China demand boosting commodity prices; Taiwan impresses; US Fed balance sheet expanding again; world PMIs still ok; pandemic gets worse in first world; UST 10y at 0.84%; oil and gold unchanged; NZ$1 = 66.9 USc; TWI-5 = 70

China demand boosting commodity prices; Taiwan impresses; US Fed balance sheet expanding again; world PMIs still ok; pandemic gets worse in first world; UST 10y at 0.84%; oil and gold unchanged; NZ$1 = 66.9 USc; TWI-5 = 70
Sunrise at Waiake Beach, Torbay, Auckland. Image © Shutterstock.

Here's our summary of key economic events over this holiday weekend that affect New Zealand, with news the new pandemic wave hitting first world northern hemisphere counties is a very bad sign, and the economic knock-on effects could be awful.

But first, 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.

Import demand is causing shipping rates to stay high.

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 India, onion and potato prices have suddenly risen, doubling in ten days. Rains damaged crops and now their government has imposed stock limits on traders. India's festive season demand is also driving prices up.

And staying in India, their central bank chief has tested positive for COVID-19.

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

The US Fed balance sheet is expanding again, now up to a new all-time record of US$7.177 tln and eclipsing the June 2020 level. This balance sheet is +80% higher than a year ago.

At the end of this week, the first estimate of the US Q3-2020 GDP is due to be released. Analysts see a +32% rise from Q2, making back much of the -31% fall in Q2. (It's an intricacy of arithmetic, but to make back all of the Q2 fall, the Q3 rise would need to be up +46% - so they will still be running very much slower than the year-ago level.)

The first views of October PMI activity were released over the weekend. 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 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.

Back in Australia, their housing market is surging, with this weekend's auction clearance rates exceeding 80% in Sydney and 73% in Melbourne.

The latest global compilation of COVID-19 data is here. The global tally is 42,830,000 and up +848,000 since Saturday. It is first-world countries that seem to be having the most difficulty containing the new wave. Sweden is back in a hard second wave. And 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. Italy and Spain have reintroduced sweeping new curbs. Global deaths reported now exceed 1,152,000 (+18,000 in two days).

The largest number of reported cases globally are still in the US, which rose +164,000 since Saturday to 8,853,000 and new record highs. he number of active cases is very sharply higher at 2,878,000 so a flood of new cases more than recoveries. Their death total is over 230,000 and still rising at +1000 per day. Their death rate per million is now 694/M and approaching the terrible Ecuador level.

In Australia, they are not getting any resurgence. There have now been 27,520 COVID-19 cases reported, and that is +38 more cases than we reported on Saturday and new cases are popping up in most states. Reported deaths are unchanged at 905.

The UST 10yr yield is unchanged at just on 0.84%.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 has had a very slight dip, down -US$2 to US$1901/oz. And it is little-changed from the same level it was this time last week.

Oil prices are unchanged today, now at just under US$40/bbl in the US, while the international price is now just under US$42/bbl.

The Kiwi dollar is still at 66.9 USc and little-changed. Against the Australian dollar we are holding at 93.7 AUc. Against the euro we at 56.4 euro cents. And that means our TWI-5 is now at 70.

The bitcoin price starts today a little firmer at US$13,021 with a +1.8% rise. 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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32 Comments

Wait, I'm sure someone on here was telling us all, over and over again, how germany had reached herd immunity and was so wise and we should copy them asap. Now what happened to that...?

The uncomfortable reality...

Cases continue to increase while the death rate goes down. https://youtu.be/eQO1PB8-xtg This seems to imply that the virus is becoming less dangerous, not that it was particularly dangerous to anyone other than the very elderly with health complications.

Sweden is doing very well despite having increased cases their death rate is still close to zero https://covid19.who.int/region/euro/country/se

What's really sad is New Zealand's over reaction by keeping the borders closed, particularly during the summer months which are not only less dangerous from a COVID point of view, but also because that's when we make most of our 17 billion in foreign tourist income. Prepare for a drop in living standards.

Q: are you counting all positive pcr tests as a "case"?
Q: does a case have to have symptoms?

I read somewhere that the specificity (defined as true_negative / total_negative) of the PCR can be as low as 70% so that's why they run it a few times. The vast majority of "infections" go unnoticed so they never become "cases". I'd guess that the majority of those tested positive at the border "cases" never realised they were sick, such was the mildness of their illness.

When you say run a few times, do you mean test CT?
How far are you Amping the cycles up to get a hit, more or less than 25, more or less than 40, some other figure?

No I meant they likely apply a Bayesian approach to identifying true positives using multiple separate tests, or at least I would hope so. I know what you're talking about though "cycle numbers" in the PCR test, analogous to gain in electronics, you can increase the sensitivity at the expense of specificity. I saw Professor Simon Thornley talking about that. It's all nuanced, in Iceland for example disregards positive tests if they detect antibodies because those "cases" are regarded as non-infectious. In my opinion all this testing is a waste of time and money.

Thanks for that link. Facts rather than hype and hysteria.

What's really sad is New Zealand's over reaction by keeping the borders closed, particularly during the summer months which are not only less dangerous from a COVID point of view, but also because that's when we make most of our 17 billion in foreign tourist income. Prepare for a drop in living standards

So are you saying from your armchair that international tourism should be operating as normal everywhere or just NZ? S'pore, Thailand, Vietnam, and Japan all have large tourist revenue but are generally closed to foreign tourists. Would you suggest to them to that they're doing it wrong and need to open their borders?

nice link so norway 279 and finland 353 have few deaths and its under control meanwhile sweden 5933 deaths and they call that success, i guess there relatives wont think so

That's a straw man argument. Nobody says that we should copy Sweden exactly. Even Anders Tegnell says that if he could wind back time he'd do things differently by better protecting the elderly. The German approach is ideal. Pragmatic inexpensive virus countermeasures with open borders and an open economy. Protect the elderly and vulnerable.

no thanks i like our freedoms we now enjoy, you are advocating we move to level two just to let in tourists, i say give it time fast testing, vaccines and bubbles are on the way, within six months things will be much much easier
its a shame NSW can not do what the rest of australian states are doing no community transmission, every other state has achieved that even victoria otherwise we could have a bubble with them open
Public life
Wearing a mask is mandatory in public transport and when shopping. Shops and restaurants must observe distancing and hygiene regulations. All large-scale events are generally prohibited until 31 December 202
https://www.auswaertiges-amt.de/en/einreiseundaufenthalt/coronavirus
https://www.integrationsbeauftragte.de/ib-de/service/fragen-und-antworte...

12
up

NEWS
Holiday briefing: New pandemic wave threatens world economy

Good news for housing and share market as more opportunity to reserve bank n government to provide more stimulus to push housing market using panademic as an excuse.

Earlier if one check house price estimate in QV use to reflect near around CV but now reflect 10% to 20% above CV.

Helping to boost.....

Exactly.

About the only certain thing we can know for sure.

Cv = bad overseas but = great in NZ!!

So the ASIC Chairman' accountants billed the Government for $118k for his tax advice then he asked that same firm for a refund of $12k for bad advice? If that $12k went directly back to him, personally, rather than the Government, he's in big trouble.
https://www.afr.com/politics/federal/shipton-s-tax-bill-to-trigger-asic-...

Lucky long weekend.

For Joe Rogan & Kanye West.
https://youtu.be/qxOeWuAHOiw

Q: How does this work?
A: It doesn't

16 October. Infectious guy in pub

21 October. Come back tmr 22/10 for test
Step One, come back tomorrow - we're busy...
However, the owner of The Malt pub in Greenhithe, where the infectious person visited, told RNZ's Morning Report that when he went to get tested on Wednesday night he was told by staff to come back on Thursday for a test as the wait time was over three hours long.

https://www.rnz.co.nz/national/programmes/ninetonoon/audio/2018769516/ne...

25 October, McVicar put into Jet Park managed isolation facility
Step two: McVicar and his staff, who also all tested negative, were told to stay at home until October 30, two weeks after their potential exposure to the virus. But Eileen McVicar was told that she was free to go out into the community again.

Two days later, today, an Auckland Regional Public Health Service nurse rang McVicar and told him to go to Jet Park because of the risk to his mother.

https://www.nzherald.co.nz/nz/covid-19-coronavirus-mixed-messages-as-gre...

- contact tracing Auckland Style, More Victorian, less like New South Wales.
- time to move a few people on.

You could not make this up

While he says it's "no big drama" staying in hotel quarantine, McVicar says the Ministry of Health "didn't seem to know what was going on".

Two days after being told to self-isolate at home, an Auckland Regional Public Health nurse told McVicar to move to a managed isolation facility.

https://www.newshub.co.nz/home/new-zealand/2020/10/coronavirus-greenhith...

Equally funny is the fearless reporting.... running the first half of the article as a breathless promotion of smooth MoH PR.

# part time Health Minister

Are you wearing your mask and using QR codes Henry..do you get out much?

Henry_Tull is an arm chair perfectionist, a bit of a "Karen". I suspect his ramblings are driven from being partisan "2 ticks blue", currently frothing at the mouth after a young female was voted a second term in Government.

Believes when an unelected bureaucratic department doesn't ace their objectives it falls solely at the feet of the PM, regardless of the real world logistics. Probably thinks all border staff should be tested on a daily basis (Ports of Auckland alone = 600 staff = 1 test per minute over 8 hours), and then will moan that the results are too slow because lab techs are busy catching up with other tasks such as screening cancer biopsies.

many airports are setting up onsite testing so its just a case of money and whom is prepared to foot the bill, i think dogs may be the better answer to pinpoint people in between testing, if workers walk pass a dog on the way in and out, that with regular testing should make the borders tighter
https://www.stuff.co.nz/national/health/coronavirus/122352131/covid19-th...
https://www.theguardian.com/business/2020/oct/20/rapid-covid-test-heathr...

Dan, you are a rubbish mind reader.
- where did you get reference to PM?.

You seem to make up stuff I post, and then seem critical of the things you just made up.

I have happily said the only election feature to pop corn follow would be could labour govern on their own or not.

If you are happy with the real life examples of contract tracing, just say so, tell us where McVicar is wrong.

Frazzz Yes thanks across both islands, this month, Christchurch + 3 hr radius & Auckland, both sides of bridge. Rest of North next month.
Air crew on Saturday not masked up. Frazz if you are a weak breather, masking up on the plane will load you with co2.
QR code is just a diary thing, best you make your own arrangements. Look after yourself.

A tip for you. When you pay extra for a cancelable/refundable airnz ticket, don't be surprised when they say yes, we refund it will be 6 weeks to repay you. :).

Good to hear yes look after yourself and the rest will follow

The US Fed balance sheet is expanding again, now up to a new all-time record of US$7.177 tln and eclipsing the June 2020 level. This balance sheet is +80% higher than a year ago.

Hmmmm...
Congress explicitly stated the Fed's goals should be "maximum employment, stable prices, and moderate long-term interest rates."2 It is these goals that have come to be known as the Fed's "dual mandate.

Fed failing on both fronts.


World over reserve banks are failing as many have run out of ammunation and are now trying extreme experiment with hope that it works.

7 trillion seconds equates to about 220,000 years.

Thats a lot of dollars.

Yep, the securities they represent are detailed here.

A significant amount of these securities are collateralising Fed liabilities, such as currency in circulation (~ $2.0 trillion) and US Treasury general account (~$1.7 trillion). Bank claims in the form of QE reserves amounting to ~$2.855 trillion account for the rest.

Let's revisit the pandemic projection chart CH Smith prepared on February 2, 2020 (link below), nine days after authorities publicly acknowledged the Covid virus outbreak in China. Wave 2 shown on the chart is now underway with a vengeance and next up is Global Depression....The most consequential falsity is that we get a vaccine, end the lockdowns, seek herd immunity, etc. etc.
The global economy was teetering on the edge of recession and financial implosion long before the pandemic appeared. Ending the pandemic cannot restore an illusion of "growth" that masked a hollowed-out, fragile, brittle global economy. The Global Depression was baked in long before the pandemic. All the pandemic did was kick out the last supports holding up the fading facade of "growth."

https://www.oftwominds.com/photos2020/exponential-virus2-20.png

WHO just posted this praising NZ
https://www.facebook.com/watch/?v=378206889975696

No worries. The cure for anything wrong in the world is more housing stimulus. Adrian Orr and his merry band of nation wreckers are standing by to pump tax free capital gains directly into your landlords pockets!

They say some of it might even trickle down to you one day. There will be some change left after they leverage into a few more slum-boxes right?