US data uninspiring; Canada gets uptick; world trade stabilises; Beijing unrepentant over Hong Kong; China tightens IP rules, delays ag US imports; UST 10yr yield at 1.76%; oil and gold down; NZ$1 = 64 USc; TWI-5 = 69.4

US data uninspiring; Canada gets uptick; world trade stabilises; Beijing unrepentant over Hong Kong; China tightens IP rules, delays ag US imports; UST 10yr yield at 1.76%; oil and gold down; NZ$1 = 64 USc; TWI-5 = 69.4

Here's our summary of key events overnight that affect New Zealand, with news the trade ructions continue with more-of-the-same spinning producing not much.

But first in the US, the National Activity Index monitored by the Chicago Fed suggests that American economic growth slowed further, and more than expected, in October.

And the DallasFed regional factory survey was lower too in their region, although not quite as large a decline as was expected. The extended fall in new orders is however a special concern in the oil patch.

In Canada, their latest data was better than expected with wholesale trade up in September and reversing the August decline to be +4% higher than a year ago, and inventories were down slightly.

According to the CPB World Trade Monitor, momentum in trade actually rose in September for the first time in four months. True, many of their markers are still flat or negative, but trade can do with a little bright spot these days. "Momentum" is an unusual metric, but it is driven here by a surprise rise in production rather than trade volumes themselves.

In an odd turn of events, Beijing has restated its support for Hong Kong chief executive Carrie Lam after a massive rejection by voters of her administration. Apparently, admitting she has failed is as unacceptable as admitting Beijing has failed to win any meaningful support for its hard-line policies. Beijing has censored all analysis of the Hong Kong vote result inside China, only saying a vote was held. But Beijing's retaliation for the outcome is yet to come. Despite this, Hong Kong financial markets are up strongly on the result, up +1.5%.

On Wall Street today, equities are up +0.6% in mid-day trade and that follows similar gains in Europe overnight.

Although there is no progress to report in the US-China trade talks, we can report that China is toughening up on IP protection and enforcement, a key demand of the US side. Criminal punishment will become much easier now.

But the trade war is still being fought with China’s imports of American soybeans at their lowest level in three months in October. China delayed unloading of American soybeans at its ports, deliberately backing up the recent order pipeline.

The UST 10yr yield is now at 1.76% which is just -1 bps lower than this time yesterday. Their 2-10 curve is stable at +14 bps. Their 1-5 curve is overnight at +4 bps. Their 3m-10yr curve is also less positive +17 bps. The Aussie Govt 10yr is at 1.08%, a dip of -1 bp since this time yesterday. The China Govt 10yr is now at 3.21% and +1 bp blip up. The NZ Govt 10 yr is now at 1.34%, down -1 bp.

Gold is down -US$4 to US$1,457/oz.

US oil prices are lower at just under US$57.50/bbl. The Brent benchmark is just under US$63/bbl.

The Kiwi dollar is continuing its stable run against the greenback, now still at 64 USc. On the cross rates we are holding up at 94.5 AUc. Against the euro we are little-changed at 58.1 euro cents. That leaves the TWI-5 at just on 69.4.

Bitcoin however is having a volatile ride and is now at US$7,212 which is up +2.5% from the low point it reached yesterday. 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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52 Comments

Comment Filter

Highlight new comments in the last hr(s).

What's the PM's department's position on Hong Kong.
Is it climate change there?

Whats your position?

Disengagement.

I doubt farmers would be happy with that "Disengagement"

Sanlu
Beingmate
China Farms

Add:
Falun Gong
Body parts
Fentanyl
Uighurs
Hong Kong

Yet we still trade with all of these other countries?
The top four arms exporters — the United States, Russia, France, Germany

Correct, none of those four countries are China.

Fortunately we can buy military weapons, arms and munitions from a selection of those and other countries.

https://youtu.be/zdR-I35Ladk

10
up

The PMs position will be silence in the name of trade, which for a very small country like us is OK.

However as a nation, culturally we stand firmly behind the calls for democracy, even if we don't approve of the vandalism and violence.

In my opinion I suspect that at least a portion of the violence has been instigated by pro-Chinese elements who were trying to cause an out-of-control escalation of the protests, so the authorities could justify responding in force. They were partially successful.

Not OK.

12
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Interestingly her omnipresent virtue signalling is conspicuously absent when discussing the affairs of China.

She's not stupid, she knows that if we piss off china they can make a few minor adjustments to policy and crush our economy.

I really do wonder where we would be now if Labour had got a few more votes and a labour green coalition had got in without Winston first.

I really do wonder where we would be now if Labour had got a few more votes and a labour green coalition had got in without Winston first.

A scary place.

But probably still better than if National and Act had got in...

Sucks that those are the two choices we realistically have at election time.

Definitely also agree.

Prag, your first sentence reads as an assumption, rather than evidenced fact.

Take the blue tinted glasses off, your reading might improve.

Yes Prag, this is important, list your three 3 top facts that you evidenced, based the sentence on.

Sorry, don't have any access to IQ tests or any other form of intelligence tests that the PM has done (and even calling those "facts" is a bit of a push). So I only have my opinion, same as you have yours.

China certainly could hit our economy short term - cancel all the students and tourists. Stopping buying milk or timber would be only a blip since they are international commodities - just export them to Singapore and let whoever buy (they may just relabel and sell on to China).

Jacinda doesn't think about NZ's economy very often so I doubt it being crushed is her fear. She may well be worried about crushing labur party finances and the kind of anonymous hassles Anne-Marie Brady experiences.

Acquiescing to China is no different to appeasing the school yard bully - you are just putting off the inevitable. Better to quietly draw a few lines in the sand and prepare for the retaliation. I really can't blame China - if countries such as NZ are willing to Kowtow well why not let them.

Interestingly, you seem to have gotten it slightly wrong:

Prof Brady said the government's public statements signalled an "adjustment" in the relationship between the two countries.

"It's a big deal, and I think it indicates an adjustment in New Zealand's relationship with China that's under way. Another indication of that was yesterday the Prime Minister and also Shane Jones talked about diversifying exports from the China market.

"Our diplomats for a long time have been hedging against the risk of being overdependent on the China market but it was never publicly articularted so again yesterday those public comments about diversifying from the China market is significant.

"In fact, another comment this week on our foreign policy has been from Winston Peters ... emphasising New Zealand's values."

...

She said New Zealand was strong when working with other countries towards upholding a global rules-based order, and previous examples showed New Zealand could stand up to China on that.

"New Zealand's action to speak up on the extreme human rights abuses occuring against Uighur in China was part of a collective action, 23 countries signed hat letter and we don't speak alone on this issue, we are speaking up for the values that we hold very dearly," she said.

Cool. I guess that act has completely undone everything else to date.

https://croakingcassandra.com/2019/04/03/pandering-to-the-prc/

And, "upholding freedom of expression" in New Zealand, should not be confused as rebuking China.

No, I agree they should be doing more. Of the two major parties, at least they've started.

Diplomacy involves subtle rebukes. Xi flounces at the slightest touch.

Better a little than nothing, but more required. Perhaps the Uighurs can be part of the "us" in "They are us".

This is great! But without results is still just talk. Developing alternative markets must always be a priority, but in the current world a significant challenge.

Where was this reported?

Ta Kate - precarious footing for our country.

Although there is no progress to report in the US-China trade talks, we can report that China is toughening up on IP protection and enforcement, a key demand of the US side.

Does this mean the US will start lifting tariffs gradually now? Only gullible American voters believed the tiff was about trade deficits and bringing factory jobs back to the US all along when in reality all Trump cared about was helping American corporations maintain their global dominance.

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"China is toughening up on IP protection and enforcement"
You reckon!?
Smile and Wave is not a new expression, but it probably reflects whatever 'concession' China will make to anyone, let alone the USA.

Whatever your position on China , one should never forget that you are dealing with a violent, ruthless, dishonest dictatorship with no scruples , and a country that acts in its own interests without a second thought to the consequences of its actions .

Once you understand that , you can engage them from an cautioned and informed position

14
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They are also playing a long game, and we have only ever though short.

It is understandable that a country would act in its self interest. Especially major powers that have few friends. It's wrong to say they don't give a second thought to to the consequences of their actions. The situation in Hong Kong is testament to that as they withdrew the extradition law change and have not intervened militarily. That would indicate some thought is going into this don't you reckon. I'd say it is the West that seems to do stupid things without a second thought. Libya, Syria, Iraq, Afghanistan....

The West has been run by wealthy Oligarchs for years but we feel safer in a democracy. Wars in the Middle East are about oil, not some higher moral objective and we all know it.
The risk is China destabilises our world order, which while not perfect ,is probably the best we can do.

I think Western intervention in the ME is largely due to Protestantism and the strong urge to be involved in the Biblical myth. it doesn't really make sense otherwise. The US and the English speaking countries of the former British Empire are fond of referring to themselves as Judeo-Christian and this undoubtedly influences their decision making when it comes to the region. Also they find it romantic with all the history, Lawrence of Arabia, films like Exodus. American officers are given the Seven Pillars of Wisdom to read as part of their training. If only it were just about oil.

The West has been run by wealthy Oligarchs for years but we feel safer in a democracy.

Zuesse: Americans Are Only Now Beginning To Learn They Live In A Dictatorship

At least we have the supposed 'rule of law' which means that theoretically the 'Oligarchs' can be challenged by ordinary people. Not so in China. The wars in the ME are in indicator of the corruption that infests the entire world. the challenge is how to fix it.

At least we have the supposed 'rule of law' which means that theoretically the 'Oligarchs' can be challenged by ordinary people.
It's Official: The United States Is Now A Banana Republic

Unfortunately, as we are about to show, it may already be too late to fix the US: as the following stunning chart shows, the US is already effectively a banana republic if one defines such a nation as one which has a small but ultrapowerful and unaccountable kleptocracy which gets richer year after year by stealing from the rapidly shrinking middle class.

Here is the problem: while the US has one one of the highest median incomes in the entire world, with only three countries boasting a higher income, it is who gets to collect this money that is the major problem, because as the chart also shows, with just a 50% share of the population in middle-income households, the US is now in the same category as such "banana republics" as Turkey, China and, drumroll, Russia.

Brilliant! I like that word "Kleptocracy". Now when will the average American wake up to reality?

Boatman- I agree but all those words could be used to describe Trump and America too !

Europe’s banks will have to raise up to €400bn (£343bn) of fresh capital or slash lending to meet the draconian demands of Basel III regulations, risking an investment crunch across the region and a second decade of economic stagnation.

An expert report for the European Banking Federation (EBF) and UK Finance warns that the rigid, dysfunctional rules could shrink total bank lending by €2.9 trillion and slash economic growth by 0.5pc a year over the next decade, leaving the weaker economies with no safety margin against repeated recessions. The short-run shock could be even worse. Link

The property market is approaching insanity in the Wellington region.
Wellington-based developer Ian Cassels went to market in Lower Hutt on Friday . By the end of the day, all but one of the 29 units in the High St Quarter had sold. Although common in Wellington, the development was one of the first in Lower Hutt that did not provide car parking.

The only way to get into Wellington city for apartment residents without a car is to walk 15 mins to a single-track station only serviced during peak travel hours on weekdays. Good luck trying to on-sell these apartments during a property downturn.

I guess that's what happens when you only have two cities with white collar job prospects, one that's at peak capacity already and the other that can't/won't build upwards and faces difficulty building outwards. I have friends that have moved to Auckland from Wellington because it's getting so ridiculous down here. My rent is now more expensive than two of my elder siblings' home loan repayments combined. I grudgingly resigned my lease but I honestly believe this will be my last year in Wellington, it's one step forward and two steps back in terms of life progress down here. If the govt were to start moving more of it's ministries out of Wellington it may have a decent effect, but I don't foresee that happening. All I can say is, you can most definitely beat Wellington on a good day.

Years back, the way to get excitement going in a new release was for the developer to buy some of his own units 'on market' to show the demand and validate the asking prices. They then quietly got released into the secondary market as time passed.
Maybe it's still happening?

"Good luck trying to on-sell these apartments during a property downturn"

Or during a rail strike, or points derangement, or.......

I am just curious, if foreign money was the main driver if insane inflation in the property value, what is driving the insanity any further? In 2013 the average interest rate was about 4.5% now is 3.5%. Surely a 1% drop in an already low interest rate does not mean much from a buyer perspective. I know that on a 800K loan with 25 years term, it mean about $5k more interest per year, but is this figure significant enough to maintain high property prices in absence of considerable foreign money? how?

Maybe some of the overflow from Auckland, previously? Auckland seems to have stalled for a couple of years now and investors have been looking to the regions for capital gains, and Wellington was a way behind Auckland at the start of this.

The Old Guard in China should read about something we Westerners call the Wind of Change ......... or , they could even listen to a song of the same name written in 1989

To be fair the West was only interested in Hong Kong democracy at around the time it was to be handed back to China.

The Hong Kong vote is significant.

China had attempted to portray the HK protests as a few malcontents (despite the evidence otherwise). Instead, the voters have shown the complete opposite. Many of the stronger CCP-siding candidates have been given a shellacking.

The Westpac chief executive Brian Hartzer has resigned and chairman Lindsay Maxsted will step down early following a money laundering scandal. Maxsted, who has been on the Westpac board since 2008 and chairman since 2011, said he would “bring forward his retirement as chairman to the first half of 2020”. Ewen Crouch, who has been on the board since 2013, will not seek re-appointment at the company’s annual meeting on 12 December.

I have friends here in NZ with family in HK. They are concerned about the situation there, so much so, that one of them does not wish to return, even to see her elderly mother. Whilst we write & read about it they're living it, right here in NZ. Interesting to hear the Australians finally waking up to the fact that the CCP has been very active within their democracy, influencing key people from both sides of the debate. The sooner we wake up to their (CCP) nefarious activities here in NZ the better, as well.

The problem with money is that the rent is too damn low.
https://www.epsilontheory.com/the-rent-is-too-damn-low/#.XdxY6hpNT5g.twi...