Here's our summary of key economic events overnight that affect New Zealand, with news in the shadow of closed American markets.
First, remember today is a public holiday in the US - Martin Luther King Birthday. Both the bond and stock markets are closed.
First we should note that the Davos talkfest is underway again. It will have no impact this year despite the headlines it generates, just as it hasn't had for years. But both China and Hong Kong senior officials will be there to try and divert attention from Taiwan's free elections and Hong Kong's recent clampdown moves.
In China, their central bank did not cut its medium term lending facility rate as was expected. It held it at 2.5%. But it did add much more to banking system liquidity, a +¥216 bln (+NZ$47 bln) net injection from its overall ¥995 bln (NZ$222 bln) offering yesterday. This was a surprise (unexpected) move. Markets are now absorbing the implications of these two policy actions.
In Canada, the Business Outlook survey run by their central bank reported further declines in sentiment and now there is barely more 'positive' views than 'negative' ones. If anything the negative momentum is building. Almost 40% of firms surveyed said that are suffering sales declines. The same survey found that price pressures are easing however.
Japanese machine tool orders revealed a recent recovery in December, up +9.2% from November driven by strong local orders, up more than +15% on the same basis. These recent gains reduced the year-on-year deficit to under -10% and its least since late 2022.
Indian exports rose strongly in December from November, up +13% on that basis, but were only +1% higher than the same month a year ago. The Red Sea choke effects haven't hit them yet.
EU industrial production withered further in November, down -0.3% from October to be -5.8% lower than the same month a year ago. It is not a healthy track overall, but was particularly hurt by Ireland, Belgium and the Netherlands. Showing good gains were Denmark especially, but also Sweden. Even France managed a year-on-year rise. But not so Germany. (If the UK was still included, it would have been a drag too, although not by as much as the average.)
Meanwhile, Germany released its full year 2023 GDP result which recorded a small -0.3% drop. That was far worse than the +1.8% expansion in 2022 although it was what was expected. The 10 year long-run annual gain has been +1.2% so 2023 was disappointing all round for them and they had the dubious distinction of being the worst performing major economy in 2023. But they are not yet in "recession" if your definition is two straight declining quarters; despite the -0.3% drop in Q4 from Q3, their Q3 change was revised to be flat.
In Australia, there has been a rather remarkable legal decision handed down relating to a gas pipeline proposal and "cultural heritage". Justice Natalie Charlesworth rejected claims on behalf of a group of Tiwi Islanders that the proposed pipeline would damage Sea Country and anger two creatures of their Dreaming stories – Ampiji, the rainbow serpent and the Crocodile Man. Her judgment slammed the evidence based on “cultural mapping” presented by the taxpayer-funded Environmental Defenders Office as “so lacking in integrity that no weight can be placed” on it and said there was “a significant degree of divergence” in the evidence given by Tiwi Islanders. She called the EDO positions "confection" and "made up" by their lawyers, and not supported by the Tiwi Islanders themselves.
The UST 10yr yield starts today at 3.98% and up +4 bps from this time yesterday. The key 2-10 yield curve is less inverted, now by -016 bps. Their 1-5 curve inversion is unchanged, still by -85 bps. And their 3 mth-10yr curve inversion is marginally less inverted, now by -141 bps. The Australian 10 year bond yield is now at 4.11% and up +3 bps. The China 10 year bond rate is now at 2.54%, up +2 bps. The NZ Government 10 year bond rate is another -3 bps lower at 4.64%.
Wall Street is on holiday today and the S&P500 isn't trading. Overnight European markets were about -0.5% lower. Yesterday, Tokyo ended its Monday session up +0.9%. Hong Kong fell -0.2% but Shanghai rose +0.2%. Singapore ended its Monday session up +0.2%. The ASX200 ended little-changed but the NZX50 fell a chunky -0.7%.
The price of gold will start today up another +US$6/oz from yesterday at just on US$2055/oz.
Oil prices are marginally softer at just under US$72.50/bbl in the US and down by -50 USc. The international Brent price is now at just under US$77.50/bbl.
The Kiwi dollar starts today at just under 62 USc and down almost -½c from this time yesterday. Against the Aussie we are down -¼c at 93.1 AUc. Against the euro we are almost -½c lower at 56.6 euro cents. That all means our TWI-5 starts today just on 70.5 and -40 bps lower.
The bitcoin price starts today lower again, now at US$42,485 and down another -1.0% from yesterday. Volatility over the past 24 hours however has been modest at +/-1.5%.
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71 Comments
Anyone claiming that China’s economy is collapsing should look at this graph. A collapsing economy does not alleviate poverty. A collapsing economy doesn’t improve the lives of the majority. There isn’t a historical precedent for such a thing, unless you buy into typical anti-communist historical distortions that is. Source: UkraineHumanRightsAbuses Link
their poverty level measure is very low and their statistics very unreliable - regardless they can still lift people out of poverty while money they need to grow their economy leaves the country - it will be the future statistics not the past ones where the problems will show
World’s five richest men double their money as poorest get poorer
Oxfam predicts first trillionaire within a decade, with gap between rich and poor likely to increase
I disagree with a part of the Oxfam report. They say it will take 229 years to eliminate poverty. I suggest they are wrong - poverty will never be eliminated. There is a part of human psychology where people will seek to secure more for themselves at the expense of others. It is about power, greed and survival (even though the accumulated wealth is much more than required for survival). So ways will always be found to subjugate the masses and poverty is perhaps the strongest tool of them all.
The extreme poor of course. You and I did not write our comments on a computer or mobile phone and post it via the internet thanks to the poor. We can only do this thanks to the extreme rich, like Bill Gates, Steve Jobs or Jeff Bezos. That's why they got extremely rich of course, because they provided billions of people with something of value.
It is a major source of poverty. Are we only allowed to discuss poverty when we leave out the major factor? Apologies for challenging your fairytale view of poverty that "one does nothing" because they are lazy. In extreme poverty I have met many people who prefer to be poor rather than climb on the corruption ladder. Sad that you think they are poor because they are lazy.
Recall when Bezos was floating around in zero G on his Blue Origin space ship and he thanked all his employees who made it possible? What was his employees response - they blasted him because at best he generally paid only minimum wage while raking in huge profits? I ask again who is the parasite?
I would suggest to you that business owners who do not pay their employees a fair wage while they rake in huge profits are bigger parasites. After all they got rich of the backs of their workers.
I think you're being somewhat disingenuous. There are all kinds of influences that prevent people from being able to seek out better paying jobs. The US market is perhaps worse than others. I have heard numerous anecdotal accounts that suggest that even the unions can be predatory on workers, but employers are often in a position of uncontested power. I am unable to accept the concept of 'generosity of the employer' for employing them. In the modern moneterised world, especially in the US there are strong indications that many employers are inventing new forms of slavery, trapping people in low wage jobs with little choice and power. That, I suggest, makes them predatory.
"they got rich of the backs of their workers"
The employees certainly help the business owner become rich, but is it at the "unfair" expense of the employee ? Did the employees not look for a job, and did they not agree to work for the employer without being forced into it? Did they not agree to the salary they will received in exchange for their work at the company? Are they not free to leave if they don't like their job or if they feel they are treated unfairly? The answer to all these questions is "yes, it was the employee's free choice"
As for Refactornz I think you are being disingenuous. You sound a bit like the landlord lobby when they argue if their tenants thought the rent was too high they can go and get another house somewhere else. When the market is all about a few employers trying to get rich while paying employees minimum or less wages, those employees have very little choice.
That sort of happened already didn't it? Many jobs got exported to China, the internet allowed shopping on-line, and the consequences wages got driven even further down, and people get even more desperate. What does that look like now after 50 odd years of the internet and capitalist monetary policies? The world going to hell in a hand basket and most places teetering on the threat of collapse.
Two of the problems I have with the assessment of poverty are:
1 The measures are relative, not absolute. As wealth and cost of living increase, the point at which poverty is indicate, also shifts. I see this as a typical 80:20 distribution bell curve. Meaning there will always be 20% in "poverty".
2 The assessment of poverty is essentially a western capitalist construct that is predicated on monetised continuous growth. The assessment indicator baselines are western developed nation definitions of adequacy, base in the assumption that we western deveoped nations have found the recipe for success and sustainability that lesser developed nations need to aspire to and emulate.
From my own experience living and working* in one of the "poorest" countries in the world, I have come to a position that poverty, by the common western definitions, does not account for life satisfaction or happiness.
* From 2018-20 I worked as an Ag/Hort advisor in Timor Leste. I was a NZ VSA volunteer supporting NZ & Aus government funded projects to relieve food insecurity and elevate dietary nutritional levels in remote rural communities. By my NZ standards, those communities lived in poverty. Yet I observed a higher degree of happiness and life satisfaction than I observed and continue to observe in NZ urban communities.
It's really an interesting question isn't it? I would suggest that the problem comes when "enough" for you is defined by someone else. I think the individual has to define it for themselves.
But the psychology behind it is treacherous as MFD indicates. When a person begins defining "enough" based on what other people have, then all kinds of problems start to raise their ugly heads, not least being the competition for scarce resources.
It comes down to what you want to achieve, specifically. But this should never be to be better or have more than the next person. Greed and lust only lead to bad things.
On point 2, it seems bizarre that the baselines are set to a western model of life which are insatiable consumers of resources. I too agree that less is often better, however there are climatic factors there too. If you are poor in the Sahara you will struggle to stay alive in the heat and cold, however if you are poor on a tropical island with abundant natural food resources such as fruit and fish, and can sleep outdoors without any insulation needed, then you will struggle less and be able to enjoy life more.
"By 2015, the share of the world's population living in extreme poverty fell to 12 percent from 36 percent in 1990"
https://www.nytimes.com/2021/12/02/world/global-poverty-united-nations…
A rising tide...
From extreme poverty to moderate poverty.
Redistributing the wealth of the million richest people to the billion poorest wouldn't shift the dial much. What is needed is wealth creation (whatever that is and however it works). I think the poor will always be with us because there will always be people who throw away their income and have nothing to show for it, even if we attain the nirvana of eliminating extreme poverty.
Your view on how the poor live is appallingly inaccurate. Read less right-wing dogma that encourages the stereotypes you believe and read more about what living in poverty is actually like. Ignorant views like yours make me sick and only identify the person repeating them for what they are.
Read what I wrote again and edit your post. To reiterate: even if we eliminated poverty for a microsecond there will always be people who put themselves back into poverty through poor choices. It's human nature.
Bah, explaining is losing. Go ahead and judge me based on poor reading comprehension. You only reveal your own misanthropy.
‘Only around a third of younger Britons now own their home at the age of 30, compared with more than half of earlier generations at that same age’ https://economist.com/britain/2024/0 Link
”…we are starting on the track of back to feudalism.”
You may well be onto something with that comment.
If you wanted society to become more feudalistic, here are some measures that could be taken:
1. Concentration of power and wealth in the hands of a few individuals or families.
2. Weak central government or governance systems that are unable to enforce laws and regulations effectively.
3. Economic instability and inequality.
4. Social unrest and conflict.
5. Lack of upward mobility and opportunities for the lower classes.
6. Decentralization of authority and the rise of local power structures.
7. Dependence on personal relationships and patronage networks for economic and social advancement.
How do we and other democratic countries compare?
The UST 10yr yield starts today at 3.98% and up +4 bps from this time yesterday.
In the past, when markets priced in a 70%+ probability the Fed has almost never gone against the tide. At the moment, about 20 bps (~80% probability) of cuts are priced in for March. Link
Thus instead of the central banking narrative that lower rates lead to higher growth, the empirical and verifiable reality is that higher growth leads to higher rates and lower growth leads to lower rates. If rates are the result of growth, they cannot be the cause.
This raises some new questions. Firstly, if it is not interest rates that drive growth, what then? And secondly, why do central banks keep insisting that they are using interest rates as their main monetary policy tool, when this is simply impossible? Recently, central banks have been lowering rates, while proclaiming that this is a measure to stimulate the economy. But the empirically verifiable fact is that they lowered rates, because economic growth has decelerated. Falling growth means interest rates must follow down. And what has been the role of central banks in the growth slowdown preceding the lower rates? We may presume that they had not used their vast powers to engineer economic growth – powers they worked hard to obtain in previous decades, in the form of independence with little meaningful accountability.
Instead of unravelling this mystery, central bankers have been making counter-factual assertions about the causation of interest rates and growth. Yet we know them to be in possession of thousands of highly trained staff and the best quantitative data sources on the economy of anyone. Since the hypothesis of complete incompetence or irrationality is a last resort, it stands to reason to adopt the working hypothesis that central banks have employed these counter-factual assertions on purpose. Two reasons come to mind: Firstly, they are using the interest rate narrative in order to suggest that they are adopting beneficial policies, when this may not really be the case. Secondly, they may in this way be able to distract public attention from the true causal relationships in the economy. In this case, a far less benevolent interpretation of central bank policy becomes suggestive.
As Forder (2002) has argued, obfuscation has served central banks particularly well since they have become so all-powerful: the danger for them in this era of unprecedented powers is that the general public may simply (and rightly) link bad economic outcomes to bad economic policies adopted by central banks, not to the – now far less powerful – governments. In other words, since almost all economic keys have been handed over to the central banks, one can reasonably expect them to be blamed for the economic mess that is such a recurring feature of economic policy during those decades of ever greater central bank power. As a defense mechanism, central banks could be expected to argue that they are doing all in their power to help the economy, while pinning the blame on other actors. But for this to work, observers need to be misinformed about what the true levers of monetary policy are.
A desire by central banks to misinform would explain why they have spent vast resources on “economic research” – pseudo-scientific writings that are often far removed from reality, but are designed to place any blame for the terrible economic performance that they have been responsible for on other actors – preferably the government, fiscal policy or ‘irrational’ and ‘uneducated’ ordinary people who are looking for ‘easy answers’ or seeking ‘populist explanations’, while anyone contemplating the possibility that big banks and central banks might not always look after the public interest and instead might collude in order to put their own objectives first is identified as a ‘conspiracy theorist’. In other words, the “economic research” produced by central banks is usually of a kind that at best looks like political PR to objective observers, if not outright propaganda. Link and further analysis
Crikey. Right on the nail. But being humans, I would have thought someone would have blabbed by now.
Also, if they have an agenda, whose is it, and what is it? If this is already in the public domain, I must be reading the wrong conspiracy theory, populist websites.
France kicks wind and solar targets to the curb and focuses on reliables.
https://www.france24.com/en/france/20240109-france-drops-renewables-tar…
There must be some sort of lesson here.
"France has overtaken Sweden to become Europe’s top net power exporter, while Germany has moved from exporter to importer during the first half of this year. "
https://www.bloomberg.com/news/articles/2023-08-07/france-is-europe-s-t…
The lesson, which many of us Greenies already know, is that nuclear is a great power source and in many countries should be the core of their generation. Possibly our only hope of getting away from fossil fuels without dramatic reductions in our energy use (which would likely mean widespread discontent and/or starvation).
Wind and solar can't do the job on their own without dramatic overbuild and storage. Something like Onslow and NZ's hydro infrastructure could have gotten us close, but imagine the scale of the Onslow equivalent required to make a difference in a country like France or Germany.
Now think about how temporally correlated that wind and solar generation is, over the day and over the year. And how that generation doesn't match demand exactly.
You need storage to make one curve fit the other, and that requirement grows as wind and solar increase as a proportion of generation.
profile,
France kicks wind and solar targets to the curb and focuses on reliables. Indeed, realities begin to bite.
I think you made the point very recently that India intends to roughly double its coal production by 2030. I thought it would be interesting to see just how much additional CO2 this would release into the atmosphere. Given that we know, based on their atomic weights, that CO2 is 3.67 times heavier than carbon, we can do the maths. On the assumption that it will be largely bituminous with an average carbon content of 66%, then we have some 660 carbon atoms per kg of coal. Assuming an additional 600 million tonnes( a very conservative figure), then we can work out that by 2030, an additional 1,500 million tonnes of CO2 will be entering the atmosphere annually. NZ's current total(CO2e) emissions are under 80 million tonnes annually and stable/falling. Interesting?
In Australia, there has been a rather remarkable legal decision handed down relating to a gas pipeline proposal and "cultural heritage"
That decision is only "remarkable" if viewed from a NZ perspective.
Yes Yvil. We in Nu Zilund have drifted into a political driven unreal situation I think. It's a great realistic decision in Australia.
But Australia has it's weirdness as well. Sitting on a Qantas jet last week they were acknowledging traditional owners of something. Could not think what that was as we were at 10,000 meters on a piece of great modern economy.
But I think we have been through the depths of that and it's turning around.
So over a year of high interest rates is having an effect, ay? Who'd have thought!
Worth mentioning that recessions usually occur after yield curves have reverted to the norm. Will central banks, as they have done in the past, hold interest rates higher than they should be to get inflation back in check? Or, will they, this time, recognise they can relax i-rates and simply let economic 'friction' do the rest of the job for them?
"A huge wave of liquefied natural gas is about to flood a world that’s supposed to be transitioning away from fossil fuels.
More than $235 billion has been plowed into the next slate of projects for the super-chilled fuel since 2019. The first of those plants will come online later this year, and a further $55 billion may be invested through 2025, Rystad Energy forecasts show.
That will help drive an historic 70% jump in LNG export capacity by the end of the decade, according to Baker Hughes.
Massive export projects from the US to Qatar will cement LNG in the global energy mix for decades, especially with some purchasing contracts going into the 2050s — beyond targets set by many nations to become carbon-neutral."
https://www.bloomberg.com/news/features/2024-01-11/natural-gas-boom-to-…
The thing thats a 10th of the cost is converting Huntly to wood fired: https://www.genesisenergy.co.nz/about/news/genesis-biomass-trial-succes…
Vivek Ramaswamy expressing concern about the BRICS and its monetary machinations.
Ramaswamy, a billionaire entrepreneur-turned-politician, said the BRICS is establishing a currency backed by gold to replace the dollar as the reserve currency of the world. "This is a major problem for the United States. This would permanently increase our borrowing cost if the dollar is no longer the established reserve currency of the world," he said while responding to a question about the dollar, which is not backed by any commodity, losing its value.
The 38-year-old US presidential hopeful said that this was happening especially at a time when America was $34 trillion in national debt - "which is not the great time to increase your native borrowing costs".
https://www.businesstoday.in/latest/world/story/vivek-ramaswamy-brics-c…
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