Here's our summary of key economic events overnight that affect New Zealand with news competition for resources is heating up, and none more so than for energy resources.
But first in the US, data out overnight for September shows retail sales have been stronger than in earlier indications. They increased +0.7% from August, and August was revised up to a +0.9% gain, both beating market forecasts of a small fall. It is another sign of resilience from consumers despite supply constraints affecting vehicles and computers, The biggest increases were seen in sales at sporting goods, general merchandise stores, and at petrol stations.
But American shoppers aren't feeling that buoyant. The widely-watched University of Michigan survey slipped back slightly to levels that were as weak in the early stages of the pandemic. Something doesn't quite square between spending freely and feeling apprehensive.
Even though the New York Fed's Empire State survey of factories fell back to August levels, they are reporting growth above its long term trend, widespread price increases that seem to be able to be passed on, and optimism about the future.
However, American firms generally are finding it almost impossible to pass those rising costs on in their export prices, and are just having to suck it up with sharply rising import prices.
Canadian factories have the same cost pressures with producer prices up +15% year-on-year to September, although there has been a small slowing over the past few months.
The northern hemisphere winter is approaching and every country from China to the US is struggling with high energy costs that will sharply raise the costs of winter heating this year. In the US, a new analysis shows that those using heating oil will pay more than +40% more than last year; those using propane +50% more.
Every country is hungry for fuel, and none more so than China.
Globally, future energy use will be dominated by electricity generation, and the big increases required to 2050 will come from solar, it has been forecast. The same estimates also show that while they won't grow, the use of coal and natural gas will still be a big and important fuel sources for electricity generation for the next 30 years at least. These estimates don't see nuclear making any comeback.
In China, there has been a rare public comment from Beijing on the Evergrande situation, and it was to squash fears of systemic risk. Their central bank has rebuked the company calling it "poorly managed" and wants Evergrande to step up asset disposals and resume its stalled projects. And the official said most individual financial institutions did not have highly concentrated exposures to Evergrande.
Despite these soothing comments, the Chinese Communist Party's anti-corruption unit has dispatched inspectors to 25 financial institutions, including top state-owned banks, in what appears to be a crackdown prompted by the Evergrande debt crisis.
More generally in China, poor retail sales, surging raw material costs, widespread power outages and Delta outbreaks have slowed the country's economic recovery over the past three months. And the combination of these factors is expected to show up in Monday's GDP release with (for them) just a +0.5% economic expansion in their Q3.
Meanwhile, the price of copper is taking off again. Its price hit a record high on yesterday as surging power prices threaten to curb supply at a time when stocks are at rock bottom. The crunch will hurt China the most, as it consumes more than all other countries combined. However, it controls little production and is on a fast hunt for supplies it can control, especially in Africa.
The economic implications of being left out are also worrying the Australians. Their prime minister looks like he is ready to adopt some sort of soft carbon target, but not because it is the right thing to go for the global climate, but because "climate change is as much about the global economy as the environment, and Australia will be left behind if it does not respond". And it looks like he has been shamed into going to the Glasgow COP26 climate summit.
And staying in Australia Delta cases in Victoria have risen to 2179 cases reported there yesterday, and that was far more than expected. Deaths were 11 yesterday. There are now 21,324 active cases in the state and there were six deaths yesterday. In NSW there were another 399 new community cases reported yesterday with another 284 not assigned to known clusters. They now have 5,243 active locally acquired cases which is lower, but they had another 17 deaths yesterday. Queensland is reporting zero new cases again. The ACT has 35 new cases. Overall in Australia, more than 65% of eligible Aussies are fully vaccinated, plus 18% have now had one shot so far.
The UST 10yr yield opens today up +6 bps to be now at 1.58%. The US 2-10 rate curve is marginally steeper at +118 bps. Their 1-5 curve is steeper too at +101 bps, while their 3m-10 year curve is steeper at +153 bps. The Australian Govt ten year benchmark rate is up +7 bps at 1.68%. The China Govt ten year bond is up +2 bps and now at 3.00% and its highest in 3 months. The New Zealand Govt ten year is up +5 bps today at 2.18%.
In equity trading, the S&P500 is up another +0.7% in afternoon trade in their Friday session and heading for a weekly gain of +1.9%. They are still some way off the September 3 all-time record high however. Strong earnings reports plus the very good retail sales data are behind today's jump. Overnight European markets were all up by +0.7% except London which lagged again with only a +0.4% rise. Yesterday, Tokyo ended with a +1.8% gain to be an impressive +3.9% ahead for the week. Hong Kong closed up +1.5% to end their weather and holiday interrupted week up +1.1%. Shanghai was up only +0.4% yesterday and ended its week down -0.8%. The ASX200 ended yesterday up +0.7% for an overall weekly gain of 0.6%. The NZX50 had a tough week, falling -0.3% on Friday to end its week down -0.6%.
The price of gold has fallen back by -US$29 to US$1768/oz.
And oil prices are another +US$1 higher at just over US$81.50/bbl in the US, while the international Brent price is now just under US$84.50/bbl.
The Kiwi dollar opens today another +40 bps firmer at just on 70.7 USc. Against the Australian dollar we are +50 bps firmer at 95.3 AUc. Against the euro we up nearly another +½c at 61 euro cents. That means our TWI-5 starts today at just on 74.4, and now well over the top of the 72-74 range of the past eleven months.
The bitcoin price has risen sharply, up +7.8% today from this time yesterday to be now at US$61,326. Volatility over the past 24 hours has been very high at just over +/-4.2%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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89 Comments
The Woke forces are clamping down on the use of most energy sources based on fear/panic over climate change. Which is having some counter-productive effects.
Eg all schools converting to heat pumps instead of coal or gas boilers. Then the electricity for the heat pumps comes from burning dirty coal from Indonesia? And more total energy needed/used.
And what a problem to have - 'We show a persistent and widespread increase of growing season integrated LAI (greening) over 25% to 50% of the global vegetated area, whereas less than 4% of the globe shows decreasing LAI (browning). Factorial simulations with multiple global ecosystem models suggest that CO2 fertilization effects explain 70% of the observed greening trend'
'FAO’s latest information points to a record cereal production of 2 800 million tonnes (including rice in milled terms) in 2021, up 1.1 percent from the outturn in 2020.'
Profile has given up on arguing that anthropogenic global warming is not occurring because its effects are now undeniable.
Leaf Area Index (LAI) is an indicator of canopy cover, not biomass. More of the planet is greening up but the forest areas that are being lost were storing large quantities of carbon biomass.
Getting a bit sad you have to make stuff up SimonP. You chicken littles just need to get used to inter glacial warming like your fore fathers. You will use a lot less bed sheets. Hey more food, more trees - what's not to like. Especially given bed wetter butterfly specialists like Ehrlich had us all starving to death by 1980. Though I can understand why you want to keep the fear going, there are fortunes to be made carbon bludging in NZ.
If you want to split hairs on LAI - 'To track global tree cover changes, the researchers studied data from advanced very high-resolution radiometers aboard a series of 16 weather satellites covering the years 1982 to 2016. By comparing daily readings, the researchers were able to see small changes occurring regularly over a relatively long period of time—which added up to large changes. Over the entire span, the researchers found that new tree cover had offset tree cover loss by approximately 2.24 million square kilometers—which they note is approximately the size of Texas and Alaska combined.'
https://phys.org/news/2018-08-global-forest-loss-years-offset.html
How do you think all the components are sourced, extracted, manufactured, and installed?
You are swapping coal for a bunch of materials that are mined in even more evironmentally damaging ways, that lead to more peverse long term outcomes.
Carbon is not the problem people think it is. The degradation of the environment via mining, deforestation, and general misuse will cause us far more immediate issues than a gradual heating of the atmosphere.
You are right, globally we are now mining and extracting more (Both quantity and type) of resources. The seas are emptying, the forests are dissapearing, and fresh water is being poisoned and wasted at unheard of levels.
But hey, if we all get Teslas using our own off-grid solar. That is what will save the world.
If you are squeamish about mining just get your uranium from seawater - job done - more energy stored there than mankind can ever dream of using. A fast breeder will give you your best bang for your buck and a fraction of the coal/land footprint of solar and windmill farms.
'Cost-effective method of extracting uranium from seawater promises limitless nuclear power'
It is a chemical bonding process not sieving - but I guess you knew that. 'Using the material, called Hicap, is simply a matter of immersing it in seawater. As it sits in the water, the material grabs on to the uranium ions and deposits them on the surface of its fibers. ...In addition, the technique can even use waste fibers for a greater cost savings and that analysis shows that seawater extraction could be competitive with land mining at present prices.'
Dirty Indonesian coal averages about 10% of electrcity production, and is a stopgap measure. Heat pumps have a COP of up to 7 , so if you went with a conversion rate of about 30% from coal to electricity , you are still using 1/2 the energy overall.
But its good you recognise our need to invest massively and quickly in renewables and conservation.
Wait for the NZ battery project (aka Onslow hydro pumped storage) Look at the technical Reference Group. A founding member of school strike for climate action, a greenpeace representative, a Maori I assume representing the local tribes, a company construction person, looking for skin in the project no doubt. Three properly qualified people in my book, engineering type background. Also a local farmer and general purpose business person.
I'm sure it'll fly through resource management consent. The project viability is another issue.
https://en.m.wikipedia.org/wiki/Molten_salt_reactor
why are we suffocating ourselves when there is nuclear ?
Here's a history lesson: the Ministry of Works designed and built the world's finest energy system in very difficult physical conditions after WW2. The MOW and Department of Scientific and Industrial Research (DSIR) also designed and built Mercer's thermal power station as well as the geothermal power station at Wairakei, north of Taupo. The Wairakei power station was notable for being the only example of its kind outside the Italian town of Larderello. The MOW and DSIR together invented the world’s first power station to utilise flash steam from geothermal water as an energy source.
All the MOW designs now sit in the offices of a NY multinational. Dams, power stations. Trashed by neoliberals with no regard for what they destroyed.
Btw, I know one of the engineers who went to the UK to study nuclear power for NZ during the late 60s. He was in favour generally but said in NZ it would've been overkill. The other problem: name a stable region in the country where a nuclear plant would be a) practical and b) politically acceptable.
"But American shoppers aren't feeling that buoyant. ... Something doesn't quite square between spending freely and feeling apprehensive."
Perhaps:
We now find ourselves in the October 2000 stage of the market cycle and there are some important similarities between then and now to support this thesis. Back then, it was becoming increasingly clear that March of that year represented the blow-off in sentiment. Stocks managed to hold up for another five or six months before officially rolling over into the bear market that saw dozens and dozens of the most popular stocks in the market fall 90% or more. Of course, history doesn’t repeat but it may be rhyming right now....there are a ton of signs pointing to a very specific stage of the broader market cycle. That would be well past the “euphoria” stage, into the “anxiety” stage, headed for the “denial” and “fear” stages which mark the official onset of a bear market.
https://thefelderreport.com/2021/10/13/where-are-we-in-the-market-cycle/
Freezing to death in the winter puts less pressure on Earth's finite resources. It's simply the most eco-friendly option. Well done Europe for showing the way. Personally I don't have that level of commitment to the cause, but I respect those who go all the way based on principles.
Unlike the EIA, it's pretty clear to me that there is no path for the world to divest itself of fossil fuel energy, without a substantial increase in Nuclear power generation. There's a reason the Uranium spot price, and long term contract price for utilities are both at decade highs.
The price of raw uranium jumped to near $48 a pound in October, moving closer to a nine-year high of $50.8 hit only last month, as the ongoing global energy crisis and the broader transition away from fossil fuels have forced leaders across the world to reconsider nuclear as a clean and bankable source of energy. France, which gets 70% of its electricity from nuclear, announced plans to build multiple new, small nuclear reactors that could be exported to its energy-starved neighbors. At the same time, Japan's new prime minister Fumio Kishida recently told Parliament that the country needs to restart nuclear power plants, as renewable energy sources like wind and solar will not be enough to power Japan in the coming years. In September, the International Atomic Energy Agency upgraded its projection for nuclear energy and now expects global nuclear-generating capacity to double by 2050. - Trading Economics
You only have to look at the cost blowouts on roading in transmission valley in what is a relatively small project, can you imagine what the cost blowouts would be on a nuclear power plant , and where do you want the waste in your garden ? I sure don't want it in mine we can't even enforce the cleanup at tiwai aluminium smelter waste . Where are you going to find people to run competently such a plant we sure don't have them here , to let government clowns like we have loose on such a project would be inviting disaster .clean and green what a joke we can't manage a few river pollution problems let alone nuclear ones .
Oh yes I'm sure it would be a shit show here, probably also not advisable considering our high geological instability.
But for comparison, China currently has 50 nuclear reactors in operation, 16 under construction, and another 100 planned by 2035. It can be done.
Globally, future energy use will be dominated by electricity generation...
China requests to double electricity export in November and December — Inter RAO
Inter RAO increased electricity export to China by 90% since October 1 after receiving a relevant request from the China’s power grid company
If the formal request is received and the technical possibility for such volume of supplies is confirmed, the increase of deliveries to China to 4 bln kWh will be at 2021 year-end," Panina said.
Reverse QE Begins: Treasury To Drain $480 Billion Starting Monday
What does this mean in practice? As the Treasury announced today, T-Bill sizes are set to jump. Indeed, the size of its three- and six-month bill auctions will rise for the first time since March as the department rebuilds its cash buffer following the short-term extension of the debt ceiling. Specifically, the Treasury plans to sell $48 billion of three-month bills on Oct 18, up from $42 billion as of Oct 12, and $45 billion of six-month bills up from $42 billion.Additionally, as part of the cash rebuild, the Treasury will flood the market with a flurry of Cash Management Bill issuance, the first of which hits on Tuesday, Oct 19, for $60 billion.
FYI we don't import any LPG or Gas. Only Coal.
Re domestic O&G - It's a supply issue, all the fields in Taranaki are well past their peak. There will be a few minor tweaks with compressors, and a few smaller wellsites may pop up, but I wouldn't expect any meaningful domestic production much past 2035
Even though the New York Fed's Empire State survey of factories fell back to August levels, they are reporting growth above its long term trend, widespread price increases that seem to be able to be passed on, and optimism about the future.
However, American firms generally are finding it almost impossible to pass those rising costs on in their export prices, and are just having to suck it up with sharply rising import prices.
Gobbling China’s exports, US sinks into dependency
Illustrating the state of America’s supply chains, orders for US-made manufacturing equipment are at 1992 level
Bitcoin Is Now World's 8th Most Valuable Asset — BTC Now Targets Silver's $1.31T Market Cap - Global Coverage
Bitcoin's overall market valuation of $1.119 trillion has surpassed Facebook's market capitalization of $926.27 billion, making it the eighth most valuable asset in the world. Bitcoin is 17.3% away from surpassing the overall net worth of all the global silver supply.
Up 100% the last 3 months and now only 3% off the all time high, with basically no MSM coverage either. It's the same every time. People will start to take notice again after 70k USD when it passes silver and closes on Amazon.
Bitcoin is fast becoming a boomer coin Lassie. Its price will be talked about around the BBQs and cafe appointments. Boring as f. The kids are moving into other dimensions and the so-called metaverse. And I predict that some of the coins like XRP that the interest dot co ultra-orthodox refer to as 'sh*tcoins' will have more spectacular success, even be it for a brief period. The Super Saturday Lotto draw will not come from Bitcoin. And that's no put down of BTC. Everyone should have it if they can (even though most people seem to be living paycheck to paycheck despite what we're told). I'm just thinking of how it works from a behavioral perspective.
You're right, if you're someone looking for 100x returns, you wont see that in Bitcoin anymore. It's as safe a bet as it gets in crypto, and a hell of lot safer than cash which is only going down. It should be a small part of any responsible portfolio nowadays. That's not understood by the majority yet, but it will be. And for most people it will still outperform all the rest of their investments.
If you just want to go big or go bust, there's no shortage of other tokens to spread your bets amongst.
Sorry the sarcasm was not clear enough. My point is anyone who ignored the noise you mention would be significantly better off now. If you had 10k usd you were willing to risk losing 18 mths ago, that would of bought 1/2 a bitcoin and 33 ether. Today that would be 30k usd of bitcoin and 125k usd of ether.
On Super Vaccination Saturday here is a story to remind us of why this is happening:
www.realclearpolitics.com/blog/2021/10/14/10 ways lied mislead and messed up early on in the pandemic 798594.html
https://www.nzherald.co.nz/business/inflation-preview-prices-rising-at-…
INFLATION - Does anyone care about the data as what ever the number may be, however high the number may be, reserve bank governor will come out to defend and justify so why even bother with it.
Reserve Bank Governor - Easy way out , keep printing and throwing money and .................
Thanks to Facebook,
The Health Select Committee
Covid19 Public Health Response Amendment Bill
https://m.facebook.com/pages/category/Political-Organization/hescnz/pos…
Better than Netflix.
The coffers of the landlords have run dry in the main, they are really suffering financially and are struggling to pay their mortgages.
Just like any business or balance sheet, if you're surviving on and relying on fixed monthly payments, then you have to accept the risks if you don't have anything stacked away for a rainy day. Relying on govt handouts only works for so long, unless the govt itself is a tenant.
https://www.newshub.co.nz/home/money/2021/10/coronavirus-landlords-coff…
Nothing could prepare me for the most unexpected event of the decade: a rent decrease in Auckland....Crockers Property Management publishes rental statistics from the Real Estate Institute of New Zealand and the Ministry for Business Innovation and Employment, and for every month this year the key median rent statistic in Auckland Central has been lower than the previous year.
https://www.stuff.co.nz/business/126690874/what-my-rent-decrease-can-te…
Residential landlords doing just fine- commercial and farm landlords are a totally different field.
It's like you're speaking of alternate universes. If the local economy is being wrecked, this puts pressure on what people pay in rents and mortgages as revenues, margins, profits, and incomes all come under pressure.
The one in alternate universe is you.
Rent is never lost. It's basically a transfer from the commercial sector to the residential sector.
That is the great impetus for every residential landlord to readjust their rents upwards as working from home means higher property utilisation that departs from the implications on the original contract. The premium is justified as higher maintenance costs has to be borne by tenants who work from home.
You're beginning to sound like PDK and his energy draw down fantasy.
I'll buy every Greenie a flat white in my neighbourhood if WTI or Brent hits USD 100/bbl over Christmas.
Nothing more satisfying than to see wokes unwittingly paying more for the thing that they publicly denounce- I call it the 'great hypocrisy buster'.
Now I just need to ask if my mate can lend me some old mugs with oil company logos on it.
Wasn't it rising oil prices that brought the whole lot down last time?
Oil prices also played a role in eventually bursting the US subprime bubble..... this occurred via a number of channels which are difficult to disentangle. It is also next to impossible to identify the threshold of mortgage delinquencies, which led to the meltdown in the subprime market and then global financial markets. Nonetheless, one can examine the individual channels through which oil prices contributed...In sum, the direct and indirect recycling of oil revenues was a factor in the global liquidity glut that helped to fuel the US subprime mortgage crisis.
https://oilprice.com/Finance/the-Economy/Oils-Role-in-the-Global-Econom…
Here's 5 reasons why it won't play out in good ol'NZ,
- There's no sub-prime or NINJA loans for residential real estates in NZ,
- Long on oil and residential real estate and the cross hedge is created,
- The real estate market represents 13% of the country's GDP- you think RBNZ and the Beehive will watch it go free fall?
- The country's currency is sovereign- it can 'print',
- The government's power and stability depends on the majority and that majority's wealth is in real estate.
DGM theories always fail.
The real estate market represents 13% of the country's GDP
No it doesn't. The Property Council 'estimates' 15% of GDP is directly impacted by property and is based on broad assumptions related to the economic activity directly associated with property. Furthermore, the NZ govt and RBNZ are not omnipotent. They do not possess magical powers that other govts and central banks do not possess.
We had this discussion here, 13/14 years ago.
Energy underwrites money, and no energy source comes close to Fossil Fuels in terms of work per extraction effort. So there is an upper limit for oil prices. Beyond that, there is a widening chasm between work actually done, and betted-on expectation; that gap is being papered over with debt. For now. Last time oil rose, it went so fast it overshot any real value-limit - then it crashed.
We can assume the lid will be found soon - debt-repayment belief is the probable trigger. My guess is that we can't run on $100US/barrel oil - after all, we were going increasingly into debt at sub-$50.
All a sign of things to come as there will be a scramble for energy worldwide in the medium term. Still very hard to predict the time of impact, will it be a slow burn or will it be as sudden as no fuel at the pump almost overnight. So many factors in play but the fact still remains, we are just trying to kick the can down the road for as long as possible because we are refusing to even talk about the underlying cause.
We are facing a Depression, originating not in financial events but in the displacement of people, transport and other elements. Facing a system failure with a known cause (financial events) is one thing. Facing one for which you have no model is another....In studying Australia, Canada, Singapore, the United Kingdom, and the US,... 40% of surveyed workers said they are likely to quit within the next six months...Wages are important but less than many employers think. They are treating the problem as if it is a transaction. "If I offer you more money, you should want to work here" But potential employees are obviously looking for something more than a mere transaction (money) to be the center and focus of their own personal lives.....(Changing that) might start by prioritizing policies that reduce the cost of housing and health care, and reshoring the production of materials that we deem essential... Decades from now, we might look at the legacy of the pandemic, and see that it took a global crisis of choke points to teach us that real progress begins ...at home...
https://www.mauldineconomics.com/frontlinethoughts/logistical-sandpiles
I agree the trouble really starts when people want to get out of their country due to war, famine, corruption, climate change for a "Better Life". There are more and more people being displaced every year and this just drags down the other countries around them in a snowball effect. Really the whole world is in a slow downward spiral and if you cannot see that its because your insulated by a level of wealth that has made you blind.
The global phenomenon of people leaving their jobs is more about valuing your own time/life more than staying in an overbusy ‘important’ job and striving on the career ladder.
Migration for a better life is a lot harder now with COVID, travel restrictions and the fact that the so-called free countries are increasingly losing their independence and historic freedoms - apart from the uber-wealthy who can setup in places like NZ seeking better lifestyles.
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