Growth wanes in key China data; US data soft too; Eyes on Fed; Canada house sales ease; global trade in services slowing; UST 10yr yield at 1.84%; oil and gold higher; NZ$1 = 63.4 USc; TWI-5 = 68.8

Growth wanes in key China data; US data soft too; Eyes on Fed; Canada house sales ease; global trade in services slowing; UST 10yr yield at 1.84%; oil and gold higher; NZ$1 = 63.4 USc; TWI-5 = 68.8

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Here's our summary of key events overnight that affect New Zealand, with news both China and the US are delivering shaky economic data.

In China, August data for both industrial production and retail sales show growth slowing fast. The trade war won't be helping, but in the end as we have shown before, trade is only a small part of the Chinese economy. This slowing is more about its own structural problems and Beijing's policies toward them. They know they need to "reform and open up" but they aren't doing it fast enough to prevent a slowing of the whole economic engine.

The bad data has spurred another wave of hope for new stimulus policies from Beijing - which of course just delays the reform they need. So far, the government seems to be holding the line against any major efforts, but as one respected observer noted, it is going to become increasingly difficult politically to stay the course. A central bank interest rate cut is now expected soon.

Weakening data continues in the US as well. The latest regional Fed survey, this one from New York, shows the same trend. And in the US there is no suggestion of "reform" or "opening up". There the policies are revert-to-the-past, and isolationism.

All eyes are now on the US Fed and their Thursday rate review. Markets are betting on a modest -25 bps cut.

In Canada, existing home sales rose +5% in August from a year ago, but have been on a steady downward trend since May.

Global trade is slowing, as we have been reporting for months now. Till now essentially that has been a slowing of the goods trade. Now we are seeing signs the global services sector is slowing as well. And its a broad loss of momentum across many service sector categories.

The UST 10yr yield fell back on the shift to 'safety', down -6 bps and now at 1.84%. Their 2-10 curve slipped a little to +8 bps. Their negative 1-5 curve is is back out to -15 bps. Their 3m-10yr curve is much more negative at -26 bps. The Aussie Govt 10yr has settled back -4 bps to 1.19%. The China Govt 10yr is up +2 bps, now at 3.11%. The NZ Govt 10 yr is now at 1.36%, a gain of just +1 bp from yesterday.

Gold is higher today, up +US$13 to US$1,499/oz. But that is a very modest reaction to the oil tension news.

US oil prices jumped +US$8 on those tensions and are now just under US$63/bbl. That is a +15% jump and far less than the doubling that was part of earlier speculation. The Brent benchmark is now just under US$69.

The Kiwi dollar opens weaker again today, now down to 63.4 USc. On the cross rates we are softer too at 92.5 AUc. Against the euro we are holding at 57.7 euro cents. That puts the TWI-5 down to just on 68.8.

Bitcoin is now at US$10,155 and -1.8% lower than this time yesterday. The bitcoin rate is charted in the exchange rate set below.

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39 Comments

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Highlight new comments in the last hr(s).

https://www.resilience.org/stories/2019-09-16/as-society-unravels-the-fu...

"You won’t currently find these new ways of thinking in the mainstream media, nor in the speeches of politicians trying to get elected. But you will find them in the streets. You’ll find them in the courage of a Greta Thunberg: a solitary teenage girl sitting for days in front of her parliament, who has since inspired millions of schoolchildren to strike for their future. You’ll find them in the demands of the Extinction Rebellion movement, which calls for elected leaders to tell the truth about our ecological and climate crisis, and to empower citizen’s assemblies to develop truly meaningful solutions".

But of course, he may totally wrong. It might just be that we have to keep producing and consuming more.

.....ah jeez..wish I hadn't read this, you're messing with my therapy sessions.

... the headline says it all : " As society unravels .... " ... the hysterics of those first three words told me not to read any further , life is too short for this bollix ...

Haaa !

yeah GBH..all is good if you focus on your life. Mine too....but as for the next gen....who gives a shyyyt eh.

.. not at all ... as much as it is great to enjoy our current standard of living , it behooves us to leave a clean blue & green planet in our wake ...

It's just that the draconian changes being foisted on us by the malthusianistic luddite Greens are a leap too far ...

"which calls for elected leaders to tell the truth about our ecological and climate crisis"

Well the truth is there is no climate crisis

Here is some truth

- 95% of greenhouse gases is water vapour
- <4% is CO2
- We are in a cooling phase of the Milankovitch cycle and this current warming (that was evident prior to the industrial revolution) is not out of place with other warming periods like the Minoan, Roman and Medievil warming periods
- are humans contributing to warming? yes! CO2 is a greenhouse gas
- Is CO2 the control knob for global warming? No!
- Can we help with lower CO2 emissions? probably
- Will it make much difference? Unlikely
- Should we try and lower CO2 anyway? Yes!
- Is it a crisis? No!

Hi GLC,

It is true that water vapour is a greenhouse gas and that it is a major contributor, around 70% of total warming (including clouds) from memory. However there is strong evidence to suggest that CO2 increases the evaporation rate of water into vapour (ocean acidification being one). This means that even small amounts of CO2 supercharges the effects of the planets natural warming engine. It should also be noted that CO2 stays in the atmosphere for much longer than water vapour; since the start of the Industrial Revolution "more than 2,000 billion metric tons of carbon dioxide" have been added to the atmosphere by human activities. Co2 also has an indirect effect of multiple other causes of warming such as degradation on polar ice caps which reflect light from the earth's surface.

Imagining the effect of 2000,000,000,000 metric tonnes of C02 on the environment, in some, is simply a lack of comprehension... on par with imagining the distance of light years etc.

Nice bit of scaremongering

Yes water vapour cycles as does CO2.

You have to remember that warm CO2 rises and cold CO2 falls, the falling CO2 is what gives the greening effect on the planet, so that 2000 billion tons is not all sitting in the atmosphere but being recycled and providing high concentration food for plants and photo plankton

https://www.nasa.gov/feature/goddard/2016/carbon-dioxide-fertilization-g...

the way the CO2 is recycled in water is easily explained in this link

https://www.sciencelearn.org.nz/resources/688-ocean-dissolved-gases

A warming planet has been melting the caps for the last 20000 years, Where New York is today was at one point a km under ice.

Not scaremongering thanks, just adding depth to the information you had already given.

Please pay careful attention to my wording; while I say that it is (initially) released into the atmosphere, I then go on to say it is in the environment - which is different. Yes, CO2 is absorbed by the ocean, which correlates with my comment about evaporation - It is also linked to acidification which can cause massive economic damage, and is already being observed.

Regarding our natural warming/cooling cycle - Yes we are warming and nearing the natural peak for this cycle, but this warming is extremely gradual and would only be seen over many generations; not even a degree per century. Probably closer to 1 degree per 1000 years, not one degree since the industrial revolution. One more note, peak CO2 for last 1m years was 300PPM - except now, now it's around 405 and rising (it's not being absorbed fast enough)

.. in the Gummsters humble opinion global climate change is driven primarily by the sun ...

And to remedy this , I'm constructing a pedal powered rocket made out of recycled materials ( cardboard and string ) , to send a Greens group of eco-warriors up there with fire extinguishers and buckets of water to put the silly sun out ...

... one has to larf at the histrionics yesterday , that petrol would spike to $ 3 per liter after the attacks in Saudi Arabia ...

We love our fossil fuels , they are good for us , good for the economy ... the plentiful supply of fracked natural gas worldwide ( except NZ ... we're leaving ours untouched ! ) ensures the $US 150 / barrel oil days are a one off aberration , long behind us ..

1 Step forward - 5 steps back - Fracking?
"In the real world, though, the news about methane is bad and getting worse. It turns out that a mysterious recent spike in global methane levels that’s putting climate targets at risk may be coming from US oil and gas fracking. If that’s true, it’s bad news, because there’s lots more shale gas development in the pipeline and the Trump administration is expected to release a proposed rule Thursday rolling back regulations on the industry, per the New York Times."

. . all good with me , I dont live in " a climate emergency " .. so " climate targets " are just a bunch of hot air in my opinion ...

You don't live in a climate emergency? Well, bears do live in caves I've heard... Even if they are old toothless gummy bears. When this one wanders out of his maybe he'll open his eyes?

... how sad , that I haven't drunk of the climate change kool-aid ... eyes wide open , real science says " dont panic ! " ... but do clean up your act as much as you can ..

There is hope yet. I agree, it's not an all hands to the pumps situation (yet), as the real DGM hairshirts hereabouts would have us believe, but we certainly can't carry on the way we have been.

Why not carry on? The globe is greening. Death from war and poverty is plummeting. We've reached peak 18 year old and peak baby. Just sorted out vaccines for malaria, ebola and dengue. If only someone could vaccinate for first world angst and doomster click bait.

"Here we use three long-term satellite leaf area index (LAI) records and ten global ecosystem models to investigate four key drivers of LAI trends during 1982–2009. 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, followed by nitrogen deposition (9%), climate change (8%) and land cover change (LCC) (4%). CO2 fertilization effects explain most of the greening trends in the tropics, whereas climate change resulted in greening of the high latitudes and the Tibetan Plateau. LCC contributed most to the regional greening observed in southeast China and the eastern United States."
https://www.nature.com/articles/nclimate3004
https://www.thehindu.com/news/national/india-lifted-271-million-people-o...

Ah, I see our big oil shill has arrived. yeah, I'm not going to bother, you're a lost cause.

They do tend to drone on

Don’t worry the frac business has become self regulating due to dramatic oversupply of production and billions in destroyed capital. There have already been more energy company bankruptcies in 2019 so than all of 2018 in the US. It will take policy change to ensure renewables take adequate market share as fossil fuels are now low cost and abundant.

Best way to buy gold/silver? Never done before.

.. get married ! ... first time I bought silver and gold . . Been buying it regularly ever since ..

I use gogold.co.nz. beware, the buy/sell spreads are generous on gold, and outright extortionate on silver, so trading in and out will be very expensive. It's a long term buy and hold asset.

Thanks mate

Try NZ Mint, or Regal.co.nz I haven't used them, but heard them advertising, they have physical Gold.

NZmint. Eaiser than buying a car.
Contact, quote price given, order placed and paid for, delivery to your door.
If you wanted it to be even eaiser, do it over the phone with a credit card.
N.B. A month ago silver was a one week wait, heard but not confirmed that it is now SIX weeks on Perth Mint supply. Will email them for confermation and confirm.

Reply from NZ Mint.
Perth Mint silver has various lead times depending on the type of coin/bar, this is due to the new release of 2020 coins and the current demand levels they/us are experiencing. I would say roughly 2-4 weeks lead time would be realistic, NZ Mint Silver is currently a 4-6 week lead time for coins due to demand levels.

Perth Mint/NZ Mint gold is estimated 1-2weeks lead time depending on the size of the order, again due to demand levels.

In addition to physical gold, which does have high commissions so best to hold long term in a third party (non-bank) vault, you can buy US-based gold ETFs - I hold GLD and IAU. There is some controversy about the amount of physical gold actually held by these big funds but I think it’s fine to hold for the short to medium term, when gold looks to be on a long bull run. It’s been a long time coming. Would not be surprised if it goes well over USD all time high over the next year or two. The USD/NZD exchange rate has changed a lot recently though, so you have to factor that in. Apart from that, seems better than holding cash that’s for sure - gold has gone up near on 25% in the past year.. Handy to swap out for shares if/when the market finally tanks too. In that case, gold will be high, market PE ratios very low. It’s only a good probability, not a certainty of course.

I am with you on that Vor. I hold some GLD and I am thinking of buying more if a break out of 1550 can be sustained. Easier then fiddling with physical gold but probably with some added risks.

Definitely buy and hold for a year or two until equities cycle down then re-balance.

Yes, that’s my thesis here TM. A classic value investing, sell high (gold) and some overvalued stocks, buy-very-low undervalued stocks. If rates do go negative, that’ll push gold pretty high too I think. Unknown when the share market will turn of course, could be today, could be years, but it’s had a looong bull run and overall market PE ratios are pretty damn high.

https://www.stuff.co.nz/business/115811300/fuel-firms-told-to-invest-at-...

Only in smalltown NZ could the minister in charge of the cleanup / repair of the fuel pipeline have a husband whose company's digger caused the hole and then we be told re the driver "he did not have a relationship with the company,"

Only in smalltown NZ could we be expected to believe any of this....
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12268009

In China, August data for both industrial production and retail sales show growth slowing fast. The trade war won't be helping, but in the end as we have shown before, trade is only a small part of the Chinese economy. This slowing is more about its own structural problems and Beijing's policies toward them.
Hmmmmm....

What is bigger than the PBOC and any of its policies is the eurodollar system and its own mind. China’s central bank is desperately reactive, not proactively asserting control with every statement and program. The global dollar reserve is slowly strangling the life out of the Chinese economy.

What China really needs is dollars. Desperately, which is why they’ve been opening up every possible intake channel of late. Link

Trade suffers first because the global reserve currency is its first requirement, the ability to fluently, efficiently translate economic factors from one system to another. There’s almost no appreciation for the functions – and what those actually are – of a global reserve.

We give almost no consideration to what a reserve currency is today. It is almost always thought of in terms of something like oil, the US dollar means people in the United States get to price the vital commodity in their own currency. Some like to talk about a petrodollar as if that actually means something…

A reserve currency is an intermediator, more than a buffer between national systems often with very little in common. Starting with currency denomination and monetary terms. The example I often use is an export firm in Sweden obtaining goods in that country to be shipped to Japan for final use. The trade can certainly happen without a global reserve, but not efficiently…

If, however, both sides can use a currency that is common in both areas it then obviates the need for either of their national denominations. Should Japanese as well as Swedish banks both hold balances of this middle currency as a regular part of their business, no special concessions required, then trade becomes easy and (very nearly) free.

The downside is that this requires a whole lot of that middle currency to be made available practically everywhere. Link

Thanks. Keep up the great extracts and links. Politics follows, not leads. Beware fake directions of causation.

NZD down about 15% in last 2 years. Everyone in NZ has taken a huge pay cut in international terms, but few realize it.

Currency fluctuations are interesting, in particular for those overseas folk who bought residential property, irrespective of our own issues with housing - flat to declining, they've potentially lost 15% of the value due to the $ falling, 15% less profit when they transfer their ill-gotten gains into their own currency, I wonder at what point that starts to cause a rethink?

I made some speculative investments (start-up companies) overseas when the $ was high, and with the declining dollar my investments have improved despite tangible results.

First we had ghost cities now we have ghost trains - no doubt displacing nz logs.
"In the most extreme case, one train carried 40 empty containers and just one full container all the way to Europe. This makes the China Railway Express’s impressive growth number highly dubious, and most certainly a “bubble”. Even with all their tricks, companies can barely fulfill their promise to regulators: they have overbooked railway resources."
"...The Ministry of Finance is reportedly determined to pierce the bubble by enforcing a schedule for phased subsidy reduction. Subsidies by local government are to be no more than 40% of a route’s total cost in 2019. The ceiling will be further lowered to 30% in 2020 and zero by 2022."
https://pandapawdragonclaw.blog/2019/08/23/empty-trains-on-the-modern-si...