Eyes on US non-farm payrolls as political tensions ease; US jobless claims high; Canadian housing weak; China's inflation high; Aussie trade surplus enormous; UST 10yr yield at 1.87%; oil and gold lower; NZ$1 = 66.1 USc; TWI-5 = 71.3

Eyes on US non-farm payrolls as political tensions ease; US jobless claims high; Canadian housing weak; China's inflation high; Aussie trade surplus enormous; UST 10yr yield at 1.87%; oil and gold lower; NZ$1 = 66.1 USc; TWI-5 = 71.3

Good morning, wherever you are. Here's our summary of key economic events overnight that affect New Zealand, with news the relaxation of geo-political tensions is helping markets.

Today, all eyes are on tomorrow's US non-farm payrolls report and markets expect it to rise by +160,000. But the number of Americans on unemployment rolls surged to more than a 1½ year high at the end of 2019 to over 1.7 mln.

The easing of Middle East tensions is helping Wall Street post another modest +0.5% gain today. Overnight European markets posted slighty larger gains especially in Frankfurt. Yesterday, Asian markets had large rallies, with Shanghai up +0.9%, Hong Kong up +1.7% and Tokyo up +2.3% on the day.

The US Federal Reserve is reporting that consumer debt in the US rose +3.6% pa in November, staying high after the +5.5% rise in October.

Canadian housing starts unexpectedly fell in December and building permits shrank in November, casting a downer on Canadian economic prospects.

China's consumer inflation rate rose to 4.5% and an eight year high in December although that was slightly less than what was expected. It is all driven by the food price. On the producer price front, the deflationary period is ending with only a -0.5% drop in December, a far cry from the -1.6% drop in October.

And China, the world's largest car market, sold 21 miln vehicles in 2019 but that was a decrease from 2018. In the US, their vehicle sales also fell, to 16.7 mln units.

The World Bank says that emerging economies now owe US$55 tln in external debt, climbing from 54% to 168% of GDP since the debt binge began in 2010. (New Zealand's external debt:GDP ratio is 95%.)

Australia has posted another blockbuster trade surplus, +AU$5.8 bln for both goods and services in November 2019, a record for a November and taking its annual surplus to +AU$67.1 bln, also a record high. However, slowing imports are pointing to worries over consumption levels - they were down almost -3% year-on-year in November.

With NSW water storage falling at a fast pace, their State government has committed to double the expansion of its Kurnell desalinisation plant output to deliver about 30% of Sydney's fresh water requirements. Plus, it is to establish a new desal plant to supply Newcastle with some capacity. This link has a useful long history of temperatures and droughts in Australia. Both are at all-time records (despite the Murdoch News organisation's efforts to deny them).

The UST 10yr yield will start today higher at 1.87% and a rise of another +1 bp. Their 2-10 curve has moved wider overnight, now at +30 bps. And their 1-5 curve is now at +13 bps. And their 3m-10yr curve is also wider at +39 bps. The Aussie Govt 10yr is up +6 bps at 1.26%. The China Govt 10yr is little-changed at 3.18%. And the NZ Govt 10 yr is holding at 1.49%.

The price of gold is down further today, down another -US$10 and now at US$1,549/oz.

US oil prices have fallen again today to be just on US$59.50/bbl while the Brent benchmark is unchanged at just under US$65.50/bbl.

The Kiwi dollar will start today lower at 66.1 USc. On the cross rates we are also lower at 96.4 AUc. Against the euro we are down to 59.5 euro cents. That puts our TWI-5 back at 71.3.

And bitcoin is lower as well today, down +3.4% to US$7,820. 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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Australia has a trade surplus of $A 67 Billion ...

... so how come the government doesn't support their Fire Service better ....

If it was an election year Sco Mo would be buying them Flick the Little Red Engine .... an extra engine in every town .... SIGH .... and so politics goes ...

Further, Australia spends 35 billion on defense but that doesn't include defending the country from catastrophic fires. Go figure.

Yes being ex-Airforce, I struggle to understand why with their history the Aussies have not purchased a squadron worth of Canadair CL415 water bombers, or the water bombing packs that are available for C130s. These packs are roll on roll off and the aircraft can be converted to the water bombing roll in under an hour.

For that matter, the NZ Government could probably consider buying a couple too.

... contact Ron Mark ... have a natter with him .... I met him at Oxford once , very engaging chap ... sure he'd listen to your ideas ...

Link didn't work AJ. Might be the system i'm on though.

My Friday book, someone put me onto this, it's interesting.

https://www.amazon.com/Rise-Kill-First-Targeted-Assassinations/dp/140006...

" If someone kills you , rise up and kill him first " ... gotta love the Talmud ... reminds me of big brother's advice on my first trip to a pub at 16 ... " if you think someone's about to punch you , hit him back first " ... sage advice in Canterbury .. .

Take that advice to its extreme and you'd be living alone.

I am fascinated that a religious document, many believe to be the word of God, advocates violence. But then one way or another they all do, don't they? Just goes to show that people wrote them, and they are all about politics, not God! And the Church wonders why they are losing followers!

... something most religions have in common is the need to control and oppress the masses ... particularly the females ... and to enhance the lives of their earthbound representatives , the male priests ...

And , there was something about being kind to one another , too ...

Yup, the Romans tried to kill an idea, but gave it legs instead, so then they decided to control and shape the idea and created the Church of Rome. And this has caused a lot of grief in the last 2000 odd years. A belief in God does not need the bible, just an open mind and eyes, and an ability for critical thought.

Amen to that !

Which God (3000+) and counting

nothing like some thoughts and prayers to make it all better. Maybe thats what Australia needs?

Thoughts and prayers is a bit of a hilarious irony. Why are people praying to some omnipotent being to help them solve a problem that said omnipotent being had the power to prevent?

Well said, DC, re the Murdoch press. You have to wonder if they have offspring?

https://www.reuters.com/article/us-worldbank-economy-idUSKBN1Z72UA
Not that they'd know much, the next link is someone singing from the PDK songbook.

https://www.resilience.org/stories/2020-01-09/how-wages-are-linked-to-en...

Needless to say, the average contemporary economist does not readily see any long-term carrying capacity constraints for human beings. The historical record is full of past hurdles to growth that were overcome by substitution and technological progress. The numbers on contemporary growth, and the evidence before one’s eyes, do not seem to be sending signals that we are running out of substitution possibilities or out of inventions that enhance productivity.” — Martin Weitzman (1992)

According to the German government, deStatis, factory orders for the country’s production dropped by 9.1% year-over-year (unadjusted) in November 2019. Rather than turning upward, it was the third time in the last six months with a contraction greater than 9% – a level beyond the bottom of Europe’s last declared recession in 2012-13. The 6-month average is down, not up, down to -6.5% which is the worst since November of 2009.

That’s a protracted slump.

Seasonally adjusted, factory orders two months ago were as low as they had been in May 2016, lower than in almost every month of 2015.

It is a pretty clear progression. It began in Germany’s factories right at the start of 2018 and from there it has spread. Dismissed the entire time as nothing, a minor and transitory annoyance, it has grown and grown into what is now a globally synchronized downturn with an as-yet unknown bottom.

European QE accomplished its goal, as narrowly constructed. QE is always and everywhere about sentiment and nothing more. It doesn’t print money, doesn’t add more liquidity to any system, it only makes people think the central bank is helping (though most people, even otherwise savvy German businesspeople, couldn’t answer you if asked in what way or how). Link

Mexico should be actually booming. I know the word “boom” has been completely erased and redefined over the last few years so as to be totally meaningless, but here I mean a real one. With production moving into the country from China, as far as the trade wars go Mexico is one of the clear winners. All else equal, a literal explosion of growth should have been very apparent…in 2019.

Not so. Therefore, something else (globally) must be taking place which has taken Mexico’s trade war gains and simply overwhelmed them with accelerating negatives.

That’s the other part, the most interesting part, of why we are watching Mexico like Germany or Japan. Despite the “stimulus” induced optimism we find in mainstream descriptions of what’s going on in the world, it just isn’t showing up in the real figures.

It was a clear sentiment change back in September when everyone had Jay Powell’s rate cuts and Mario Draghi’s QE to finally hang some optimism on and gird up their expectations. Having denied there was anything at all significantly wrong for months on end (that whole “transitory” nonsense), central bankers from midyear last year finally showed up.

Rate cuts and the like, the usual stuff that everyone because of pure rote recitation nods favorably along with as “stimulus.” They say they feel better whether they do or not because it sounds comforting that central banks are back in action and that’s what they always say in the financial media.

Looking around the world, however, it is difficult to find any comfort particularly in those places where it should be most evident. Germany is one, if for no other reason than its downturn has gone on so long the sheer length of time is by itself almost otherworldly. Mexico is another because it directly contradicts these big assumptions. Link

Finally the ECB's negative interest rate policy is paying off: the ECB has brought the real economy to its knees, while the property market has been pushed into bubble territory. Well done ECB! Link

Go Aussie, $67 billion better off in one year. Well done them. We should ask them for help and advice, they are just so much better at business than we are.

RW- No, they're not better off. They've swapped some finite resources (of which that continent has a few) for some digital proxy. The problem is in the link I just put up, other post this thread. When there are no remaining resources, your proxy is worth squat. This is a silly as Jack trading the family cow for a few 'magic' beans.

They are much, much worse land/resource stewards than we are, and we are cowboys ourselves. If we counted things correctly - instead of the nonsense that $67 billion count is; how much soil has blown away this year? - they were minus for the year. As they, and we, have been for the last 200 years. Take the time to real that link.

PDK logic as evidenced here:
PDK: "Economists never think in systems terms"
PDK: ***finds economist who builds arbitrary equilibrium model incorporating the effects of renewable resource who (un)surprisingly finds exactly what he wants after calibrating his model***
PDK: "This is exactly what I have been talking about all this time! Someone has definitely read my playbook!"

Nymad: ***points out to PDK the irony of him berating economists in the past for their overly simplistic and abstract modelling - as is largely the case here***
Nymad: ***suggests PDK read up on CGEs and especially how this referenced model was calibrated***

Sound accurate?

... someone is poking the polarizing bear , someone is ... and about to get a good old slapping in return ....

Sound accurate ? ....teeee hereeeeeee ....

A slap only stings when the rebuke is justified.
All others just tickle. And, I'm very ticklish.

I've found the polarizing dear kinda spends too much time with the wrong sort of models.
Inhumane and antihumanism.

. . the financial gap between us and them keeps getting wider ...

Whatever they're doing , it works ...

.. meanwhiles , back here in the land of the great Kiwibuild reset .... ahem .... yessssss ....

We have rain...(apart from up North)...come on cyclones get you act together

Whatever they're doing, is disintegrating in front of their very eyes.

One of the old-time commenters on this site, was a leader in the climate-driven shift from Australia to New Zealand - it'll become a flood. Despite the spin about fire-loads (one wonders how the forest got along before Europeans, and just how it is the animal populations survived) they are in permanent, escalating, trouble.

The current Govt are indeed a woeful distance adrift from real sustainability - but they're a lot closer to it than the Nats. And their lightweight, obfuscating supporters......

Do they make us look bad.
Or
Do we make them look good

I never.
That was never a year of delivery

https://www.google.com/amp/s/amp.theguardian.com/world/2019/dec/31/new-z...

The year of delivery : of more lame excuses , backdowns , flip flops , resets , working groups than any other government within our living history ...

2020 .... the year of " bringing it all together " ... or something equally bland or unaccountable ... lets do this ...

But, but, but, at one time NZ had the Rock Star economy & Australia, was ever so envious, evidently.Of course though, having an economy like
Gary Glitter, is not all that wonderful after all, is it.

Oops. DP.

Who owns the proceeds from Aussie commodity exports minus exit taxes?- not many Australians.

... they have aroundabouts $A 1.5 Trillion in their compulsory super accounts ... so I'd say most Australians have a share in their fine nations burgeoning wealth & exports ..

Can you confirm what share is local ownership versus foreign in respect of commodity exports?

Complusary Super accounts - money they have worked for (not mining proceeds).
They will need plenty of new shiny red fire trucks and water bombers in the future. Wine growers are starting to get in trouble,
Australia’s sixth-largest wine company, McWilliam’s Wines, appoints voluntary administrators
https://www.news.com.au/finance/business/retail/australias-sixthlargest-...

It's a surprise those wine guys hung on for so long, what with way the industry got re done around brands a couple of years ago.

I blame the ANZ ... well , John Key specifically .... he sacked David Hisco .... who was collecting fine wines using the firm's petty cash

... next thing , McWilliams is bust ....

Coincidence or not , bankers are tuggers ...

Boomers not drinking enough - Millinenials have stopped after watching their parents at the pub...

At the pub? We used to dream about the pub. Home brew made from potato peelings and washing up water and nettles was what we had. We were lucky. A lot of people were a lot worse off than us.

It is said years ago, some Lincoln College students were so proud, so struck with their home brew that they took a sample to one of the bio professors lab and had it analysed. The report came back as “your horse has diabetes.”

Beautiful, and how much had he drank to get the results like that.

They have truly mastered the art, innovation and complex technical challenges necessary to lift a shovel...

All hail the mighty Australia and their ability to profit from the sale of finite resources which they found in the back of their shed - heaven forbid they ever run out - they'd have to actually have to generate some value then rather than just dig it out of the ground...

With all the attention on the ME, this sort of slipped under the radar;

https://www.news.com.au/technology/innovation/military/were-on-full-aler...

Must be running out of food.

No the media are looking for headline splashes, and this issue has been going on for sometime. A few months ago the Chinese opened fire on Vietnamese fishing boats in international waters, and if I remember right, sunk at least one. We have a major conflict building in our back yard and the media are largely asleep at the wheel. A part of this is that the Chinese have commissioned their second aircraft carrier with a third on the way, so they effectively now have a blue water navy where in the past their capability was restricted to littoral operations. A distraction in the ME will only help them sneak something past the other powers in the area.

The Philippines have no military capability to speak of, the Indonesians have a reasonable level, the Vietnamese somewhere in between, but none of them isolated or together have the capability on their own of holding off the Chinese. the best they can hope for is to slow them down while other allies come to the party. And those "other allies" may or may not be the Singaporeans, Australia, the US, NZ, UK (?). The Chinese are cosy with the Russians and Iran so look for a complex plan of smoke and mirrors.

Nice post Kate -
But pancakes are not the intended product. Such flours are likely soon to become the feedstock for almost everything. In their raw state, they can replace the fillers now used in thousands of food products. When the bacteria are modified they will create the specific proteins needed for lab-grown meat, milk and eggs. Other tweaks will produce lauric acid – goodbye palm oil – and long-chain omega-3 fatty acids – hello lab-grown fish. The carbohydrates that remain when proteins and fats have been extracted could replace everything from pasta flour to potato crisps. The first commercial factory built by Solar Foods should be running next year.

Monbiot is usually right.

But I wonder about this time? Do they separate the hydrogen? If so, I posit that the food energy may be less than the electrolysis energy required. That would be an EROEI loss, and that sort of doesn't work. Plus which, you need everything else to be working too. I suspect the reality is local food production of an as-near-sustainable-as-possible kind.

This time I think Monbiot is grasping at straws.

It reads like the hydrogen is a catalyst or carrier like oxygen is for us or carbon dioxide for plants PDK. How would it look on that basis?

Are you asking what are the other outputs, either gaseous or solid? The answer to that would be interesting, however again reading between the lines, it looks like the scientists here are working to identify another, alternative source for all our food needs without the traditional environmental and ecological impacts of farming.

Thing is, if this process, or something like it doesn't materialise as commercially (and nutritionally) viable this decade, the globe really will be stuffed - freshwater being so horribly exploited.

Did some quick calculations - if you could feed the worlds population on this stuff it would only require an area of PV about 300km on a side to replace all agriculture. Ie about 90000km² vs 50 million currently used. Just 0.2% Feeding the world's population is never going to be a problem.

It's almost as if we have this near infinite energy source that no one considers.
They instead get hung up about discrediting innovation like this on the basis of 'negative EROEI'..

Gen 4. No need for sand hills.

... only for the next 5 billion years ... after that , the sun goes into a super nova ...... she explodes ...

We need to begin planning for this outcome ...

... I'm declaring a " Sun Change Emergency " ....

... super nova deniers will be shouted down , sledged and abused incessantly .... they don't get it ...

All hail the king
You are the king
The Sun King
https://youtu.be/imp0BqHBxyQ

And for the after party

https://youtu.be/ujBRavK6YWo

Careful Kate many farmers will accuse you of blasphemy. The smart ones will be looking to set up their own plant!

It may not be very palatable to humans but you could definitely feed yummy animals with it. Meat could become the most environmentally responsible food. Wouldn't that cause heads to explode :)

... if GOD hadn't intended for us to burgerise the animals and to eat them , he wouldn't have made them out of meat ....

Or given us buns

Once again which God? We are all made of meat - meat heads like yourself should then explain why only some meats can be eaten and not others - did God point this out in manual?

Its holy cow batman.

Kamadhenu (Sanskrit: कामधेनु, [kaːmɐˈdʱeːnʊ], Kāmadhenu), also known as Surabhi (सुरभि, Surabhī), is a divine bovine-goddess described in Hinduism as Gou Mata (the mother of all cows).

Kamadhenu is also known as Gayatri and is worshipped as a heavenly cow.[1] She is a miraculous "cow of plenty" who provides her owner whatever he desires and is often portrayed as the mother of other cattle and gives health, wealth, happiness and growth in the life.[2]

In iconography, she is generally depicted as a white cow with a female head and breasts, the wings of a bird, and the tail of a peafowl or as a white cow containing various deities within her body.

https://en.m.wikipedia.org/wiki/Kamadhenu

I saw a post of Facebook this morning advertising an online Quiz that you can take to determine whether you too can be a property investor or not "Do you have what it takes to be a property investor?".

If spruiking property investment via 'fun' online quizzes over social media isn't a sign of a bubble about to collapse I don't know what is...

You're just a doom and gloomer. If you have a lazy eye, a monobrow and some equity then you too can leverage yourself to perceived wealth just like The Man 2 does.

Two Headline on the same website at the same time :

"Residential property is now a bad investment"

"Why you should not believe the "experts"

The newspapers. Being on the record
Are they right now
Are they wrong now
Or
Were they wrong before
Were the right before

https://youtu.be/NWW1MmEA6bk