China's trade gains expanding; Taiwan does even better; Australian service sector weak; Aussie banks gird for rising mortgage stress; UST 10yr yield at 0.72%; oil and gold lower; NZ$1 = 66.9 USc; TWI-5 = 69.9

China's trade gains expanding; Taiwan does even better; Australian service sector weak; Aussie banks gird for rising mortgage stress; UST 10yr yield at 0.72%; oil and gold lower; NZ$1 = 66.9 USc; TWI-5 = 69.9

Here's our summary of key economic events overnight that affect New Zealand, with news Australia's banks find few home loan borrowers can resume normal mortgage repayments.

But first, China's foreign exchange reserves rose in August, although but not by as much as was expected.

They were boosted by China's August exports which were up a healthy +9.5% from a year ago and that was far more than expected. But their imports were down -2.1% which was also more than expected. That means their trade surplus was higher than forecast and the best since May 2019. Almost 60% of their surplus is from trade with the US and that surplus is a huge US$34.2 bln for the month. Container volumes pouring into the US West Coast ports confirm the trade. With New Zealand, China ran a trade deficit of -NZ$500 mln in the month.

Strong import demand of food items in China is raising global food prices.

And in Taiwan, their international trade rose as well, but with a better balance. Their exports rose more than expected, by +8.3% above the August 2019 level, and their imports rose a very similar amount.

In the US we should note that they are on a long holiday weekend - Labor Day - and their markets won't reopen until Wednesday our time.

And the S&P500 futures suggest that Wall Street will return with about a +0.5% rise. That will be after last week's -2.0% fall.

Yesterday, the ASX200 ended up +0.3%, the NZX50 Capital Index was up +0.7%. Shanghai however closed down a sharp -1.9%, Hong Kong down -0.4% and Tokyo closed down -0.5%. American and many European markets were closed yesterday.

In Australia, their independent services PMI survey has come in weaker in August than it was in July. And that is supported by new data that shows a stall in the rebound of Australian job ads.

And ANZ is requiring borrowers for up-market property in Melbourne to front up with 30% deposits. It claims it is preparing for mortgage stress to peak in the middle of 2021. This reassessment is happening as it is becoming clear that only a small 13% of borrowers who agreed deferral terms have resumed normal repayments. 87% haven't.

The latest global compilation of COVID-19 data is here. The global tally is 27,201,000, up +251,000 since yesterday. Global deaths reported now exceed 890,000 (+9,000 in one day).

Just under a quarter of all reported cases globally are in the US, which is up +25,000 to 6,473,000 and a relentless rise despite the holiday weekend and the official reluctance to test. US deaths are now just over 193,300 and a death rate of 584/mln (+1/mln) and now nearly at Italy's level. The net number of people actively infected in the US is up slightly to 2,545,000. Testing over the weekend has gone into a lull.

In Australia, there have now been 26,322 COVID-19 cases reported, and that is only +43 more cases overnight and clearly the Victorian emergency easing. Australia's death count is rising however to 762 (+9). Their recovery rate is now almost 86%. There are 2962 cases in Australia (-102) and a turned tide and more recoveries than new infections.

The UST 10yr yield is still at 0.72% while Wall Street is on holiday. Their 2-10 curve is unchanged at +57 bps. Their 1-5 curve is at +17 bps, and their 3m-10yr curve is still at +62 bps. The Aussie Govt 10yr yield is up +1 bps at 0.97%. The China Govt 10yr is up +3 bps at 3.17%. And the NZ Govt 10 yr yield is also up +3 bps, now at 0.63%.

The price of gold is down -US$6 and now at US$1,929/oz.

Oil prices are lower today, down to just on US$39/bbl in the US while the international price is down to just on US$42/bbl.

The Kiwi dollar is softer again today and now at 66.9 USc. Against the Australian dollar we are softer too at 91.9 AUc. Against the euro we are little-changed at 56.6 euro cents. That means our TWI-5 has slipped marginally to 69.9.

The bitcoin price is also lower again today, but only marginally, now at US$10,178. 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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45 Comments

13
up

This is worrying and could be calm before the storm :

'And ANZ is requiring borrowers for up-market property in Melbourne to front up with 30% deposits. It claims it is preparing for mortgage stress to peak in the middle of 2021. This reassessment is happening as it is becoming clear that only a small 13% of borrowers who agreed deferral terms have resumed normal repayments. 87% haven't.'

Unemployment /extend of Business closure going future will determine how NZ economy progress, once wage subsidy and other stimulus ends.

20
up

In the current climate this is the sort of thing that should be happening. Banks signaling more prudent lending habits vs the lolly debt/profit scramble of the last 20 years.

Interest only should be eliminated for all lenders. It is simply a lever of speculation, and is a major driver of the inequality gap.

Interesting that they're particularly concerned about "upmarket" properties.

12
up

30% should be the norm anyway.

Hmmm. Yeah, nah.

Would be reasonable if the RBNZ under Orr hadn't previously spoken of their desire to increase house prices for the "wealth effect". And reasonable if the RBNZ was actively advocating for policy tools to be put in place now to allow them to push money into the market to support employment without actively inflating asset prices.

There are no friends in business
ANZ requires larger deposits for high-risk Melbourne postcodes
ANZ Bank is putting some Melbourne postcodes under tougher scrutiny when it assesses mortgage applications as it prepares for a wave of property foreclosures next year when customers default on loans in the wake of the coronavirus crisis.
https://www.afr.com/companies/financial-services/anz-requires-larger-dep...

Ozzy house prices to drop, Alk will follow and then the rest of NZ.
Alk apartment prices are the first to start falling.
Ozzy articials saying upto a 40% reduction. Hopefully we will only get a 25 to 30 percent fall.
That will impact on house building and the construction sector and have a huge roll over arround the country. Not to worry we are getting a new national holiday, yee ha.

Not if we print another 100 billion!

Grant Robertson is fairly tight with his purse strings, he seems to be running the money show and keeps Labour under a bit of control (thankfully). I'm picking he'll tighten up for a year or two and then open it up before the next election to gather more votes because they will need them after what is headed our way.

and then open it up before the next election to gather more votes

Surely he's going to resort to that but won't help this time around. Short-term fiscal stimulus extends the growth run of an economy approaching the end of its growth cycle.
We're all treating the oncoming disaster as a recession when it could easily turn into a depression for NZ's economy in need of major structural economic reforms to shake off.

Fully agree.
What we are being fed / well the lack of what real info we are being fed is stunning. Yesterday's 'let them eat cake' extra public holiday announcement was a fine example of the leadership we have. Today's policy announcement of 'small business banking costs' another example of what they haven't done in the last term while failing at other stuff.
Reading between the lines, their internal polling must be looking quite bad.

In this current turbulent times the current Government announces a.....Public holiday.
An example of real leadership. As a traditional Labour voter I am tempted to donkey vote. This is a time to demonstrate and implement policies that will assist the country in overcoming the economic battering that will engulf all sectors. Politicians.......They obviously have no idea about the real world. Get them to work in a job for 12 months and see how they cope on an average salary. Or better yet, put them in the shoes as a small business owner and observe the outcome.
Winnie......Now he's squawking about issues he kept quiet about previously. So transparent, even his supporters can see what he's doing. What a waste, keeping quiet, don't rock the boat..Don't want to scare the voters.

I don't know if that's a plausible response to a massive economic crisis. Will austerity work?

They know it's going to be bad and they will try and keep a lid on the money IMO. The big question is can they deliver and make the hard calls.

..print all you like but if there is no demand to borrow, then the cash just sits and does nothing. In the current insecure job market i can't see any great demand for borrowing nor much enthusiasm to lend.

This will be a trough that will keep on giving. Will be like the annual arguments about when Ramadan should begin.
"Labour says it will consult with an expert advisory group to work around the many issues that will arise from creating a new statutory holiday. If they don’t get the right experts onboard, including Māori astronomers and tikanga experts, it could be a problematic proposition.

There isn’t a general consensus among Māori about when to observe the new year."
https://www.stuff.co.nz/pou-tiaki/300101385/matariki-should-unite-all-ne...

Ex-Minister of Finance across the ditch Mathias Cormann takes a hit on property rental. Don't believe Granny Herald and its 'double every 7-10 years' nonsense. Especially right now.

The 1970s Hillman home, bought for $332,000 from its Keystart mortgagees in 2006, just sold for $250,000. That’s an $82,000 loss after 14 years, going backwards $5850 a year, plus the interest costs on its Westpac loan.

As well as taking a hit on the price, Cormann’s investment spent 447 days with the for-sale sign up — it first listed in May last year seeking offers in the high $400,000s

https://thewest.com.au/lifestyle/house-that/federal-finance-minister-mat...

When the market is as hot as now, hard to think that may have downturn and one forgets that fall in asset price be it housing or stock hits when no is expecting and are on High but yes if current boom persist even into next year after all stimulus has ended than can assume that house price is a one one way direction in NZ.

It is always hard to think that a market will pop when it's running high but they ALWAYS do, some win and others loose, that is how the cookie crumbles.

When the market is as hot as now.....

According to who? Granny Herald?

Thats the price you pay for paradise.

(sarc)

Shocking??????
What's shocking????
What do you see that's shocking - cos I cant see it

who is going to pay it back? The economy doesn't look to be coming out of this stronger.

Billions being spent into thin air with nothing of consequence to show at the end fits my definition of shocking.

I wonder if NZ could start to feel a lot like Greece was in 2009, but without the nice climate.

...or the cuisine, or the beautiful architecture, or the etc etc. NZ really isn't all that it's cracked up to be.

Greece had a debt to GDP ratio of around 170% in 2011 - and still does. We're a long, long way away from that, even if we add another 20% this year.

Not if we end up having to bail out private debt held by banks as Ireland was forced to do by the ECB.

?? ??? ???

Here is a video for you.
See what we can learn from Canada.
They have same unreal spending.
https://youtu.be/evDnJjrCFmY

The message for Wellington is that the only green economic recovery that works is lead by all getting on some new John Deere gear.

Parker's invitation only Southern public meetings are green but in an other runny, not funny way.

Stimulating productive economy by credit in the western developed world is impossible. Stimulating by credit would work in an economy that has a reasonable spare production capacity that can be reasonably activated by leveraging debt. Western world is no longer that economy. Its growth (if any) is not coming from that type of industries, it comes from innovation types (information technology, medicine, space travel, electric cars etc) with extremely high risk/reward that are not suitable for lending against.
Even if business borrow money, it will for investing in Asia.
You can stimulate consumer economy by credit, but that does sound very stupid. If you are borrowing money and burn it, how are you ever gonna pay it back?
Is it a wonder, that housing has become a catchment for all the created credit in the western world? Even northern European countries are going through the same thing as rest of the western world.

Labour stealing a march on National as the 'party for small business' - doing something that'll directly help small businesses in the pocket book:
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12362967

More a failure of commerce commission.
- nothing stopping her running through them now, get an answer before the election.

https://comcom.govt.nz/
But in typical fashion COL must try & do things twice.

Did I miss something. There just hasn't been much said on the total failure of the Southern Response appeal. I can understand National,Gerry and the insurance council not saying much but I guess others just see it as old news. For what it's worth, IMHO, this is what happens when government steps in on a commercial transaction failure, way way more costly failure than the original.

All the Parties are in the same boat. If one starts pointing out the others failures, it turns into a massive bun fight and it becomes clear to the population that none of our 'leaders' (cough splutter) can deliver. Liquidity comes to a grinding halt and the country falls apart.

Goes to the heart of the bureaucracy.
Look at Levy & Co. running amock at CDHB.

Running amok? All the bad mouthing is being done the medics.

7 of 11 CDHB heads are gone.
1 head in Wellington ex NHS expelled.
It's way past conversating.

BBC Lake Travis: Several boats sink at pro-Trump parade in Texas. "Several boats have sunk on a lake in the US state of Texas during a parade to support President Donald Trump in November's election, officials say."
https://www.bbc.com/news/election-us-2020-54045115

I guess there was a blue wave they didn't see coming.

Yes there's been no Trump bump up in the polls since the post-conventions, Biden still leads. Here's an interesting interview about it: Al Franken DEMOLISHES Trump's RNC lies (interview w/ Brian Tyler Cohen). https://www.youtube.com/watch?v=7ThmE37vXu4