US stimulus talks fail; October PMIs expand; China commodity prices jump; APRA sees tough 2021; pandemic infections accelerate; UST 10y at 0.84%; oil soft and gold unchanged; NZ$1 = 66.8 USc; TWI-5 = 69.9

US stimulus talks fail; October PMIs expand; China commodity prices jump; APRA sees tough 2021; pandemic infections accelerate; UST 10y at 0.84%; oil soft and gold unchanged; NZ$1 = 66.8 USc; TWI-5 = 69.9
Mount Taranaki

Here's our summary of key economic events overnight that affect New Zealand, with news the pandemic resurgence in both North America and Western Europe are very worrying trends.

But firstly in the US, their stimulus talks have fizzled. White House negotiators were instructed to pull back as an election tactic.

The first views of October PMI activity were released overnight. In the US, their services sector expanded faster despite a slowing of new order growth. But their factory sector's expansion rate was unchanged.

In the EU, they are getting a retreat with their services sector contracting although their factory sector is still expanding. Germany is still expanding but France is the laggard.

In Australia, their services sector's October expansion is strong enough to cover a factory sector whose expansion is slowing.

In Japan, things are not flash at all, with both services and their factory sector contracting in October, even if less so.

In China, iron ore prices are staying high (+40% in 2020) but have stopped increasing. However, steel making coal prices are back rising fast again (+16% in 2020). And prices for corn are racing higher as the local grain harvest is late (+30% in 2020) even if officials claim it will be a full one.

More data out of Taiwan is impressing. Their September industrial production rose by more than +10% compared with the year-ago levels, and much faster than the good +4% growth in August. Export orders are driving this. By comparison, their nearly +3% rise in retail sales looks tame.

In the EU, they have decided that non-meat products can use the term 'meat' or 'burger' or 'sausage' despite existing bans protecting 'milk' and 'cheese', and despite aggressive actions protecting regional provenances. It is a typical European two-faced approach, claiming accuracy but rolling over for local lobbying. It is a kind of greenwashing.

In Australia, the head of regulator ASIC has stepped aside in a growing scandal over an 'entitlement culture' at the top of the organisation where many personal expenses were covered by the organisation. ASIC was at the forefront of prosecuting the 'culture' claims against financial organisations.

Fellow regulator APRA has been testifying in Canberra, and says that 2021 will "be just as difficult as 2020" in terms of financial uncertainty and stability.

Wall Street is heading for a losing week, the first for a month. It is flat in afternoon trade today compared with yesterday, and if that holds will be down -0.9% for the week. Overnight, European markets were up about +1%. Yesterday, Shanghai ended -1.0% lower to cap a week where it lost -1.7%. Hong Kong ended Friday up +0.5% on the day and ending with a weekly 2.2% gain. In Tokyo, they ended Friday with a daily +0.2% rise and a weekly +0.5% gain. In Australia, the ASX200 ended the day down -0.1% for a similar weekly change. The NZX50 Capital Index was up +0.5% on the day enabling it to record a weekly gain of +0.3%.

The latest global compilation of COVID-19 data is here. The global tally is 41,982,000 and up yet another record +585,000 in one day. It is first-world countries that seem to be having the most difficulty containing the new wave. It is raging in France, the UK, Spain and Italy again, and Belgium also has a very bad outbreak. Authorities in all these countries have lost control and it is hard to know how they will regain it. Global deaths reported now exceed 1,134,000 (+7,000 per day).

The largest number of reported cases globally are still in the US, which rose +81,000 yesterday alone to 8,689,000. They are clearly now in a third wave and yesterday's increase was higher than the highest day in their second wave. The number of active cases is at 2,792,000 so many more new cases than recoveries. Their death total is over 229,000 and still rising at +1000 per day.

In Canada, they are about to record 10,000 deaths and their second wave daily infection rate is nearing double their first wave.

In Australia, they are not getting any resurgence. There have now been 27,484 COVID-19 cases reported, and that is +18 more cases than we reported yesterday and new cases are essentially from NSW and WA. Reported deaths are unchanged at 905.

The UST 10yr yield is unchanged at just on 0.84%. It had reached 0.87% and near a four month high, but slipped back sharply when the stimulus talks ended in Washington. Their 2-10 rate curve is little-changed overnight at +69 bps, their 1-5 curve is also unchanged at +25 bps, along with their 3m-10 year curve, still at +76 bps. The Australian Govt 10 year yield will start today also little-changed at 0.84%. The China Govt 10 year yield is also still at 3.20%. But the New Zealand Govt 10 year yield is up +2 bps at 0.61%.

The price of gold is unchanged at US$1903/oz. And it is still at the same level it was this time last week.

Oil prices are a little softer today, now at just under US$40/bbl in the US, while the international price is now just on US$41.50/bbl. But despite these low prices, there was another good rise in the number of active wells operating in US oil fields (+6).

The Kiwi dollar starts today just a little firmer at just over 66.8 USc. Against the Australian dollar we are holding at 93.7 AUc. Against the euro we have dipped to 56.4 euro cents. And that means our TWI-5 is still at 69.9.

The bitcoin price has taken a step back today and is now at US$12,797 with a -2.0% retreat. 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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16 Comments

So what all this about PayPal now taking payment to sell products with Bitcoin, but not making payment for those same goods in that 'currency'? ie: Bitcoin 'goes in' to PayPal; you can by something and pay for it with Bitcoin, but they don't pay out in Bitcoin, just in $'s. If that's right, it sounds like a Bunker-Hunt type project and his great silver idea!

Who cares as long as you can buy and sell...reminds me of the old barter system.

Maybe. But it looks like PayPal might take over from the New Zealand Residential Property Market as THE place to launder those Dodgy Dollars that might have come your way! Bitcoin in, Dollars out.

That's alot of plastic crap to buy

There won't be any money laundering as you can only put cash in and take cash out. Presumably they hold an equivalent amount of btc to match your account. So if I have say, 10 btc, there is no way for me to use that to buy books on amazon unless I cash out. Fortunately there are already many ways to easily spend btc in the real world, although I'd rather burn my nzd first

ASIC looks to be the foxes in charge of the hen house...

Mass economic uncertainty in the US, stimulus talks not going anywhere, potential civil unrest from upcoming elections, pandemic getting worse. Markets say "no problem". Maybe we should stop calling them "markets", which indicate they operate buying and selling based on value. Whats a better name? Shamarkets instead of share markets?

Base a board game on it then. Good name would be snakes and ladders. Sure to be a hit with politicians too.

'Resurgen panadenic threatens global recovery'

Above is good news to stock and Housing Market as reserve bank and givernment will get more excuse to promote policies to pump up the asset class.

New Mantra = More Screwed The Economy - More Printing of Money and Stimulus

This is just the begining as will see more stimulus even in 2021 and may continue into 2022 and beyond as now reserve bank and governments have no choice but to folow the path chosen by them.

10
up

Yes the pandemic has been fantastic for assets. Can't wait for War, Famine or some greater catastrophe to really increase those ROIs. The last thing we need is stability and no excuse to continue juicing it.

Preferred your original picture of Mt Taranaki with the lighthouse in the foreground. Stunning

(QE + OCR)^Government spending = economy.

“ . . first world countries seem to be having the greatest difficulty containing the third wave”
This quite possibly because it is only first world countries actually fully report instances of Covid.
One needs to just look at countries such as India and Indonesia and it would seem likely that only a very small fraction of cases of incidents and deaths are likely to be reported.
This has considerable significance for the future control and elimination whether it occur naturally or dependent on a vaccine.

Interesting here,
Dr Chris Moy, head of AMA in Australia.

https://youtu.be/IFvQS6ADReQ
Fascinating comments about WA, VIC & NSW.

The feeling is NZ and particularly Auckland is alot like VIC.

World see NZ is the place to be for future short term investment, so Kiwis will react differently to CB stimulus compare to the US - So hopefully, seeing this year positivity, after initial stimulus, early next year our RBNZ should steadfast to announce more QEs - this is the key to maintain upwards momentum of NZ overall economy.

Yes we have an opportunity here. The government should not leave all the heavy lifting to the RBNZ though. The RBNZ is not actually the govt, although people are starting to get confused and think that Adrian Orr is responsible for all the financial decisions in the economy and Grant Robertson is some kind of bystander.

People are still having trouble getting their invoices paid on time and paying their invoices. The banks did not support small businesses to get through the difficult times with increased overdraft facilities so even viable businesses are having to be cautious and pay invoices only when they come due. Pushing banks to lend will only make them act to appear to want to lend. What needs to be done is to introduce competition in the form of Bank of IRD loans or a new state bank while at the same time linking loans for housing by commercial banks to a proportionate ratio to increased lending to business. There needs to be a stick to beat banks with if they don't behave.

There needs to be a short term 'infrastructure' package to soak up some of the unemployment and the most obvious candidates are transport upgrades and state housing builds. Look back at how the first Labour govt in the 1930's got the job done on housing and repeat. Find what works and do it again. Forget what didn't work.

A lot of our problems come down to a failure to invest in new ideas or refurbish existing structures in a timely fashion. What is needed now is not to save money and hope for the best. What is needed is investment in R & D and effort to make new ideas into prototypes and prototypes into new businesses. The govt should be spending money on this sort of thing so that the private sector has more material to work with.

Private debt in New Zealand is 90% of GDP. NZ Govt Debt is 20% of GDP. Govt needs to spend more as a proportion of GDP to take the debt pressure off the private sector. Australian govt debt is 40% of GDP. US and UK govt debt is near 100% of GDP.

The fact that NZ govt debt is so low compared to other countries is not because we are smarter than other countries, it just means that we have allowed the NZ govt to spend less on essentials items and pushed the costs of supporting those essentials onto the private sector. Those in the private sector who are smart enough to privatise the profits and socialise the losses have done well. All the rest of the businesses have seen their profits eaten up in increased rates, fees. rents, interest payments, gst and .similar user pays devices. This trend needs to be reversed so that the private sector has a chance to create new jobs to replace the loss of jobs that automation, data harvesting and core function concentration is creating.

Well NL? precisely. The past 25years any NZ govt is shy away from the fact that we're too much into F.I.R.E druggie economy, vested interest play largely there. One of the cunning way to hide those housing inflation? simple, don't put it into CPI report. We've been conned that we're export led economy whilst without public general knowledge that only being pulled by the Dutch bank conglomerate, the rest of OZ banks? including Mr.Orr previous employer? nuff said.. just flaming the FIRE. The IMF has warned NZ the past 10years about this private debt. NZ is little country that any prudency measures? will most likely to be binned, labelled as Nanny state try to intervene: Alcohol, gambling, Tobacco, Vaping, Sugar, Salt, Nitrate, Real Estate etc. - all stating about the tax income (including the recent Marijuana promo), RE tax obviously through what you've said land rates etc. - Either blue & red team? shy away to give much tools to RBNZ, DTI rejected by Nat, CGT rejected by Lab. - so? sadly, even the recent leader stated that 'the only way to curb this silent but visible RE inflation?' is 'add more supply' now, Mr.Orr & team are not idiot. That's is a clear signal 'yet again' that the heavy lifting was being left to them.. NO NZ govt at the helm willing to tackle this issue, afraid of jeopardizing their popularity contest. So? I said to Orr & RBNZ team, so be it: we've got the next 15months at least to do this herculean task alone, the new govt just want to kick the can further with 'supply reasoning' - let's do it, we should kick the can further to be out of sight completely, Here're our tools: LVR (permanent bin it), QEs/LSAP (triple to quadruple it), OCR (put to double digit neg), never uttering these acronyms again: CAR, TD guarantee, DTI - the target is to make those 4 big OZ into OBR submission/2023 & draw 'some' of their profit savings in their RE book back into real NZ productivity, some of those big funds is currently being silently shifted to the bank above which trying to lift a real productivity. - After all, how many chances the like of this worldwide pandemic? given us the single shot of opportunity to adjust our current sole economic orientation? from F.I.R.E flame illusion to become the real supplier, Nation of productivity again. But don't hold your breath, NZ is a bunch of Kiwis, which often like to ignore terminal ill diagnosis, avoid, prolong, pretend.. until, final stage kick in - then straight to palliative care, eventually sealed with time of death declaration record.