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Global PMIs turn up; China braces for more big rain; Australia braces for Victorian lockdown; HSBC takes a beating; UST 10yr yield at 0.56%; oil up and gold holds; NZ$1 = 66.1 USc; TWI-5 = 69.5

Global PMIs turn up; China braces for more big rain; Australia braces for Victorian lockdown; HSBC takes a beating; UST 10yr yield at 0.56%; oil up and gold holds; NZ$1 = 66.1 USc; TWI-5 = 69.5

Here's our summary of key economic events overnight that affect New Zealand, with news of a bounce no-one thinks will last.

In the US, strong new orders have powered the widely-watched ISM factory PMI to a better-than-expected expansion. But a strong counter-feature is that their employment category stayed in a seriously contracting state, suggesting those firms surveyed don't expect the rise to be sustained.

Something similar happened in the US version of the internationally-benchmarked Markit factory PMI, but the overall result for this one came in less positive and less than expected - and lower than the 'flash' result.

Essentially, we are seeing a post-lockdown recovery but the re-opening mistakes threaten further progress and factory managers seem to sense that.

The private sector China PMI outperformed the official one again, and came in with an even better expansion than their original 'flash' report for July. A notable category here is that new export orders are still contracting and haven't expanded in any 2020 month yet. Employment is also still mildly contracting.

A more immediate risk threatens China. After continuous rains in June has raised flood levels in mid and southern China, a new typhoon is due to hit the country tonight to make matters worse. All eyes will be on how their major river dams cope. Shanghai is on high alert.

In Australia, the same PMI series shows their July recovery in the factory sector gathered pace with output and new orders both returning to growth. But again, factories are not expanding their workforces.

And of course, Victoria is going into a deeper lockdown, although not quite as severe as the New Zealand one. It will have nationwide economic impacts and undoubtedly affect New Zealand exports to Australia.

HSBC, which is Europe’s largest bank, has drastically raised provisions for expected loan losses to US$6.9 bln as the pandemic weighed on economic activity in most places it operates. It is also being bruised by the impact of US-China trade friction and now China wants to punish it for obeying anti-money laundering laws in Canada that ensnared a Huawei princess. (She is about to be extradited to the US.) Their first half profits fell from almost US$10 bln in 2019 to just over US$3 bln in the equivalent six months to June 2020. It is speeding up its previously announced job cut program of 35,000 positions.

India is pushing forward with measures to prevent trade partners mainly in Southeast Asia from re-routing Chinese goods to India with little added value. This is part of an overall plan to limit imports and push for self-reliance.

In global equity markets, the S&P500 is up +0.9% in afternoon trade on Wall Street. The Nasdaq is up even more. Overnight, European markets rose a very strong +2.2%. They follow Tokyo which was also up +2.2%. But Shanghai only managed a +1.8% gain and Hong Kong actually fell -0.6%. The ASX200 was flat and the NZX50 fell -0.5%.

In Australia, there have now been 18,318 cases reported, another +395 overnight, and still very much concentrated in Victoria but also small and growing pockets in both Sydney's suburbs, and now Queensland. Their death count is up to 221 (+13). Their recovery rate is now under 58%. There are now 7479 active cases in Australia (+184) and almost all are community transfer.

The latest global compilation of COVID-19 data is here. The global tally is 18,148,000 and that is up +296,000 since this time yesterday. Global deaths reported now exceed 690,000 (+10,000).

A quarter of all reported cases globally are in the US, which is up +41,000 from this time yesterday to 4,832,000. US deaths are now just over 158,500 and a death rate of 479/mln (+1/mln). And the net number of people actively infected in the US rose +23,000 overnight to 2,284,000.

The UST 10yr yield has risen with the opening of Wall Street and is now just over 0.56% and moving off its record low. Their 2-10 curve is steeper at +45 bps. And their 1-5 curve is a little steeper too at +10 bps, while their 3m-10yr curve is much steeper at +47 bps. The Aussie Govt 10yr yield is up +4 bps at 0.87%. The China Govt 10yr is down -2 bps at 2.97%. And the NZ Govt 10 yr yield is unchanged at its new lower level of 0.75%.

The gold price is marginally lower today, down -US$2 to US$1,974/oz. This market seems suddenly hesitant on what the future is.

Oil prices are up, but by a bit less than +US$1/bbl today. They are now just over US$41/bbl in the US and the international price is now just under US$44.50/bbl.

But the Kiwi dollar is softer again against the US currency and now at 66.1 USc. Against the Australian dollar we are unchanged at 92.9 AUc. Against the euro we are unchanged at 56.3 euro cents. That means our TWI-5 is at 69.5.

The bitcoin price is firmer by +1.4% today at US$11,435. 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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77 Comments

15
up

https://nypost.com/2020/07/29/humanity-likely-faces-rapid-catastrophic-c...

But let's not worry about that. Let's go on lauding - or lamenting - Economic Growth.

And - as per MR this morning - concentrate on whether 'traders' are cognisant in the wee small hours, rather than whether the massive amount of financial churn compared to the physical underwrite, is impossibly large.

Nature is marvelous at self corrections. That's what COVID is. We've repressed that in favour of calling in our debt spiral of the last 40 odd years.

10
up

What a load of rubbish. We all love a bit of good statistical modelling. But we rarely see it. The NYP has similar credibility to CNN etc. Has the Covid-19 story left room for this stuff again. Next you will be quoting Greta again, PDK!

12
up

SIT23 - chuckle. Shoot the messenger(s) 101.

Cred with who?

And Greta is right in the ballpark - independent numbers (ex Otago/Physics) suggest somewhere between 2025 and 2030 we need complete cessation of carbon emissions. Sorry, it's a finite planet. Just in case you haven't heard. What I find more incredible, is the increasing bets on the less and less remaining; all these folk 'investing' and financially churning, so little real underwrite. O course that will end well.....

15
up

Sounds like we are screwed.

Oh wait, every second post on here says that.

Everyone wants to be the canary.

It didn't end well for the canary...

I wonder why a miner decided to bring his pet canary down the mine in the first place?

15
up

I love this concluding line in the paper.
Admittedly, in our analysis, we assume parameters such as population growth and deforestation rate in our model as constant.

Seriously PDK you couldn't be more ironic if you tried.
Essentially - 'Economists are useless because they make simplifying assumptions.' Then... 'But just ignore the same practice in research which suits my narrative.'
Unwittingly you are citing a paper which is structured and undertaken exactly as it would have been in a quantitative econ paper.

12
up

Calculations show that, maintaining the actual rate of population growth and resource consumption, in particular forest consumption, we have a few decades left before an irreversible collapse of our civilisation (see Fig. 5). Making the situation even worse, we stress once again that it is unrealistic to think that the decline of the population in a situation of strong environmental degradation would be a non-chaotic and well-ordered decline. This consideration leads to an even shorter remaining time. Admittedly, in our analysis, we assume parameters such as population growth and deforestation rate in our model as constant.

Phew, if there's one thing humans are known for it's our incredible foresight and our ability to make tough decisions before reaching a crisis point. That's why things like the halting a global pandemic, restructuring our economies post-GFC, and mitigating climate change have all been so easy for us to date.

.

13
up

Ah yes.. humans. Totally brilliant..

Making the same considered, debated, enlightened, reasoned decisions that a yeast would make as it outgrows the Petri dish.

But the report said in over 4000 years of human civilization we have only cut down 1/3 of all the forest. Is that all?? Doesn't really sound like the apocalypse is coming next week then.

4000 years ago (and in all the 3000 years following) there were very few people cutting trees, and they were using sharp stones to do it. Now there are many hundreds of thousands of people cutting trees and they are using very efficient chainsaws and industrial harvester machines and carrying them away in double trailer trucks. The exponential curve on this is very steep indeed at this end of the 4000 years. Apocalypse is closer than you think.

There is always someone saying the end is nigh. How many times have we heard from reputable scientists and politicians that we are only a decade away from some environmental catastrophe with associated societal chaos.

In the 60's and 70's we were a decade away from an ice age and famines.
Then it was acid rain that would see plants die and famine.
Then it was the ozone hole was going to fry us all.
Then sea level rise was supposed to have drowned a fair chunk of out coastal cities by now, the the arctic was supposed to be ice free. And it was world leaders saying this stuff.
Peak oil was having us living in a mad max world by now, yet oil is still cheap as chips.

Now I am not saying we aren't facing problems in the future, just that they rarely show up in the timeline predicted by the experts.

What an ignorant comment.

There are quite a few more things Beanie could add to that list.

Snappy reparteeeeeeeeeeeeee lolololol DUH!

If the human race hits "Peak Technology" then we will be in big trouble.

But we're also planting lots of trees.

I saw a report last year that indicated the number of trees in Europe was significantly more now that in the 1930s (?). Basically the consequence of building materials moving away from wood.

PDK does't get out much. "As a result, Europe's forests grew by a third over the last 100 years. At the same time, cropland decreased due to technological innovations such as motorization, better drainage and irrigation systems: Relatively fewer area was needed to produce the same amount of food. Furthermore, many people migrated from rural to urban areas, or overseas.

Fuchs' fascinating conclusion: Forests and settlements grew at the same time and Europe is a much greener continent today than it was 100 years ago. A closer look at different regions and countries reveals Europe's recovery from the deforestation of past centuries."
https://www.washingtonpost.com/news/worldviews/wp/2014/12/04/watch-how-e...

From the article..

"Both the Netherlands and Britain had empires that relied heavily on the sea and their naval strength. In order to build ships, they needed wood -- and in 1900, only 2 - 3 percent of their territory was still covered with forests. Both countries have since been able to increase their forest area to 10-12 percent, as data from 2010 shows."

Typical of a denier, you have cherry picked the time frame to support your "growth forever" cornucopian narrative.

How can we have growth forever when we have falling global population this century? Thanks for high lighting that UK/Holland has also increased forest cover. What is your point?

Profile is a waste of time re this stuff...head so far in the sand you can barely see his toes.

So you are suggesting Europe was significantly LESS forested now that in the 1930s? Try math rather than feelz?

Are we not planting trees as well though?

NZF planting pine trees which are really bad for the soil.

The world is undergoing net forestation for the last 35 years - about 230million added hectares of forest, and also a massive greening and increase in photosynthetic action (about 30% increase per plant mass) since 19th century as a result of all the extra CO2 in the atmosphere. During the last glacial maximum 20-30k years ago the forest cover and photosynthetic activity were hugely smaller than they are now. Seems the things you believe just aren't true.

Looks like denier nonsense to me. Got a credible source?

LInear? ??

Only an economist would call this linear ....
https://www.youtube.com/watch?time_continue=59&v=_HscLx0isjQ&feature=emb...

Yep, don't think there's much under that beanie.

I've come to the conclusion that most brains are wired in linear fashion. Otherwise why would they put up with the rort that is fractional-reserve, debt-issued banking?

yes wonder if that piece will make it on to One Network News. Maybe as a brief filler before the first ads.

No chance, the only news that matter is Covid, the other 99% of people who die from other causes don't deserve to get mentioned either

COVID is on track to be the 3rd largest killer in the US this year.

Can someone please confirm how much it cost to keep the chch shooter in prison? I'm not to sure what I did hear on alarm clock this morning. I'm sure I did hear it was approved by government.

According to Herald, Government released documents say $3.6 million over two years - $4932 per day.
Cabinet approved $1.99m for 2019/20, and $1.66m for 2020/21.

FFS. Can we pay some 3rd world country a couple of $k per year to keep him in their prison instead? Same for all longer prison sentences. Or could we make our pacific aid contingent upon their incarceration of our worst (it's something their countries could do pretty well) Lets save a few hundred million a year on this most egregious of expenses.

Why just him? Why not all of the prison population?

20
up

It's not like shipping your criminals away to remote islands is a new idea.

But really to be kind we should make it a plan, what party is prepared to make this idea a plan? Might be livesaver for greens.

No, and it doesn't necessarily mean being cruel either in 21st century. Being kept for 5-15 years in a prison on a tropical pacific island with normal amenities might be preferable to many, we have internet for video calls to friends and family. Big cost for running prisons is labour, which is as little as 10% of NZ costs in the islands. We are paying them 10's of millions a year in financial aid, it would be far more cost effective and positive to islanders to give them money via wages for a service they provide to us like this.

Yeah but who wants another Australia???

That would simply shift the cost from here to there, mind you would crate some employment

Seeing as Australia remains keen on shipping NZ citizens convicted of crimes in Aus back here, why can't we reciprocate?

You realise they ship them here AFTER they serve their time in prison right?

Two weeks ago an article in stuff.co.nz of a PI NZer coming out of isolation wanted to get back on track. He was a 501 deportee. 40 years old. Had been in Australia for 10 years. Went to Australia aged 30 with a string of convictions as long as your arm accumulated in NZ before he went there. Many of the 501's move to Australia as escapees from the NZ law. Immigration laws in AU do not prevent them from getting in there. They can never obtain citizenship. AU immigration processes require you to obtain an NZ Police Clearance.

In NZ, prior to 2010, he amassed convictions for assault, threatening behaviour, possession of an imitation firearm and unlawfully presenting a firearm at a person. He became involved with the Rebels about seven years ago through friends and quickly worked his way up the ranks by being a “committed member. Elise, who grew up in Māngere, Auckland, earlier told Stuff he’d lived a crime-free life in Australia and worked hard, most recently in the construction industry as a labourer, to support his family. His mistake was joining the Rebels Motorcycle Gang
https://www.stuff.co.nz/national/300067379/coronavirus-deported-bikie-bo...

How are the people he assaulted and pointed firearms at?

Don't forget he is also a returning nzer, he is one of the ones the RE industry are pinning their hopes on. He is the reason for the fabled housing shortage and mental prices.

Because only a minute perecentage of Australians moving to NZ become violent, drug distributing bikies. A far smaller pecentage than the other way around.

If NZ had the bikie problem Australia has had I would say it would already be occurring.

Given he will never be let out it may be kinder to put an end to it now. It would save a lot of money that could be used to support more worthy people. Surely we owe to it those in need.

From memory the hanging law is still there somewhere. Tough call but there is a certain element that can not be helped and at the costs listed above his incarceration is not financial viable or beneficial to NZ when that money could be spent elsewhere.
Edit.
It has been removed except for treason.

The only crime punishable by death in New Zealand is treason, the death penalty for murder and piracy having been abolished in 1961. As far as is known, there have been no executions in this country except for murder. .. Wiki

From memory raping the queen also gets you executed (or did 30 years back).
Capital punishment is too expensive given exhaustive appeals. Outsourced 3rd world incarceration for life would probably only cost about the same as 1-2 years in an NZ max security jail.

Frustrating isn’t it.
It would be a few thousand dollars, if that to just set his feet in concrete and drop him off in the middle of Cook Strait.

This is pretty funny

Sometimes people didn’t know what they were actually voting for.

“Some people see themselves as voting for a prime minister, which technically they're not actually doing. We vote for our local candidate and for our preferred political party - the parties themselves choose who will lead them.”

https://i.stuff.co.nz/national/politics/122327028/tick-tick-podcast-surv...

Why bother with policy.

Labours election strategy: Money scramble photo ops, Jacinda newspaper articles. Smile and Wave, COVID mumble mumble, Hide the incompetent ministers......

Well at least there's one Nat supporter who can spell.

“If you’re an ACT Party supporter, you’re very sort of sceptical about government generally and about the state generally. And so you're more likely, I think, to give any agency of the state a negative rating.”

Let me break that down for the Labour supporters here: If you an ACT party supporter, you are flagged by the police (and not even the secret kind) and face the prospect of the 'kind, transparent' equivalent of dawn raids by armed, unidentified teams suppressing and intimidating you under the paper thin excuse that you used to own a firearm that is now on the banned list. It is totally understandable that any persecuted group will not trust or support the Volkspolitzei. The rest of the paragraph is worthless opinion from a biased or ignorant person in that other agencies of the state will not be caught up in this distrust.

But, but, but, I thought our top exports to the West Island were Gold and Oil? Not clear how Victoria lockdown affects that.

Undoubtedly Barfoots will release its monthly deluge in the coming minutes/ hours to the delight of many. Anecdotally, on two separate one hour Sunday occasions I have witnessed 8 signings of sales agreements, by the above agency at a local "cafe".I would add ,only the contracts were in English.

Did you recognise any of their top salespeople?

https://www.barfoot.co.nz/news/2015/may/top-salespeople-2015

I cannot see Ronald MacDonald .

12
up

Alternative headlines for US (and for once I agree with Trump)

" US death toll falls by 50% compared to April peak"
"Those now getting infected are younger, and hence less likely to succumb"
"Tests in USA in April were 5 million; in July they were 21 million; more tests = more positive results"

% of pop of Earth currently infected is 18 million divided by 7.8 billion.
Each country infected thus far has peaked about 2.5 months after reaching 100 cases.
Then, infections and deaths decline and thus far, in no country (?) have they exceeded first peak.
Second wave in 1918 was 5 times bigger than first and that pandemic killed 40 million plus of a much smaller pop. This one so far has killed around 700,000, or under 2% of 1918 total.
% of people under 60 dying once infected is under 0.025%.
These are not things news media put out because they class anything except the government and WHO narrative as "conspiratorial" or anti-scientific.

https://virusncov.com/covid-statistics/australia
shows one country which belies "Each country infected thus far has peaked about 2.5 months after reaching 100 cases"

Excellent truth bombs there.

about 700k known deaths and ~0.5% IFR means more like 140million infected to date. Add to that some 3rd world countries are accidentally or deliberately omitting 60-70% of their deaths and we are probably closer to a million dead and 200million infected. Still not bad in the grand scheme of things

They still haven't agreed how many actually died in the 1918 flu pandemic over a century later. Pandemic numbers can never be accurately deduced till after the pandemic has ended and even then, its notoriously hard and takes a lot of effort getting data from places that haven't recorded accurately. It will be years. All we have now is a snap shot of flawed current reporting data, which we have to accept is incomplete, possible very incomplete, and some models. Models are just there to help with policy decision making and seeing as most policy decision making in the world has been corrupted by politics and social issues (rather than being rationally science based) this will no doubt make the true nature of the pandemic even harder to quantify.

That 700k death count will be undercounted in developed countries too, not just "3rd world countries" as you suggest.

Breakfast briefing: A bounce no-one thinks will last

Certainly confirmed in this securities trading arena

what comes next

https://surplusenergyeconomics.wordpress.com/2020/07/27/178-the-ides-of-...
"To return to where we started, energy-driven interpretation reveals that the financial system, and policy more broadly, has been building a monster for at least twenty years. It is indeed ludicrous that people and businesses have been paid to borrow, by negative real rates, and by the narrative that the Fed and others will never let anyone pay the price of recklessness. As ECoEs have risen, and prosperity growth has ceased and then started to go into reverse, policymakers have persuaded themselves that ‘growth in perpetuity’ can be sustained by ever-greater credit and monetary activism, and by an implicit declaration that the whole system is ‘too big to fail’. That trying to fix the ‘real’ economy with monetary gimmickry is akin to ‘trying to cure an ailing house-plant with a spanner’ seems never to have occurred to them. We may be very close to learning the price of ignorance and hubris."

Endless economic growth is really a masquerade for endless debt (who is the winner there). Apparently printing for ever leads to stupido assets prices and then a collapse. Stage one has a tick beside it, and stage two, are we there yet....?

money.https://www.zerohedge.com/markets/more-60-global-debt-now-yields-less-1

Have a look at this data which will give you an idea on how close to the edge the NZ populations finances are. https://cffc-assets-prod.s3.ap-southeast-2.amazonaws.com/public/Uploads/...

Its a classic dead cat bounce, the bets should be on as to when the cat hits the ground again. I will go for October 1st 2020. Could be a month or two early but the outcome will be the same.

I'm picking 4th November 2020.

Victoria introduces largest individual fine on books for breach of isolation order
A fine of $4957 will be issued to people found to have breached a requirement to be self-isolating

Meanwhile back in NZ down in Dunedin woman who broke out of isolation
Judge Phillips sentenced her to a six months’ suspended sentence

Let's make her Minster of Health.

Too much?
Include her in the coalition cabinet, any portfolio she thinks she can get across.

Days to the General Election: 24
See Party Policies here. Party Lists here.