US Fed lowers it sights; US economic data weak; China investment rises; Japan's trade surplus swells; university jobs start to go; UST 10y at 0.68%; oil and gold up NZ$1 = 67.4 USc; TWI-5 = 70.3

US Fed lowers it sights; US economic data weak; China investment rises; Japan's trade surplus swells; university jobs start to go; UST 10y at 0.68%; oil and gold up NZ$1 = 67.4 USc; TWI-5 = 70.3

Here's our summary of key economic events overnight that affect New Zealand, with news we are now all focused on the depth of the global recession with recovery a long way off.

The US Fed has been meeting and has kept its policy settings unchanged for a fourth consecutive time. But its forecasts show that it plans to hold these positions until at least 2023. It says it is expecting something of an economic growth bounceback in 2021 but it seems to have trimmed the scale of the recovery expectations in 2021 (from +5% to +4%). Reducing forward projections is a Fed pattern these days. But at least they don't see the 2020 jobless rate rising from here.

US retail sales for August were virtually unchanged from a year ago, and well below analysts' expectations. This is consistent with the weak Redbook reporting. And the July data was revised lower even though that was a +3.5% year on year gain.

American mortgage applications were lower last week than the previous one.

American businesses continue to destock, with inventories now down a massive -5.9% year-on-year, and taking -US$120 bln out of their reserves.

And Canada is reporting a stubbornly low inflation rate of +0.8% year-on-year, but deflation month-on-month.

In China, manufacturing investment rose +5% in August from a year earlier, the first gains of 2020 and another sign the Chinese economy's recovery is embedding. Further, these gains are from the private sector, with national and local authority investment taking a back seat in this data and unchanged from a year ago.

In Japan, their trade surplus swelled in August when a small deficit was expected, with exports down less than expected and less than in July, but their imports were down more than expected and about the same decrease as in July.

In Australia, universities are now shedding jobs in large numbers are there is no end to the enrollment retrenchment from foreign students. This is likely to become a very sore workplace issue among the articulate and influential staff.

The OECD is reporting a substantial decline in economic activity among its members but is also says the decline has been less than feared. But New Zealand gets no mention in its assessment.

We will get our own economic impact review for the June quarter later this morning with the GDP release that is certain to show we have been in recession. The signal that the NZ Government's borrowing program has been scaled back suggests our recovery may not be as distant.

On Wall Street today, the S&P500 is up +0.1% in afternoon trade although earlier it was up as much as +0.7% with a brief bounce following the Fed data release. But it was very brief. Overnight, European markets closed mixed but generally up of about +0.2% even if London was down -0.4%. Yesterday, Shanghai ended the day down -0.4%, but Hong Kong and Tokyo were little-changed on the day. The ASX200 ended up more than +1.0% while the NZX50 Capital Index gained +0.4%.

The latest global compilation of COVID-19 data is here. The global tally is 29,657,000 and up +271,000 in one day. Global deaths now exceed 931,000 (+5,000).

Just under a quarter of all reported cases globally are in the US, which is up +37,000 to 6,802,000. Active cases exceed 2,514,000. Their death total is now just over 200,000 and still rising at about +1000 a day (and now 606/mln).

In Australia, there have now been 26,779 COVID-19 cases reported, and that is only +41 more cases from yesterday and only from Victoria and NSW. Deaths however are up however at 816 (+8). Their recovery rate is holding at 88% now.

The UST 10yr yield is unchanged at just on 0.68%. Their 2-10 rate curve is softish however at +53 bps, their 1-5 curve is still at +14 bps, while their 3m-10 year curve is now just over +58 bps. The Australian Govt 10 year yield is down -1 bp at 0.91%. The China Govt 10 year yield is up +2 bps at 3.16%. However, the New Zealand Govt 10 year yield is -3 bps lower at 0.58%.

The price of gold will start today up +US$6 at US$1960/oz.

Oil prices are much firmer today, up more than +US$1.50 to just on US$40/bbl in the US while the international price is now just on US$42/bbl.

The Kiwi dollar will start today at 67.4 USc and marginally higher from this time yesterday. Against the Australian dollar we are higher as well at 92.3 AUc. Against the euro we are up at 57 euro cents. That means our TWI-5 is now at 70.3.

We should also note that the Chinese yuan appreciated significantly against the US dollar yesterday, taking it up to levels last seen more than a year ago.

The bitcoin price is also higher today, now at US$11,035 and +2.2% higher than this time 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 ».

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
End of day UTC
Source: CoinDesk

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

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

69 Comments

10
up

Quote of the day

“You'll develop, you'll develop herd, like a herd mentality,”

Classic.

He's in a herd of one!

So I herd

Surely this quote must come a close second? “the greatest diplomatic triumph of Israel’s history”
https://www.thetimes.co.uk/edition/world/trump-hails-gulfs-shift-on-isra...

Has UAE and Bahrain just invited terrorism into their lands from the hardcore Islamic states...

No, the terrorism is what holds 6 million Palestinians enclosed in ghetto-like conditions, divested of every resource they had.

theglc. Would have been the case once but consequent on the aggressive projection of Iranian military power across the ME Israels position as the common enemy of Arab and muslim states has receded with the shiite terrorist exporting theocracy in the north now posing a much bigger threat than that perceived as coming from Israel.

If I had decided to go and live in a refugee camp in 1948, I would have actually sorted out some sort of different lifestyle choice by now.

If only you could

25
up

Re Australian Universities job losses: this calls into question the leadership of tertiary institutions in Australia and NZ where they have put a large proportion of their resources into recruiting international students, using postgrad programmes (& creating many new ones) solely for the purpose of enrolling these students. With little regard for the authentic pathway of preparing graduates for industry. The Govts have offered post study work visas to incentivise this whole industry. Now the scale of the financial dependency is showing.

31
up

The lure is probably not so much in the courses but in the residency prospects.

Speaking English is a major plus on your CV, when competing with similarly qualified students from your own country.

14
up

This is true, but can also backfire. An Indian guy that works for us that did the whole education then residency thing said that of the dozen or so people that he was friends with when he came over about 3 are left. Most couldn't find a job good enough to qualify for the residency visa. He claims these institutions "lead on" a lot of the foreigners who pay obscene amounts of money for a shitty degrees only to have to eventually go back home again.

10
up

This has been building for decades in tertiary. Essentially, a per-bum-on-seat funding model incentivises credentialism: the invention of ever-more-arcane (and employment-wise, Useless) pieces of paper. It's no different to segmenting a market for disposable nappies into age and gender brackets, except that the average life of a pack of nappies is a week, but a 'degree' in ~insert latest fad name here~Studies chews up years of a student's life, to say nothing of the Modest Fee charged each year. It's simply a racket, no less.

11
up

Correct.
One just has to look at how the program offerings have changed at all universities in New Zealand significantly over the past 10 years. At AU there are 'professional' track 18 month postgraduate programs charging in excess of $80k.
For so long now, the solution to any issue (business model) at all universities has been simply "we'll just get more international students."

11
up

Its not just that. Theyre frugal hermits.

How many times you seen a group of international students at your local cafe or pub?

Each to their own, and a sketchy topic, but the impact is far greater than someone getting an education and a uni deriving income.

I was speaking with an Indian mate of mine who lives here. When he was a kid it was all study to get ahead and there was insane pressure from the family to succeed, personal time was an occasional thing. He was struggling with not being too hard on his kids and allowing them more personal time than study time.
If you're an international student and your parents have invested their lifes savings into your studies, a beer with mates at a pub is on the 'wants' list.

12
up

This is true Kezza R. A friend of our’s in the UK gave us some information on our last visit. Indian families know that NZ is an easy target and that we have been taken advantage of big time. It is a well known rort. He laughed as he was telling us this, they believe we are really gullible and that we don’t believe that Indian students are using us as a backdoor into Australia. Everyone in India talks about how easy it is to get into NZ.

Why just pick on Indians; heard an interview on the radio with a Chinese student leader in Auckland who said , quite unashamedly, that the students in China were frustrated by not being able to come, as it delays their residency application process.Costs of quarantine and study fees not an issue.
So much for the nominal reasons.
PS, I don't blame them for wanting to come, not at all.

I'm sure Stephen Joyce insisted that international students come to New Zealand for the high quality education, not a path to residency.

And that's your logic, your thinking for doing nothing, addressing none of the issues?

What are you talking about? Did you reply to the right post?

Some of your comparisons thinking

So where do you think I have proposed not fixing any issues in education? You're quite sure you are commenting in the right place?

Henry_Tull is a paid National Shill. Normally he's on here finding any excuse to bleat on about Labour's failures, it's quite clear he's replied to your comments as a thinly veiled attempt, in a roundabout way, to defend Stephen Joyce.

Kiwichas - not just picking on Indians it’s just that our friend had first hand knowledge from his family and friends in India. I don’t blame them either. But we have been taken for a ride.

Totally understandable. I would be doing the same if I was in their position. I'm not so keen on the backdoor entry if you study here being so loose.
It's a political football like housing. They all spout off selling their agenda but in practice they dont so much about it. I dont really give it too much thought as it's all blar blar blar no action and they'll continue to keep the system ticking along to keep themselves in power.

A graduate in my team from Malaysia shared his horrible experience working with counsellors at AUT to choose a master programme a few years ago.
The guy had made up his mind to pursue AUT's construction management programme but the counsellor kept insisting he give their business programmes a crack instead for better career prospects in NZ.

U.K. Inflation Eases to Five-Year Low on Restaurant Discounts

Economists expect a bounceback in coming months, and Bank of England Governor Andrew Bailey said this month he didn’t expect the rate to turn negative in the short-term.

Still, inflation has been at less than half the BOE’s 2% target since April -- the first full month the virus lockdown -- and the report comes a day before officials announce their September policy decision.

While no move is predicted on Thursday, the low reading may buttress arguments for an expected further easing of policy later this year.

What else?

The US has now had 200,000 deaths, I recall Trump thought they might get to 60 or 70k, he is looking sillier by the day, but where will they get to?, looks very 500k ish right now, with no vaccine in sight.

Death of Covid is less than 10% - its the numbers that are looking sillier by the day

Fascinating - then what caused the rest of the huge increase in excess mortality? There were > 20k excess deaths in the week of the 12th April alone in the USA.

https://ourworldindata.org/excess-mortality-covid

A survey I read said that 6% of US covid deaths had no comorbidity factors. The other 94% of covid deaths had an average of 2.4 other health issues. But all 100% got extra funding for the hospitals concerned because of the covid link.

Anyone whose been the CEO of any substantial business (Government) knows that one of the main tasks is to instil confidence and dampen down fear.
What they then say to themselves in their own office when the door is shut may be different!
I recall asking my CEO years back "What do you actually do?" His answer was "To put on my armour and lead you guys into battle, even if I know I will die and most of you might as well. My job is to make sure you have the confidence and belief to follow me"

18
up

Your CEO sounds like an absolute plonker.

What a wacky answer!

Is his name David Brent?

I mean with people getting reinfected herd immunity via infection is not going to happen. There are about 340 million in the USA including illegals. The best estimates of the IFR is about .5%. So you are looking at 320 million x .005 = 1.6 million people.
Unless there is a vaccine??
You can however probably lower the IFR by keeping people over 75 locked up. The IFR in this case will probably drop to about .3%. However I question the morality of keeping the elderly locked up into perpetuity. But who am I to question the new normal.

Before you get on your high horse. NZ is however playing an incredibly high risk strategy. We are essentially betting every thing & the kitchen sink on an safe, effective vaccine before our economy completely implodes. Which IMHO it will do with our tourism or a reasonable substitute. I personally think this is a bad bet but who knows we may get lucky.

Interesting that Central Banks are increasingly talking about allowing inflation target overshoots before raising rates.

With rates now zero bound they've finally recognised that moving the goalposts is the only way the debt ponzi game can be kept alive.

Inflation or deflation? - pick your poison, neither is looking good.

Yes but inflation overshoots are just dreaming. So saying that makes no difference whatsoever.

I tend to agree but it does indicate they're pretty much out of ammo.

20
up

If you think Jacinda is protecting you by increasing house prices she isnt. She is protecting specuvestors and destroying your childrens futures.

'16 properties and buying more thanks to capital gains, lower mortgage payments and higher rents'

https://youtu.be/_mXsqU88MqU

Hard work, dedication and a bit of leverage from offshore.

14
up

All the people doing hard work at a job or their business are getting screwed, but specuvestors are getting rich. You can't claim people are working hard to get capital gains, which ostensibly came from lowering interest rates and money printing. Sure they might have redone a kitchen or bathroom or paint something, but they aren't creating more land around them to increase it's value. As most of the increase has gone into land values, not exactly the "hard work" category...

The unitary plan in Ak has made property development much more profitable so now we have further land value increases. Or at worst, no land value drops any time soon.

Yeah, it's so easy, right? Can just totally laze round in a hammock and drink Pina Coladas and make millions and do hardly any work
And even Jacinda, the greenies and the unionists are helping. Even had old Winnie out there with a clawhammer working on the CGT

Just give us specuvestors with no kids a break please.

This just in: In an effort to maintain New Zealand's reliance on the "wealth effect" incoming high-school students will be issued a house, mortgage and printed money with which to pay the mortgage. Socially sponsored year-on-year price increases will power New Zealand's economic growth. High-volume immigration will be used to insure there is no dissent in this brave new world.

Unfortunately, in this Brave New World, it’s the Epsilons who are running the show.

Cap gain hasn't worked anywhere to stop this. You need to move on from that one in search of an answer.

Fed announcement today was suppose to lift the nasdaq but it seems now even Fed has run out of ammunation and Nasdaq reacted negatively.

QE and low interest rates are the new norm and now the question is What now from here as borrowing can lift the sentiment for sometime but not endlesely and with many losing jobs and businesses are going backwords and so does many who are about to retire in few years and seeing the safe investement in term deposot going no where as a result unsure how they will maintain their lifestyle going future.

Interesting time ahead as reserve bank and government has done what they can and the only option left now is to print more and more money with no idea what all this is leading to in long run (If anyone has new idea, please comment).

In NZ and USA govetnment for now is only concerned how to manage till election time before taking further action or taking no action so again is wait and watch and one must not forget that consequence of panademic and lockdowns have yet to come and may be worse as many have underestimated the affect of consiquences as blinded by smoke of asset bubble specially housing in NZ.

Even Fed has mentioned that they have done all that they can (So fed has run out of ammunation) and now want government to distribute free money as cheap money has done what it could and now only free distribution of money may help to delay (Government too have no other option but to throw money to people - disguise unemployment) .

Agree that affect of coronavirus have not yet been felt as supported by monetary and fiscal policy. In fact many are feeling and are rich as has helped to boost stock and housing money with so much of cheap and free market in the market and on other side many are struggling to make ends meet.

Uncertain time and economically feel that will get worse before getting better.

Bitcoin Bulls are picking this will drive more players into BTC. A lot of talk about BTC at $100k in the near term. Where will that capitalisation come from you ask? Well there's a bunch of multi-millionaires and billionaires who are likely to start looking for better yields and markets that have a fixed rule set and a solid standard. When you consider that the large investments by the likes of Greyscale and Microstrategy are happening on the OTC market outside of exchanges we're not even at the early adopter stage yet.

Microstrategies CEO: "Moving away from the dollar is now Saylor’s primary concern. He said he can’t stand the inflationary risk." https://www.coindesk.com/microstrategy-ceo-michael-saylor-bitcoin

Fed also hinted that QE will be the norm ...

So now only way to maintain the economy is QE which gives a license to many zombie companies to flourish besides any company or person who is all geared to borrow as much as and more will flourish.

Dangerous time.

Wage subsidy has also hidden the true unemployment rate and will be interesting to see how it unfolds in future - pain for many (unemployed / depositors / savers) and gain for some ( speculators / borrowers).

Best time in history for all speculators to borrowers as risk is covered by reserve bank and government.

Yep.
A significant point is the current mega poor financial deterioration is entirely made by ourselves, or Grant actually.
Its dull thinking to say the dip was less, or the June bounce better, because that was all Grant spending flowing thru the till.
Smart thinking sees the poor financial position being slower & longer to dig out.

The reporting of finances yesterday, missed comment on incomes and earnings. For the people. The productivity assumptions are brave.

The PM & GR seem to have a blind spot to the role jobs and incomes have to us, us the economy.
The doubling down on residential housing wealth effect is novice work.
The infrastructure spending is a dead weight, Shaw & Co proved the calibre of thought used there and calibre of vanity projects. Funnily the PM doubled down by chastising Shaw as a great minister in a complex job.
Really, whats to love in Shaw. Why is he her favorite minister. Oddly the Shaw & Co enviro school applicant executive resigned last week.

Contrast is provided by the Singapore plan, a productive, a jobs plan, investing in people.

https://www.rnz.co.nz/news/political/426263/economist-concerned-governme...

He questioned what new steps the government would take to boost economic growth other than housing and immigration.

"More of the same is not going to give us better outcomes.

"We have tried to have this growth in property prices, growth in borrowing, growth in immigration without having the increase in the productive capacity of the economy, infrastructure - it is really not going to work.

Fire, Floods and over 201,000 dead Americans from the coronavirus, Seems like Mother Nature is trying to tell the Americans something. Like: "Vote Out Trump"!

Here's their latest natural disaster: BBC Hurricane Sally: 'Catastrophic flooding' as storm hits US. "Hurricane Sally has brought "historic and catastrophic flooding" to the southern US after making landfall."
https://www.bbc.com/news/world-us-canada-54174831

Same in 1938 when the New England hurricane hit NY killing 600 people, ie mother nature's message then was to get rid of Franklin Roosevelt.

Classic TDS. Or classic sarcasm. I can never tell which one with you.

Was it coupled with mega forest fires, and a raging pandemic too! Nahh see you forgot those major details Mman kind of important.

Some system context.
MOH is, what it is.
Raises the option that activities and operations be passed to other entities, like private hospitals, private aged care, pharmacy guild.

Confusion, lack of leadership and poor vaccine distribution. Those are some of the themes laid bare in two critical reports on the Health Ministry's measles and influenza campaigns.

https://www.newshub.co.nz/home/new-zealand/2020/09/two-critical-reports-...

Today a report on supply chains verified that reporting, noting "extreme frustrations".

The report said doctors were put in "difficult positions with patients encouraged to get vaccinations and arriving to find there was no stock".

However, GPs say they were not even asked by the Ministry to provide input into the review.

Poor old DR Bloomfield defends MOH, saying..
"I don't think the reports are scathing," Director-General of Health Dr Ashley Bloomfield responded.
- Its not the writing style here its the content that deserves comment & thought.

Add to this having a part time health minister and it makes you wonder how the PM sees suddenly everything will work wonderfully, & and org structure great. What experience has she got.

Oh dear - has the sky fallen on your head yet, Henry?

11
up

oldbloke. The sky has fallen in for CHCH people's health under Bloomfields management because he failed to resolve a developing catastrophe where relationships between the board and executive deteriorated over a long period from unhealthy to downright toxic, culminating in a mass exodus of talent and with it irreplaceable institutional knowledge and expertise. Senior clinicians even appealed directly to Ardern which she imperiously ignored for a month until the meltdown forced a 'we will quickly react' BS spin response from her. Bloomfield then swans down to ChCh and utters technocratic platitudes while Hipkins stays safe in the beehive bunker but the damage to Cantabrians health care from MOH's failure to fix the issues is already done. St Ashley is of course untouchable by cindy's adoring media so his role in the debacle remains largely unexamined.

Mate OB is so pro Labour can do no wrong it's not funny. No amount of pointing out what is actually going on will sway his point of view. He's still banging away at that dead donkey waiting for it to get up and proform its duty.

Yes, it's entertaining the way Labour has delivered one crashing failure after another but the party fanatics remain not just believers but comically shameless advocates. Consider the latest tertiary fees free debacle that Ardern excitedly announced as a flagship policy but has bombed miserably and now joins other 'key' initiatives in the dustbin. Ardern is yet again allowed by her media fan club to dodge the heat on this while Hipkins tries to spin the failure as something else and under the carpet the whole mess is swept as though it was never a pet project of the PM. Eurasia has never been at war with Oceania, that's the political consensus and all historic documents agree.

Yes Bloomfield has cost us a lot of money, in a cool calm and moderately collected manner.Because of a totally preventable and foreseeable second wave and consequent lockdown.Would not want his job but he:
Did nothing Jan-Mar, when even the WHO thought things were bad.
Thought you could not transmit Covid without symptoms.
Thought masks might increase Covid transmission
Must have known, or should have that no incoming were being tested for Covid in the managed isolation in June.
Must have been involved in the decision to severely restrict testing in Auckland in July, when it was at it's most vital after the June catastrophe.
Had not ensured that quarantine staff had any testing at all till recently.
Assured us they would all be tested day 2 and 12 after that, but still only day 12 apparently.
Tries afterwards to make it look like a bolt from the blue when cases pop up a month after the June failure.
Not worried about quarantine staff working in hospitals as well, or going to Les Mills and hyperventilating over 89 close contacts.
Confident on quarantine workers PPE and training despite 2 that we know of infected.
Constantly conflates "low risk" with "no risk" in a very reassuring manner.
Is on $600,000 pa...
I'm sure he has done a lot of good, but the failures standout.

From nbr

https://www.nbr.co.nz/node/227592
Simon said ..... a lot of things right on Covid..

Are you just showing off your NBR subscription? Most of us cannot, of course read your link. Simon who, for a start?