Here's our summary of key economic events overnight that affect New Zealand, with news the sharp dive in crypto prices, especially bitcoin, has induced a risk-off tone in markets today.
And financial markets are bracing for tomorrow's release of American CPI data. They expect it to stay high with the headline rate at 8% which will trigger another outsized Fed rate hike on December 15 (NZT). That is currently priced in at +60 bps, with their policy rate expected to top out at over 5% in mid 2023. The risks are to the upside however, unless inflation comes down soon.
American mortgage applications fell again last week, but this time the retreat was small. But from year-ago levels they remain down more than -40%. Their benchmark 30-year interest rate rose to 7.14% plus points.
US wholesale inventories rose barely in September from August as firms work to control the recent run-up, but they remain +24% higher than year ago levels so there is more to go to get them back under control. The inventory-to-sales ratio remains elevated in the perspective to 2021 levels, but on a longer term perspective isn't unusual.
However, there are increasing reports of substantial job layoffs underway in both the tech and finance industries in the US. The economic slowdown the Fed is trying to engineer might be underway.
US election outcomes are too close to call this morning. It will take a while for the dust to settle. But there hasn't been a big swing either way, which is unusual in US mid term elections.
In Canada, some new 'evidence' is emerging on just how hard China worked to influence the outcome of their elections, mainly around trying to either defeat or bolster candidates in areas with strong economic ties to China trade. Both Liberal and Conservative politicians were targeted. China is denying the accusations. Funding came through China's United Front network, partnerships with Confucius Institutes, and these revelations come after the Dutch outed secret Chinese police stations operating in Europe and Canada.
China's annual consumer inflation eased to 2.1% in October from year-ago levels and down from 2.8% in the prior month on the same basis. That was below the expected 2.4% and is the lowest since May. Food prices jumped +7.0% however led by a big jump in pork prices (+9% in October from September). Prices for beef and lamb were little-changed. Prices for milk were little-changed too.
China's producer prices fell -1.3% in October which was the first drop in factory gate prices since December 2020, reflecting disruptions to output and weak domestic demand amid strict pandemic curbs as well as falling commodity prices. Production materials declined -2.5%. Declining producer prices were a feature of the 2012-2017 period when China was building its industrial power. But this latest retreat comes as that international advantage seems to be fading.
China is throwing ¥250 bln (NZ$35 bln) into "bond financing" for struggling property developers. Its a lifeline for many, and is hard to see as a real commercial transaction.
The UST 10yr yield started today at 4.17% and up +3 bps from this time yesterday. The UST 2-10 rate curve is little-changed at -53 bps. Their 1-5 curve is more inverted at -48 bps. And their 30 day-10yr curve is unchanged at +60 bps. The Australian ten year bond is down -13 bps at 3.84%. The China Govt ten year bond is unchanged at 2.72%. And the New Zealand Govt ten year will start today down -9 bps at 4.63%.
In New York, Wall Street has opened lower with the S&P500 down -1.1% late in their Wednesday session. Overnight, European markets finished with narrow retreats averaging about -0.2% in all markets. Yesterday Tokyo ended its Wednesday session down -0.6%, Hong Kong fell -1.2%, and Shanghai ended down -0.5%. The ASX200 closed up +0.6% but the NZX50 ended little-changed with a sharp late sell-off.
The price of gold will open today at US$1714/oz. This is down -US$3 from this time yesterday.
And oil prices start today -US$4 lower than this time yesterday at just on US$86/bbl in the US while the international Brent price is just under US$93/bbl.
The Kiwi dollar will open today at 59 USc and down -1c since this time yesterday. Against the Australian dollar we have stayed firm at 91.5 AUc. Against the euro we are almost -½c softer at 58.8 euro cents. That all means our TWI-5 starts today at 69.2 and -70 bps lower than this time yesterday.
The bitcoin price is now at US$17,023 and falling so may be different when you read this. It is down almost -17% since this time yesterday and is at its lowest in two years. And volatility over the past 24 hours has been extreme at just on +/- 10.6% with serious market instability. (Update: now down at US$16,705)
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
82 Comments
China is throwing ¥250 bln (NZ$35 bln) into "bond financing" for struggling property developers. Its a lifeline for many, and is hard to see as a real commercial transaction.
Home prices in China are falling and that is actually part of the plan (and explains lockdowns). Evergrande wasn't the start of a housing blowup over there, it was a key piece of this plan with the fallout already being felt around the world.
The PBOC in October '19 estimated that 70% of Chinese household wealth is tied up in real estate of one kind or another. China's economy had been heavily investment oriented with a lot focused on residential dwellings. Xi Jinping's "common prosperity" is therefore a direct threat to the financial wellbeing of the vast majority of urban households (thus enforcing draconian "pandemic" policies to "gently" remind them they don't get a say) with fallout already being felt far beyond Chinese home markets and China itself. Link
Finance capitalism basically sought to break away all of the public infrastructure. Most financial fortunes and financial fortunes in history were made just in the way that Zola had described, by prying thefts from the public domain.
But the financial capitalism doesn’t say… You don’t have to steal it; you actually make it your policy, giving away the financial domain in the way that President Yeltsin gave away all of Russia’s natural resources, public utilities, electric companies, anything that yields an economic rent that can be just easy income without any investment. And you financialize it.
You’ve had, for the last – really since the 1980s, but even since World War 1 – this movement to prevent industrial economies from being low cost. But the objective of finance capitalism, contrary to what’s taught in the textbooks, is to make economies high cost, to raise the cost every year.
That actually is the explicit policy of the Federal Reserve in the United States. Turn over the central planning to the banking system to essentially inflate the price of housing, with government guaranteed mortgages, up to the point where buying a home is federally guaranteed up to absorbing 43% of the borrower’s income.
Well, you take that 43%, you take the wage withholding for social security and healthcare, you take the taxes; the domestic market shrinks and shrinks. And the finance capital strategy is exactly what it is in the United States today, in Europe. Shift all of the money away from the profits of industrial capital that are reinvested in making new means of production. To expand capital into a shrinking economy where the financial sector intrudes more and more into the economy of production and consumption and shrinks the economy. Link
Binance walking back from the FTX take-over. Wowsas. Sounds like most of the FTX compliance staff quit yesterday too. Doesn't take a genius to figure out whether those things are related.
In 1989, The Imperial Palace in Tokyo was ''worth'' > all of California. In 1999, shares of any company with a .com in its name were ''worth'' 100x earnings. In 2007, owning 5 houses with variable rate mortgages was considered ok. In 2021, FTX = Buffett. We never learn, uh? Link
https://www.thegreatsimplification.com/episode/44-art-berman
https://www.odt.co.nz/news/national/nz-fuel-reserves-kept-secret
https://dailytelegraph.co.nz/opinion/minister-should-release-fuel-stora…
'the country had only eighteen days average stocks of refined fuel storage capacity and they suggested we should be aiming to get closer to Australia, which had twenty eight days.'
Explains the release yesterday - buried under the irrelevant Commerce Commission red-herring. No journo - anywhere that I can see - has asked the simple question: How much storage do we have? But either way, expect rationing. And don't blame any stamp of politician, the drivers are bigger than that.
India and Russia have had strong relations since the Soviet era going all the way back to the 50s. In fact, the US-led Western Bloc pushed India closer to Russia by choosing the wrong side in the entire Indo-Pak debacle.
This was all entirely foreseeable as commented here many times when they announced the closure of the refinery and that this would also reduce NZ emissions (patently ridiculous)
Re the dailytelegraph my understanding though was that Marsden Point was never able to process Taranaki condensates, it was designed for Middle Eastern crude?
If we couldn't get refined oil, then wouldn't the refinery also have trouble getting the raw stuff? i.e no supply is no supply.
Yes, but I understand the refineries we rely on are all in Asia, so more likely to get disruption there than to crude deliveries from potentially anywhere else. And more risk to refined product getting diverted by governments where those refineries are located.
It is more complex than that.
Theoretically speaking, crude oil has unlimited shelf life and storage is comparatively straightforward. Refined products have to be stored separately (diesel, petrol, aviation fuel, bitumen, etc.), require continuous rotation and replenishment due to limited storage life with the added complexity of seasonal and regional variations in specifications.
So, if we are to hold more reserves onshore, the national interest argument from other small countries is to store crude oil in quantities enough to feed into the refinery for "x" number of days.
But that argument can no longer be made, and we are now at the mercy of international players to hold their ends of the deal in times of crisis.
Thanks, great detail.
Yes this is a good comment. It's pretty simple to see that getting unrefined crude is a hell of a lot easier to get than the refined product.
In times of war (even minor ones), contracts for one business to supply another business with refined products become worthless as countries put their national interests first. Without refining and crude storage, NZ is in a very vulnerable position geo politically. We could also be leveraged if someone wanted to force us into action (by either side, wouldn't put it past the US to leverage us into supporting them if something hot were to break out).
It's one of the reasons we need to accelerate a switch to electric vehicles and not just cars. That should include planes/trains/boats/trucks. But our pollies are collectively short sighted, so unlikely to have this in mind.
Compelling argument in two short paragraphs thanks...but you should have told Mrs Wood!
i will get 100l of each asap... that should help
Scaremongering.
If we run out of gas in 3 weeks, we can lower the OCR by 50bps as a temporary measure to stimulate the economy.
Why do people keep bringing up these old bogeymen that were solved by our central planners decades ago?
Perhaps bring more migrant workers to push cargo on hand carts and take us around in cycle rickshaws?
we just hook the beehive up to the transmission pipes. Enough hot air and gas comes out of there to power everything.
Some say we just have to eat bitcoin
I reply with one digit...
What happened to the great Red Wave?
An euphemism for Trump’s hairpiece?
So not the clean sweep by the GOP as imagined by many, including me. This must indicate to the Republicans, at the least, that the Trump mantra is no longer a sure thing as far as the electorate is concerned. In turn they may look to re-consolidate towards less controversial images and personalities. Old guard such as Romney, J. Bush may be dusted off?
Trump and abortion. Without them two it might have been different.
It shows the US has at least a solidify half of the voting pop. that is not bonkers bonkers.
Demographics is still destiny.
If the Southern whites want to go back in the Jim Crow direction the aren't doing it.
Apparently Democrats are the majority among the population - it's a combination of younger people not bothering to vote and the electoral boundaries in a FPP system that make Republicans win more often than not.
Looks like the Supreme Court has shot the Republicans in the foot. 43% of Dem voters say abortion rights are the main issue for deciding their vote, only 18% primarily driven by inflation.
I guess this is the consequence of pushing so hard for policies that most of their citizens don't support.
Agree it's massively impacting the red vote
We complain here that the RBNZ is not, or no longer independent. But it is another thing altogether to have your Supreme Court in the same category. On the face of it though the abortion ruling, put simplistically, turned on technical reasons that the Roe vs Wade decision was not within their jurisdiction in the first place. Obviously the electorate did not buy into that and that means the electorate accepts their Supreme Court as being politicised and that in turn, is trouble. The Supreme Court has great history and its independence has produced tremendously serious and important decisions. That ability and application, was crafted by some superb legal minds, strong and just personalities, the great Chief Justice John Marshall for example. Now sadly it seems, the American people are no longer being able to perceive that bastion as a last line of defence against political machinations and corruption.
It astounds me that they are President appointed and it's a lifetime tenure. Completely undemocratic.
The Reps only took this stance as historically there was a huge voter group where it was the one and only issue i.e came with a guaranteed vote base.
But they've misjudged - times have changed and for an even larger pro-abortion group it is now their one and only issue as well.
So Canada has uncovered all this political interference and secret police stations from the PRC within its borders. The relevant question is, why wouldn't NZ also be similarly compromised? We know of those Chinese born MPs who quietly left parliament after concerns were raised by Anne-Marie Brady but what else don't we know?
I have noticed that critics of the Chinese regime amongst Chinese immigrants are few and far between. It is quite curious. It is okay to be critical. I'm very critical of the British Empire. Most of us here are very critical of our own regime. There is something very unhealthy going on.
Having worked in countries with oppressive regimes, I’m not surprised at all. It’s a risk reward situation. I can’t see much reward for being openly critical of China.
I think it is a bit deeper than that. David Seymour lost quite a bit of a support when he criticized the Chinese government. To me there appears to be a significant level of loyalty to the Chinese government at the same time as being hyper-critical of NZ's democratic systems and social welfare.
This may just be my personal experience.
Support from the sizeable Chinese community within the Epsom electorate? Or from the wider public?
I wouldn't jump to the conclusion that Seymour lost support.
He would have gained support from those Chinese who agree with what he said. But can't say so in public due to having family back home.
Plus Seymour would have gained huge support from other Asians such as Koreans, Taiwanese, Hong Kong, Malaysians etc
Yes, plus right-leaning Indians and Pakehas.
They have a leader of Māori descent. No doubt a lot of other ethnic groups in their support base. Personally I find the term Pakeha extremely offensive. Can’t wait for the hate speech laws to cancel that word.
Sometimes it seems Chinese ex pats on returning to their homeland find that they then need to stay there. Believe many know not to go back home for that reason. All likely will have relations back home too that don’t need any trouble either. There it is.
The British Empire had a history of Parliamentary democracy & Magna Carta - individual and private property rights - behind it.
China replaced feudalism with communism - effectively status quo with a change in Emperor & cohort elites - still always consider the individual subservient to the collective / state.
China has always considered the Overseas Chinese as Chinese no matter where they're born. I was married to one for 30 years, she was nervous visiting the country when we had the opportunity even though her parents left in the late 1930s following the Japanese invasion & she was a NZ citizen.
The Magna Carta. Conceived by the British aristocracy to reel in the one and only King John and overturn the power of the Crown as initiated by his predecessor William 1, beginning with the Doomsday Book. The Magna Carta is thus enshrined in our law too, giving citizens certain rights to be able to protect their lawful property and assets from intrusion by the Crown. Yet this NZ government passed a law, quietly just before the last Xmas break, that gives then the power to do exactly that. David Parker professes himself as a keen student of law, he loves it in fact, yet this is his baby.
The British Empire had a history of Parliamentary democracy & Magna Carta - individual and private property rights - behind it.
Sadly for Maori and other colonised peoples, it didn't apply to "savages".
It did.
Article the third:
In consideration thereof Her Majesty the Queen of England [sic] extends to the Natives of New Zealand Her royal protection and imparts to them all the Rights and Privileges of British Subjects.
Yes, but that went out the window in the land grab of the 1860's.
It appears there is a lack of knowledge of NZ history. The Maori Kingitanga movement of the 1850's united tribes in an effort to retain land and autonomy over their people. Governor Grey felt threatened by this move and so started the NZ wars. 1.5 million hectares of the North Island was confiscated from the tribes in retaliation.
https://steemit.com/history/@ravenruis/loss-of-tradition-the-impact-on-…
There was a thin veneer of legality over the land court process but the end result was the same.
At the time, the reaction & result would have been the same for any "British subjects" who violently challenged the authority of the Crown, nothing to do with being Maori.
As regards knowledge of history, my parents families came to NZ in 1862: from both the Highland clearances & the Irish Famine.
Beat you by 12 years. Have visited the very humble home where my great grandmother started out from in Ireland. Man, she wasn’t leaving from much.
You mean the colonists were scared that Maori would act co-operatively and form a land league to control the loss of their land... it was a land grab, pure and simple.
Ironic that so many Irish were involved, considering the British used the same tactics as they'd used in Ireland a couple of centuries prior.
That’s precisely why the Irish were involved. They were taking a chance to escape extreme hardship and religious oppression. They had absolutely nothing to lose. Just need to read the history, for instance, all that hatred boiled out in “The Troubles” where the IRA gave no quarter. They are great people and they do know how to fight.
Weren't the majority of the British field-Marshals in WW1 Irish?
Not sure on that one. But interestingly in WW2 there was a surprising number of Irish who enlisted to fight with the British. Even more interesting, it is said, that those in the Royal Navy on board ship, protestant and catholic, were best mates but stark enemies when back on shore. Complications in Ireland are nothing short of entertaining to say the least.
When the British Empire increased autonomy in its colonies then things got worse for the indigenous people. After the USA attained independence most red Indian tribes were wiped out. In South Africa they evolved an apartheid state. Australia avoided giving the aboriginals a vote until TVs became commonplace. Indian independence was worst of all - the pathetic British govt in their hurry to get out before they were kicked out permitted the partition of the country because of India's local politicians' short-term aspirations. The result was 10-20 million displaced and 200,000-2 million dead. A civilised continent where different religions had lived in peace for centuries was destroyed.
"Peace for centuries..." Really ?
https://en.m.wikipedia.org/wiki/History_of_India
https://en.m.wikipedia.org/wiki/Mughal_Empire
Criticism could impact the social credit scores of relatives back home so definitely not a good idea for an immigrant to criticise.
..be nice to see an Anne-Marie Brady feature on here. But I expect not and for the usual reasons.
So Canada has uncovered all this political interference...
US warns Australia against joining treaty banning nuclear weapons
Former Prime Minister Sir John Key has dolloped praise on China in comments to Chinese state media published as Xi Jinping's Communist Party holds a historic national congress.
Link: https://www.newshub.co.nz/home/politics/2022/10/sir-john-key-dollops-pr…
Now how is his house re-sale going?
He wouldn't care, he got the big payout.
Interesting set up in the US where as I understand it Wyoming with 580k population get 2 senators, the same as California with 39 million. Each wield the same power in Washington. Great for Wyoming, not so great for California.
Congress is supposed to even that out, sort of.
Do you think the average Wyomington wants their law written in California? It keeps the states togeather. One state one vote. (well two)
Their whole setup is mad over there, including the mid terms. Huge time and money wasted instead of just getting on and running the country. You can see why America is slowly going down the gurgler.
Is it really going down the gurgler though?
Or do you just believe that thanks the steady diet of weaponised "news" that your brain is being selectively force fed by algorithms while you hide in your hermit cave waiting for the end of times?
The collapse of the West has been an enduring narrative since as far back as I can remember. However you would think recent events would wake people up to the fact that the West still rules with its observation of human rights, material wealth and considerable military power and just generally being an all round okay place to live. No doubt we could have done better but there is always room for improvement.
I've often been accused of posting cringe when claiming West is best but I feel quite vindicated currently.
Rule of thumb. If the USA was such a horrendous, heinous nation why are thousands on thousands crawling over broken glass, risking their lives to get in there?
Because its all relative isn't it. Places like Venezuela are now a hell hole. You have to ask yourself if you are prepared to die to get out of a place, then how bad must it be ? The world in general is in fast decline. 2015 figures for those trying to get into the USA under asylum was apparently 3500 now this year its like 160,000 and its climbing exponentially according to Aljazeera. Luckily the USA is a big place, imagine if those sort of numbers were trying to get in here, it would bring the whole country to its knees.
Agree Zach,
Just because someone says that western democracy is better than the existing alternatives it doesn't mean we are saying it is perfect.
The very nature of democracy is messy because humanity is messy. Sometimes people confuse that messines with decline, it's the opposite. Absolutes are the enemy of humanity.
My favourite quote is "from the crooked timber if humanity no straight thing was ever made". This is the strength of western democracy, it acknowledges this and works with it. Russia, China, they try to force straightness and rigidity which is why they are doomed to fail.
In Hawaii there is a tree colloquially known as the politician tree. Look at them and you see why. They start their life growing true, the trunk straight and vertical, and then after a few years, that trunk begins to bend, and bend.
The power crazed (Willie Jackson et al) are having a go at the mo at being the dictators - as has happened for centuries in many places..
But the constant battle to maintain democracy will prevail this time I think.
https://www.stuff.co.nz/opinion/130305893/the-good-things-we-gained-fro…
Democracy ? "........ Such is the power of these ideals that where they were violated, such as in South Africa, Pakistan and Fiji, the state has never been able to completely eradicate them
.
What's going on with Bitcoin?
It's on sale.
Be quick!
. . Buttcoin is now $US 15 847 ... quickly , fill yer boots ... it's just like land , they're not making any more of it ...
Now I'm freeeee
Free fallin'
A couple of billionaires are having a pissing match.
The only thing better for fiscal sovereignty than having the state look after it is surely having it lorded over by crazed billionaires.
Bitcoin and others are always going to be problematic. The whole "not your keys, not your coin" thing makes it unlikely to be widely adopted. It's too complicated and risky for the average non nerdy person.
News such as 3 billion dollars worth of stolen bitcoin being located inside a popcorn tin in the bathroom closet of a hacker gives one an uneasy feeling about its viability.
Just read that Bitcoin mining has a carbon footprint 15 times that of gold mining... and burning fossil fuels to find gold isn't even morally defensible (except for perhaps a few industrial applications).
Without gold none of the electronics today would exist. Its used in every semiconductor its industrial applications are priceless. Bitcoin on the other hand is a 100% waste of energy.
In 2021, only 8% of worldwide gold demand was for industrial applications. The remainder was central banks, investment and jewellery. A large junk of that jewellery demand is actually investment demand, particularly in India (it's a form of social security for Indian women).
Here it is the 10th of November and ASB KiwiSaver still have not posted there return until the end of October. They are also no longer transparent on performance as they only post a last 3 month result. Compare that with the efficiency of Milford or Fisher funds and these blonkers really aren’t providing good service or a good result. Have brought in Blackrock to support their investment decisions I believe. No regrets moving away from their scheme some time ago and happy to pay higher fees to those that provide a much better service and performance.
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