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S&P500 at record high; Canada jobs grow; Nikkei225 also hits a new high; China lending explodes; chocolate a new luxury item, UST 10yr 4.19%; gold slips again but oil rises; NZ$1 = 61.4 USc; TWI-5 = 70.9

Economy / news
S&P500 at record high; Canada jobs grow; Nikkei225 also hits a new high; China lending explodes; chocolate a new luxury item, UST 10yr 4.19%; gold slips again but oil rises; NZ$1 = 61.4 USc; TWI-5 = 70.9
2024, Year of the Wood Dragon
2024, Year of the Wood Dragon

Here's our summary of key economic events overnight that affect New Zealand, with news that China is now on a full national holiday for a week (春节, Year of the Wood Dragon) and authorities managed to stave off a share market crisis before they closed.

In the US, the S&P500 is about to close above 5000 for the first time. As we post this, there is 75 minutes of trading this week to go. That means it is up +0.6% today, up +1.4% fort the week, and up +6% so far this year. And all this is in the face of rising bond yields which makes it a bit unusual. The Fed's win in its battle against inflation while keeping employment growing is a key factor that profits remain robust. Investors are impressed.

In January, Canada added +37,000 new jobs in the month, a surprise because a decrease was anticipated. But +49,000 were part time positions and full time employment fell -12,000. Their jobless rate eased slightly on this data, also not expected. Unfortunately for them, their population grew faster than employment.

In Japan, the Nikkei 225 Index jumped as much as 1.1% before settling only marginally higher at 36,897 yesterday (Friday), its highest levels in 34 years as strong corporate earnings, a weakening yen and a dovish outlook on Bank of Japan monetary policy pushed the markets to these new heights. On Thursday, a Bank of Japan Deputy Governor said the central bank would not aggressively tighten its monetary policy even if it eventually decides to end negative interest rates.

In China, under official pressure banks are shoveling out the loans. Banks extended more than ¥4.9 tln in new yuan loans in January, a record high since comparable records began in 2004 and beating forecasts of ¥4.5 tln jump. Mortgages rose to ¥980 bln in new lending and corporate loans jumped by ¥3.86 tln. Meanwhile, "total social financing" which is a broad measure of credit and liquidity, also reached a record high level of ¥6.5 tln (NZ$1.5 tln), well above forecasts of ¥5.55 tln.

In Hong Kong, the show trial of Apple Daily publisher Lai has become ludicrous and the Ministry of State Security pushes hollow claims in a warning to anyone else not toeing the Party Line - or anyone who didn't toe it even prior to their imposing the new "national security" law.

We should note that on Wednesday is election day in Indonesia. They will get a new president. Indonesia (the world's fourth largest country by population) rarely features in Kiwi minds. (It should do.) But it does figure large in Australia, and if it matters to Australia, it will end up mattering to us. Some 200 million Indonesians will elect 20,000 legislators. But the main show is the presidency, a three-way race. But all three presidential candidates have major Trump-like flaws. Australia is right to be concerned. It could get mean, messy, retributional, and with "faith-based" religion screwing people's emotions. The days of Indonesia being a relatively 'moderate' regional influence may be coming to an end.

With China largely closed for its New Year holidays, commodity prices are likely to just meander along with little direction. But that won't stop chocolate prices racing higher on climate-related supply challenges. Cocoa prices were up +17% last week alone, to be up +42% so far this year alone, up +123% in a year and up +160% since this surge started in mid-2022. Chocolate is back only as a luxury item. Meanwhile sugar prices, which maxed out in 1975, aren't showing any similar acceleration.

Staying with commodities, the price of palladium fell below that of platinum for the first time since April 2018 as growing demand concerns and bets on stable supply weighed on the metal. The price of palladium is now at its lowest since mid 2017. Palladium (and/or platinum) is most used in catalytic converters for ICE cars.

Household spending rose +2.3% in December from a year ago in Australia. This was the smallest growth in household spending since February 2021. But that is before inflation was accounted for. Discretionary spending actually fell -0.6% (also before accounting for inflation). This data highlights how their cost-of-living crisis is affecting them.

The UST 10yr yield starts today at 4.19% and up +2 bps from yesterday. That is up +17 bps from 4.04% a week ago. The key 2-10 yield curve inversion is little-changed at -30 bps. Their 1-5 curve inversion is less at -72 bps. And their 3 mth-10yr curve inversion is little-changed at -121 bps. The Australian 10 year bond yield is now at 4.19% and up another +3 bps from yesterday. The China 10 year bond rate is unchanged at 2.45% and still looking quite manipulated - all other durations around it are still falling. The NZ Government 10 year bond rate is up +9 bps at 4.91%.

Wall Street is in its Friday trade up +0.6% having pushed through the 5000 level. If it closed at this level it will be a gain of +1.4% for the week. Overnight European markets were all down about -0.2%. Yesterday Tokyo ended its Friday session unchanged to be up +1.3% for the week. However Hong Kong fell -0.8% to be up +2.7% for the week. But Shanghai was closed for their long holiday and ended its week up +4.8% is aggressive State buying. Singapore was down -0.2% yesterday. And the ASX200 ended Friday unchanged to be down -0.7% for the week. The NZX50 was also little-changed yesterday to be down -0.5% for the week.

The Fear & Greed index has moved back to the "extreme greed" level whereas a week ago it was in the "greed" range.

The price of gold will start today down another -US$8/oz from yesterday at just on US$2023/oz. A week ago this price was US$2036/oz. Rising bond yields make it tough for gold.

However oil prices are still on the move up, up +50 USc today to just under US$76.50/bbl in the US while the international Brent price is now just over US$81.50/bbl. These levels are +US$2 higher than a week ago.

The Kiwi dollar starts today at just on 61.4 USc and up +½c from this time yesterday and the same gain over the week. Against the Aussie we are also up nearly +½c at 94.3 AUc, and a 14 month high. Against the euro we open at just under 57 euro cents and also up +½c. That all means our TWI-5 starts today at just on 70.9 and up +50 bps from yesterday at this time and equalling its 2024 highs.

The bitcoin price starts today at US$47,622 and up another large +5.8% from this time yesterday. And this new higher level is +10.2% higher than a week ago and its highest since December 2021. Volatility over the past 24 hours has been high at just on +/- 3.0%.

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22 Comments

Boral building supplies continues to add significant shareholder value by just sticking to the basics of running a good business. You would think after many decades of failure Fletchers would be able to do the same.

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The Reserve Bank of New Zealand (RBNZ) has a history of leading other central banks. They were the first to hike and the first to pause. Now economists are saying NZ inflation is NOT under control, and more hikes are coming. One-off or a Canary in the Coal Mine? Link

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Regardless of all the stats, forecasts, opinions and politicking,  daresay Joe Blow on the street here, with concern to the household budget, would wholeheartedly agree,  “NZ inflation is NOT under control.”

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6

The Chinese frantic approach to stave off collapse is compelling viewing. 

Multuple bubbles are close to popping. 

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The whole planet's frantic approach to stave off collapse is compelling viewing. 

Multuple bubbles are close to popping. 

fixed it

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8

Swiss chocolate (Lindt) has always been a luxury item   :-)

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I would argue the 90% cocoa block is a necessity.

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I wonder if that's still the case today? Once upon a time of block of Lindt might have cost the best part of an hour's pay. These days at under $4 / block, that's less than the price of a cup of coffee - and pretty much anyone can afford that. While many things have increased in price a lot over the years, chocolate has not moved much at all - to the point that it now feels much cheaper than it once did. Funnily enough, ditto with some of the fancier nuts like macadamias. Used to be terrible expensive, now much more affordable.

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https://www.taxpayers.org.nz/nztucuria2402poll?utm_campaign=240210_news…

"National is up 2.6 points on our last poll in November 2023 to 39.6% while Labour drops marginally to 27.9% (-0.4 points). ACT is up significantly to 13.7% (+5.6%) while the Greens are down substantially to 9.0% (-4.8 points).

The smaller parties are NZ First on 5.0% (-1.0 points), Te Pāti Māori on 2.3% (-1.1% points), and others combined were on 2.5%."

 

Edit: unusually, some MSM have reported & commented on this Curia poll

https://www.nzherald.co.nz/nz/politics/poll-shows-act-leader-david-seym…

 

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On those results they would exceed the number of seats the last Lab government had. The treaty principles seem to be very popular regardless of what the media and the loud minority would have is believe it seems. The media also told us Luxon would not be able to increase support for National or the government. Wrong again….how surprising.

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Can't remember the exact numbers, but feel like I saw a poll somewhere saying about 65-70% support of the Treaty principles? (correct me if I'm wrong, of course).

I have no idea how this will play out, but it does seem that Seymour will be on to a vote winner here. My gut feeling is that Luxon will say 'not on my watch' until it becomes clear just how popular the bill is, and then it will become the basis of a referendum (i.e. "it's up to the public to decide").

Paradoxically, I think the more hysteria there is in the media and from the likes of Willie Jackson etc about the Treaty principles bill, the more popular it will be and the more Seymour/ACT will reap from it.

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Anyone who really wanted the treaty principles stuff would have voted for ACT wouldn’t they? ACT are just National with extra racism and guns. NZF are just National with extra racism and smokes. 

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Please explain the racism in: 

"That all New Zealanders are equal under the law with the same rights and duties"

https://www.act.org.nz/defining-the-treaty-principles

...then excuse the last Govts unbridled extreme racism & unmandated antidemocratic attempts to create their ethnostate.

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18

I agree.  The MSM are living in a bubble.  It's time to stop preferential treatment by race.  It's laughable that the media are trying to spin their narrative that equality is now racist.

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Doubt they will make 3 years ...pigeons are circulating looking for a good spot to roost.

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The next meaningful post you make will be the first!

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Median prices of new US single-family houses sold in December dropped to $413,200, which is down 17% from the peak in October 2022. This is also the lowest median price since December 2021. 

So prices of 'new houses' are heading south. This is how Wolfie Richter sees it:

We’re building smaller houses with less costly amenities that we sell at lower prices, and we’re buying down mortgage rates at a considerable cost to us, and we’re hedging those buydowns, and when those hedges blow up, that costs us too, and we’re throwing other incentives at buyers, so that we can get the payment down. And now people can buy a new house for a lower mortgage payment than a resale home. And we’re competing with homeowners and taking sales away from them.

 https://wolfstreet.com/2024/01/25/prices-of-new-houses-drop-to-2-year-l…

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From KB post

Matt Nippert at the Herald (paywalled) looks at the average salary for executives at various charities in NZ, and how many staff they have.

The ten highest paying charities are:

  1. Te Whānau o Waipareira Group $510k, 178 staff
  2. University of Auckland $428k, 6,246 staff
  3. VUW, $369 staff, 6,301 staff
  4. Waikato Raupatu Lands Trust, $368k, 172 staff
  5. Massey University $353k, 3,351 staff
  6. St John, $321k, 3,622 staff
  7. Ngai Tahu, $312k, 779 staff
  8. Canterbury University, $302k, 2,620 staff
  9. Lincoln University, $287k, 614 staff
  10. St Kentigern Trust, $284k, 415 staff
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Interesting. Not saying that charity CEOs should not be highly compensated but it's natural for people to question why, particularly given that charities are essentially not for profit-oriented organizations. 

Related, I am surprised as to why Wellington City Council’s chief executive Barbara McKerrow is on a salary equivalent to that of the Prime Minister of Japan.  

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I did a quick sense check on one aspect: Apparently Auckland Uni has twice as many students as VUW yet VUW has more staff than AKL..?

And Canterbury University has roughly the same number of students as VUW but well under half the staff...?

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Comparing Gold vs Bitcoin ETFs, the iShares Bitcoin Trust (IBIT) is now over USD4 billion in a month. This is the largest launch in ETF history by far.

It took the first Gold ETF (GLD) 3 years to raise USD10 billion.

IBIT on track to do it in 3 months.

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Damien Grant on the NZ Supreme Court activist judges
https://www.stuff.co.nz/politics/350173571/we-need-better-judges-writes-damien-grant

...anyone else missing the Privy Council's intellectual rigour?

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