Here's our summary of key economic events over the weekend with news various crises got worse, including Ukraine and the Chinese property sector.
China’s property developers started 2022 with weak sales, as many real-estate companies struggled to rekindle interest from home buyers despite Beijing’s recent attempts to ease some restrictions on the troubled sector. January contracted sales reports released in recent days by more than a dozen Chinese developers showed year-over-year declines ranging from about 10% to more than 80% for some companies. They also reflected price reductions by industry heavyweights such as Country Garden Holdings and Sunac.
And Zhenro Property Group, one of the few large property developers thought to be in ok shape has succumbed to the same liquidity stresses that have befallen its peers. After calling news reports about the company "untrue and fictitious", it has had to admit that "existing internal resources may be insufficient to address its upcoming debt maturities in March". The train-wreck that is China's property development sector rolls on.
And staying in China, total vehicle sales fell to a 25.3 mln annual rate, down from a 27.9 mln sales rate in December. For the month alone this was +0.9% rise from the same month a year ago. The slip was because NEVs (hybrids, battery and hydrogen) fell almost -20% after the country cut subsidies of NEVs by -30% starting in January. Prior to that, growth in this sector was very strong. It seems Chinese buyers ill buy NEVs, but only when incentivised by price. China is still the world's largest vehicle market, by far. (The US's annualised sales rate is only 15 mln, even if it is rising.)
Hong Kong's city-wide lockdown to test for COVID is the last straw for many expats there and an exodus is underway. First it was the protests which brought Chinese 'law' and authoritarian style to the city, now this. Hong Kong’s top market regulator has warned that the city’s development as an international financial center is at risk after the agency lost -12% of its employees last year. A recent report from the European Chamber of Commerce in the city said that Hong Kong’s isolation could last into 2024, and that it anticipates an unprecedented exodus of foreigners as a result.
Japanese consumer prices rose by just +0.5% in January from a year ago, easing from a +0.8% gain a month earlier which was the highest figure in 2 years. But the January rise is their fifth straight month of increase.
In the geopolitical front, Russian-backed separatists packed civilians onto buses out of the breakaway Donbas region in eastern Ukraine overnight, a shock turn in a conflict the West believes Moscow plans to use as justification for all-out invasion of its neighbour. But it turned out to be a farcical operation that collapsed early. However, the prospect of sanctions is hitting market risk appetite. Russia is now pouring more troops into Belarus, and close to the Ukraine capital.
US financial markets will be closed for Presidents Day (ex-Washington's Birthday) tomorrow, making this a long weekend holiday there.
In economic news, the American real estate market turned in a stronger result in January, selling homes at a 6.5 mln annualised rate, up +6.7% from the equivalent December rate and beating forecasts. Their median price is now US$350,300 (NZ$523,000) per dwelling, boosted by a record low inventory of houses for sale of just 7 weeks at the current sales rate.
Meanwhile the Conference Board's leading index tracking for the US slipped in January when a rise was expected.
Fed speakers were out in force over the weekend, all talking up the need to "make adjustments" to fight inflation. Evans (Chicago Fed), Bullard (St Louis Fed), Mester (Cleveland Fed), Williams (NY Fed) and Brainard (Fed Vice Chair) have all been on the hustings. Williams was less enthusiastic about an outsized hike.
And the White House Council of Economic Advisers told Congress that several factors in the coming months should help slow the recent steep rise in consumer prices.
Canada's retail sales rose more than expected in January compared to January 2021. They were up +8.6% on that basis, easily beating the inflation effect. However, the sales rate in the month slowed from December.
EU consumer sentiment got slightly worse in February, when it was expected to get slightly less bad. It is almost always negative, but the track isn't encouraging even if it is now at 'average' levels.
The Ukraine standoff is still pushing the aluminium price higher, yet another new record high. And nickel has hit a 10 year high. Meanwhile the lithium carbonate price rose even faster over the weekend, taking the weekly rise to almost +7%, but in this case not due to the Ukraine tensions.
At the current round of G20 meetings in Jakarta, they failed to endorse International Monetary Fund and World Bank proposals for an immediate debt service suspension for poor countries that seek restructurings and an expansion to include some middle-income countries. China doesn't want debt relief for countries that owe it money, and China is the largest creditor. China would rather hold the obligation over the debtors.
In Australia, JP Morgan analysts have been tracking listed company earnings and they report that we are in for a bumper set of December 2021 results. In fact, they are likely to be up more than +20% from a year ago, to a record for any period pre-or-post pandemic. Half will exceed broker expectations, and that includes two of the four big banks, some other financials, miners, surprisingly some retailers, and property companies invested in online distribution centers.
And an Aussie billionaire has teamed up with Canada's Brookfield (Mark Carney is a director) to make a serious bid for one of their largest power generators, AGL Energy, with the aim of getting them to shut their coal-fired capacity much sooner that currently planned and invest much more (AU$10 bln) in renewables.
In NSW, there has been 5,582 new community cases reported yesterday, now with 107,285 active locally-acquired cases, and another 21 daily deaths. There are now 1,280 in hospital there and continuing to fall away. In Victoria they reported 4,867 more new infections yesterday. There are now 46,703 active cases in that state and there were 9 deaths there. Queensland is reporting 4,265 new cases and 2 more deaths. In South Australia, new cases have fallen to 1336 yesterday and 3 more deaths. The ACT has 560 new cases and no deaths, and Tasmania 555 new cases and no deaths either. Overall in Australia, more than 17,000 new cases have been reported.
The UST 10yr yield opens the new week at 1.93% and unchanged. Recall, it started last week at 2.04%. The UST 2-10 rate curve starts today little-changed at +46 bps. Their 1-5 curve is unchanged at +82 bps and their 30 day-10yr curve is also little-changed at +190 bps. The Australian ten year bond is unchanged at 2.18%. The China Govt ten year bond is stable at 2.82%. And the New Zealand Govt ten year is the same as at the end of last week at 2.81%.
The price of gold starts today at US$1899/oz and up +US$2 from this time Saturday. Last week, gold was up +3% and is now at a 35 week high.
And oil prices are up +50 USc at just on US$90.50/bbl in the US, while the international Brent price is still just over US$92/bbl.
The Kiwi dollar will open today little-changed at 66.9 USc. Against the Australian dollar we up slightly at 93.4 AUc. Against the euro we are marginally firmer at 59.2 euro cents. That means our TWI-5 starts today at just on 71.5 and +40 bps firmer in a week.
The bitcoin price is down another -4.3% since this time Saturday and now at US$38,313. Volatility over the past 24 hours has moderate at +/- 2.9%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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