Global PMI's near stagnation; Bridgewater shorts equity market; China revises economy size up; bitcoin drops sharply; UST 10yr 1.77%; oil and gold down; NZ$1 = 64.1 USc; TWI-5 = 68.4

Global PMI's near stagnation; Bridgewater shorts equity market; China revises economy size up; bitcoin drops sharply; UST 10yr 1.77%; oil and gold down; NZ$1 = 64.1 USc; TWI-5 = 68.4

Here's our summary of key events overnight that affect New Zealand, with news China's economy has been revised higher, growing it by more than the entire New Zealand economy.

First up, there are a range of early November PMI releases for some of the key global economies released today to give us a fix on on-the-ground trends.

In the US, their manufacturing PMI is marginally firmer but still quite low at 52.2. Their services PMI is also up a little but still even lower at 51.6. A reading of 50 is stagnation.

In Europe, these levels are even lower with the factory PMI at 47.1 (contracting) and their sevices PMI at 51.5. The combined picture is a stagnating 50.3.

In Japan, they are also stagnating with a manufacturing PMI at 48.6, a services PMI at 50.4 and combined at 49.9.

In Australia, their PMI has slipped from stagnation to contraction. And that applies to both their factories and service sector.

(Just for the record, the New Zealand factory PMI is expanding at 52.6. while our services PMI is expanding at 55.4.)

There has been more, probably pointless posturing by the presidents of the United States and China on their desire to sign an initial trade deal and defuse the tariff war. But scepticism abounds now. Certainly markets are ignoring this official talk and the S&P500 is heading for a small loss for the week.

In the US, Bridgewater Associates, the world’s largest hedge fund, has bet more than US$1 bln that stock markets around the world will fall by March, according to a Wall Street Journal report.

In China, they have revised the size of their economy higher with a one-off Census adjustment that adds more than 2% to previous data. It is a revision that adds more than the entire NZ GDP to their data. Most of that was because their services sector was larger, now accounting for 53.3% of their economy (compared to 52.2% previously). That pegs the size of the Chinese economy at US$13.1 tln in 2018, second only to the US at US$20.5 tln at the same date. (On a PPP basis is may be much closer, however.)

The UST 10yr yield is unchanged overnight 1.77% which is a -6 bps decline over the past week. Their 2-10 curve is less positive at +14 bps. Their 1-5 curve is weaker for the week at +7 bps. Their 3m-10yr curve is also less positive +18 bps. The Aussie Govt 10yr is -1 bp lower overnight at 1.10%, but that is a fall of -6 bps over the last week. The China Govt 10yr is now at 3.20%, and -7 bps lower a week. The NZ Govt 10 yr is now at 1.35%, up +2 bps overnight but down -6 bps for the week.

Gold is down -US$5 from this time yesterday to US$1,463 and also a -US$5 fall for the week.

The VIX volatility index is just over 12, and a similar level to this time last week. Its average over the past year is 17. The Fear & Greed index we follow is still on the 'greed' side but not at 'extreme greed' levels as it was last week.

US oil prices are lower by almost -US$1 today to just under US$58/bbl. The Brent benchmark is just under US$63.50/bbl. These are very similar levels to a week ago. The US rig count fell again, taking it to its lowest level since March 2017.

The Kiwi dollar has been remarkably stable, now still at 64.1 USc and is essentially unchanged in a week. On the cross rates we are now at 94.5 AUc and a +½c gain in a week. Against the euro we are little-changed at 58.1 euro cents. That puts the TWI-5 at just on 69.4 and a gain of only +15 bps since this time last week.

Bitcoin is lower yet again this morning at US$7,132 and a drop of -6.7% overnight. At one point this morning it had gotten down to US$6,900. In a week, bitcoin has now fallen -16%. China has launched a fresh crackdown on cryptocurrencies, warning of the risks entailed in issuing or trading them. 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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Highlight new comments in the last hr(s).

... following a link on that link ... UBS's housing bubble index ... of 24 major world cities shown , only 5 were in the range fair value through to undervalued ...

Canadian and Eurozone cities rated most expensive ......

And of course, there's a counterview:

China’s True Growth Could Be Half What You Think.
China’s GDP data release always generates great market excitement despite rarely straying more than 25bp below or above the government target. This stability has led a number of analysts to propose their own measures, typically based on a variety of Chinese proxy data but, in the end, not that different from the official numbers.....based on the performance of countries comparable to China, the latter’s GDP growth could be as low as half the official number and that markets are likely overestimating China’s importance for the global economy. That being said, China has one of the highest levels of corporate debt in the world and slower growth implies greater risks of financial instability.
https://macrohive.com/hive-exclusives/chinas-true-growth-could-be-half-w... (locked)

Numbers, models & numbers

https://www.asiatimes.com/2019/10/article/fake-figures-could-cloud-china...

https://amp.scmp.com/comment/opinion/article/3018829/chinas-population-n...

China has inflated its population data so much that its status as the world’s most populous country may be false
This happens so provinces can get education subsidies and Beijing can hide the results of decades of family planning.

Yes not to mention their (And India's) huge gender imbalance, through quite literally reducing their female population due to cultural preference. This is going to be one of the major reason behind their population decline.

Here's some very interesting articles on the subject: The Washington Post: Too Many Men. "In China and India, men outnumber women by 70 million. Both nations are belatedly trying to come to grips with the policies that created this male-heavy generation" https://www.washingtonpost.com/graphics/2018/world/too-many-men/

Article Inkstone: China's Gender Imbalance "China has the world’s most skewed sex ratio at birth, with about 115 boys born for every 100 girls, according to the Global Gender Gap Report 2018, published by the World Economic Forum".
https://www.inkstonenews.com/society/inkstone-index-china-has-worlds-lar...

Yeah I don’t trust any of their data.

Just for the record, the New Zealand factory PMI is expanding at 52.6. while our services PMI is expanding at 55.4.)

The col are not that bad after all

Someone said last week that NZ economy was on the brink? Not see any signs here in Wellington or Christchurch, will check Auckland next month.

Might have been me.
People don’t look at lead indicators enough. For example, building consent approvals may be high in Auckland at present, however resource consent applications are down about 30-40% in the last 6-12 months, which at some point soon will show up in building consent data,

Where are you getting your data from?

12 months to September, we are about 10% higher than the same period to 2018

The council doesn't publish it's resource consent data publicly, but you can request it.

You referring to Building or resource consents?

RCs, refer to my 9.54 comment.
RCs obviously lead BCs

Cool

Current building consents thanks to National, the lack of consents coming through is thanks to a lack of confidence in Labour / NZF and the Greens ability to smooth over the coming recession.

So over two years after the National govt dissolved before the 2017election all things good are because of National, all things negative are because of Labour?

Is there any logic behind that statement other than National good, Labour bad tribalism?

Wellington is a special case really, with its huge bureaucracy.

Yes that goes without saying. Plus the weather is rubbish.

Wellington is in a Jacinda committee creation $ bubble at the moment.

Even under the last government the bureaucracy in Wellington was bloated.

Fully agree, then Jacinda added a hundred plus commities to do the jobs of the people that were already employed to do those jobs.
The old hand out the $'s to the Govt sectors and to the poor and we buy votes Labpur policy.

I have worked in and around government ministries in the last 5 years, hand on heart staff numbers could easily be cut 30-40%

thats the big challenge, cut those staff and spend the money on core services.

Exactly

Re; Bitcoin. Did you know that China is home to the world’s largest bitcoin mines, thanks to abundant and cheap electricity, and at one time the country accounted for 95% of the volume traded in global markets. So as soon as China does manage to develop and enforce it's own Government controlled cryptocurrency then you can expect Bitcoin and the like to drop considerably more then just -10%.

Reuters article: Bitcoin plummets to a six-month low on China crackdown
https://www.reuters.com/article/us-crypto-currencies/bitcoin-plummets-to...

Quartz article: Chinese money dominates bitcoin, now its companies are gunning for blockchain tech
https://qz.com/1072907/why-china-is-so-hot-on-bitcoin/

And we are not immune. I hope lonewolfnz, our resident crypto commentator, doesn't come from Hamilton!
"Police seize $6.7m cryptocurrency"
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12286896

https://www.facebook.com/Lonewolfnz

"Lives in Hamilton, New Zealand"

Joe, running a wide ranging review.

https://youtu.be/-0sKkbjQYqw

Joe Rogan ...serioulsy? I assume you are a fan of the Hosk as well...

I will take the win again.
Thanks, this is getting easy.

I enjoy Joe's content. If anything it's authentic, a title very few can claim these days

Your a winner well done

Perusing the interest.co charts section this week I noticed that the govt employees number has risen substantially over the past 2 years. It should include the 30 June 2019 data but doesn't. I wonder why?

The figure to look at is employees + consulants/contractors..

Has anyone noticed their grocery spend has increased by a fairly large amount over the last few months?
$50 to $80 more a week for two adults and three young kids extra. Early $300 now when it was arround the $250 mark...
It maybe me loosing the purse strings a bit though..

I noticed meat has jumped

How do you do it? Shop online-and-pickup and you'll get what you pay for (the max). Do it yourself, and there's still less to be paid by comparison shopping. Oh, and 'take a list and stick to it!' of course. Saves on all those impulse buys that come out at this time of the year!

Haven't really noticed that, apart from a bit of a jump in meat.
We are pretty disciplined in buying much of our groceries when things are on special.