Here's our summary of key economic events overnight that affect New Zealand with news the sense of worry in Beijing is clearly rising for a number of reasons.
But first in the US, it is a public holiday with both the equity and bond markets closed for Martin Luther King Jr Day. The bullion markets are trading however.
North of the border in their Business Outlook Survey, which the Bank of Canada takes seriously, it hit its highest, most expansionary level ever in the December edition just released. It reveals fast-rising demand, capacity constraints and supply-chain issues, strong labour demand and higher pay, and fast-rising costs for which prices are being raised. If Omicron hadn't hit hard after this survey was conducted, the Canadian central bank almost certainly would be raising rates at their upcoming January meeting next week. Now it's a line-call.
In Japan, November machinery orders rose faster than expected both on a month-on-month basis (+3.4%) and a year-on-year basis (+11.6%). That says a lot of positive things about global investment intentions.
In China they reported their Q4 GDP was up +4.0% from the same quarter in 2020, which is much better than anticipated but down from, +4.9% in Q3-2021.
However, Chinese retail activity struggled in December, rising just +1.7% year-on-year when a +3.7% rise was expected and November was up +3.9%. It's their slowest growth in 16 months, and looking past the 2020 pandemic, the slowest growth in China ever. For all of 2021 retail sales were up +12.5% so most of that came early in the year and relies on a suppressed base effect.
China's industrial production was a bright spot, up +4.3% and its best rise in four months even it is unusually low for them. Only a recovering rest-of-the-world and the export orders from them, saved the day.
Chinese electricity production tells a different and perhaps real story - it actually fell -2.1% year-on-year, so that kind of does cloud the other data results and suggests, even if they are positive, the real story might not be so good. Everything is 'national security' in China, so reporting 'declines' is frowned on again.
Clearly, Beijing is worried. The People’s Bank of China lowered the interest rate on 700 billion yuan worth of 1-year MLF loans by -10 bps to 2.85%, as well as on 100 billion yuan worth of 7-day reverse repos by the same margin to 2.1% late yesterday. But this wasn't enough new policy support to stop a sharp selloff in Chinese property developer bonds yesterday. This whole sector is now in crisis mode.
Adding to the sense of worry, President Xi made a speech where he implored Western nations not to raise interest rates. Even after acknowledging the supply-chain crunch, high commodity prices and tight energy markets, he called on Western central banks to sit tight.
The Beijing worry index is also rising on the Omicron front, with Winter Olympic ticket sales now cancelled. And in a related move anti-doping agency WADA has warned athletes not to eat meat in China because of the elevated likelihood it will contain banned steroids.
In NSW, there were 29,504 new community cases reported yesterday, a sharpish rise, now with 338,613 active locally-acquired cases (and undoubtedly an undercount), and 17 more deaths. Hospitals face serious staff shortages, and they have been told the number of COVID-positive people needing inpatient care could exceed 4500 within the month. They are now up to 2,776. The NSW Chief Health Officer there will be a high number of deaths in coming days. In Victoria they reported 22,429 more new infections yesterday, also an increase. There are now 245,040 active cases in that state - and there were 6 deaths. Queensland is reporting 15,122 new cases and 7 new deaths. In South Australia, new cases have held at 3,829 yesterday with no more deaths. The ACT has 1316 new cases and 2 deaths and Tasmania 1037 new cases. Overall in Australia, 73,258 new cases were reported yesterday.
The UST 10yr yield opens today at 1.79% and holding while the New York bond market is closed. The UST 2-10 rate curve starts today unchanged at +82 bps. Their 1-5 curve is also unchanged at +107 bps, while their 3m-10 year curve is still at +175 bps. The Australian Govt ten year benchmark rate is up +4 bps at 1.91%. The China Govt ten year bond is down -1 bp at 2.80%. The New Zealand Govt ten year is up +7 bps at 2.54%.
While Wall Street is closed, European markets were trading and were up about +0.8%. Yesterday, Tokyo rose +0.7% but Hong Kong fell -0.7% in Monday Trade. Shanghai rose +0.6%. The ASX200 was up +0.3% yesterday, but the NZX50 could only manage a +0.1% rise.
The price of gold starts today at US$1820/oz and up US$2.
And oil prices start today unchanged at just on US$83.50/bbl in the US, while the international Brent price is now just under US$86/bbl. These prices are close to a seven year high.
The Kiwi dollar will open today at 68 USc and unchanged from this time yesterday. Against the Australian dollar we are softish at 94.3 AUc. Against the euro we are holding at 59.6 euro cents. That means our TWI-5 starts the today at 72.3 and the same as this time yesterday.
The bitcoin price has moved down by -2.8% to US$42,174. Volatility over the past 24 hours has been modest at +/- 1.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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50 Comments
Re China reporting: With so many journalists having left China for safety reasons, and national reporters under threat if they report any negative news it must be difficult to get authentic news out.
https://www.theguardian.com/world/2021/jul/26/foreign-journalists-haras…
There must be incredible anguish building in high circles over the credibility of the forthcoming Olympics. An expected showpiece is fast looking like becoming something of a Greek tragedy. Diplomatically and culturally, with aspersions aplenty over, human rights, covid, pollution & now food safety. Lots of loss of face then? Most unwelcome, at times like these often, attack can assume the form of defence?
There must be incredible anguish building in high circles over the credibility of the forthcoming Olympics. An expected showpiece is fast looking like becoming something of a Greek tragedy
Who would care to watch professional corporate sponsored sports people strut their stuff in public, supposedly on behalf of their country? - hardly fitting with the ethos of the Olympics..
Aye both the embracing of professionalism & the intrusion of politics has undoubtedly overrun that traditional ethos, sportsmanship, honours for your nation and on. Thinking back, the last games free of that was probably 1964? Can only agree any country, including China, that builds a mountain of debt to host a pageantry that is little more than a pantomime, needs its head read.
The circle of politics. Lange/Douglas introduce & then increase GST. Anderton subsequently espouses this to be to the detriment of low income earners & persuades a receptive Clark/Cullen to hike income tax to compensate. Key lowers income tax & raises GST to compensate. And now we have both, high GST & income tax more or less back where it started from. Not quite that simple I know, but still a blasted money go round isn’t it.
Who then got another kicking when the 2017 Tax Cut package was repealed by Labour as it undid some of the damage of taxing the inflation components of earnings increases. Labour cancelled that, but then ruled out changing the thresholds to at least align with the inflation that the Government's agreement with the RBNZ to maintain an inflationary environment stipulates.
The tax brackets have still not been adjusted since.
And it makes sense for them too. Their costs increase faster than mine, and that's before paying internationally competitive wages to nurses and teachers, which they don't do. So while I don't blame them for doing what they can to claw back their own cost pressures, people need to remember where tax comes from. Salaried workers can't pay more for houses with money they never ever actually get to spend, no matter what their nominal wage increases to in a white-hot job market.
In China interest rates are falling whereas in rest of the world - developed countries are forced to raise.....two different world and all thanks to excessive generosity by reserve bank by ignoring the fundamentals and going overboard.
Reserve banks have created a bigger mess than corona virus.
Agree that there were acting in response to corona virus but anything in extreme is bad specially when it was evident that inflation is getting out of control. To kick the can down the road, they coined Temporary Inflation and now are forced to retrace.
Even in extreme antibiotics are harmful.
It is not a hindsight argument as they were been warned by many in early 2021 but went with least regret policy ignoring data and advice by throwing 'Transitory Inflation' to shut the argument.
If they reserve bank is more wrong than right than time to think.....
Some of the greatest economic minds (public and private) on the planet have been seriously scratching their heads for 2 years now. Part of that is exacerbated by the unpredictable nature of the virus. They expected something less severe than what we got I would say, but I think they knew it was going to be a marathon.
Now they're dealing with the virus, and the consequences to supply chains, and the ramifications of flooding markets with money.
Even now, you'd be brave to make too many big financial bets, the best economic advice seems to be "be conservative, drop debt, keep calm and wait for the dip".
Our government and Adrian Orr have a lot less control over what's going on than a bunch of people on here give them credit for.
On the 'less severe than what we got" front, I would beg to differ on that.
It really has been blown well out of proportion by all the boomers who hold the seats of power, and to go arm in arm with the IMF and WHO's policy for a great reset.
There's a lot of back tracking and apologizing about he last 2 years starting to come out, and history will ultimately tell who was right and who was wrong.
The elites never let a plague go to waste. Never has so much been squandered for such a pitifully low death rate.The UK had a higher age adjusted rate for first decade of the 21st century, and no one gave a toss and life/death went on. One of those plagues were no famous people died and life insurance companies didn't go broke.
https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarr…
Apparently in the 60s and 70s their officials travelled to the likes of Singapore and Hong Kong to work out how other ethnic Chinese populations had managed to create so much more prosperity, and thus this new hybrid Communism-Capitalism model was born.
We will see how good it's foundations are.
They had the balance about right 10 years ago. But Xi tilted the balance away from capitalism to communism and authoritarianism, and the results are here for all to see.
Only got themselves to blame, and arrogance is a big part of their problems. Not to mention groupthink and Leader Worship.
Not being talked about here, but the Government is receiving criticism for putting $85 mil into NZRs Dunedin workshops.
My view is that this is a good spend of money as it will eventually (initially it is only upgrading the buildings) will build capability and help towards resilience. Employment should also be helped too. Will save money long term.
Irrelevant against the built rail environment which includes the following constraints:
- Narrow 3'6" gage
- Little electrification
- Many low tunnels
- Very limited coverage
- Massive vulnerability to tectonic events, poster child Kaikoura and entire main trunk of SI
Taken together, this spells a very limited and inflexible transport network. One example: complete inability to transport high-cube containers.....
But no one is allowed to build water dams or infrastructure because either the greens, Fish and Game, DoC or Maori Iwi all start kicking up a fuss and sticking their hands out.
Ergo, no new infrastructure for the last 50 years (broadly speaking).
NZ has basically an infinite amount of water that falls on areas that can serve most of the country (the mountain ranges). We should be capturing it and using it.
They have already toughened up bro - Luckily plant have evolved in higher CO2 conditions and can't get enough "Global increases in atmospheric CO2 concentration have increased intrinsic water-use efficiency, but this relationship is also modulated by water availability. Here, we have identified that a severe, multi-decadal drought in the American Southwest has caused some of the largest increases in plant water-use efficiency ever observed. The increase was particularly large in shrubs, which dominate much of the landscape in the region."
https://www.pnas.org/content/118/52/e2118052118
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