90 seconds at 9 am: Dull data, heightened threats to democracy

US home sales slip; Canadian retail sales lower; tariff waivers get political; another key Brexit vote imminent; Aussie bank targets residential investors; UST 10yr yield at 1.79%; oil up and gold unchanged; NZ$1 = 64.1 USc; TWI-5 = 69

23rd Oct 19, 7:18am by David Chaston

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Here's our summary of key events overnight that affect New Zealand, with news of dull economic data and worrying political moves that undermine democracy.

Equity markets are treading water worldwide.

American existing home sales were soft in September, falling -2.2% from August and undershooting most analyst expectations. But they were up +3.9% from a year ago.

The next regional Fed survey of manufacturers, this one from the mid-Atlantic states by the Richmond Fed reports a pickup in activity, and by more than expected. However, most of this just makes back the rather sharp falls in September.

Also undershooting expected outcomes was Canadian retail sales data for August. And their loan officer survey shows that their mortgage market is turning lower and tougher.

The Canadian election has returned the Liberal incumbent, although into a minority government situation. But just like its neighbour to the south, this result is marred by not mirroring the popular vote.

In the trade war skirmishes, the China is using tariff waivers to manipulate US election campaign sentiment. It has granted them to Chinese buyers allowing them to buy huge amounts of soybeans. It seems they have concluded, like Russia, keeping the current US president in office is a goal, a gift that keeps on giving for China's influence internationally.

And China is extending its surveillance reach internationally, through iPhone and Android hacks that allow it to monitor anyone now.

In the UK, there are important Brexit votes imminent in their Parliament. We will update this item when definitive results are available. Meanwhile the political threats and brinkmanship continue. Update 1: The London Parliament blocks Johnson again.

In Australia, major home loan lender Westpac has reduced its deposit requirements for residential investor lending from 20% to 10% even for interest-only loans. It is a significant initiative to win a greater market share in this segment.

The UST 10yr yield is holding higher, although down a tick from yesterday at 1.79%. Their 2-10 curve is positive at +18 bps. Their negative 1-5 curve is back positive at +3 bps. Their 3m-10yr curve has is also now positive at +4 bps. The Aussie Govt 10yr is lower at 1.14%, a fall of -3 bps. The China Govt 10yr is now at 3.25%, a +2 bps rise. The NZ Govt 10 yr is now at 1.34%, up +4 bps since this time yesterday.

Gold is unchanged overnight to US$1,484/oz.

US oil prices are firmer today, now just over US$54/bbl. The Brent benchmark is just over US$59.50.

The Kiwi dollar is firm against the greenback today, now at 64.1 USc although a small slip from where we left it yesterday afternoon. On the cross rates we are firm at 93.4 AUc. Against the euro we are at 57.6 euro cents. That puts the TWI-5 up at 69.

Bitcoin is now at US$8,216 and marginally firmer 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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37 Comments

by Andrewj | 23rd Oct 19, 8:08am 1571771285

The Big Narrative used to be that the capitalism of the West would undermine the dictatorship of China’s one-party state.

Turns out the dictatorship of China’s one-party state undermined the capitalism of the West.

https://www.epsilontheory.com/the-stereogram/?utm_campaign=website&utm_…

by Advisor | 23rd Oct 19, 11:06am 1571781985

Used to be a topic of discussion in my game theory class. Dictatorship regimes in China are more stable than the deeply-divided and gullible voters in the West.
The CPC has time on its side to deliver results on socioeconomic commitments for its populace and also the room to play the long game whereas governments in the West are compelled to quick fixes and short-term thinking.

Case in point - The perils of democracy

by RickStrauss | 23rd Oct 19, 11:32am 1571783554

It only requires clamping down on any questioning to carry out the work.

And potentially reeducation or disposing of those who do not align with one's grand plans.

The problem with dictators is that you're also never sure whether you'll get a Mao or a Deng Xiaoping, a Lee Kuan Yew or a useless, thieving Ferdinand Marcos.

by steven | 23rd Oct 19, 2:32pm 1571794364

crony capitalism, vested interests finished off by a totally corrupt President, ie China didnt win the game, the USA lost it.

by theglc | 23rd Oct 19, 8:15am 1571771754

In the trade war skirmishes, the China is using tariff waivers "to manipulate US election campaign sentiment"

How on earth did you conclude that from the article? Seems like Chinese crushers have time on their hands to buy based on demand and prices they are happy to pay whether it be from US or Brazil.

Sounding a bit like CNN hyperbole

by Andrewj | 23rd Oct 19, 8:27am 1571772422

USA used to sell 30 billion plus of Ag commodities to China now it's around 7 bill. Must be hell of lot of produce stored somewhere, beware the consequences of a US/China trade deal.

by theglc | 23rd Oct 19, 8:41am 1571773275

And the big Q is how can other players fill that void in Ag so quickly, doesnt add up, unless their was a huge global oversupply prior to the tariffing.

Sure the swine fever takes care of a bit but still.....

by Advisor | 23rd Oct 19, 8:51am 1571773916

Earlier this year, China cut its import of Canadian canola to a third ($12b to $4b), citing pest problems. The ban was actually a part of punitive measures slapped on Canada following a diplomatic fallout last December.
The Chinese have for years relied on canola imports for the oil from its seed while the remnants serve as fodder for livestock.
I don't understand how they could switch to an alternative in such a short span.

by Andrewj | 23rd Oct 19, 10:25am 1571779516

We underestimated how much development had happened, in a short time in Brazil, Russia and the old Eastern Block.

by steven | 23rd Oct 19, 2:33pm 1571794417

and that's Trump voter base that is hurting, China isnt stupid.

by Dgm | 23rd Oct 19, 8:15am 1571771706

Year to June, Aucklands population grew by 24,000. Consents issued 10,500. We're already building more than the population growth.

by Advisor | 23rd Oct 19, 8:27am 1571772466

One would hope so but in reality, it is never that simple.
Many of those houses will end up vacant because we still aren't building enough affordable homes. Building affordable houses in the current landscape of sky-high construction, land and compliance costs does not make business sense.
Hopefully, the proposed changes to building regulations and making prefab easier to work with could turn this around a bit.

by Dgm | 23rd Oct 19, 8:39am 1571773183

Under the National (speculators) government, there was an under supply of houses. Any one on the street will know what speculators do in that situation, they hoard more knowing that the shortage will push prices higher, it's only fools that will hold on when the supply is ahead of population growth.

Construction costs in Auckland is coming down..

Aussie is having a crisis in building consents dropping and China having an excess housing stock.. more tradies to ramp up the huge pipeline of building work

by RollingOn | 23rd Oct 19, 9:52am 1571777529

The Clark government did more for speculators than the Key government.

I struggle to see a difference with this one as well. Can you point it out?

by CJ099 | 23rd Oct 19, 12:16pm 1571786205

Well did the Clark government try to replace our flag as a marketing strategy so NZ would be more palatable to top end Chinese buyers? No, but Key did. Did! Did the previous government deliberately push Resident Property Investors out of Auckland in 2015 by getting banks to introduce hefty 40% deposits for them, That left the Auckland field clear for Overseas Investors to asset strip. No but Key did! Did the previous government falsely claim that Foreign Investment was only a 3%? No but Key's National party did!
Does that help to clarify things for you?

by RollingOn | 23rd Oct 19, 3:36pm 1571798204

"Well did the Clark government try to replace our flag as a marketing strategy so NZ would be more palatable to top end Chinese buyers?"

Why should I take you seriously?

by Advisor | 23rd Oct 19, 10:53am 1571781216

Good point.
The foreign buyer ban should also force developers to cater more to affordable housing needs, now that the appetite for premium housing in NZ is on the way down without all that laundered money floating around the economy.

by waymad | 23rd Oct 19, 9:22am 1571775749

It would be Interesting to analyse the effects of the SkyCity Convention Centre fire on several economic and construction indicators:

Fletcher's prospects
Materials used for the roofing (hay + bitumen - really???)
Awkland CBD impacts
APEC spend and domino effects

by Fritz | 23rd Oct 19, 10:14am 1571778883

Broken windows fallacy will be hundreds of jobs are extended on the rebuild...

by Mrs The Point | 23rd Oct 19, 10:45am 1571780715

The little pig who made his roof out of Straw, Butynol, and installed it with a blow torch ended up with a disaster when he went on smoko break and left his propane torch going.
Sounds like a parable we should have learned from a long time ago.

by steven | 23rd Oct 19, 2:35pm 1571794501

You mean NZ workers casual attitude to safety bites again? time will tell on that one.

by Kate | 23rd Oct 19, 11:04am 1571781871

I recall way back when the National government stepped in with Sky to get the bigger and more technically ambitious project off the ground. Thought then it would end in tears.

by Fritz | 23rd Oct 19, 11:31am 1571783477

I thought it would end in tears when I walked behind workers as I walked past the site a month or two back. The workers were smoking pot.

by waymad | 23rd Oct 19, 4:54pm 1571802858

Maybe t'wasn't an unattended blowtorch as wot sent 'er up - but a hastily discarded spliff.....

by RickStrauss | 23rd Oct 19, 5:44pm 1571805882

I do wonder whether there was actually any unattended blowtorch. Fires when applying torch on membrane seem to have occurred in quite a few construction jobs, reading around. Is it just a risky technology to apply?

by powerdownkiwi | 23rd Oct 19, 9:30am 1571776257

https://fpif.org/dig-beneath-the-worlds-far-right-governments-youll-fin…

by nymad | 23rd Oct 19, 10:19am 1571779186

You may also see them investing in non fossil fuel technology, too.
But hey, let's not let that get in the way of the narrative.
https://www.iter.org/proj/inafewlines

by steven | 23rd Oct 19, 2:35pm 1571794541

ah, na.

by Audaxes | 23rd Oct 19, 9:41am 1571776867

.90 seconds at 9 am: Dull data, heightened threats to democracy[my bold]

I have been both cataloguing and protesting for years the increasingly authoritarian powers of the UK state, but that the most gross abuse could be so open and undisguised is still a shock. The campaign of demonisation and dehumanisation against Julian, based on government and media lie after government and media lie, has led to a situation where he can be slowly killed in public sight, and arraigned on a charge of publishing the truth about government wrongdoing, while receiving no assistance from “liberal” society.

Unless Julian is released shortly he will be destroyed. If the state can do this, then who is next? Link

Lest we forget: The monarchy of New Zealand is the constitutional system of government in which a hereditary monarch is the sovereign and head of state of New Zealand.

by powerdownkiwi | 23rd Oct 19, 9:50am 1571777439

https://www.theautomaticearth.com/

He always puts up a good list - the Assange take-away has always been that if our narrative resembled the truth, there would be no space for wikileaks.

The fact that he/wikileaks happened, tells us we are part of a hegemony.

by Zachary Smith | 23rd Oct 19, 11:16am 1571782606

Assange will soon believe that 2+2=5.

by Zachary Smith | 23rd Oct 19, 11:13am 1571782384

Is there actually anything wrong with a country trying to influence the elections of another country?

It would be understandable for a country to communicate to voters of another country that there will be ramifications if they choose a certain path.

by Noncents | 23rd Oct 19, 11:25am 1571783121

Exactly, it's not like the USA has been interfering everywhere for decades.

by RickStrauss | 23rd Oct 19, 11:28am 1571783299

Surely it's up to the citizens of the country.

They may want to enjoy self-rule. They may not want to be ruled by another country. They may think that countries leveling threats at other countries, or trying to change their governments or undermine their democracy...well, they may think that's a bit unsavoury. Whether it's an imperialsitic USA or an imperialistic China. (After all, surely we would not be silly enough to resort to "two wrongs make a right".)

Xingmowang has suggested very clearly here on several occasions that people should butt out and cease to comment on "internal matters" in China, because these are up to China to decide. All that folk really seek is that the CCP also live by their own words and take that same approach. Is there anything actually wrong with the CCP living by what they espouse for others?

by Audaxes | 23rd Oct 19, 12:28pm 1571786928

King's Speech

According to Lagarde and other officials like her, central bank independence means being freed from politics. And while that may be technically true, what it really has meant especially since August 9, 2007, is that central bankers are free from accountability.

They are also untethered to the destruction they sow and let happen on their watch due to the simple fact they don’t know their jobs. Argentina was a poignant recent example of just that fact for Lagarde. Mervyn King supplied the big one as it related to the rest of the world:

" Conventional wisdom attributes the [post-2008] stagnation largely to supply factors as the underlying growth rate of productivity appears to have fallen. But data can be interpreted only within a theory or model. And it is surprising that there has been so much resistance to the hypothesis that, not just the United States, but the world as a whole is suffering from demand-led secular stagnation."

King pointed out, as I have frequently enough, how the “recovery” following the again somehow Global Financial Crisis in the US and elsewhere has been worse than the one which followed the Great Depression. How can that be?

by steven | 23rd Oct 19, 2:28pm 1571794136

I wonder what happens to all the houses with such massive mortgages if they are in big CC flood risk areas and the insurer(s) run away?

https://www.nytimes.com/2019/10/17/climate/federal-reserve-climate-fina…

I guess NZ has no big fire risk but well,

https://www.sacbee.com/news/politics-government/capitol-alert/article23…

welcome to the new normal.

by Mannering | 23rd Oct 19, 4:24pm 1571801060

For the uninitiated, some comments on the Japanese construction industry from one who lived and rented apartments and office space there for 36 years and was a business consultant to Takenaka Komuten, Shimizu Kensetsu and Taisei Kensetsu, with 5 years in the design department of the latter.

There is very high-level of construction in Japan relative to the population because:

- The design life of most Japanese buildings, especially accommodation, is 30-4- years, so after 30 years or so there is very little residual value. Very cruel. This is in large part because of Japanese culture and the constant renewal of material things.
- Shoddy construction, especially in the high growth years of the 1960s and 70s, in large part because of the vey close links links between the LDP, the Yakuza and the construction industry, as manifest by very lax supervision via responsible ministries due to "amakudari" or descent from heaven. One example being the widespread use of beach sand with its corrosive effect on rebar instead of the stipulated river sand.
- A collapsing population and associated family formation rates due to radical changes in attitudes to sex, marriage and children and the cost of rearing the latter or which I fathered two.
From the above, were are now very large numbers of empty apartments and houses, in some areas up to 30% because of the rapidly declining population and the perceived obsolescence of much of the building stock. I have first hand experience of this as a result of letter box stuffing marketing campaigns when I and my two sons assisting me found that about 25-30% of the addresses we visited were empty, and that in what is allegedly the highest tax paying area in Japan.

Yes, Tokyo is still growing in a country with a declining overall population because of in-migration from dying rural and small town areas. Just take a drive into such areas to see dying cities, towns and villages full of abandoned farms and homes and shuttered shops.

Japan is the poster child of our future.