction isn't full of conviction. Meanwhile, the New Zealand dollar has fallen right out of favour
But first in the US pending home sales rose in October from a disappointing September but still remain lower than a year ago. Still, this data means that total existing-home sales in 2021 will exceed 6 million, and the highest in 15 years.
The pace of the Dallas Fed factory survey eased back a little with its expansion impulse slowing somewhat. There were good gains in new orders, but a fall in capital investment. Prices paid continue to rise, but prices received aren't, and that squeeze is starting to be noticed.
Also topping out are Canadian producer prices, high but not rising much in October from September.
In Canada, the Port of Vancouver has descended into ‘distress’ as British Columbia flooding severs rail lines and highways. There are now 54 ships waiting to unload but no way to move the goods. Meanwhile vast numbers of empty containers can't move either, breaking the supply-chain system there.
In China, new data shows that housing rents are falling. Average home rents in China’s major cites declined by -1.3% in November from the prior month while transactions in home rental market tumbled by -18%.
China is on a Common Prosperity drive at home, trying to roll back the extreme disparities in wealth that their expansion has generated. They are also on a hunt for resources, concentrated in Africa. It seems that "common prosperity" is only a drive at home - in Africa, they are fueling their expansion with vast amounts of cash corruption.
The economic sentiment indicator in the Euro Area dropped by -1.1 points from a month earlier to 117.5 in November, the lowest for six months but in line with market expectations. There was a marked decline in consumer confidence (-6.8 vs -4.8 in October), as households were concerned about potential new lockdown measures due to rising pandemic cases across the bloc.
The German CPI inflation rate came in at a very high 5.2% in November - in the way they measure it. Using the EU 'harmonised' measure, it was +6.0% higher. Their energy component rose a stunning +22%. This German data probably means EU inflation probably hit a record high when it is reported in about two weeks. And in turn that will put severe pressure on the ECB to respond - probably with rising benchmark interest rates.
In Australia, new satellite data shows that just one coal line there spewed 230,000 tonnes of methane each year. There are 400 Australian coal mines of various sizes. So as much as 60 mln tonnes of methane could be leaking in Australia, just from their coal mines. (Updated: For reference, New Zealand as a whole country emits under 30 mln tonnes of CO2e equivalent from methane per year. Questions have been raised since publication of this comparison, so investigation is underway. H/T KW.)
The World Health Organization said the Omicron coronavirus variant carried a very high risk of infection surges as more countries closed their borders, reviving fears over economic recovery from the two-year pandemic.
In Australia, Delta cases in Victoria have risen again to 1007 cases reported there today. There are now 11,501 active cases in the state - and there were another 3 deaths yesterday. In NSW there were another 150 new community cases reported today, with 2669 active locally acquired cases, and they had no deaths yesterday. Queensland is reporting three new cases. The ACT has 7 new cases again. Overall in Australia, just under 87% of eligible Aussies are fully vaccinated, plus a bit under 6% have now had one shot so far.
The UST 10yr yield opens today at 1.51% and a +3 bps recovery from this time yesterday. The US 2-10 rate curve starts today a little steeper at +100 bps. Their 1-5 curve is little-changed at just over +99 bps, while their 3m-10 year curve is steeper at +140 bps. The Australian Govt ten year benchmark rate has recovered +8 bps to 1.74%. The China Govt ten year bond is unchanged at 2.88%. The New Zealand Govt ten year is down -1 bp at 2.46%.
The fall anticipated in the futures trading has not happened on Wall Street in their mid-day trading on Monday. The S&P500 is up +1.4%. Overnight, European markets were all positive too, with Paris up only -0.2%, but London up more than +1.0%. Yesterday Tokyo ended -1.6% lower, Hong Kong was down -0.6%, but Shanghai finished flat. The ASX200 ended its Monday session down -0.5% and the NZX50 ended down -0.8%.
The price of gold will start today at US$1785/oz and little changed from this time yesterday.
And oil prices have risen today, up by +US$3 to be just under US$71/bbl in the US, while the international Brent price is now over US$74/bbl.
The Kiwi dollar opens today softer again at just under 67.9 USc and a new 1 year low. Against the Australian dollar we are soft at 95.4 AUc. Against the euro we are -1c lower at 60.3 euro cents. That means our TWI-5 starts today at 72.8, down -100 bps from this time yesterday and its lowest since the end of September.
The bitcoin price has recovered to now be at US$57,445 and +6.1% above the level at this time yesterday. Volatility over the past 24 hours has been very high at just over +/- 4.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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By the way NZ leaks methane which is the equivalent of 210,000 tonnes of CO2 from natural gas transportation, 850,000 tonnes from flaring oil and gas wells, and 135,000 from coal mines.
https://www.stuff.co.nz/environment/climate-news/125060135/what-it-woul…
RBNZ Chief Economist says "it will be more difficult for the RBNZ to pull off quantitative tightening (QT) than it was to embark on quantitative easing (QE)."
Hang about! Haven't we continually been told that it is much easier to cool down an over enthusiastic economy than stimulate a sluggish one? The whole thing is a farce.
Which was stupid. If a whole industry needs to disappear, the people in it be retrained and upskilled to different work (which has happened multiple times over the past century or so), RBNZs mandate is to stop that from happening. Essentially their mandate is to stop the business cycles of capitalism. The RBNZ could, in theory, just print money and pay everyone in NZ to do nothing, that would ensure maximum "employment".
The whole QE exercise was a publicity stunt with costs attached
Reserve Bank of New Zealand just comes right out with it:
"Studies found the government bond purchases worth 10 percent of GDP have, on average, lowered 10-year government bond yields by around 50 basis points."
Underwhelming, isn’t it? Pitiful, actually. Link
Furthermore:
A recent Bloomberg article described central bank easing with the phrase “pumping money into the economy.” That’s a misconception. Monetary easing is actually an asset swap. The public was holding savings in one form, and now it holds it in another. The Fed buys Treasury securities from the public, and replaces them with currency and bank reserves (base money) that someone has to hold, at every point in time, until the Fed sells its bonds and retires the cash. All monetary policy does is to change the mix of government obligations held by the public. Only fiscal policy – specifically deficit spending – changes the total amount of those obligations. - courtesy of Hussman
Really? This is an immature thing for him to say. His mandate is for price stability. If that means a recession then so be it. His monetary policy should be directed at keeping the CPI between 1-3% not maintaining above 0% real gdp growth. If he targets the later he is frankly not doing his job.
Much like how it’s an emergency if we have the prospect of deflation and house prices falling 10%. But if we have actual high inflation recorded in CPI far above the target and house prices rising at 30% then it’s a let’s take it slowly and see what happens approach. The bias is unbelievably in favour of pumping asset prices and causing financial repression for those that do not.
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