China's industry in profit recovery; Singapore factory production strong; Swiss vote again on immigration; US durable goods orders weak; Aussie auctions strong; UST 10y at 0.66%; oil and gold stable; NZ$1 = 65.4 USc; TWI-5 = 69.2

China's industry in profit recovery; Singapore factory production strong; Swiss vote again on immigration; US durable goods orders weak; Aussie auctions strong; UST 10y at 0.66%; oil and gold stable; NZ$1 = 65.4 USc; TWI-5 = 69.2

Here's our summary of key economic events over the weekend that affect New Zealand, with news American factory orders are remaining weak and missing analysts recovery projections badly.

But first up, China has reported that its industry is recovering its profitability and in quite a strong manner. In August they were down -4.4% from the same month a year ago, but that was a good recovery from the -8.1% shortfall in July. But not improving however are high inventory and receivables levels.

China’s US$1 tln sovereign wealth fund posted a +17% gain on its overseas investments in 2019. That reverses a small loss in 2018 and is a similar gain it posted in 2017. Much of the gain was from investments in the US which is still where most of its investments are. Norway also has a huge sovereign wealth fund and in 2019 it earned +20% in 2019 - but recorded a -3.4% loss in the first half of 2020. In 2019 the NZ Super Fund reported a +21% return, but has also struggled in 2020.

In Hong Kong there has been a continuing rush for British passports. The trend started in 2019 and has continued unabated in 2020 as riots and China's tight grip is fuelling the surge.

In Singapore, they reported a very strong rise in industrial production for August, up almost +14% from the same month in 2019 when the expected gain was less than +5%. It is a positive surprise built on gains from their electronics industry.

In South Korea, consumer confidence is falling again and that is from a low base to start with. It is a worrying sign for them.

In Switzerland, they are voting on another referendum trying to limit immigration. A 2014 one passed by a razor-thin margin but was never passed into law because it infringed on agreements it had on freedom of movement with the EU. This one is another attempt to freeze out the EU, sometimes referred to the Swiss Brexit. Results will be known in a few days. If passed it will be tough on Swiss employment because the EU is their largest trading partner. The referendum is supported by one right-wing political party and is not expected to pass this time, although the pandemic impact has added uncertainty about the result.

In the US, their August durable goods orders were weak. They came in -6.3% lower than the same month in 2019 and well below analysts expectations. In fact, business investment in capital goods were down almost -11%. These are big retreats from the boardroom. Perhaps the only positive is that they are inching back up monthly and have done so for four straight months now.

But weak factory orders didn't stop a strong rise on Wall Street in their final session last week. And the futures market suggests it will rise another 1.5% when it opens tomorrow. That would be enough to wipe out last week's earlier losses.

Across the border, Canada has reported a four month government deficit of -C$149 bln compared to less than -C$2 bln in the same period in 2019.

In Australia, there is a widespread expectation that their Federal Government will roll back their responsible lending rules next week. These are rules imposed after the Hayne Inquiry into financial system behaviour. Banks have claimed they effectively stifle lending. Consumer groups claim the lending they stifle is irresponsible lending. If the rollback happens, it will render the Hayne Report moot. Bank shares surged in trading on Friday, with the CBA up +3.0%, NAB up +6.9%, Westpac up +7.4% and ANZ up +6.3%. The Aussie banks have had a major lobbying 'win' here.

And Sydney's auction clearance rate rose to 75% this weekend. And Melbourne has removed restrictions on open homes, which is expected to generate a make-up surge.

The latest global compilation of COVID-19 data is here. The global tally is 32,919,000 and up +554,000 in two days. That is a clear signs the pandemic spread is accelerating again. Brazil and Russia are the key countries providing the most impetus, but European nations are as well. New infection levels are exploding in the UK, France and Spain especially. Global deaths reported now exceed 995,000 (+10,000) but clearly many are going unreported.

Just under a quarter of all reported cases globally are in the US, which is up +90,000 since Saturday to 7,297,000 and there is a resurgence there too. The number of active cases are rising at 2,562,000 so they have more new cases than recoveries and making no progress. Their death total is now just over 209,000 and back rising at +1000 per day. It seems destined to track higher soon.

In Australia, there have now been 27,040 COVID-19 cases reported, and that is only +40 more cases that on Friday. Australia, and even Victoria, seem to be managing their community outbreak well now. Deaths are up however at 872 (+3). Their recovery rate is now over 90%.

The UST 10yr yield ended last week at just on 0.66% and that is a -4 bps decline for the week. Their 2-10 rate curve is unchanged at +53 bps, their 1-5 curve is also unchanged at +15 bps, while their 3m-10 year curve is now just under +58 bps. The Australian Govt 10 year yield is down -3 bps at 0.83%. However, the China Govt 10 year yield is up +3 bps at 3.16%. The New Zealand Govt 10 year yield is still at 0.47% and off its record low.

The price of gold is starting the week at US$1861/oz and -US$5 lower than when we checked on Saturday. Over all of last week, the yellow metal has dropped a heavy -4.3% or -US$85/oz. And silver fell even harder, down -15% in one week.

Oil prices have firmer very slightly and are now just under US$40.50/bbl in the US, while the international price is unchanged at just under US$42/bbl.

The Kiwi dollar starts today at 65.4 USc and minor softness the weekend. But against the Australian dollar we are firmer at 93.1 AUc and almost a +½c from Friday. Against the euro we are marginally firmer at 56.3 euro cents. That means our TWI-5 has inched up to 69.2.

The bitcoin price is unchanged from this time Saturday, and still at US$10,729. 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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35 Comments

"Retail Apocalypse" lots and lots of generalised assertions and lacking hard reputable sourced information to back it up.
Use of many of the supporting clips laughable; scene of meaningless sheets of figures being highlighted or computer screen flashing data mean absolutely nothing . . . an after-hours empty mall with closed shops with roller doors down to support the notion of downturn . . . . photo of a thirty-something looking Donald Lambro who is actually 80 . . . . and many other questionable things. . . seriously?
Need to be far more critical of what one watches.

I just watched both of those videos from start to finish just to see what these DGMs are getting brain washed by... it makes me depressed just watching a few minutes of that ...

Looks like at least the Swiss still have some sanity.
Rejected Swiss Brexit by 61.7%.

If there's one country that wants-its-cake-and-to-eat-it, its Switzerland. Always has....But it's a beautiful country that is arguably being ruined by mass immigration.

A combination of fiscal probity and monetary stability made the currency a safe place to wait out the crisis, and investors began buying up Swiss currency, driving up the value of the franc. This was a disaster for Swiss exporters, and the Swiss government initially imposed reserve requirements on non-resident deposits. When that failed to stem the inflow of capital, they banned interest payments..... When the Swiss government imposed a 12% “negative rate” on nonresident deposits, “the move stunned market participants,”

https://www.bloombergquint.com/gadfly/swiss-history-of-negative-interest...
Everything has been done before.

"Despite its political and economic problems, Venezuela ranks first among all Latin countries in cryptocurrency adoption. One can only imagine how much Bitcoin could grow now that it can bypass the internet."

Unfortunately if the government of any country decided to disallow a satellite transmission license into their region then that satellite operator would be obliged to terminate the links. Absolute power...remember.?

What if I told you, the internet is just several computers connected together. So is the cloud. The Pirate Bay still exists in spite of all out war on it's domains. The deep web is 90% of the internet and Google has no idea about it. In some countries it's faster to mail a usb drive than download a large file. But data persists.

You've got more chance of nailing blood to a wall, than governments do of regulating the world wide web.

Minor parties (excluding the Greens) have put forth their stance on immigration but the two major ones still elude the question, hoping Covid would take care of the issues around it.

The problem that won't go away because of Covid is the number of residency applications in hand that have doubled in the last 18 months, sitting at nearly 27k end of August 2020.

https://www.rnz.co.nz/news/national/426983/election-2020-immigration-res...

Is it true Jacinda is fighting COVID to the tune of $16M dollars through arts grants ?
$26k "Towards writing a novel about the collapse of democracy in an association of alpaca breeders."
$30k "Towards development of a new body of work exploring modernism, feminism & queerness, with specific reference to the Otago region."

Just securing a few Luvvie Votes....

Waymad quick, secure Christmas delivery

https://www.amazon.com/First-Little-Book-Intersectional-Activism/dp/1472...

Titania believes that childhood is a form of slavery, with adults indoctrinating their charges into outdated belief systems. Why, for instance, do teachers focus so relentlessly on mathematics and literacy when their pupils lack even the most basic understanding of poststructuralist queer theory?

full list of truly worthy tax payers money below used to fight COVID ! More solid policy Jacinda and Labour coalition.
https://www.taxpayers.org.nz/creative_nz_grants

I am sure the fees-free first year tertiary fees going into creative arts and humanities programmes that will eventuate in little to no economic value to the taxpayer eclipses the cost of these grants.

https://www.educationcounts.govt.nz/statistics/tertiary-education/partic...

Jolly Swagman interviews Nobel Prize winner and behavioral economist Vernon Smith on housing bubbles. Highly recommended and very enlightening interview and a lot of relevant insights to chew through. Jolly Swagman is a bright, curious guy who's really come into his own on things economic while many Aussies are too lazy to accept anything except the status quo and what's pushed to them through the media.

https://josephnoelwalker.com/99-housing-bubble-week-epilogue-not-all-bub...

ah, good to see he's back, I ran out of his podcasts to listen to when he vanished during COVID season 1.
I have some lunchtime listening again. :)

Enjoy.

Finally ... the Occam solution ...
"The Māori Party" promises to halt all immigration into NZ until housing supply catches up with demand,
https://www.rnz.co.nz/news/political/426797/maori-party-housing-policy-i...

I see the new Māori party leadership has vowed to undo some of the damage dealt to the community by their own predecessors, on whose watch housing speculation and mass migration were elevated to 'primary growth drivers' status in the NZ economy.

Finally, a political party that will deal with one of the biggest issues we face currently.

Let's hope we have some sensible, decisive leadership in Parliament when such rubbish petitions are brought into discussion.

Petition requests That the House of Representatives grant a residence amnesty to approximately 200,000 migrants on temporary working visas

https://www.parliament.nz/en/pb/petitions/document/PET_101348/petition-o...

Petitioner Ryann Lourenço wasn't in NZ in 2000 when the Clark administration granted amnesty to 1000's of overstayers to which Australia responded by slamming the doors shut to NZer's cancelling CSV visas

Petition - House of Representatives grant a residence amnesty to 200,000 migrants on temporary working visas, similar to the amnesty granted in 2000 under the fifth Labour Government

Lourenço, a former Queenstown chef, says migrants want to support themselves and NZ's economic recovery. He has petitioned NZ Govt to relax visa restrictions so he could find work. Ryan and his girlfriend, Daniele Fukuda, are now living in a converted truck at a campground in Porirua

The great cover up
Article in NZHerald about contamination by the Auckland Harbour Bridge
What is extraordinary about it it the number of government agencies that knew about it, their legal advisors and the number of lower echelon employees involved. And the ease with which it has been kept under wraps. It has been covered up for 20 years and never once has a whistleblower come forward until now

These are the agencies who had their fingers in it

NZTA
Auckland public health officials
Auckland City Council
Auckland Regional Public Health Service
Auckland medical officer of health Simon Baker
Auckland Harbour Bridge
Total Bridge Services

It's that easy

Poisoned land: NZTA hushed historic bridge contamination
https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12368410

With federal government borrowing the largest additional credit source to the economy [NZ experience], it is also the least economically efficient method which only adds more to negative factors piling up against legitimate growth.

The more only the government can borrow, the more only the government does borrow. And the more the government does borrow, the harder it is to get the economy growing (sorry, Krugman). The more difficult it is for meaningful growth, the more banks will only lend to the government. Link

Surprised to see you here promoting bitcoin Audaxes

A global phenomenon spreading like a virus - Abenomics: Big Debts With Nothing To Show For It

NZ on the same road of failure - Government receives $1.385b of bids for negative yielding $450m bond

The number of "reduced" properties are rising rapidly on Trademe. Interesting times ahead.

Reduced number of properties ???? or
Increased number of properties with a reduced price

Yes, 239 now, was less than 50 a couple months ago.

also, worrying for Queenstown.

https://www.trademe.co.nz/a/property/residential/sale/otago/queenstown-l...

I highly recommend you listen the podcast I posted above. Vernon Smith says that bubbles burst without much fanfare. Even though it is obviously happening, people choose to ignore it because of loss aversion. He said the magnitude of the psychological torment of prices falling is often greater than the gratification of prices rising.

China Channel issues.

https://www.rnz.co.nz/news/business/427092/a2-milk-shares-fall-12-percen...

Shares in A2 Milk, the second most valuable company on the NZX, fell 12 percent to a five-month low.

However, A2 said the sales problems appear confined to just the daigou channel because demand underlying consumer demand in China remained strong.

A2 Milk said sales through the daigou channel - purchases made by Chinese visitors or companies in New Zealand and Australia - had been disrupted because of border closures and Covid-19 lockdowns.

Daigou, is where people in say Sydney go to Coles or Woolworths & buy infant formula, parcel purchase up (including supermarket check out receipt) & post it back to mainland China. (Aud $10/KG courier)
In the evenings in Sydney you walk round shopping areas, hearing the thwack thwack thwack of packaging tape coming from commercial offices.

Lockdowns stop shopping, and lack of transport space has stuffed them.

P.S. local legit exports expect their profit margins be hammered when next new covid fright rates (including sea freight) come after Xmas.

Interesting. I was wondering what was behind this.