US economic data 'moderate' at best; China still struggling; UK growth evaporates; Aussie business confidence weak; eyes on RBNZ; UST 10yr yield at 1.59%; oil up and gold down; NZ$1 = 64 USc; TWI-5 = 69.7

US economic data 'moderate' at best; China still struggling; UK growth evaporates; Aussie business confidence weak; eyes on RBNZ; UST 10yr yield at 1.59%; oil up and gold down; NZ$1 = 64 USc; TWI-5 = 69.7

Here's our summary of key economic events overnight that affect New Zealand, with news the global economy is stumbling but central banks are covering investor risk downsides.

Job openings in the US were expected to rise in December but instead they recorded a sharp fall.

And Boeing scored no new orders for airplanes last month, the first time it has come up empty-handed in January since 1962.

American household debt rose by +US$600 bln in Q4-2019 to take overall household debt to US$14 tln for the first time. The rise was led by more housing debt which is now approaching US$10 tln. Household debt now exceeds 67% of American GDP.

And the Fed said it sees the US economy operating at a "moderate" level at present. In particular, they see consumer spending easing off. And they say they are watching the coronavirus "closely".

In China, the semi-official death toll from the coronavirus outbreak is now 1018 and rising. A week ago it was 492, so we are still doubling every seven days. 96% of them are in Hubei Province. The virus has now been officially named as Covid-19, and officials are raising the idea that it might peak soon. In China, a monumental effort is underway to insulate Beijing from the epidemic.

To keep their economy functioning, the Chinese central bank added a massive NZ$200 bln in liquidity on Monday. And that was on top of the mammoth effort earlier in the month of almost double that.

In the UK, their economy saw no growth in the final three months of 2019 from the prior quarter, as manufacturing contracted for the third quarter in a row, and the service sector slowed. Year-on-year their economy grew by just +1.1%.

In Australia, the widely-watched NAB business confidence report shows there is very little, to no growth in their private sector businesses at present.

But at least the Aussie's are getting gains out of their key housing markets with estimates of a +10% rises in house prices. This is exactly the behaviour that low interest rates generate.

Later today in New Zealand, all eyes will turn to the RBNZ who are reviewing our official interest rate and monetary policy settings. Let's hope they don't compound the Aussie low-rate mistakes here.

Worldwide, equity markets turned in a modest gain everywhere yesterday, and so far today. They are all counting on central bank liquidity injections to support risk, and seeing no downside even if the underlying economies shrink.

The UST 10yr yield is at just on 1.59% and a +4 bps rise from this time yesterday. Their 2-10 curve is still positive at +17 bps. And their 1-5 curve is still negative at -7 bps. But their 3m-10yr curve has switched positive, but only just +2 bps. The Aussie Govt 10yr is up +4 bps at 1.04% even. The China Govt 10yr now at 2.85% and also firmer by +2 bps. The NZ Govt 10 yr is up by less, up just +1 bp to 1.29%.

Gold has fallen today, down -US$9 to US$1,565/oz.

US oil prices have made a small advance today and are now just over US$50/bbl. The Brent benchmark has also firmed to just under US$54/bbl.

The Kiwi dollar will start today firmer at just on 64 USc. On the cross rates we are marginally softer at 95.4 AUc. Against the euro we holding at 58.6 euro cents. That leaves our TWI-5 broadly unchanged at 69.7.

Bitcoin has made another run up over US$10,000 and is now at US$10,233 which is a +4% rise in a day. 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 ».

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

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11
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Corona will not be contained. It has characteristics that make it impossible to contain without total lockdown weeks before it shows a single case and you have to be on an island like NZ to do it at all. Even at this stage we are still underestimating it. I guess our government has never heard the phrase "Better to be safe than sorry".

This video shows some newish info that shows that there is basically little chance of containment.
https://youtu.be/MbJ6P0UB0io
From what I see there isnt much the Govt can do except prep for it.

reading that a chinese passenger arriving from China at Washington DC had a plastic bag containing dead birds. This was back on 27 Jan. This is the problem with millions of such travellers blissfully unaware of what goes on in their own world let alone the rest of it, able to disperse themselves by the thousands all over the world in a matter of hours.

15
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We dont have to worry about it though because Jacinda will go round giving all the sick people a hug that are in the hospital and in quarantine.

Doesn't matter party politics, the governance and management of this public health issue seems very poor.
From communication of the basis elements of risk management, backgrounding the state of preparedness. Health system and economic. Point of contact (a once a day stand up) for press/social media.
The contrast to handling this, contrast to Shaw & Co in ur face messaging and child frightening is epic.

Does the Ministry of Ed have a plan for the event of an outbreak here?

At what point to schools get closed, and when they're closed does education continue via on-line classes or does it just suspend?

10
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The dumbest thing about Carlos's comment is that multiple people have up-voted it.

Probably the same folk who get easily triggered into hysterics by a young Scandanavian suggesting folk listen to scientists.

Hearing some rumors that it is suspected to be here from second hand info - Upper or Lower Hutt I think is the latest one

One person traveling on the train to and from Wellington CBD for 5 days and their children going to school and we have a shocker unfolding.

10
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Let's keep clear of rumours, please ..leave that to the talk back radio and NZ Herald

10
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I'd much rather know the rumours than have everything scrubbed and censored and know nothing until it is a full blown epidemic, à la CCP. Forewarned is forearmed.

Fair enough ...my point was I don't think this site is the place to post rumours - maybe facebook or contact stuff?

Comments section on peak prosperity youtube videos. Hilarious and depressing at the same time. So many DGMers.

Too much corruption. BBC Coronavirus: Senior Chinese officials 'removed' as death toll hits 1,000. "The party secretary for the Hubei Health Commission, and the head of the commission, are the most senior officials to be demoted so far. The deputy director of the local Red Cross was also removed for "dereliction of duty" over "handling of donations". https://www.bbc.com/news/world-asia-china-51453848

Finest authoritarian regime form. Build up a bureaucratic culture that punishes openness and rewards lying and deception. Then when things go sideways hide the problem until it becomes impossible to deny, then try to find scapegoats to parade before the public while continuing on with the same toxic practices. Stupidity is repeating the same actions again and again and expecting a different result.

https://bellacaledonia.org.uk/2019/11/21/notes-from-underground-2-pullin...

"Once the incompatibility of economic growth and ecological viability has become speakable in a room like the one where that meeting took place, we are crossing an event horizon. I’m not sure anyone knows how things work on the far side".

In a world of polarised politics and power plays this statement from the article reverberates; "How do you break the silence, without becoming someone no-one listens to?"

So often in history many people who have been ostracised, had their reputations and lives trashed just because they went against the powered, political elites only to have been proven very right in the long run. While those who chose to silence them face no consequences at all.

Who are you thinking of?

Galileo?

Pick your own. there are plenty of examples.

Try Robin Olds for one.

Patrick Moore

11
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and last night the Fed pumped in $30 billion dollars into the repo market which wasn't quite enough so they pumped in another $37.9 billion so that's the first time that has happened. Nothing to see here!

So the Fed is pumping billions everyday into the debt market which in turn is pushing up the price of stock in the USA and around the world.

Anyone got a pin!

Have you got any good links to explain what the Repo market is and why the Fed would do this vs other liquidity options?

Poldark..... will post some info in later

Macro voices, gives a start.

Beyond what the Fed is doing by temporarily creating/lending inert bank reserves on it's balance sheet collateralised by high grade securities there are real world transactions in the euro dollar market which are described here - while the volumes traded are somewhat diminished at present, they totally dwarf any involvement by central banks and have purpose beyond creating expectations.

Here you go Poldark - various sources to go with other sources quoted below. I prefer visual explanations so have included some sources here. Not saying I believe everything they say but at least it enables be to gain a small understanding in financial matters happening outside of NZ.

https://www.youtube.com/watch?v=vhm3XXQqwmk
https://www.youtube.com/watch?v=c8vyLYkyoWw&t=590s
https://www.brookings.edu/blog/up-front/2020/01/28/what-is-the-repo-mark...
https://www.youtube.com/watch?v=jScS6jwCCX0
https://www.youtube.com/watch?v=EgXsaOCxiqg ( This guy is quite funny, thinks his mobile phone could do the job of President as it's a role that is controlled by the FED. He was a medical doctor for 20 years too so has an interesting perspective on the corona virus.

You are misrepresenting the Federal Reserve.

As our bill purchases continue to build reserves toward levels that maintain ample conditions, we intend to gradually transition away from the active use of repo operations. Also, as reserves reach durably ample levels, we intend to slow our purchases to a pace that will allow our balance sheet to grow in line with trend demand for our liabilities Link

Links of importance:
https://www.newyorkfed.org/markets/domestic-market-operations/monetary-p...

http://www.omo.co.nz/Fed-TOMO-POMO.gif

I will believe there is a housing surplus when rents start to fall.

Fritz, your Salvation Army link is a sad commentary on NZ. Sometime before Xmas Jacinda announced she was going to take on 2000 more mental health workers. I've heard nothing about this since. Has this been quietly buried? At the time it seemed an outrageously extravagant comment; where are you going to find 2000 qualified mental health workers? I think this empty promise will doom Labour's chances of re-election if nothing else does. Then again I don't think National is interested enough in mental health to exploit this opportunity. So mental health will, as usual, go begging.

12
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The issue with interest rates has gotten so dire we really ought to be marching on the Reserve Bank. There would be no more effective way of improving social cohesion and reducing wild inequality than to bring the damn interest rate back up. Orr and Co can't seem to find inflation under their very noses, even when it falls within the target range.

Recall not long before the 2008 GFC a stock broker commenting that the RBNZ arrives at the party too late, does too much, and stays too long. That was when Dr Bollard had pushed rates up around 8.5% for a first mortgage. Looks like we have similar entrenchment now, but at the other end of the scale.

18
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We have learned worldwide that lowering already markedly-low interest rates has no effect to compare with the inflation of asset prices - in particular housing and equities - so punishing savers, rewarding the wealthy, and impoverishing those who don't own a house. The policy settings here and elsewhere are disastrous for genuinely productive/supportive economies and thus social cohesion. Thus policy makers - reserve/central bankers and this generation of politicians - are wildly out-of-touch with the fundamentals of democratic well-being.

Debt has been pushed into the widening gap since 1970.

Whatever the form, it is the gap we need to be discussing, The charging of interest (nowadays charging for keystroke-created digits) was always going to pushed to zero, then below (until the system imploded). Currently, the charging of interest, under a lowering lid of energy/resource possibilities, can only be at the expense of someone else; there aren't enough chairs for when the music stops. So if banks are 'making money', someone else isn't. Currently the 'isn'ts think they're getting richer through RE 'valuations'. Given that those are debt-backed, there must come a serious readjustment.

It's the relationship between debt and 'growth' (being some advance commonly measured in economic activity or enlargement) that has disintegrated. Debt was once a lever to this advance or 'growth'. No longer. What we need is a new definition of 'growth' in terms of some humanly beneficial advance. It's the obsession with redundant measures of growth that lies at the base of the problem. Debt is merely the outlier to this failed/failing objective. Why don't we seek to 'grow' better democratic - more widely participatory and beneficial- cultures, families, societies? That would be 'growth' indeed.

"Why don't we seek to 'grow' better democratic - more widely participatory and beneficial- cultures, families, societies? That would be 'growth' indeed." Careful - you are on the verge of committing a blasphemy!

But of course you are completely correct. Apply that question to the landlords across the country. Why don't they charge a rent that is affordable for their tenants (by affordable i suggest that is no more than 25 - 30% of the median take home pay, in other words capped at a maximum of $150 - $200 per week for a entire house)? After all they claim to be providing a social service! But no they claim to have a right to a return on their investment, so therefore have to be able to set rent at $1000 per week. No one questions their business decision making process that led them to paying far too much for a property they intended to rent out, or how they financed that purchase. We don't even challenge them when it sits empty because no one can afford the rent, although there are people sleeping in their cars just blocks away. We don't grow a better society because the people with the power and influence also have, or control to some extent, the money and they are only concerned with the rate their bank account is growing, not who is paying for it.

I had two houses with over 60% equity in them. The returns are not what you are lead to believe.

The central bankers know exactly what they are doing. It's deliberate.

Exactly - the US Fed, like most Central Banks, is too afraid to raise interest rates. They want to keep the good times rolling. Or at least, the good times in the stock market rolling.

At some point though, the good times have to come to an end… Meanwhile, ‘let the good times roll’

The FED got a fright when they did try increasing interest rates. Realised very quickly that with current debt levels it would bring the economy to a standstill. Their answer to the problem.... more debt and even lower interest rates.

11
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Is 2020 the year of reckoning for NZ's economy?

- no housing shortage
- coronavirus
- limited life support left
- drought
- election

you forgot the climate change effect

No he mentioned that - drought - https://thespinoff.co.nz/science/11-02-2020/cheat-sheet-just-how-bad-is-...
Is this climate change?
To a degree, absolutely yes. To what degree, it’s harder to say. But we do have weather pattern forecasts that indicate that typically dry areas of the country will be on average much drier in the coming years. And the increased temperatures we’ve been seeing for a while now are also having an impact. As climate scientist James Renwick put it last month, “it has now been 35 months since New Zealand had a month with below-average temperatures”. That should worry anyone who enjoys a regular shower and a tall glasses of water.

By climate change effect, I mean the effect regulatory changes at the central and local government levels will have on the economy - business compliance costs, changing consumer trends, insurances, forecasts, financing etc

And the pyshology of being told you're rubbish/lesser people by using a plastic bag or buying some petrol.
Activism change management gets people backs up.

So do trolls

When good folk question your support of china one child policy do you, do you count that as you being trolled?

How would you feel about moving 100km north? That is about the total impact of NZ warming over next 50 years at current rate. Near zero impact on average rainfall, positive impact on lifestyles and agriculture. Hardly any sort of concern.

US elections.
Big debt.
Market manipulation.
...
...
...

Japanese cruise ship.
'https://www.japantimes.co.jp/news/2020/02/10/national/japan-test-all-pas...
Only 336 tested and a positive result of 136.
Aparentally the issue with testing is that Japan dose not have enough testing kits....
I'm not swallowing that! It sounds like a cover up to keep numbers down.

Hasn’t Singapore got higher numbers then HK. That’s also bit strange. However there is nothing that we can do about it. If or when it starts impacting NZ is when the govt are in trouble. No communication, no preventative measures in place, only decent news from overseas. And strangely companies like ATM share price goes up......isn’t most of their forecast growth from China?

Re ATM..babies will still need to be fed formula, my main concern is getting stock shipped around the country.

Why are we still letting flights in from China - today there are flights from Guangzhou, Beijing and China
Watch this video https://www.c-span.org/video/?c4851492/user-clip-senator-tom-cotton-admi...

Realistically, I don't think it matters at this point. There will be many potential carriers in the country already. The only chance to stop that would have been a complete lockdown on flights, several weeks ago.
We just have to hope that our lower population density, summer climate and... adequate health system will prevail and limit it to the sort of damage we get from regular flu strains.

Agree.
What will become glaringly obvious is the Government's ability to be lead or lack there of. If strategies and preparedness are not currently swinging into place behind closed doors already, the election will be a one sided event. The country will not tolerate excuses or lack of delivery on this topic.

If as per China 25% of those with the Coronavirus need hospitalization our system simply could not cope with that - government should be converting Spark Arena and any other large spaces they can find into quarantine hospitals ASAP

I really really hope you are wrong. With up to 20% of infected requiring hospitalization for weeks, and only 3 beds per 1000 people in NZ if it takes off here we will rapidly lose ability to treat the seriously ill.

Yep, that's a fact all that remains to be seen is that the Govt that knew these stats acted and got their a in g to prepare.
20% is what the stats are showing on official sites.
31,803 (81%)
in Mild Condition

7,345 (19%)
Serious or Critical
https://www.worldometers.info/coronavirus/
Great site to look through.

Common sense to stop flights in and out of China. Looks like the lack of accurate information coming from China has activated a wait and see policy from governments around the world where their economies are strongly reliant on China.

Water situation now getting dire in Puhoi north of Auckland. Unless you have TWO water tanks your now screwed. Massive clamp down on useage here, down to less than one tank now with the possibility of another month until it rains. Bailing the dishwater out of the sink to water the plants. If the city supply runs dry, Coronavirus will drop to number 2 on the list of problems.

Would you not just fork out and buy a tank load - same as people on Waiheke and Coromandel are doing now?

There's a wait time for water of around 2 weeks south of Auckland, and up to a month north.

Auckland Council cut the flow rate of water stations in the north, meaning long queues of tankers and even longer waits for deliveries. Meantime urban Auckland can use as much water as they want.

Exactly Doris do people not watch the news ? its going to be drinking water only pretty soon.

For 60 million others, the 'house-arrest' is involuntary. In a watered-down version of Wuhan's shutdown, the wealthy cities of Hangzhou, Ningbo, Wenzhou and Taizhou in Zhejiang have issued household "passports" which allow just one person per residence to leave home every two days to get supplies. Similarly, many residents returning to cities like Shanghai and Beijing from their Lunar New Year trip home are having to 'quarantine' themselves for two weeks before returning to the office. Companies must apply to their local government to open, and for those operating, employees must wear masks and not sit too close to each other. Remote working continues to be the choice for most white collar workers.
Drones equipped with loudspeakers are broadcasting some interesting orders to those who fail to follow public-health safety practices such as wearing a mask. Agriculture drone manufacturer XAG is working to deploy a fleet of drones that can spray disinfectant on affected areas such as bus and train stations and other public spaces.