A review of things you need to know before you go home on Wednesday; trade deficit stable, cars king, Rio Tinto tests Meridian again, NZX50 tumbles, swaps turn lower, NZD weaker, & more

A review of things you need to know before you go home on Wednesday; trade deficit stable, cars king, Rio Tinto tests Meridian again, NZX50 tumbles, swaps turn lower, NZD weaker, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
None here either.

SWINGS & ROUNDABOUTS
The September merchandise trade balance came in as a deficit of -$1.242 bln which was a little less than the -$1,580 bln in September 2018. That takes the annual deficit to -$5.2 bln which is also slightly less than the equivalent deficit in the same year in 2018. September 2019 exports were +5.1% higher than the same period of previous year, while imports were -2.1% lower on that same basis. In the year to September, we ran a +$2.9 bln surplus with China, our largest trading partner, and a +$1.4 bln surplus with Australia. But we ran deficits with many other countries, the largest with Japan at -$744 mln and the USA at -$637 mln. Without the China FTA, and the CER relationship with Australia, we couldn't afford to buy Japanese, American or EU goods. In fact, the deficit with all countries in the EU is -$6.5 bln annually. Would it make sense to tariff them? (Your mental answer to that question will reinforce the stupidity of the American trade/tariff actions.)

CAR CONVENIENCE DOMINATES
According to new Census data released today 69% of all workers got to their jobs in their own car, truck, or van, and another 4% shared these vehicles. More than 1.4 mln workers drove a private car, truck, or van to work and more than 120,000 students drove to their place of education. There are only 6.2% of people using public transport, and 2% cycling to work or study. As readers will know, in Auckland many people drive to public transport, using both, and it is unclear how the Census resolves this double-counting (or how respondents answered their questions). Cars with their point-to-point and time flexibility will always beat public transport systems that don't exactly do where and when riders need journeys. It is an unresolvable inconvenience that disrespects passenger's time.

TRYING US ON AGAIN
The Tiwai Point aluminium smelter's viability is up for review again. This time the Government says no taxpayer funds will be used to support it. However, that doesn't mean there will be no costs to the taxpayer. If NZAS is shutdown, there will be a cost to upgrade the Manapouri power connection to the national grid. In 2013 the then-Government paid $30 mln to keep the facility operating. The owner of the Manapuori power station, Meridian, has seen its share price tumble today.

SHARP LOSSES
The mood in equity markets is grim locally, although the world's equity markets are positive either. The S&P500 ended is session today down -0.4%. That followed Europe which was flat (although the FTSE was up +0.7% on Brexit hopes that didn't eventuate). Today Shanghai, Hong Kong and Tokyo have just opened and all are negative. The ASX200 is down -0.3%. But the NZX50 has crashed almost -2.0% in late trade. The big losers include all the power generators who face a sudden addition of supply from Manapouri who have collectively lost -$2.5 bln in market capitalisation today. Other big losers include Air New Zealand (-1.4%), Auckland Airport (-1,5%), F&P Healthcare (-1.2%). Listed property companies also took a beating today. Oddly, Fletcher Building rose.

SWAP RATES TURN LOWER
Wholesale swap rates have stopped rising is a sharp reversal today. The two year is down -3 bps today, the five year is down -4 bps, and the ten year is down -6 bps. The 90-day bank bill rate is unchanged at 1.05%. Australian swap rates down -3 bps across most tenors today. The Aussie Govt 10yr is down -8 bps to 1.11%. The China Govt 10yr is up +1 bps at 3.24%. The NZ Govt 10 yr is down -4 bps at 1.30%. The UST 10yr yield is down -5 bps at 1.75% and giving up all of yesterday's rise.

NZ DOLLAR WEAKER
The Kiwi dollar is also lower and back to just on 64 USc. Against the Aussie we are unchanged at 93.5 AU cents. Against the euro we are lower at 57.5 euro cents. That means the TWI-5 has slipped back to 69.

BITCOIN SOFTER
Bitcoin is soft today at US$8,042 and a -1.8% slip on the day. The bitcoin price is charted in the currency set below.

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We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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27 Comments

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Highlight new comments in the last hr(s).

Boris Johnson has achieved the vote needed 329 to 299 and the Brexit deal is now done ( in principle ) , but he now he needs to get the next step done and dusted by 31 October which is the timetable for the exit

I hope so, I really do. Brexit was a vote by the remainder of the UK largely, against The City, The Establishment equals London. Since then that contingent together with its associated press has tried relentlessly to overturn the referendum and democracy. That in itself, illustrates one very good reason why the majority of the country saw it as necessary to vote for Brexit.

The city and Establishment wanted out of the EUROPEAN Union. Too much light was being shone on their hidden un taxed wealth...but well done for being fooled by the well funded machine.

Well now that is an angle indeed. But that being the case, with the god almighty power of that sort of backing, one could have reasonably expected, the whole damn thing and exit to be done and dusted in just a few months and it would now be Sir, if not Lord, Farage.

Looking likely to drag on for some time. No body really wants this deal because it's pointless. BBC Brexit: PM to push for election if EU offers longer delay. https://www.bbc.com/news/uk-politics-50148094

Foxglove,

I don't think so. I have very recently spent 2 months in the UK and I think it much more likely that the vote to leave was driven in large part by anti-immigration anger.

There you are there myself too and I totally agree with you and back that up from advice of some UK expats know quite well here. But I did say in my initial comment, one reason not the only reason. Apologise though, could have been more specific.

But the NZX50 has crashed almost -2.0% in late trade.
Priced for perfection?

Buy when there's blood in the streets - or flames in the bitumen?

Possibly. But it is hard to discount future earnings with more rate cuts, given previous claims are being called upon right now and as far ahead as one dares to forecast.

Moreover,

When commodity prices rise it is because, like wages and the labor rate, companies can easily afford to pay those higher prices. They are more concerned about maintaining growth on the top line. Material producers are able to pass along price increases only at times when their customers are able to absorb them. When there is economic growth, there is expansion all throughout. Including prices.

That’s why you can plot something like the PPI index alongside GDP’s corporate profits series and they come out in very close correlation:
When companies are raking in the profits they are paying more input costs for materials as well as labor. If they aren’t increasing their profits, they aren’t doing either of those things. And that describes the world since 2008, especially since 2011. Link

Wondering this morning where all the USA food that was going to China is today, found some of it

https://www.bloomberg.com/news/articles/2019-10-22/u-s-bacon-pile-is-big...

'China Just Injected The Most Liquidity Since January... And It's Not Enough'
https://www.zerohedge.com/markets/china-just-injected-most-2-day-liquidi...

The government won't pay 30 million dollars power subsidy to Riotinto.
But how much are they shelling out to Wallywood to keep the Wellington
children's-movie industry afloat?

All subsidies are self defeating. A tilt against reality. Pointless to argue, because one exists, then that justifies another sink hole.

You would have to be pretty damn stupid to subsidise a company to take 15% of our power which significantly increases power prices for everyone just to save a few jobs when we have very low unemployment.

I was thinking of employment.
If the Southland smelter shut down, there would be over 600 employees and their families lose their financial support.
If Wellington film industry tanked, sure some dozens of sundry goffers (sorry, gaffers) and 'creatives' might not be able
to disport themselves self-importantly around movie cameras or don fantastical costumes; and most importantly a certain
acclaimed homegrown director might lose an opportunity to further fill his already weighty coffers.

It will be argued, undoubtedly in the relative select circles, that the Wellington thingy is more of an “investment” in that there would be future growth, more film work, NZ South Pacific Bollywood that sort of carry on. Same more or less as supposedly justified for our high class elite, lavishly paid, yachties. Like you I don’t buy it.

The walls are closing in on Trump: MSNBC Trump's 'worst day' yet: Reagan aide says new evidence makes Trump 'impeachable'.
https://www.msnbc.com/the-beat-with-ari/watch/trump-s-worst-day-yet-reag...

Which of course means that Vice President Joe Biden telling the Ukrainians to stop investigating his son's business mates or there would be no more US aid, is in the same league. Joe sure lost his election bid in the Ukraine, alright.

Have you got an article link on that or are you or are you just talking twaddle? I think it's the later.

RT are awesome. Thank goodness we have them.

No you must understand its Ok for the Left to do it.

dubious. That said, quite different than undermining your own countries military strategy for personal gain. Trump is great for Putin, disaster for democracy. Read more.

“Cars with their point-to-point and time flexibility will always beat public transport systems” - try telling that to the Japanese, Europeans, etc. I get the feeling the main reason we don’t use public transport is because almost all of us don’t have access to it

"Cars with their point-to-point and time flexibility will always beat public transport systems that don't exactly do where and when riders need journeys. It is an unresolvable inconvenience that disrespects passenger's time."

Massively disagree.
People will intuitively do what is quickest, easiest and cheapest for them. When that balance tips, by traffic/congestion becoming worse and/or public transport improving, the tide flows towards public transport.