US trade balance stay near record deficit; China Singles Day frenzy starts; more countries join carbon neutral target; equity markets dive; UST 10y at 0.76%; oil and gold drop hard; NZ$1 = 66.5 USc; TWI-5 = 69.9

US trade balance stay near record deficit; China Singles Day frenzy starts; more countries join carbon neutral target; equity markets dive; UST 10y at 0.76%; oil and gold drop hard; NZ$1 = 66.5 USc; TWI-5 = 69.9

Here's our summary of key economic events overnight that affect New Zealand, with news of more heavy falls in share markets of countries suffering from renewed virus hits.

But first, the US merchandise trade balance for September was -US$85 bln, matching August and just marginally less than the record set in July. Exports were down -10% year-on-year while imports were unchanged, so it is a major deterioration from a year ago

Aircraft maker Boeing says it will shed another -7000 jobs over the next year, on top of the already very heavy -23,000 retrenchments already made. It is now reporting losses and large negative cash flows.

In China, the online frenzy that is "Singles Day" (Nov 11, or "double 11") has started already with hugely popular and aggressive pre-sales. It is a retailing event that will show up in their Q4 GDP results. It is a sales frenzy that will be joined by 100s of millions of people, clog their distribution and logistics networks, and involve vast spending surges. Black Friday is but a shadow of Double-11. It is covered here because it is an economic event of global significance.

And China is also getting ready to roll out a digital yuan in digital wallets - but even in its test stage, counterfeits are having to be dealt with.

In South Korea, consumer confidence jumped the most since the GFC in a very positive sign for their economy as it makes its pandemic recovery.

South Korea has now joined Japan in committing to be carbon-neutral in 30 years. They are ahead of China which says it will achieve that in 40 years. New Zealand also has the 2050 target. (Australia has ignored the target Federally, but every State in Australia has adopted it.)

In Australia, their CPI inflation was up +0.7% in the year to September. This quarter it rose +1.6% not quite cancelling out Q2's -1.9% drop. Interestingly, retailers took advantage of strong consumer demand increasing prices for "furnishings, household equipment and services" by a massive +12% in the quarter and recovering their competitive cuts in prior quarters - the "Harvey Norman surge" building back margins by taking advantage of consumer stress. The ending of free childcare over the pandemic onset also raised the CPI rate.

Wall Street is back with major losses today with the S&P500 down -2.9% in early afternoon trade. Overnight even larger falls came out of European markets with Frankfurt down a heavy -4.2%, others less so but still steep declines. Yesterday Shanghai ended up +0.5% while both Hong Kong and Tokyo shed -0.3% each. Both the ASX200 and the NZX50 Capital Index added a modest +0.1% at their respective closes.

The latest global compilation of COVID-19 data is here. The global tally is 44,159,000 and up +506,000 since yesterday. In Russia, France, Spain, the UK and southern Italy authorities seem to have lost control and it is hard to know how they will regain it without new sweeping lockdowns. Global deaths reported now exceed 1,170,000 (+8,000). A sharp rise in deaths is now expected now this third wave has taken hold.

The largest number of reported cases globally are still in the US, which rose +78,000 since yesterday to 9,057,000. The number of active cases is higher at 2,935,000 so many more new cases more than recoveries. And a new trend is the sharp rise in hospitalisations. Their death total now exceeds 232,000 and still rising at nearly +1000 per day. The US is now in that exclusive club of ten nations (some very small) with a death/million rate exceeding 700.

In Australia, they are not getting any resurgence. There have now been 27,554 COVID-19 cases reported, and that is +27 more cases than we reported yesterday with most in NSW. Reported deaths are up +2 at 907.

The UST 10yr yield is down -2 bps today at just on 0.76%. Their 2-10 rate curve is a little flatter again overnight at +61 bps, their 1-5 curve is also flatter at +20 bps, along with their 3m-10 year curve, now flatter at +69 bps. The Australian Govt 10 year yield will start today down -1 bp at 0.78%. The China Govt 10 year yield is unchanged at 3.19%. But the New Zealand Govt 10 year yield is down another chunky -4 bps to just on 0.51%.

The price of gold is down sharply today, down -US$29 today to US$1880/oz.

Oil prices have also fallen sharply, down -US$2.50 to now at just on US$37/bbl in the US, while the international price is down a bit less to just under US$39/bbl. These falls are on the back of very large rises in crude oil inventories in the US as local production rises more than expected. And it is China that is buying that very cheap American crude.

And the Kiwi dollar is softer by more than -½c at 66.5 USc. Against the Australian dollar we have remained firm at 94.3 AUc. Against the euro we also holding at 56.6 euro cents. But that means our TWI-5 is down to 69.9.

The bitcoin price starts today down -3.4% at US$13,140 but holding on to about half of yesterday's 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 ».

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.

36 Comments

11
up

All the newbies to the share market are going to find it is not all beer and roses or should that be wine and skittles.

Beersies, actually...

They will if they sold up 2 weeks ago...

or brought in march when the nzx50 went below 9000 now at 12k or the dow went below 19000 now at 29k.
it has been an unbelievable ride so far this year and does need to correct to take some heat out, but with money printing and no interest rates where else apart from property can it go

Where the stock markets go, houses will follow. Computer modeling is not going to work, need those behavioural economists.

Those same behavioural economists who know exactly what the answer is? More Debt!
Sadly the whole lot of them were all trained in the same place - a stint at Harvard one way or another - and with the same inappropriate education to today's problems. Bow and Arrow stuff to defend Hiroshima....

When in doubt, we turn to the charts, which can be useful for spotting the next support level. The Dow, for instance, is down 838.66 points, or 3%, to 26,624.53. That’s under support at its Sept. 23 low of 26,763. If the benchmark is able to close above that level today, great. If not, the next support might not come until 25,000, down 6.1% from the current level.

https://tinyurl.com/yy2h49w7
Below that is 23,000 then 17,500....Then.....

"...support at ... 26,763. If the benchmark is able to close above that level today, great."
Today's close? 26,520, down 942

mike hoskings says your wrong, investing in houses is as safe as we all hate holidaying in NZ like he does
"Once again, let’s bring reality into the equation; a bubble has never burst on New Zealand property.
In the worst of days it sinks maybe 5 to 10 %, in between it rises up to 100 %"
https://www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/opinion/mike-...
https://www.newstalkzb.co.nz/on-air/mike-hosking-breakfast/video/mikes-m...

This sounds like one of Mike's classic hot takes, a property bubble has never burst in New Zealand. Therefor it never will.

https://xkcd.com/605/

I've been following the NZ property market for a long time, I can't recall it ever being this manic. Feels like something has to give eventually.

Sounds like the money printers are going to have to start cranking up again! Gold price drops don't make a lot of sense, thought people would be grabbing metals as COVID looks less controllable and markets get hammered with no US government response.

Gold price fall makes sense if you have to pay some unexpected bills and have your safety net in Gold. Like a Margin Call.....

Housing market is incredibly crazy. Crosslease houses in Howick when checking with agents are coming with expectation 10% to 30% above RV that is house earlier going for 850000 are now asking between million to 1150000.

Is RBNZ and Government not aware and thinking that house prices have gone up by few percentage or turning blind eye.

10
up

They’re very much aware — they just think that a housing correction, unlike a pandemic or the destruction of our largest industry, has the power to do *real* economic damage. The sad thing is that they might be right, given the depth of the hole we’ve been Digging so assiduously for the last decade...

How many MPs would be facing bankruptcy if there was a x% drop in property prices, making them ineligible to sit in parliament?

Probably a lot less than a month ago.
Haven’t seen an asset register yet, however it just might be the newbies don’t have such a vested interest to keep breast feeding landlords as the last bunch did.

i would say with a lot of national Mps tipped out a lot of the investment housing went with them, there was also an influx of younger Mp's so unless they come from rich parents they are unlikely to have much of a portfolio.
it makes for interesting times as the people in charge slowly over time will favour the FHB and renter before the investor

Well, they saw a small fire and thought it was manageable even if it was a little larger, so threw the kitchen sink at it. Problem was the kitchen sink was made of wood and full of gasoline.

It could just be a chowick thing.

13
up

We had more rain in the night, this is turning into a very good spring.
My cattle are pumping, putting on over 10 kgs a week. With cattle it’s not so much the price I get for them as what I pay for my replacements. I work on a margin hopefully this year around $500 a head. In bad years I often still make reasonable margins, in good years when people are confident it can be harder.

I want to tell you a story about my family. In the 70’s we farmed almost entirely cattle which was unusual at the time. In 1972 we were getting $1.57 a pound (obviously slow to go metric) Later that year with all the OPEC problems the beef price got knocked, it fell to .47c a pound.
My family never borrowed against livestock only against land often from insurance companies like AMP. Because of this the bank manager never looked at the price of our livestock just if we could service debt. That year we sold big bulls for $300 a head, the year before we were getting a thousand dollars. I went to prep school that year and it was $160 a term, 3 term year.
I remember as a boy going to the Fielding sale and my father buying 300 cattle for under $50 each, what followed was one of the best years ever.
The down side was farmers who borrowed against livestock got a call from the bank, they called Wrightsons the ‘ring and sting bank’.
My uncle always said the beef market corrects every 12 years of so, the confident get burnt and the margins return.

I a talking about this as so many farmers today use livestock finance companies (10% interest), many trade short, buying lambs trading 3 lots in a year, keeps the cash flow healthy, I’m just not sure this is going to stay sustainable with falling stock numbers, there is also not the incentive to be careful when it’s not your money, it only takes a couple of confident buyers to affect all our margins. It's been a long time since we had a correction.

Fear the gods of the marketplace, they are cruel masters.

Andrew - Just missing a mountain and a slab of rock to read off and the picture is complete. Oh - and a beard.

You are right to warn about stock financing.
The second tier lenders are getting more and more sophisticated with their lending.
The banks probably lend 50-65% of livestock value.
The Heartland type deals up to 100% while retaining ownership and short term funding.
Stock Co now offer to purchase your complete dairy herd and lease it back to the farmer.
The terms are getting more complicated and I know of farmers getting burnt when caught by short term price fluctuations but are forced to sell. Younger farmers haven't experienced wholesale withdrawal of funding from farming and the consequences on individual families.

Some also get a cut from the meat companies when you kill and stock agents when you buy.

The down side "risk" was farmers who borrowed against livestock got a call from the bank, they called Wrightsons the ‘ring and sting bank’

The subtext of the story is farmers who are able to borrow against their land are mortgage free and have the borrowing capacity to borrow against the property whereas farmers who are mortgaged have to take a punt and borrow against the stock and hope for the best

Old-money v New-money

Those who are incompetent, for lack of a better term, have little insight into their incompetence —an assertion that has come to be known as the "Dunning–Kruger effect” which suggests that "poor performers are not in a position to recognize the shortcomings in their performance"

The Fed Is Really Running Out of Firepower

Central bank officials aren't bluffing when they say that only government spending can rescue the U.S. economy.
What to do? No doubt, Fed officials should still commit to using all their tools to the fullest. But they should also make it abundantly clear that monetary policy can provide only limited additional support to the economy. It’s up to legislators and the White House to give the economy what it needs — and right now, that means considerably greater fiscal stimulus.

Hmmmm... government funded consumption?

And in the US that government spending will only go to favoured states (likely based on party affiliation and politician effectiveness) and business's. Read this morning that Boeing is to lay off another 7000 workers, to total them at 30,000 put out of work. Too late for them! And no sign that the intrinsic corruption and elitism is likely to be addressed or even discussed openly.

That's true - COVID seems to be already hitting blue states harder than red states. Multiple factors behind this trend that shows more joblessness in blue states - harsher lockdowns, service industry dominance, more dependence on federal funding, higher living costs, etc.

https://justthenews.com/nation/economy/tale-two-recoveries-red-states-ou...

From "Just the New" - yes very balanced reporting?

Red states are more dependent on federal funding than blue.

That has been my prediction for nearly ten years in how this plays out. Once the private sector is squeezed out the government takes over. My comment has been it is all about consumption, and it doesn't matter what pathway leads to that consumption. I say this as a what will happen prediction, not what I'd like to see.

If there's one link everyone should read today, it's that one! Thx.

"New Zealand also has the 2050 target."

What is the point of the govt setting a target if it does nothing to try and achieve it?

Politics. They don't have to achieve or pay for it. But is sounds good and they blame other failures on it. It's beautiful.

Gives the aluminium hat brigade something to complain about - "look, the government is trying to enforce a New World Order" (by saying that they will at some point LATER try to encourage better environmental outcomes, then continuing to DO just about nothing...

Just reading the paper ‘on this day’ section - ‘1929 - Prices crash on NYSE on what becomes known as black Tues, heralding the Great Depression of the 1930’s’.

Some decent falls on NYSE overnight - standby ASX/NZX