US retail sales rise but factory production falls; Canada ends some pandemic support; China has bumper grain harvest; S&P warns; Australia faces China tariffs on cotton; UST 10y at 0.74%; oil and gold unchanged; NZ$1 = 66.1 USc; TWI-5 = 69.6

US retail sales rise but factory production falls; Canada ends some pandemic support; China has bumper grain harvest; S&P warns; Australia faces China tariffs on cotton; UST 10y at 0.74%; oil and gold unchanged; NZ$1 = 66.1 USc; TWI-5 = 69.6
In the southern Tasman Sea between Dusky Sound and Preservation Inlet. Photo by Roger Harris

Here's our summary of key economic events overnight that affect New Zealand, with news the pressures of weighing against the pandemic is about to bring a 'blizzard' of sovereign ratings downgrades.

But first, in a positive surprise, American retail sales for September ended a bit better than most analysts were expecting. They rose from August and were up +5.4% from the same month a year ago. On-line (non-store) retailing is powering the gains, up +27% from a year ago. Used car sales powered the vehicle retailing industry, up +14.4% year-on-year.

But those gains are not being seen in American industrial production. The latest data fell more than expected in September when actually a rise was expected. This production is now -7.3% lower than in the same month in 2019. Imports (from China) are filling the product demands in a spectacular failure of their avowed industrial strategy.

But consumer sentiment doesn't seem to care. It is up in October from September, although still a massive -15% lower than this time last year. Maybe the 'don't care' description isn't entirely fair - the views on 'current conditions' declined in October from September. But future expectations rose. So perhaps American consumers are just waiting for a leadership change.

And it is now official; the US posted a -US$3.1 tln budget deficit in their fiscal year ended September 2020 - three times more than for the previous year's terrible outcome.

In Canada, their central bank is ending three emergency support programs. Their bankers' acceptances and mortgage bond programs will both end scheduled operations next week, while their repo operations will be wound back.

In China, a bumper grain harvest will leave the nation with more than a years consumption in inventory, and cap the recent rise in grain prices, they claim.

South Korea has posted a worsening jobless rate in September, but it is still a low 3.9% even if it isn't improving. Many countries will look with envy at that level.

And Singapore's exports fell sharply in September, in an unexpected worsening of their trade balance.

After barley, wine, beef and coal, the next trade China is punishing Australia with is apparently going to be cotton, as farmers brace for a Chinese announcement of a 40% tariff imposed by Beijing. The screw is tightening and Canberra has become much more circumspect very recently. Two thirds of all Aussie cotton is exported to China.

Remdesivir, the only antiviral drug authorised for treatment of COVID-19 in the United States, fails to prevent deaths among patients according to a WHO-funded study of more than 11,000 people in 30 countries. But the drug company behind the treatment is organising a push-back on the findings.

Standard & Poor's is saying that the immense costs of supporting health programs, businesses and workers through the pandemic was fundamentally undermining most countries’ finances. And so there are a 'blizzard' of ratings downgrades about to be announced.

On Wall Street, the S&P500 is up +0.3% today and making back yesterday's dip. They are heading for a weekly rise of +0.7% so much of that is happening today. Overnight, European markets rose by more than +1.6% making back most of yesterday's fall. Yesterday, Shanghai traded up +0.1%, Hong Kong ended up +0.9% in a partial recovery, and Tokyo was down another -0.4%. For each of these Asian markets, the weekly change was +2.0%, +1.1% and -0.9% respectively. The ASX200 ended its session down -0.5% from the prior day cementing in a weekly +1.2% gain, while the NZX50 Capital Index was down -0.4% and ending also ending the week with a +1.4% gain.

The latest global compilation of COVID-19 data is here. The global tally is 39,081,000 and up at the fastest pace ever of +394,000 in one day. The case growth is concentrated in Russia, the UK, Iran, France and Italy. Global deaths reported now exceed 1,101,000 (+7,000) but clearly many are going unreported.

The largest number of reported cases globally are still in the US, which rose +79,000 in one day to 8,248,000. They are clearly now in a third wave (initial was in April, then a larger one in July, and this new one threatens to be larger again). The number of active cases is at 2,693,000 so many more new cases that recoveries and going backwards fast now. Their death total is over 223,000 and still rising at +1000 per day. By the end of 2020 their death toll will top 300,000+.

In Australia, there have now been 27,371 COVID-19 cases reported, and that is just +9 more cases than we reported yesterday. But again, most were in NSW. Deaths are unchanged at 904.

The UST 10yr yield is little-changed this morning at just on 0.74% but that is -4 bps lower than where we were at this time last week. Their 2-10 rate curve is a little steeper at +60 bps, their 1-5 curve is still at +19 bps, while their 3m-10 year curve is also little-changed at +65 bps. The Australian Govt 10 year yield will start today down by another -2 bps at 0.73%. The China Govt 10 year yield is unchanged at 3.25%. The New Zealand Govt 10 year yield is also unchanged at 0.54%.

The price of gold is still little-changed from yesterday at US$1902/oz but that is -US$23 lower from this time last week.

Oil prices are little-changed, now just over US$40.50/bbl in the US, while the international price is still just under US$43/bbl. Both benchmarks are little-changed over the past week.

The Kiwi dollar starts today just a tad firmer at 66.1 USc. But that is a -½c fall in a week. Against the Australian dollar we are also firmer at 93.3 AUc and holding on the recent gains. In fact it is more than a +1c gain in a week. Against the euro we are holding at 56.4 euro cents and unchanged in a week. And that means our TWI-5 is now at 69.6 and little-changed over the past seven days.

The bitcoin price is unchanged today, still at US$11,340 but +2.6% higher in a week. The bitcoin rate is charted in the exchange rate set below.

And finally, don't forget to vote today. Polls open at 9am and close at 7pm.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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43 Comments

China Ag, remember to check out

http://dimsums.blogspot.com
The item regarding Malta fever is interesting

Quite horrific to see what’s behind the propaganda lines in China.
Yet, NZ organisations are desperate to enter into partnerships with this regime.

Maybe its that thinking that is inline for a Reset.

https://www.smh.com.au/politics/nsw/maguire-s-post-politics-plans-crumbl...

Two significant items of interest in the linked SMH article
You might want to contemplate giving further thought to

1. Bright Foods is or has been a playa here in NZ, and
2. Surprise, they export hay from Australia to China

Here is ABC Oz, showing exactly the daigou industry....
Buying milk powder from Coles/Woolworth and posting it to China...
Hear the thwack, thwack, thwack of that packaging tape....

https://youtu.be/BdMD4o_mvDI
Do you believe 150,000 daigou in Australia?

Reference to A2 milk & Blackmores....

It's Brazil that I find interesting, they are super growers now and they still have lots of potential. Brazil has 48 million hectares in just two crops, 178 million hectares in grass. I was hoping to get the the Moto Grosso to stay with some farming acquaintances but that's been put off. It's also not that safe anymore along with Argentina. 214 million head of cattle in Brazil, massive player in the ag world and a potential disruptor either way.

China took all of last years Brazil Soy and they have sucked up most of USA/Canadian Soy, imports into China for the last year must have been enormous.

Not much use being a super grower on a dead planet?
According to some estimates, industrialized farming–which produces greenhouse gas emission, pollutes air and water, and destroys wildlife–costs the environment the equivalent of about US$3 trillion every year.

Externalized costs, such as the funds required to purify contaminated drinking water or to treat diseases related to poor nutrition, are also unaccounted for by the industry, meaning that communities and taxpayers may be picking up the tab without even realizing it.
The way we produce food is not sustainable.
We need to integrate nature into decision making at
every level to ensure food production does not destroy
the basis on which it depends.”
https://wedocs.unep.org/bitstream/handle/20.500.11822/27628/3.%20Janice%...

21
up

you just need to support inter-generational family farms. I am shocked every year by what the big cropping guys down the road are up to. Big corporates end up been run by accountants with negative outcomes for not only the environment but rural communities too.

Fully agreed, I hope that Ag coop Banks/Financiers are more prudent on this area both in OZ & NZ, tweak some of their financial model to promote more sustainable growth, not like those forever greed of RE 'productivity' by 4 OZ bank kids - leave those 4 naughty kids downgraded into OBR & let all Kiwis move their funds back to what we are known good for.

Support Inter-generational Farmers and their farms? Why?
Can we infer from that you are a second-generation farmer and your farm is inherited
How big is it

yep, my ancestors came here in the 1860's so I am fourth, hopefully children will continue and be fifth, family farmed in Stirling scotland before that. I sold out to a dairy farmer and now have 250 acres sth of Havelock North. I have a small vineyard and trade lambs or bulls sometimes both. I am into multi species planting which in looking promising. I want to get back into farming just haven't found the right farm, missed out on two, in hindsight I wish I had been bolder. I am also getting old enough to enjoy a hand, some jobs are just not fun on your own. I also love planting and growing trees making the environment more interesting and diverse.

We need to keep middle class families as landowners, goes for housing too, it's what I believe makes a stable democracy, people with skin in the game. The big corporates are also I suspect not so crash hot ,with a capital gains tax it will be interesting to see if they hang about. I have had experience with large scale farms and I think their continued growth funded by debt is problematic, that goes for horticulture too. Around here all farms sold this year that I know of have gone to corporate type farms and a large charity.

Brazil has massive farms many over 300,000 hectares and the same corporates have been huge investors in Argentina changing the Pampas into cropping land. This will be a big issue for these countries in the future with massive inequality.

The end game is multi choice, at the moment.
https://www.world-grain.com/articles/14343-bioceres-anticipates-brazilia...

Can beat you by 10 years. My great grandfather arrived in Canterbury 1850. The original family farm was only sold on in 1958 & that family still owns it. My grandfather & father farmed seperate to that up until it was sold in 1943 because my grandfather couldn’t manage it while my father was serving overseas. There remained for a longtime, a lot of regret in the family about that.

My wife's family were very early, farmed at Aubrey, but went back to Devon after a few years and then continued on to join family in India. Came out here when they were 19 and first farmed at Fairlie but found it cold and harsh. My wife's family went to India I think in 1763 and left at partition. Her grandmother was the Last Viceroy's wifes lady in waiting or one of them.

My husband's family on his mother's side arrived (from Newfoundland) in the 1850s on the ship 'Clara', a ship they had purchased and sailed here with another large family. They brought with them a steam engine. Met up with another ex-pat Newfoundland family who had established a sawmill at Whatipu on AKLs west coast and the steam engine powered the mill. Sold that business and headed north, farming and milling at Whananaki, Maungatapere and Otuhi. Amazing people and an amazing story.

That is an amazing story, just imagine all those beautiful trees.

talking of corporates have you seen the new one starting up, they are trying to raise 100m to start buying land
https://nzrlc.co.nz/

yeah, i wouldn't do that

Hearing comments from various sources in Sthland RE saying that investors are turning to farms to invest in - equity partnerships are highly sought after by investors. They want to get their cash out of banks and in to something they believe will hold its value. They are not looking for dividends but rather return of capital in the future.

These are the farmers we need, instead we let a whole lot of farmers leverage their equity and go on a debt binge that is going to be very painful to correct.
https://farmersweekly.co.nz/section/other-sectors/on-farm-story/our-atti...

Accountants and negative outcomes etc. That and the rest of it more or less sums up how I got to feel about the Key National government. Create Corporate NZ but let the staff and shareholders, ie us at street level, fend for themselves. National lost touch with the ordinary folk and to be candid, nothing much about the new leadership and culture points to much change.

I am still looking for a copy of that book, think I got a copy out of the States, thanks. Barber had an interesting book on the British in China.

https://www.amazon.com/Fall-Shanghai-splendor-imperial-revolution/dp/069...

I cannot see myself ever voting for National again, why keep the Brownlees? major vote losers. Under M Thatcher the UK conservatives had 2.4 million paid up members,today it's around 140k. Same happened here,that enables super donors to exert too much influence, goes for labour too.

I have far too many books and don’t need to keep that one. Happy to mail it to you, if there is some way to do that without having to flash your address on here?

It's okay I sent it to a friend and he's going to post it on. Thanks for the offer, I have a ton of books if you ever need something to read.

Yet most farmers are "blue for life"?

It's a lovely short clip of him speaking. Amazing thinker, amazing man.

Appreciated for that input, I know little about it.. your general stats really high light the next potential source of world Ag player.

we have 12 million hectares of farmland, just a rounding error.

Brazil doesn't do much double cropping, there is huge potential there for massive yield increase.

When is RBNZ due to normalise the treatment of mortgages with deferred repayments or on interest only arrangements due to Covid-19? That was only supposed to be a temporary program.

One wonders, idly, what percentage of that there US Retail surge is guns'n'ammo......

'Blizzard' of ratings downgrades...that doesn't sound great. But I thought economies everywhere were doing fantastic hence our exuberance about loading up with as much debt as possible to buy as many houses each as we can. I smell a rat.

Thousands of jobs go begging because unemployed Kiwis won't take them

More than likely the offered wages are so poor potential NZ candidates cannot sustain the costs of commuting to and fro from affordable accommodation and work.

-These jobs pay above minimum wage. (They don't say by how much)
-I wonder if any of the Ni-Vanuatu workers read this article and are now wondering whether their supposed efficiency rating being 1 of them to 3 kiwis will be reflected in their pay rates if they ever get to return?

This articial shows we are going to an inflationary effect on these products.... or the growers go broke.

How much would you be prepared to pay for a tasteless punnet of over-fertilised strawberries

Not much at all, I'll grow them and they will have flavour.

There is so much plain BS in that article Audaxes.
For example: There is one person quoted there complaining about the shortage. But two years ago he bought about 40 kiwis and backpackers into the area (at great cost to their fragile finances)
Two days in it became. "no work, please leave"
Now the prick moans about worker shortage.

So that's in the viticulture industry KH, not horticulture?

Interesting what is coming out about Jo Biden and his son Hunter latelyand how it is being suppressed on social media.
If former Mayor of New York City, Rudy Giuliani is correct and which he will be being a lawyer, he is holding a smoking gun that will keep Biden out of office and put him in jail.
https://youtu.be/GureRbH-_Xs

Here we go again.
It is looking like the Biden and social media goose is well and truly cooked.
https://youtu.be/xqsdqkq52AI

And more coming...
https://youtu.be/QPQRSZ_UopE
This one saying that Hunter is giving half of his earnings to his father.....
It dosen't look like poor old sleepy Joe will make the election unless h can suppress this info.

Specially for you Kezza R
https://patpmovie.com/watch-now/

Even our Kiwi media has played apart in this. Very few to none have a good word to say about Trump but do not research into if what they are told is ligit.

The Republican Party are a master class at this type of political thuggery. Far heavier sluggers than the Democrats. Orchestrated, timed and staged to maximum effect. Last time it was Hilary who led with her chin with her careless emails. This time? This looks like a replay.