Here's our summary of key economic events overnight that affect New Zealand, with news that as weak economic data and recession fears fade, risk is returning to financial markets.
Housing starts in the US rose by +1.9% in October from September, above market expectations as limited supply in the resale market has boosted new construction. Also, residential building consents, a forward-looking indicator of future construction, moved +1.1% higher. However, these might be recent trend increases but both are still lower than year-ago levels..And completions are now running higher than new housing starts.
In August the US TIC flows were positive into the US by +US$62 bln. Expectations were that September's inflows would top that at +US$89 bln. But in the event there was a surprise outflow in September. The net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC outflow of -$67 bln. Of this, net foreign private outflows were -$62 bln, and net foreign official outflows were -$5.3 bln. That is a massive US$156 bln surprise in just one month.
A new Boston Fed research paper released this weekend examines how much labour market surveys undercount gig-workers. It could be by a lot, and answer the question about why the US participation rate seems so low. US employment is already at a record high. It may well be very much higher than those official levels, and that has monetary policy implications.
Given that it is widely accepted that the US is battling a flood of illegal immigrants, in ordinary times some facts might quell the angst. But these are not ordinary times where facts matter.
In Canada, producer prices are falling, essentially due to the much lower fuel prices. They fell by more than -1% in October from September, the steepest decline in producer prices since August 2022. Year-on-year they are down -2.7% on the same oil-cost retreat.
In China, October foreign direct investment was only +¥106.5 bln from September (+$24.5 bln), continuing the run of weak inflows. In fact these are now -9.4% from year-ago levels.
At the APEC conference in San Francisco, lots of talk, a few agreements, but even at the margins the consequences will be light. Nothing seems substantial. However, talking is better that the alternatives..
The UST 10yr yield is little-changed from yesterday, now at 4.43%. A week ago it was 4.62% so down -19 bps from then. But their key 2-10 yield curve is now much more inverted, now by -46 bps. Their 1-5 curve is marginally more inverted, by -80 bps. Their 3 mth-10yr curve inversion is now -96 bps and slightly more inverted. The Australian 10 year bond yield is now at 4.47% and down -4 bps from yesterday. The China 10 year bond rate is unchanged at 2.67%. And the NZ Government 10 year bond rate is down -10 bps from yesterday, now at 4.98%. A week ago it was at 5.22% so a notable fall since.
Wall Street's Friday session looks like it will end little-changed on the S&P500 and so it books a +2.3% weekly rise. Overnight, European markets closed up about +0.9% to catch up with Wall Street's Thursday jump. Yesterday, Tokyo ended its Friday session with a late rally to be up +0.5% for the day and up +2.3% for the week. Hong Kong went the other way, down -2.1% to end its week up +1.1%. Shanghai ended Friday little-changed and was up +0.3% for the week. The ASX200 ended Friday also little-changed for a weekly rise of +1.0%. And the NZX50 closed out its Friday session down -0.5% for a minor weekly rise of +0.3%
The Fear & Greed index we follow has moved over to the 'greed' side as risk appetites return.
The price of gold will start today at US$1980/oz and down -US$2/oz from yesterday. A week ago the yellow metal was at US$1936/oz so a weekly gain of +2.3%.
But oil prices have recovered a bit less than +US$3 overnight, to be just over US$76/bbl in the US. The international Brent price is now down to US$80.50/bbl. Markets over-reacted yesterday apparently, not in the direction, just the scale of the pullback. A week ago these prices were US$77 and US$81/bbl respectively, so we are essentially just back to those levels.
The Kiwi dollar starts today at 59.8 USc and essentially unchanged from yesterday. But it is up almost +1c from a week ago. Against the Aussie we are down -½c at 91.9 AUc. Against the euro we are also down -20 bps from yesterday to 54.9 euro cents. That all means our TWI-5 starts today at just on under 69, and a net -20 bps lower. A week ago it was at 68.9 so very little changed from then.
The bitcoin price starts today at US$36,386 and down a net -0.5% from this time yesterday. A week ago it was at US$37,215. Volatility over the past 24 hours however has also been modest at just on +/- 1.6%.
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29 Comments
At the APEC conference in San Francisco, lots of talk, a few agreements, but even at the margins the consequences will be light. Nothing seems substantial. However, talking is better that the alternatives..
This part of Xi's speech to US CEOs (full speech here: https://mfa.gov.cn/eng/zxxx_662805/202311/t20231116_11181557.html) is interesting and worth reflecting on: Link
It’s an interesting question. Anyone who knows anything about a potential military invasion knows it would be very ugly, for China as well as Taiwan and beyond. If it was easy, it would have been done already.
So really hard to know. I find predictions of some time before 2027 unlikely.
Rather than timeframes , I prefer to consider triggers. Perhaps an existential threat to Xi’s reign. But what would that be? A worsening economy and mass youth unrest? Which could potentially occur in the next few years.
Taiwan and beyond. Certainly. Xi might try an embargo, blockade even but that will require ships on the water and Taiwan would eventually turn at bay and sink a few and then that will trigger the military option which as you say, is no easy conquest. If Taiwan should fall then the balance of power in the region is mightily altered and that in turn lays bare China’s intentions territorially precipitating the threat to the security of Japan, Sth Korea, Philippines and more. To revert to the old cold war terminology Taiwan is in the category of the first domino.
Of course Audaxes could be right and there will be a peaceful transition. But if he's wrong:
Internal strife has always seemed a likely trigger.
Still strikes me that China has the opportunity to generate it's own pretext by plopping military assets on outlying islands as a "let's just see what happens" strategy - keeping options open, and maybe opening new ones.
I wonder about whose side time is on. I suspect China is going to decline faster than the US, so that puts more pressure on China to get it done. And Xi will want to do it before he's in his 80s.
Great speech writers. Love the point about their sociopolitical and cultural goal not being to have a very small number of highly wealthy citizens. Ouch.
Heaps of praise for the UN and the need to respect international law, but what a load of hogwash when they ignore the rulings against them in terms of UNCLOS and the territorial rights of others in the South China Sea.
Still, much in the speech to be admired regarding his communication of philosophical matters.
How can things change? Us has literally trillions tied up in China. Us big guys all totally depend on their Chinese investments selling cheap junk to their US consumers. This will never change unless the Republican/Democrat Crony Capitalist cartel loses power. This will not change without a big fight in the US. Trumpie tried. Their corruption beat him up. THe Kennedy guy is trying. They have to beat him up too, if their trough is to be kept full. Great spectator sport.
Reshoring to the US is happening, though.
One thing that could really speed it up is the US government going so bust it has way less ability to maintain all the bases and fleets and be the World Police. Global shipping costs, including insurance, will increase big time because of the risks. It is going to be a painfully expensive rebuild in the US though - part of the reason I expect at least years more of decent inflation.
When the world lose its trust in the USD..
Other factors such as hyperinflation and debt ceiling negotiations also impact currency diversification and de-dollarization, because they provide added fright to foreigners that the value of their dollars in the Fed might "depreciate and crater", he said.
"If the US is seen as irresponsibly managing its economy, it will necessarily impact the value of its currency," he said. "There will be that effect of trying to move away from holding assets in dollars." https://global.chinadaily.com.cn/a/202306/09/WS6482567da31033ad3f7bb3f9…
The US runs the global institutions that enforce dollarisation - IMF most obviously. Also worth noting, as you say, that nobody wants dollar-denominated financial assets to crash.
I hope that BRICS make a dent in dollarisation to help countries out of the dollarised debt trap, but seriously doubt we will see a significant shift in the foreseeable future.
It's surreal watching the economy collapse in slow motion while the three coalition of cruelty leaders do photoshoots in bland hotel rooms. At least Winnie seems to understand that cutting Govt spending hard will just deepen the recession.
One of the bang up-to-date datasets that is worth tracking is the MSD weekly benefits data. I particularly like the benefits 'cancels into work' dataset (graph 5), which shows you the movements off benefits into work. The flow of people from benefits to work reached record levels when the economy was at what economists call 'unsustainable levels of employment'. Needless to say it is now flashing red (like all the other indicators).
Other weekly datasets include MBIE fuel price monitoring where you can see the price that importers are paying for fuel (and the mark-up). You can also still get weekly median wage and filled jobs on the Covid-19 data portal.
Bitcoin As Legal Tender: Joana Cotar Of German Bundestag Proposes Groundbreaking Legislation In Germany
Unlike many of her contemporaries who often cast a wider net over the crypto spectrum, Cotar focuses exclusively on bitcoin. "Establishing a formal Bundestag committee that recognizes the technological differences between bitcoin and other crypto assets and mainly deals with the importance of bitcoin for our society is very important for us,” she said. Her stance is unequivocally bitcoin-centric, as she confirms, "My initiative is Bitcoin only."
Stopped in at a Placemakers this morning. It was dead. I said as such and the guy serving said they are going to stop opening on a Saturday.
So coming to to summer, on a Saturday, they will be closed.
Remember post GFC when companies went to four days? Starting to feel a bit like that.
"Consequently, forming a coalition appears to be fraught not because of anything to do with economics, but because NZ First and ACT know full well that should the Nats water down those two parties strongly-held views on race-related matters, then both those two minor parties will be abandoned by their supporters at the next election."
"Incoming Prime Minister Christopher Luxon is now being openly mocked and ridiculed by political commentators for his failure to achieve a coalition government."
https://www.rnz.co.nz/news/political/502687/knives-out-for-incoming-pm
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