Here's our summary of key economic events overnight that affect New Zealand, with news a global soft landing seems much more likely now, despite China's travails.
The actual number of Americans on jobless benefits was just 1.58 mln and an eight month low, and the number of new filings were 173,000 last week and close to a seven month low. None of this very current data suggests labour market stress is about to hit them.
And the September Challenger job cut report was low too, and the recent trend shows the earlier rises seem to have run out of steam.
So perhaps estimates for tomorrow's non-farm payrolls report of jobs growth of +170,000 has upside risks attached.
Meanwhile, the US trade deficit narrowed to -US$58 bln in August, its lowest since September 2020. Both goods and services exports rose from July, goods imports fell from the prior month.
Canada also reported an improved trade balance, a rare August surplus. Their exports also rose, and by +5.7%.
And Canada's closely-watched local Ivey PMI slipped slightly but far less than expected, and remains in a good expansion phase.
Today is the last day of the extended Mid-Autumn Festival in China and Beijing has set rules for an unusual end. To ensure the break does not hurt their fragile economy, they have decreed that Saturday & Sunday will be workdays, so workers there are facing a seven day back-to-work week through to Friday a week away.
Singapore reported an unexpectedly strong retail sales surge in August, its best in six months driven by strong food sales.
South Korea is starting to see inflation rise again. It got down to just 2.3% in June but since it has risen steadily, now at 3.7% in August from a year ago. But the anualised rate between July and August was much faster than that.
In Australia, exports rose while imports fell, allowing them to record a larger trade surplus in August than expected. They reported a +AU$9.6 bln surplus in the month when an +AU$8.7 bln surplus was expected. (This is a goods and services result.) Almost all the extra surplus was exports from their gold mining industry.
Staying in Australia, it is getting tough and ugly being a renter. Data from housing portal Domain reveals their national residential rental vacancy rate was only 0.8% in Q3-2023. In Perth it was only 0.3%, in Sydney 0.9% and hardly better (for renters) in Melbourne, Adelaide or Darwin. But it was easier in both Canberra and Hobart.
We mentioned yesterday that the coal price is falling. It is, and did so more today taking it back near two year lows. The copper price is shifting lower too, near one-year lows. Nickel and tin prices are soft as well. None of this shows traders are expecting rising demand from China.
Container freight rates fell less this week than last, but they did fall again, taking the sequence to seven straight weeks of declines and costs are now lower than pre-pandemic levels (by -2%). Every major trade route reported slippage this past week. But bulk cargo rates were up marginally again last week and building on an impressive spurt over the past month.
The UST 10yr yield starts today down -2 bps from yesterday at 4.72% as the correction embeds. Their key 2-10 yield curve is again less inverted from yesterday at -30 bps. Their 1-5 curve is now at -70 bps and little-changed. Their 3 mth-10yr curve inversion is also unchanged today at -67 bps. The Australian 10 year bond yield is now at 4.60% and up +25 bps from yesterday. But the China 10 year bond rate is unchanged at 2.71%. The NZ Government 10 year bond rate is down -3 bps to 5.60%.
Wall Street is sagging slightly today, down -0.2% in Thursday trade. Overnight European markets closed mixed. Frankfurt was down -.2% but London was up +0.5% to bookend these markets. Yesterday, both Hong Kong closed up a minor +0.1% and Shanghai was still closed for their National Day holidays. But Tokyo recovered sharply after the prior day's fall, up +1.8% yesterday. And the ASX200 ended up +0.5% in its Thursday trade. And the NZX50 was up +0.7%.
The price of gold will start today at just on US$1817/oz and down another -US$3 from yesterday.
Oil prices have fallen another -US$2 to be just over US$82/bbl in the US. The international Brent price is just under US$84.50/bbl. These are five-week lows.
The Kiwi dollar starts today at 59.6 USc and up more than +¼c from yesterday. Against the Aussie we are also firmer, now at 93.7 AUc and up +20 bps. Against the euro we have also firmed marginally to 56.5 euro cents. That all means our TWI-5 starts today at just over 69.7 and up +30 bps.
The bitcoin price has moved very little on a net basis from yesterday, and it is now at US$27,483 and up a minor -US$41 from then. Volatility over the past 24 hours has been modest at just on +/-1.3%.
Well done Black Caps. Go the ABs!
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63 Comments
Everyone here needs to make the time to watch this link.
It traverses yield-curves, bitcoin, interest and inflation – from an energy/money nexus.
https://www.thegreatsimplification.com/episode/91-luke-gromen
Look out, ahead....
This bit sticks out for me
90% of oil production growth in the past decade is from US shale.
Gonna be interesting when shale production really starts to slow...
The US will just pivot and do a deal with Venezuela. Massive reserves.
Just keep an eye on the news.
Or next US state, if Venezuela doesn't want to play ball...
This is really good, super important. As is the whole site, one of my favourites.
The TLDL summary is:
US oil is running out. Price of oil is worth more in the future than US T bills will be. China moving away from the US debt holdings. China likely to do big deals with energy producers and start settling in Yuan, which can then be swapped for Chinese high tech goods (telecoms/power stations/infrastructure). The US has financialised its economy so much, its digging its own grave, Ukraine war shows this where Russia is out producing weapons. BRICS countries hold most of the worlds energy reserves. US military knows it really can't afford an extended war and now with mutually assured destruction, its not worth another world war. US dollar now in trouble and US Feds only option is to print more. De dollarisation is picking up speed.
Probably for NZ we are doing the right thing, playing the middle ground. If a China led BRICS ends up winning the economic war (looking likely due to the ineptitude of US leadership), we need to have someone buy our goods. Deals with China/India/Russia/Saudi become much more important potentially going forward. Selling food to China for electronics/vehicles/infrastructure is likely our best bet going forward.
de-dollarisation, lol. As if anyone is going to stick their savings in Yuan or Roubles.
Zeihan on De-dollarization: https://www.youtube.com/watch?v=xTwwNoh0E6Q and https://www.youtube.com/watch?v=4V2s5-lOKAA
So he believes that the US will use its military might to defend the USD as the world standard? Even though he admits Saudi Arabia is now settling in Yuan? Interesting take, but very US centric. I could get ardent Chinese geopolitical analysts saying the same thing but with China in place of the US.
No it's that no one trusts anyone else with their money, not much to do with military except in so much as the military protects the govt as a going convern as no one is invading the US anytime soon. I don't see England or France proclaiming that historically US was part of their empire and so it's time to invade and rid the north american continent of Nazis.
USD is the least bad option if you are choosing currency to trade or stash your trade surplus in.
USD Debasement 6.3% in 16 weeks
That's his top reason, from your 2nd link, so claiming "it's not much to do with military" goes against your own expert and evidence? And it makes sense because Saudi is looking for partners that can project power, so their main product can still be shipped around the world freely. The US has been pulling out of the middle east rather a lot over the last decade or so as it pivots towards Asia. They no longer have a permanent carrier group there, "coincidentally" at the same time Saudi Arabia has look more towards China and OPEC.
The PDK link at the top explaining what is going on. I have read Zeihan book and follow him. The PDK offers a view. Worth a listen as a contrast.
I find this interesting stuff, though the issues are incredibly multi-faceted and complex. I started reading Peter Zeihan's book but gave up partway in, but his theory regarding the US Navy being the safeguard that keeps global supply chains running was interesting. Got far enough into the book to see he thinks the US will be fine based on resources and geography (and NZ will be okay), before I stopped. He just felt a bit too off-kilter and odd...
Nate Hagens on the other hand, very interesting and quite reasonable sounding in podcasts I've heard.
Not sure what to make of some of it. Would be interesting fodder for large predictive AI models - Asimov's Foundation - were there enough and high-quality enough data points.
Yes he's very bullish on the USA
Worlds most powerful military, most energy independent, worlds 1st or 2nd largest breadbasket, worlds most completely internal vertical materials and manufacturing capability, better demographics than most other places, world reserve currency and soon to own all access to space?
Don't get me wrong they've got issues but you'd be silly to bet against U S A
You could rattle off a list like this for the British empire in the early 1900s
And they are such a backwater 3rd world country now? I don't understand?
Essentially this is where denial has got us to. Those scarce resources will have increased competition, but also flow on effects. China is invading the South China Sea essentially to gain access to the expected oil reserves there, but they are tromping all over the other countries in the region in the process. Some of those countries current interests are primarily around fishing (food stocks), but that will change if fuel becomes too scarce/expensive because there is no viable alternative. Will the US invade another country to secure oil, when they realise how little they have left? War is coming unless the pollies can see common sense, but China, the US, Russia all suggest that there is little hope of that.
It's funny... We value "wealth" yet the word ultimately measures quantity or abundance. To get our human version we actually value scarcity higher.
Methinks we might not be the most intelligent species.
If oil really did go up in price significantly the move to electric cars (and trucks) would be much quicker, flights would be only for the super rich again, people would start walking and cycling more, and we would be emitting a lot less CO2. Sounds pretty good to me...
Try divesting your wished-fors, and make time to watch/listen to the whole thing.
Then you realise EVs are the right answer to the wrong question.
As for the other wishing-for comment upthread - Venezuela - that commenter should do likewise. Clutching at any individual straw is invalid when running an exponential-growth paradigm based on energy and using finite source.
Personal car travel will probably be a whole lot rarer, more like the 1950s. The car comes out of the garage once or twice a week, if there's even one in the garage to start with. But bus trips take far less time because there's less congestion.
To me, the problem with some politicians' obsession with roads over any other public transport is they seem completely oblivious to any possibility that alternatives to personal car travel and road freight might need to be planned for. They killed coastal shipping, they eroded rail freight, and they're failing to plan for the future...
Clothing, food, basic necessities would also be super expensive. What would our social mobility freedoms look like then?
We'll have to buy less stuff. Which might mean we have to define our meaning in ways other than the ability to constantly acquire new stuff.
I agree
Thanks for sharing - great video to watch!
That's a great interview...added to my pod library.
Let’s see how this ‘soft landing’ rhetoric looks like in 6 months.
Well done to the Black Caps. And let’s hope the IRB sees sense and reduce the rugby world cup to 16 teams next time, these mismatches are boring
That's because its NOT really a world cup is it ? They have to scratch about trying to even find teams. The Football world cup is a different story, something like 200 countries actually have a team and the competition to even qualify for the top 32 is huge.
Maybe they should have the top 8 teams, plus 2 qualifiers, and similar to this year's iteration of the cricket world cup they all play each other in a round robin prior to getting into the quarters.
*woops, sorry folks for a moment forgot we're on a finance related site, not a sports one*
Still better than the baseball World Series!
Urban lore: World series named after an original sponsor, World Tobacco.
Uncertain of veracity.
Spot on HM the RWC is dragging on for far too long
I've been in Fiji since it started, the excitement is palpable here. Fiji at least bring some excitement to the game, also the commentary in their games has been great ! The ABs seem stale, the kiwi commentators are boring and overly technical. Should be using the ACC commentary on sky. At least it would be amusing !
Don’t get me started on the NZ commentators… full of bias and cliche
US Supreme Court case looking at whether tax on unrealised gains is unconstitutional
https://www.cnbc.com/2023/10/05/supreme-court-tax-case-could-have-sweep…
"The plaintiffs are fighting taxes on earnings that weren’t distributed to them by arguing about the definition of income"
Thats what happens in most growing businesses, taxed profits are reinvested in the company. These people are saying they shouldnt be taxed on their profits from their sweat shop in india because they didn't actually receive them ?
They will probably win if they have deep enough pockets. Justice.
I think you misrepresent it somewhat Sluggy. You cite the article, but then you go on somewhat emotively to say "These people are saying they shouldn't be taxed on their profits from their sweat shop in India because they didn't actually receive them ?"
There are a number of questions unanswered in the article, but it is clear these people did not receive these profits. Why then should they be taxed? If they didn't receive the money, then how can they be defined as "earnings"? Did the company pay tax in India?
These questions are important and apply everywhere in the world. And how do you know the company is a 'sweatshop'?
If they didn't receive the money, then how can they be defined as "earnings"?
What does receive mean, what does earnings mean? What does income mean?
Not that simple murray. FIF regime obvious example.
If you own the asset that creates the income, then arguably you have received it (in hand or the increase in value of the asset holding the profits)
"FIF regime is an obvious example"... of unconscionable state theft of unrealised gains & occasional losses - last year global shares dropped the most in 50 years (which you conveniently ignore). Retained earnings in companies are not personal income: share traders are also liable for CGT.
Perhaps the SCOTUS may also see it that way, it is that simple.
This stuff is far from simple - picked up the Master Tax guide or waded through the NZ Tax Law databases lately (let alone the US which has multiple tax codes)?
Accounting is not science. There are no physical rules of nature to back you.
Thus income, taxable profits, revenue, moneys worth etc it can be whatever the legal precedent decides it will be.
But up thread you are arguing a specific point as though it is fact. Try defining "income" and "Earnings" before you make the argument.
Owning shares in a company is not in itself income or earnings, IMHO, even if they are profitable, until and unless you actually receive money from them. A change in share price is meaningless until and unless some action is taken to capitalise on it.
I would suggest the IRS is over reaching here in suggesting that ownership of a foreign company equates to income or earnings. Especially if tax is paid in the country where the company is actually located.
You own shares in company Y. No dividends ever paid.. Instead, the billions stay in the company. The shares go up by the equivalent amount because of this new asset they own (Early Apple as an eg).
Why would it not be income - you have received the value in moneys worth via the corresponding increase in your shares?
The law can deem this as income or no to you. It is not your personal theory that matters.
Define money..it's not easy.
Every Kiwisaver 'contributor' thinks of shares as 'wealth'. And they're not the only ones...
The joke is that there isn't enough in the sack, when Santa comes calling.
So there will be tears...
Your link at the top was probably the best explanations I have had on this matter.
Lol "unconscionable state theft"... Who/what is the State?
Whilst the method may not have been the best there was a reasonable intention behind the FIF regime.
You obviously don't understand income tax laws though and the fact that they've been written to purposely put the burden on the workers. If you want a level playing field then all income must be taxed equally.
Unfortunately our history has created a massive angst over taxes, and it's distorted so many areas of incentive and rational investment decisions. It's become an emotional disturbance.
You know we have a collective problem when tax is driving emotional behaviours, when energy is driven towards tax avoidance and evasion, when one is angry about paying taxes rather than being thankful for what they have.
Meh... (see what I did there)
We'll see who SCOTUS agrees with
I see what you did there and it shows your own denial in widening your own understanding.
It doesn't really matter who SCOTUS agrees with if they're still stuck in the same paradigm. They're shackled by the same chains that say they must follow the legal interpretations and not question the origin of the law, or whether the intentions and effectiveness of said laws are fit for purpose.
Although promoted as a temporary measure, income tax has been levied continually in Britain ever since. https://en.wikipedia.org/wiki/Income_Tax_Act_1842
While taxes on land, capital gains, inheritance etc. have been eroded, the temporary measure of a tax on productive people has come to be the mainstay.
One wonders why...? Abuse of power, corruption etc. Like running on policy to favour property while having a large personal portfolio of the same...
Speaking of tax, we obviously need to have a much bigger discussion about it's purpose and application, together with the role of government.
I'm reminded of previous governments here talking about the need to "catch up" to Australia. It would appear we both have similar cost of living issues and yet most seem to think the grass is greener over there.
They also have a higher progressive tax rate system than us, as well as various additional taxes. Why can we not align with that here?
Maybe the authors and tax experts here could provide more in depth observations?
The Collateral Markets Are Starting to Freeze Thread Euro$ Collateral System is flashing red alarms, and it's time to pay attention. Link
Imagine if our Govt canceled the weekend and made everyone work!
Well Act is campaigning on cutting everyone's Christmas holiday short and sending them back to work early
“If Labour get back in, my husband says, we’re selling up and moving to Australia.”
Good riddance & luck escaping climate change and inflation over there!!
Ozzie has a wall of meat hitting the markets as everyone wants to dump livestock before El Nino hits for good as it will make it much much more expensive to feed the stock.
The audacity farmers in this country have, blocking solutions like HWEN (which they are part of) but being first in line to whinge about climate impacts and inflation.
Yes +16% inflation on farming inputs IS hard initially but the farmers have a product to sell and they can pass the price increase onto consumers.
Most farmers would have large loans to fund their operations, these get nicely eroded away by inflation all while they're getting massive capital gains on their land!!
Imagine having only your time/labour to sell, who are you going to pass on the rising costs?!
Astounding what this 1% of the population has in political power.
Dairy remains our largest export. Might be 1% but they need a strong voice.
Yep and I’m convinced National have a cool $20b lined up to send them on their way too. There has to be something in the modelling that leaves a sour taste in your mouth, otherwise they would be happy to release it. Bailing out farmers and selling off productive land could be that sour taste.
Watching the leaders debate a couple weeks back, I think farmers have just had enough and it’s Labours fault. There was a section on excess pine slash, which Hipkins responded that you can’t shut these operations down and leave the old pine trees because they would become a much larger problem in time. Luxon responded that they would look to penalise and shut them down. The farmers, after the debate, “not enough from Hipkins” then went on to parrot exactly what he reasoned back as a reason to vote Luxon instead. A lot of bees and a lot of bonnets.
Anyone watch the minor party debate on TV1 last night ? Found it quite interesting myself. Also did the vote compass thing yesterday just before heading to the polling station to give 2 ticks blue and shock horror NZF was only 2 percentage points behind on my test. Had to get in line to cast my vote, could be and should be a decent turn out this year.
"Soft landing" is the new "transitory inflation".
No idea whether you are right or not, but brilliant quip.
The more a soft landing looks likely, the longer tightening is going to happen, the worse the eventual crash is going to be !
Et tu, Yvil? You've been listening to bank economists, too? For shame .... ;-)
Give it time. The high central bank rates are just talking a bit longer to work this time, almost certainly due to buffers people built up during covid. But work they will. (e.g. what are the reasons for why copper is falling in price. https://tradingeconomics.com/commodity/copper ... Could it be overstocked inventories?)
Usual optimism bias I see
please regard:
https://www.zerohedge.com/markets/macleod-unwinding-financial-system
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