US data lackluster; China makes half-hearted effort to engage US; OCED sees growth slipping; Westpac's crime of failing to learn; UST 10yr yield at 1.78%; oil up and gold unchanged; NZ$1 = 64.1 USc; TWI-5 = 69.4

US data lackluster; China makes half-hearted effort to engage US; OCED sees growth slipping; Westpac's crime of failing to learn; UST 10yr yield at 1.78%; oil up and gold unchanged; NZ$1 = 64.1 USc; TWI-5 = 69.4

Here's our summary of key events overnight that affect New Zealand, with news the energy seems to have leaked out of the US:China trade talks.

First up however, American housing sales in October haven't rebounded as analysts expected. They did rise marginally but the bounce was weak. But earlier 2019 growth still leaves them up +4.6% year-on-year.

Nationally, new unemployment claims are rising again.

More positive was the next regional Fed survey to report in, this one from Pennsylvania. While their general factory index rose, orders, shipments, and employment indicators all decreased.

Canada is starting to have an employment problem with the number of new jobs now falling and reversing recent trends. Worryingly, most of the falls are in their service sector.

China’s chief trade negotiator has reportedly invited his American counterparts for a new round of talks, as both sides are struggling to strike a limited deal to help de-escalate tensions. But markets aren't sensing real progress here, rather stale reruns. And geopolitical pressures aren't helping either. Neither are the Washington impeachment hearings.

Consumer confidence actually edged up in November in the EU in a report out today. It is still net-negative, but above its long term average levels.

The OECD says trade conflict, weak business investment and persistent political uncertainty are weighing on the world economy and raising the risk of long-term stagnation. World GDP growth is expected to be just +2.9% this year - its lowest annual rate since the GFC - and remain at this low level in 2020 and 2021. Mainly that is because they see US growth slipping to under +2% in the next two years. China's growth is falling too, but it is still expected to expand well above +5%. They see New Zealand expanding at +2.5% next year and Australia by +2.3%. Global GDP expanded +3.5% in 2018.

This forecast has cast a pall over equity markets today. Wall Street is down -0.2% in mid-day trade. Overnight European markets fell a similar amount. And yesterday Shanghai was down -0.3%, Tokyo was down -0.5% and Hong Kong dropped -1.6% as public policy positions harden there against keeping the City with an independent judiciary.

In Australia, disbelief grows at how Westpac allowed an old piece of software to let so many AML breaches occur, especially after CBA had been convicted of the same error and paid a AU$700 mln penalty. Not learning from their rival's mistake makes the Westpac breach seem so much worse. Some observers think Westpac CEO Hartzer will be gone within a week. Complex software that hides flaws are an existential risk for businesses required to act as law enforcement agencies for Governments that can't or won't do their own enforcement.

The UST 10yr yield is up +4 bps today at 1.78%. Their 2-10 curve is unchanged at +17 bps. Their 1-5 curve is also still at +7 bps. Their 3m-10yr curve is now at +20 bps. The Aussie Govt 10yr is up +3 bps at 1.11%. The China Govt 10yr is now at 3.% and a -1 bp overnight dip. The NZ Govt 10 yr is now at 1.33%, down another -3 bps.

Gold is unchanged at US$1,468/oz.

US oil prices are +US$1 higher today again, now just over US$58/bbl. The Brent benchmark is just over US$63.50/bbl.

The Kiwi dollar is a unchanged this morning at 64.1 USc. On the cross rates we are firmer at just over 94.4 AUc and another three month high. Against the euro we are at 57.9 euro cents. That leaves the TWI-5 at just on 69.4. We should also note that Beijing as let the yuan weaken overnight, releasing it from the very stable level it has held during the trade negotiations with the US.

Bitcoin is sharply lower this morning at US$7,574 and down -6.7% since this time yesterday to its lowest level since May this year. 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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44 Comments

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Highlight new comments in the last hr(s).

"Worryingly, most of the falls are in their service sector"
Much better to have the falls in the Productive Sector?
Service Sector jobs across the Globe are likely to increasingly come under the cosh. Before that, the wages paid in that sector will likely fall...
An interesting thought:

"One reason for the purposeful concentration of the wealth into just a few hands is that if all the money printed were more equitably distributed, the increased economic stimulation might overwhelm the ability of the manufacturing sector to keep up with the increased demand triggering inflation, which could collapse the entire economic system."

Interesting ironic quote!
Who is it?
Some chance of such redistribution as process you describe continues apace causing chronic demand deficit

It's from one of us random commentators at the end of this piece!
https://wolfstreet.com/2019/11/18/us-national-debt-spiked-by-1-3-trillio...

the careful filtering of money into the lower classes creates a balance between demand and production which keeps things in check.

"if all the money printed were more equitably distributed, it would return to the original "inequity" within a few years. Wealth is a result of an individual 's mindset and actions, proof? Over 90% of big Lotto winners have lost everything within a few years.

Exactly! Give most people money, and they will spend it. But as I've suggested below - Give people debt to invest in an illiquid asset class and they CAN"T spend it until they sell the asset. Ergo, the Drip Feed of money into society, and not the bullet payment ( the Big Lotto win) that would overwhelm The System. It's all good - until the creation of debt stops or the asset price falls.

Spend it is rational. When you get to the pearly gates possessing cash will prevent entry (ref camels and needles).

RBNZ starts another bull run in the housing sector : https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...

NZ cannot survive without housing ponzi.

11
up

As interest rates approach the zero-bound any possible "wealth" effect from house prices is likely to be negated by the boomers "ouch" effect from negative real after-tax yield on their term deposits/investments.

Falling interest rates, record immigration, low supply and mountains of overseas cash arriving on our shores created a sweet spot for the housing ponzi.

Despite what the spruikers say it's hard to see all of those conditions continueing in their same trajectory.

Just yesterday an artical quoted Jacinda that everything was fine, invest away at your heart's content.
In other words Labour is worried and have rolled Jacinda out to calm the masses and they will be looking to bring aunty Helen out for another PR, whoop whoop it's all good spending push to keep it all rolling untill the next election.

All we need now is Uncle Johnkey rolled out and it will be a trifecta of good news. Just need to track him down ..China or a golf course somewhere in Hawaii?

Hell, if I see that I am heading g for the hills...

Perhaps the purposes of rising house prices (and the associated debt, of course) is to make ordinary citizens "Rich!" without actually giving them the purchasing power to spend their 'wealth'. If 'wealth' is tied up in a single asset class, that has to be sold before it can be spent, then keeping prices rising locks that spending power up indefinitely.

RBNZ mentions that falling interest rate is a blunt knife/tool but if want and are sincere, housing sector can be controlled with other tools BUT the question is are they interested or do they not want the house speculation /rise, to prove that NZ is a Rock Star Economy ?

National lost because of housing and it seems that teven Labour will lose because of housing - though voting National will not help BUT Labour will lose by resentment votes and Jacinda Arden will be one term wonder

Reduce LVR and party begin (Add Fuel to fire which has already started)....Argument in favour is that it will be to help FHB BUT if the house price increase will it help FHB or Investors/Speculators.

Only will assist FHB to borrow more and carry high debt with rising house price - Rock Star economy.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...

Shaping up to be a funny election.
NZF will be lucky to hit 5% and when that becomes clear both Labour and National will throw them under the bus.
From then it's a two horse race between Labour who has failed to deliver supported by the Greens that will never deliver 'V' National with Bridges and Collins who could maybe deliver but no one trusts.
If Bridges got rid of Collins I think we would see quite a few have more faith that he was a leader. At present he is a leader with a Collins thorn in his side.
Jacinda is going to throw money from the roof tops next year but if the masses fail to see commonsense and purpose in the direction of is thrown she is gone.... yep so basically she has a 10% chance if winning because her history is non delivery.

.... where's our resident Buttcoin spruiker ... its below $US 8000 ... what now , oh wise one ?

Haaaaaaaaa !

You have to follow the crypto mantra of buy high, sell low.

... no ... no no no .... I'm sure you've got that back to front ... the craptocurrency mantra is to sell low and buy high ... yup ...

Heading to it’s inherent value of nil. A con if there ever was one.

I haven't seen the LoneWolf post here for a long time. Must have retired to a tropical island on his Crypto earnings.

"Heading to it’s inherent value of nil. A con if there ever was one
That comment has been rolled out how many times?.. in the mean time some of us banked a few gains, brought a few items over seas, donated via bitcoin, and parked up some coins for the future.

Bitcoin is evidence of how stupid humans can be.

Without being legal tender it is worthless except between the group of fools drinking the crypto cool-aide

Bit disappointed to see you join the ranks of the schadenfreude patrol GBH, I thought you were better than that and I generally enjoy your posts.

Contain yer disappointment, Yvil. It's entirely possible GBH has either OD'ed on them Gummies, or, alternatively, hasn't had the minimum morning dose. Either way, it's a Gummy Emergenvy! (typed it wrong but wotta pun, eh?)

Gummy shearing his login, never

A few will be happy about this Exxon have announced they plan to divest up to $25 billion of assets across the world to focus on major projects. Opportunity or just digging in to find more oil and gas in areas they can exploit with little regulation?

ExxonMobil's global E&P activities, especially in smaller, less-developed nations, has allowed large corporations to spread the resource curse and extract tidy profits from their miseries.

A common pattern has historically played out when abundant volumes of a recoverable natural resource have been discovered in poor countries:
- The country’s government spends what it expects to earn in the future, taking on debt.
- Inflation can rise, impeding the development of other industries.
- Companies operating in the countries struggle to get things done because there is no clear regulatory framework.
- Local citizens become frustrated at the lack of any tangible benefits they initially see from the resource finds.
Link

Australian news; 7:30 report no less.

Alan Kohler is top of the heap over there.
Alan is calling the Australian economy weird.
And here's why:

See the financial advisor having live at home & driving uber.
See the couple with the million $ mortgage.
See the couple that paid $388,000 for a house now worth $280,000.
See the couple saying one kid is all they want to afford.
See the doctor turned property developer.

https://youtu.be/_V5E2sWHhpM

https://youtu.be/Cb7gJHpAxJY

https://youtu.be/CIDjwOZGsTM

Almost time for the govt to cut taxes and borrow to fill the hole. Somehow though, I think the debt has got a bit ahead of us this time. Perhaps the govt will cut taxes and then cut spending.

I think what we will see is an increase in public projects which will consist of roading because they failed to start planning for bigger projects and some tax cuts for the lower earners bracket which will amount to $10 a week at best.
After that I dont think Jacinda has a plan except kick that can down the road till after the election.

Well it happened in the mid 80s...
But yeah can't see it happening now.
I wonder if, rather than a tax cut, they might consider raising WFF

WFF is a subsidy to employers

Winston has let rip into the media , in Trumpesque style he has called the #NZFdonationgate scandal .....FAKE NEWS

NO MEANS NO !!!!
Winnie and Shane Jones.. game over boys, you won't get 5% after crapping on your followers and going with Labour, calling them 'red neck's' and the mad dog clutching at straws tactics of present. See through politics.

I agree, I can't see them banging the anti immigration drum successfully this time round ( though Shane Jones is having a go at it already). They have had 2 years and did nothing. It should have been their no.1 policy bottom line to please their voters.

You forget the loyal boomer gold card brigade who would follow him off a cliff if requested.

Politicians can’t be trusted. Why, because the truth doesn’t get votes.

Correct and this why new politicians like Trump are leading the way....to change.

Good or bad - who know but reality.

I fear that spin is all that anyone / everyone has left now - no substance. Does anyone actually believe any politician these days (or anyone else that offers an opinion for that matter).

Gen X cynic.

Not when they speak like that.
The words not connected to the truth/reality people see/feel/know.