90 seconds at 9 am: NZ a winner in China trade

China trade surplus rises; India inflation up; US mortgage rates down; EU industrial production falls; Wall Street opens week flat; UST 10yr yield at 1.73%; oil down and gold up; NZ$1 = 63 USc; TWI-5 = 68.4

15th Oct 19, 7:20am by David Chaston

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Here's our summary of key events overnight that affect New Zealand, with news that China's trade surplus just keeps on growing.

In China, both September exports and imports fell, with exports declining -3.2% year-on-year and imports were down -8.5% on the same basis. Both of these were greater than analysts were expecting. Exports to the US fell -6% with trade elsewhere not much changed. Imports from the US fell -22%. Going the other way, Chinese exports to New Zealand rose +3.6% and imports from New Zealand rose +18%. The equivalent Australian data was even better for Australia, with Chinese exports to there up +6% and their imports from there up +21%.

Overall, China's trade surplus in September rose to +US$40 bln and the surplus with the US was little-changed at +US$26 bln.

In India, they reported inflation up to 4% in September and almost 5% in urban areas. Rising inflation, especially food inflation, will not help their Government.

In the US, the general trend of falling mortgage rates continues. Their 30yr Federally insured mortgage is at 3.57% plus 0.6 points. But it doesn't seem to be helping push back the view that current strong consumer sentiment and low interest rates will be irrelevant to the coming recession.

In Europe, although industrial production data came in with a small rise in August from July, the year-on-year data fell more than expected and reinforcing their economic funk.

Wall Street has opened flat after three straight sessions of gains as details of the bare-bones trade deal with China didn't help sentiment and triggered a -2% drop in oil prices. The third-quarter earnings reporting period is about to start and enthusiasm for that isn't high. Yesterday, the Shanghai exchange ended up +1.2% and Hong Kong was up +0.8%. Overnight, European markets fell about -0.2% but London fell even more.

The UST 10yr yield is unchanged at 1.73%. Their 2-10 curve is positive at +14 bps. Their negative 1-5 curve is still at -10 bps. Their 3m-10yr curve has almost disappeared at -2 bps. The Aussie Govt 10yr is down -4 bps to 1.04%. The China Govt 10yr is up +2 bps at 3.19%. The NZ Govt 10 yr is now at 1.21%, up +3 bps since this time yesterday.

Gold is up +US$3 overnight to US$1,492/oz.

US oil prices have fallen back today by more than -US$1.50, now just under US$53.50/bbl. The Brent benchmark is just on US$59. Oil prices are one thing, but tanker rates have surged to unprecedented levels, adding to the cost of crude.

The Kiwi dollar is a little softer today, now at 63 USc. On the cross rates we are at 93 AUc. Against the euro we are soft at 57.1 euro cents. That puts the TWI-5 at just on 68.4.

Bitcoin is lower at US$8,347 and down -1% overnight. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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34 Comments

by Gummy Bear Hero | 15th Oct 19, 7:58am 1571079524

.... Taxcinda has fired a warning shot to all new and re-elected Labour Party mayors throughout NZ .

Toe the party line . Do as you are told , even if it is the Greens doing the tolding ....

... else you'll be thrown under the bus as failed Wellington mayor Justin Lester was.. . Rebranded by the PM as an " independent " after his fall from grace ...

by scarfie | 15th Oct 19, 8:10am 1571080223

I worked out a long time ago that politicians, whatever flavour you choose, are irrelevant. Just part of the confidence trick, but increasing numbers are refusing to buy in.

by Gummy Bear Hero | 15th Oct 19, 8:28am 1571081325

Shane Jones has the right idea : flip the PM " the bird " ... she can't rule without NZ First .... and NZF is under 5 % in the polls ..

... so , have some fun , party on for one more year .. let's do this .... nyuk nyuk haaaaa !

by Noncents | 15th Oct 19, 8:58am 1571083124

Even the hapless muppets at NZH and Stuff have uncovered that he did indeed campaign under a Labour banner.

Obviously the polls from the last two days were still to high, she clearly wants Labour polling back in the 20s.

by Gummy Bear Hero | 15th Oct 19, 9:24am 1571084656

.. if the Gnats had a less unlikeable leader than Bridges , they'd be polling 50 % now ...

As dreadful as this Taxcinda coalition has been .... what really truly is the alternative . . Simian Bridges . .. ahhh , no . .

by Noncents | 15th Oct 19, 11:05am 1571090708

Yes politics as a whole is full of numpties, has-beens, never were, or never will bes.

It appears all the competent people run their own business in spite of the obstacles, or they head overseas.

National are anti-citizen
Labour are anti-worker
Greens are everything but
Winston first is exactly that.
Then you have the ACT baby that can't seem to care for itself.

Finally you have the toddlers watching from the sides, with fancy pipedreams that really only appeal to themselves.

by Audaxes | 15th Oct 19, 8:04am 1571079852

In Europe, although industrial production data came in with a small rise in August from July, the year-on-year data fell more than expected and reinforcing their economic funk.

Europe has multiple issues it needs to confront. Weep for Catalonia, Weep for Liberalism in Europe

by Andrewj | 15th Oct 19, 8:06am 1571079989

Mauldin had an interesting piece at the weekend. 'Our nuts are in danger'

https://www.mauldineconomics.com/frontlinethoughts/our-nuts-are-in-dang…

by Gummy Bear Hero | 15th Oct 19, 8:30am 1571081450

' Our nuts are in a coalition government '

by frazz | 15th Oct 19, 9:12am 1571083969

Keep your nuts close and your nutties closer"

by theglc | 15th Oct 19, 9:16am 1571084213

This one paragraph says it all...

GE has $92 billion in pension liabilities offset by roughly $70 billion in assets, plus the roughly $5 billion they’re going to “pre-fund.” But that is based on 6.75% annual return. Which roughly assumes that in 20 years one dollar will almost quadruple. What if you assume a 3.5% return? Then you are roughly looking at $2, which would mean the pension plan is underfunded by over $100 billion—and that’s being generous. GE’s current market cap is less than $75 billion, meaning that technically the pension plan owns General Electric.

by Andrewj | 15th Oct 19, 10:22am 1571088136

my on farm inflation running at %6, means my costs will nearly double int he next ten years.

Meanwhile we are becoming more dependent on China, so lets hope the good times keep rolling in the middle kingdom

https://www.youtube.com/watch?v=-5_jTyh-3Ng&feature=push-sd&attr_tag=2o…

by Andrewj | 15th Oct 19, 10:25am 1571088333

https://www.epsilontheory.com/the-common-knowledge-of-inflation/#.XaDRu…

by Roger Witherspoon | 15th Oct 19, 8:44am 1571082252

The sad, slow stagnation and decline of the EUSSR continues. Merkel has been called the German Breshnev. Breshnev was much more entertaining of course, being permanently pissed. How can they create 25% unemployment across southern europe and not see they must make fundamental reforms? An unreformable centralised bureaucracy on the verge of collapse.

https://worldinnovationfoundation.blogspot.com/2017/01/commonwealth-tra…

by The Person | 15th Oct 19, 8:55am 1571082938

On the verge of collapse, very dramatic imagery indeed. How much are willing to wager that the EU collapses in the next 6months?

by Roger Witherspoon | 15th Oct 19, 11:05am 1571090734

Germany: fibre-optic cable coverage across the country is less than 5pc

Ashoka Mody, the International Monetary Fund’s ex-deputy director in Europe, said no country has come to rely so heavily on Chinese perma-growth. The country is now suffering a systemic shock as a consequence. "It is almost a heart attack,” he said.

https://www.telegraph.co.uk/business/2019/10/09/germans-living-cloud-cu…

by waymad | 15th Oct 19, 11:20am 1571091604

Especially poignant that despite the obeisance to the CC meme, a substantial fraction of their electricity is generated from that Uber-Green fuel - Lignite......

The Energiewende paradox: Over recent years, German electricity production from coal has barely budged. The growing supply of electricity from renewables, which has close to zero marginal costs, has driven down wholesale power prices. That’s pushed relatively climate-friendly but expensive natural gas out of the market and given a competitive advantage to coal – and cheap, domestically mined lignite in particular. Low prices for CO2 allowances under the European Emissions Trading System mean coal’s environmental impact has not made it less economically competitive.

Unintended consequences abound, as does schadenfreude....

by Audaxes | 15th Oct 19, 12:05pm 1571094352

Firms ignoring climate crisis will go bankrupt, says Mark Carney

by Audaxes | 15th Oct 19, 11:34am 1571092444

Germany: fibre-optic cable coverage across the country is less than 5pc

Maybe, they favour 5G. I am sure some regret the civil engineering expenditure associated with laying NZ's fibre optic network underground.

by The Person | 15th Oct 19, 1:06pm 1571098010

Yup, the average german download speed of 33Mb/s vs our 47Mb/s, that's totally gonna crash their society. 15mb/s slower, i don't see how they are going to maintain their high tech manufacturing industry with that, mass starvation is just around the corner surely.

https://www.speedtest.net/global-index

As of January 2014, Deutsche Telekom FTTH was available in 884,000 households

by The Person | 15th Oct 19, 1:41pm 1571100070

And it seems like they are already onto it. Albeit 5 years behind NZ.

"If all goes to plan, surfing speeds of up to 1000 megabits per second will be possible by 2025. The overall aim is that every region and community - and preferably every house - will soon have fibre optic."

https://www.iamexpat.de/expat-info/german-expat-news/12-billion-euros-b…

by Boatman | 15th Oct 19, 11:13am 1571091223

@Roger Witherspoon ............. Britain will have done well to get the hell out of the EU when Brexit finally happens

by Andrewj | 15th Oct 19, 8:24am 1571081079

https://www.zdnet.com/article/building-chinas-comac-c919-airplane-invol…

by powerdownkiwi | 15th Oct 19, 9:19am 1571084353

It's quite an interesting moment, isn't it?

On the mid-decks, GBH is wasting effort attacking the current shift of stewards. Yet the sinking goes on. RW is developing into our wise sage - with at least a whole-ship overview. But the Titanic Time's are still busy peddling the various pumping-rates - cheering when they're a smidge above par.

We need politicians who can lead the lifeboat era - and scribes who are brave? thoughtful? dispassionate? enough to address same. Then we'd have an informed public, and thus we'd have polling which might mean something.

by Gummy Bear Hero | 15th Oct 19, 9:32am 1571085163

.. did'ya see the revamped Hyundai " Mirari " . . 645 km on a single tank of hydrogen .... clean & green , my friend .. now that's what I call progress . .

by rastus1 | 15th Oct 19, 9:57am 1571086632

..dig deeper gbh. This only solves where the filth pours out, nothing else.

by powerdownkiwi | 15th Oct 19, 10:22am 1571088157

Nicely put. The energy requires to crack hydrogen is the interesting question, as is the energy required to build/maintain the cracking facility. This is a bit like the thorium from seawater argument - there's a molecule over......here, and there's one over ...... here. By the time you expend energy gathering them....

And hydrogen is so far down the EROEI list that it doesn't sustain BAU. Yet GBH (who sooooo reminds me of the Wally of yore) and the PM are united in having to peddle it with optimistic countenances. Bottom of the barrel comes to mind. Yes, hydrogen will be part of the future mix, for particular applications. But the future mix probably won't include private cars....

by profile | 15th Oct 19, 11:48am 1571093314

The doers have worked it out for you PDK. "500 times more uranium in the sea than could be mined on land – that's 4 billion tons, or enough to run a thousand 1-gigawatt fission reactors for 100,000 years. ...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.
...If large scale extraction were implemented over thousands of years, that concentration would fall, and more uranium would leach out of the rock. That's a potential 100 trillion tons or enough to satisfy Earth's energy needs for the next billion years ... by which time the human race will probably have moved on." - apart from the hand wringers.
https://newatlas.com/nuclear-uranium-seawater-fibers/55033/

by Cowpat | 15th Oct 19, 9:51am 1571086275

Is Kiwibanks 3.49 percent with $3000 cashback on 250,000 borrowing effectively the first carded sub 3 percent 2 year .

by Audaxes | 15th Oct 19, 10:12am 1571087560

In the US, the general trend of falling mortgage rates continues. Their 30yr Federally insured mortgage is at 3.57% plus 0.6 points. But it doesn't seem to be helping push back the view that current strong consumer sentiment and low interest rates will be irrelevant to the coming recession.

Exactly, debtors refinancing a mortgage at a lower rate will have to pay the present value of the cash flow of the mortgage payments greater than those of the higher rate.

by profile | 15th Oct 19, 10:48am 1571089718

"Most of the 21st century emissions are not being emitted by the rich world. Indeed, if every single rich country stopped all CO₂ emissions today and for the rest of the century — no plane trips, no meat consumption, no gasoline-powered cars, no heating or cooling with fossil fuels, no artificial fertilizer — the difference would be just 0.72 degrees°F by end-of-century."
https://nypost.com/2019/10/12/climate-change-activists-are-focused-on-a…

by powerdownkiwi | 15th Oct 19, 12:26pm 1571095602

This is where I put up the standard warning re Profile. He is to this site, what Fred Singer was to tobacco (and to CC in the early years).

It is easy to track - spin needs to be covering something. Work out what the something is, and you're there. In this case, if a first-world person buys a piece of whiteware or a car or just about anything, chances are it is built in the third world. So the first-worlders have just offshored their build pollution.

And the 'rich country' comment conveniently avoids 'per head' emissions - the same weasel-out that some NZ'ers would have us wriggle through also.

by profile | 15th Oct 19, 12:38pm 1571096312

The pollution offshoring narrative doesn't hold up PDK. Just anther feel good greenie myth. The US: "...the decline in pollution wasn't driven by offshoring. US factories were genuinely finding ways to cut emissions. In fact, the industries that saw the biggest drops in pollution intensity actually grew as a share of output."
The EU: "Starting in the early 2000s, EU manufacturing increasingly produced more pollution-intensive goods while imports became progressively less pollution-intensive, especially from low-income countries. ...However, similar to the US cleanup, changes in production and imports were overwhelmed by improvements in production technique, which were the main drivers of the cleanup of manufacturing.
https://www.vox.com/2015/2/8/7999417/US-factory-pollution-offshoring
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2447679

by Boatman | 15th Oct 19, 11:10am 1571091034

So here's a question ............. do we run a Trade Surplus with China ?