Here's our summary of key events overnight that affect New Zealand, with news that China's growth is slowing, but it is still at a healthy level.
But first, in a second day of Congressional testimony, US Fed Chairman Powell said that he sees few risks to the ongoing modest American economic expansion.
But markets are not giving the thumbs-up today with the S&P500 turning lower in afternoon trade and benchmark bond yields falling as a risk-aversion mood settles in. Prompting the shift is a sharp and unexpected rise in jobless claims.
American producer prices rose by the most in six months in October, slightly better than expected, lifted by gains in the costs of goods and healthcare services. It is a result that underlines the Fed's recent public stance that it will probably not cut interest rates again in the near term.
The US budget deficit grew by more than a third in the first month of the new fiscal year as federal spending outpaced revenue growth, pushing the 12-month deficit past US$1 tln for the first ever in a non-recession period. (See page 5.) The Americans are leaving the roof damaged when the sun is shining.
China’s key economic activity continued to slow in October as several major indicators posted multi-month or even multi-year lows. Retail sales were up +7.2% year-on-year and below expectations, industrial production was up +4.7% and also below forecasts, and the important fixed asset formation data, a key driver of their economy, was up +5.2% when a gain of +5.4% was expected. True, all these numbers are way above what most other countries can deliver, but they do indicate a continuing slowdown. But it is not sharp, and it certainly isn't a contraction. And it is miles better than for most OECD countries. And it doesn't indicate China is "on its knees" as the US Administration seems to think.
And the China data isn't all soft. Property sales picked up and new construction starts surged in October in a sign developers are seeing improved demand.
And here's a trade war development that you may not have expected. The block by the US on chip supply to China (and Huawei in particular) is being filled by - Taiwan. It is home to the globally crucial supplier TSMC, and they are critical for the US as well. The US may not have the leverage they assume.
And China says it is in in-depth talks with the US about rolling back the American tariffs.
Germany has narrowly avoided a recession, according to official data. The country's economy grew by +0.1% in the third quarter of the year after contracting in the previous three months, and the annual growth was down to +1.0%. But this was better than was expected.
For the EU as a whole, the growth was slightly better coming in at +1.4% and was also better than expected.
In Australia, official data shows the Australian economy lost -19,000 jobs in October, the first fall in three years, and their unemployment rate edged back up to 5.3%. Analysts had thought employment would rise +15,000 so the miss is substantial. Full time jobs fell more than part time jobs. That saw the AUD fall sharply and taking the NZD with it.
The UST 10yr yield is lower at 1.81% and an -8 bps fall. Their 2-10 curve is positive at +23 bps. Their 1-5 curve is firmer at +16 bps. Their 3m-10yr curve is at +24 bps. The Aussie Govt 10yr is down another sharp -9 bps at 1.13%. The China Govt 10yr is now at 3.27% which is unchanged again. The NZ Govt 10 yr is now at 1.44% which is -5 bps lower.
Gold is up today, up +US$9 to US$1,472/oz.
US oil prices are a little softer at US$57/bbl. The Brent benchmark is just on US$62.50/bbl.
The Kiwi dollar is lower today at 63.7 USc having weakened overnight. On the cross rates we are holding at 94 AUc. Against the euro we are soft at 57.9 euro cents. That puts the TWI-5 at just on 69 and a -30 bps dip in a day.
Bitcoin is also lower at US$8,629 and a drop of -1.3% overnight. The bitcoin rate is charted in the exchange rate set below.
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39 Comments
"The Americans are leaving the roof damaged when the sun is shining." A good turn of phrase. And how are they any different to the rest of us over the last 40 years? They aren't.
On the other hand, maybe we decided as a Collective of Developed Economies that making sure that the 'value' of our rooves is all that matters?
As per AA's calculation (this was released before the 3.5% hike in excise on fuel), 48c for every dollar spent on fuel goes directly into government coffers, 53.36c in Auckland including their regional fuel tax.
~7 cents a litre goes to the landed gentry to plant trees to change the climate back to the little ice age remember. Some ring fence. More like slush fund for crony capitalists and climate cultists.
https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resourc…
The link referenced the ETS. I'll be more specific for you. "All fuels also pay an Emissions Trading Scheme levy (approximately 6.2 cents per litre for petrol, and 7.2 cents per litre for diesel)."
Money taken from (mostly oblivious) fuel users, given to farmers, to change the climate back to Little Ice Age so we can skate across the Thames again. The Roman Climate Optimum was so overated - the Little Ice Age climate is just perfect for us.
Luckily all other problems in NZ have already been solved - so we can afford such wealth transfer schemes to the needy land owner.
https://www.aa.co.nz/cars/owning-a-car/fuel-prices-and-types/petrol/
I think we're not bad at building road infrastructure, compared to other things. If public housing was managed with the same urgency and competence as, say, the construction of the Waterview tunnel, NZ would be a better place. Unlike social housing, roads are a priority whatever party is in power, and unlike social housing, even the Scroogiest of fiscal conservatives are happy to throw money at it.
FACT CHECK
That is quite the rewriting of history there. In fact, after Labour signed off on the NZTA plans and the incoming National government attempted to cancel the tunnel and put the motorway through the Waterview suburb instead, only backtracking on this due to opposition from the folk in the neighbourhood: https://www.stuff.co.nz/national/politics/96543448/factchecking-watervi…
Bill English's brother (head of Federated Farmers) wanted the money to be used for farm irrigation instead.
Quite different to the way it's portrayed in the above comment. Point of fact, it was an NZTA project across both governments, it's just Labour signed off on it and National tried to get cancel the major work and was subsequently forced to allow it to go ahead. Certainly it would be accurate to say they've tried to take as much credit as possible for the project since then.
Absolutely. And to think, we had such a high rate of home ownership in NZ because governments recognised the need to encourage and support affordability including through direct build effort. We then had to watch a bunch of folk who benefited from that claim that the sort-of free market is actually best for everything and that they did it all on their own two feet etc. Comparatively little appreciation for the role that the boosted housing supply had in getting them into affordable home ownership, thus little recognition of the need to pass the same on to next generations.
Hussman
“The only time we’ve ever seen a confluence of risk factors anywhere close to those of today was the week of March 24, 2000, which marked the peak of the technology bubble. In my view, this sort of analysis is useful because it doesn’t rely on any single risk factor, and emphasizes that while these risk factors can emerge individually without consequence, a large and critical mass of them probably shouldn’t be dismissed. My impression is that this is as close as one gets to ringing a bell at the top.”
We observed an equivalent extreme last week (ended Friday, November 8, 2019). While this is again as close as one gets to a duck, we can’t know until later whether it’s actually a duck. All we can say with confidence is that current, observable market conditions present us with a striking collection of duck-like features.
https://www.hussmanfunds.com/comment/mc191111/'
Book for Friday, about to be a movie.
Book and movie, sorry linked to wrong book this morning.
https://www.amazon.com/Go-Like-Hell-Ferrari-Battle-ebook/dp/B003K16PBY/…
Reckon there's more to the chip supply headline. TSMC's chip fabs are heavily utilised by Apple.
Likely there's a roundtrip agreement here that allows Apple's chips to be imported to China for fabrication into devices, then they come out the other side as $$$ for Apple (therefore US).
Same is true of a number of TSMC's other major customers - AMD for example with their latest Ryzen chips...
BIt of a case of money 'trumping' rhetoric (pun intended!).
"Powell sees few risks"... Anyone else remember when Bernanke and the US Fed saw few risks in 2007 and then the GFC hit? You will never hear a Central banker talking down the market until there is no denying the storm has hit. Even then they will still trying and sugar coat the situation as any negative sentiment from their mouths will only fuel the fire.
What if China has already started to follow Japan into thirty years of stagnation?
www.rogerwitherspoon.wordpress.com/2019/11/14/what-if-china-has-already…
Tamarind Taranaki has 'exposed a giant loophole' re the decommissioning costs, according to the Granny Herald article - paywalled but as the entire text is there in the html, ineffective....
Essentially, the taxpayer could be on the hook for the entire decommissioning costs if Tamarind, which advised earlier this week that it was possibly or actually insolvent, goes udders-up.....
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