US GDP recovery leaves them short; jobless benefits shrink; Toyota sees China car buying surge; ECB signals new pandemic action; UST 10y at 0.84%; oil and gold drop hard; NZ$1 = 66.1 USc; TWI-5 = 69.7

US GDP recovery leaves them short; jobless benefits shrink; Toyota sees China car buying surge; ECB signals new pandemic action; UST 10y at 0.84%; oil and gold drop hard; NZ$1 = 66.1 USc; TWI-5 = 69.7

Here's our summary of key economic events overnight that affect New Zealand, with news of large drops in commodity prices, especially for gold and oil.

First, the expected rebound in economic activity was recorded in the American GDP data for Q3-2020 from the June quarter. But that still leaves their economy operating -2.9% lower than in Q3-2019. In current dollar terms, -1.8% lower, so by any measure it has yet to recoup all its pandemic losses.

New claims for unemployment benefits last week came in at 732,000 which was just under the expected level. The number of people on these benefits are now just under 7.8 mln and -700,000 less than the prior week. Some will have found work but most will have come to the end of their support, building on the social stresses they face.

In better news, Toyota says its global production grew almost +12% in September from a year earlier to 842,000 vehicles in the month, marking the first year-on-year increase in nine months and indicating a recovery from its pandemic sales slump has begun. Their sales in China jumped almost +50%. VW is also reported a sales surge in China.

However, at home Japanese consumer confidence stayed very low in October but it is rising, which is better than not.

The Bank of Japan didn't change any key settings at its overnight meeting, but is relatively upbeat in its assessment of the progress of the Japanese economy.

In Frankfurt, the ECB has signaled that it will act in December to support a fast-sagging EU economy that is struggling with a renewed pandemic wave. Theirs is a downbeat assessment and in a growing section of their economies it is getting 'desperate'.

And that is reflected in the EU sentiment surveys that show the improvement of these consumer and business measures has halted in October.

Wall Street has started today with a relatively good partial recovery of this week's steep losses, with the S&P500 up +1.8% in early afternoon trade. Tech earnings are helping today. Overnight European markets ended flat, embedding their losses. Yesterday Shanghai ended up a minor +0.1% while both Hong Kong and Tokyo shed -0.4% each. The ASX200 had a tough day down -1.6% and the NZX50 Capital Index fell 0.5% at their respective closes.

The latest global compilation of COVID-19 data is here. The global tally is 44,684,000 and up +525,000 since yesterday and a new record daily high. It is very grim in Russia and Western Europe with serious stress on their hospital systems. Global deaths reported now exceed 1,177,000 (+7,000). A sharp rise in deaths is now expected in a week or so now this third wave has taken hold.

The largest number of reported cases globally are still in the US, which rose +89,000 since yesterday to 9,146,000. They are 'rounding the turn' but not the one their President claims. The number of active cases is higher at 2,970,000 so many more new cases more than recoveries. And a new trend is the sharp rise in hospitalisations. Their death total now exceeds 233,000 and still rising at more than +1000 per day.

In Australia, they are not getting any resurgence. There have now been 27,569 COVID-19 cases reported, and that is +15 more cases than we reported yesterday split across most states. Reported deaths are unchanged at 907.

The UST 10yr yield is up +8 bps today at just on 0.84%. Their 2-10 rate curve has turned much steeper overnight to +67 bps, their 1-5 curve is also steeper at +24 bps, along with their 3m-10 year curve, now steeper at +74 bps. The Australian Govt 10 year yield will start today up +4 bps at 0.82%. The China Govt 10 year yield is up +1 bps at 3.20%. And the New Zealand Govt 10 year yield is also up +1 bps to 0.52%.

The price of gold is down again today, down another -US$12 to US$1868/oz. Global gold demand hit its lowest level in 11 years in the third quarter of this year and central banks became gold sellers for the first time since 2010.

Oil prices have also fallen sharply again today, down another -US$1 to now at just under US$36/bbl in the US, while the international price is down a bit more to US$37.50/bbl.

And the Kiwi dollar is softer by another -½c at 66.1 USc as the greenback rises on serious risk aversion in commodity markets. Against the Australian dollar we have remained firm however at 94.2 AUc. Against the euro we also holding at 56.7 euro cents. The anti-commodity currency mood is also reflected in a rising yen. And that means our TWI-5 is down to 69.7.

The bitcoin price starts today up +3.2% at US$13,559 and making back most of yesterday's dip. 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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67 Comments

"central banks became gold sellers for the first time since 2010."
And where was the price 10 years ago? Not too far away from where it is today, ~$1,400 p.oz. But during the last decade prices did fall to $1,000, even into the face of net CB buying. So now they've turned into net sellers ('unexpected' bills to pay?!) what happens to the gold price if they stay net sellers?
Shayne's on to it...

ANZ CEO Shayne Elliott says money is already free at these levels and making it "more free" doesn't change anything

10
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Yep, it's already worthless and its asset purchasing power is collapsing. Hardly a store of value or a measure of one's efforts.

So not a good metric in determining the value of ones house, for example?

Dollars no longer dictates value. It merely dictates price.

12
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Yes... And as the worthlessness of fiat money destroys all savers , a coming wealth/asset tax that taxes the illusionay inflationary values of assets,as consequence worthless money, will be the death of the working/middleclass. ( who might have assets)

Overall. The debasement of money is a very destructive thing

Making money worthless so enterprises invest more is the equivalent of dropping minimum wage to $2/hour so as to achieve full employment.

For multiple quarters in previous years, our economy boasted all-time lows in unemployment at historical low interest rates but couldn't clock inflation above 2%.

I've said it before - the average house price is going to $1T NZD. So is the average price of a loaf of bread.

Read https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory - it's a good window into where we're at right now historically. Every is going to be OK long term. Keep calm and carry on.

"central banks became gold sellers for the first time since 2010."

The countries selling gold are those wiithout swap lines to the Fed: Uzebekistan, Turkey, and Russia. Unlike the Anglosphere, they're more constrained by their means. They can't just print like there's no tomorrow and expect the same magic as countries like the U.S. and N.Z.

That's unnerving. On the bright side, at least our hydro lakes in the South are back close to their historical average levels.
Sorry Judith but there won't be any coal burning this summer to talk about.

https://www.transpower.co.nz/system-operator/security-supply/hydro-infor...

and the coal burning last time was because of an unexpected shutdown in the gas supply, not because of hydro levels.

Yet Judith didn't advocate moving away from gas.

... and will be again.
Contingency, an unplanned, unforeseen event will see coal used.

As I understand it, the continued use of huntly (gas or coal) is largely as contingency against a dry winter.

Little known fact: Huntly can use oil upon startup as well!
Yep, dry winter which often coincides with no wind for the windfarms.

good to see the pukekohe spring bore has come online this month. With the Hays Creek Dam coming online shortly it doesn't look like they'll be increased restrictions. I don't see the hosepipe ban being lifted anytime soon. Really needs that forecast for cyclones to eventuate a dump on the waitaks or hunuas late summer.

We put in a rainwater tank just for outdoor use last year. Super handy now to have a hosepipe which is exempt from the ban.

Yes, I use my tank for doing that plus washing my car. Plus hose connection to my washing machine. Takes ages to fill now that the water level is getting low but hey, I'm not paying Phil Goff a cent for that water.
The interesting thing will be: my tank is getting low so I will change my washing machine back to town supply shortly. If lots of people act this way in future, the Council will experience unexpected increased use just when they don't want increased use!

I have 2,000 litres of storage and have just pressurised the output with a pump. It’s only for the garden and car washing. I used a third of the storage in the last week and am now wondering if that was smart. Future rain fall is not certain enough right now.

Yeah I tried gravity feed at first but it's hard to get enough pressure. Had to put in a pump to be able to wash the car etc.

La nina is predicted this summer which should mean plenty of rain for Auckland. Makes for a terrible summer but will hopefully bring the dams up a little.

the problem is the main dams are in the wrong area, the waitakere dams are full and are always full as they are in a mountain range close to the west coast, the hunua dams always struggle ,because of location and size, you think by now with centuries of data watercare could figure that out

Can't build more dams though, practically. Could you pump from the waitaks to hunuas?

This month is looking to be about 33mm in Auckland. The same month last year was 110mm. We had better start praying for some biblical deluges. I can’t see hose use in Auckland until Winter next year, at the earliest

You can't print water like you can print money.

Was staying with friends in Remuera over the weekend. Walked passed a nice older gentleman water blasting his rubber floor mats from his sparkling VW. Auckland will run out sooner or later..

I never understood folk who wash their car weekly, especially when there is an impending shortage

As an aircraft engineer, and corrosion specialist - cars (and aircraft) should not be washed any more than once a month, and probably longer. Unless you want to promote corrosion!

I don't get it - in an urban environment, what harm is there to not washing your car at all if it never leaves the pavement?

Your image- remember NZ love a shiny Black SUV or Ute - it makes them feel big and important. (even if they cannot afford it)

We love to squander valuable natural resources, don't we?

Salts YDB. We live in a coastal environment essentially. Nowhere in NZ is any more the 100 NM from the sea. So sea spray can get anywhere, and it does need to be washed off from time to time. But then polish should be applied. I am not an expert on them, but I have always felt that if a polish can be washed on, then it can be washed off. Personally I feel tht a little elbow grease offers a better quality barrier.

Councils are not able to adjust to the extraordinary rise in the present value of liabilities caused by steeply falling interest rates. They and there advisors are ill-equipped to take advantage of the industrial scale of the offset on the asset side of the ledger to alleviate the costs. The business model of councils is not purpose fit for the policy actions associated with central bank casino economics.

The business model for local councils is basically "cost plus" and everyone dealing with them understands this.

Crude Prices Are Collapsing To 5-Month Lows After Lagarde Comments
What 'V'?

Monetary policy in this day and age is a ridiculous sales job, not the purview of an actual central banker working at an actual central bank. The policy itself no longer matters; the packaging it comes in does.

If you aren’t distracted by the shiny wrapping, you realize what Powell’s saying is that after failing to hit the inflation target for over a decade he’s now going to let inflation run over the target none of them could hit because for more than a decade no one could hit their own target…

[T]hese are not serious people and that is why I keep calling for them to be replaced. The zero lower bound was never a trap for the economy, it was always one for central bankers alone – because they have no idea what they are doing, and now, with symmetry being rerun from 2018 and one-sided deviations put into the strategy language, it’s obvious they don’t even have any ideas.

where's the inflation we were promised?

Its coming and already here in a way. Except its asset inflation which is not measured by our inflation index

is it really asset inflation or just the capitalisation of low interest rates?

Once interest is in a system money has to be created to pay the interest. That money then has to find a home. It is a trend that must happen no matter what the state of production is, but production moderates the expansion of money by matching it with goods. But you know when you've reached a peak in the economy when interest rates top out and start declining. From that point on interest rates will decline, and there is a direct inverse relationship between money expansion and the money supply. This last point is widely accepted in economics. Asset prices will be the likely recipient, and I guess you will find that trend if you look. It took off somewhere around the Mid 80's. This also reflects a general trend in declining yields across all classes of assets as they are a derivative of the interest rate.

The question that is begging is what happens when interest rates hit negative, or go to zero?

Capitalism is one for one, creditism is done at leverage. Leverage is a bitch when it goes into reverse.

To put mroe context on this look to my related term for interest: "Maximum Extractive Value". Interest rates are a representation of this. I ask again, what happens when interest rates get to zero? Or Negative?

Interest falls under the category of unearned income. Start to think about what the recipients of unearned income do in a negative environment?

The battle for unearned income increases in intensity as the pool available dries up. The council commentary about is a part of this battle.

Inflation? It's residing here at my local supermarket in Royal Oak. Price rises: eg 2 Litre tubs of icecream were hovering around $5 to $5.89 a month ago, now firmly established at well over $6. Fresh and Fruity have reduced the size of their small pottles of fruit-flavoured yoghurt but still selling at the same price. I notice these things as I'm cash poor and asset-rich. That basket of groceries is going to be more expensive in future. You would think that the supermarkets would be more restrained given the privileged card they were dealt during Covid.

The easiest way for the Fed creat inflation is to revalue gold at $4,00 an ounce - job done, in 15 minutes!

If we have more than one referendum we have two referendums or referenda?
Either way we will know some results this afternoon.

The End is Nigh, it seems for the Euro. It was always an imperial dream of the French elite bureaucracy to take away the "exorbitant privilege" of the USD. The idea was to rope Germany under their control, but so far the Germans have seen it for what it is and only done the minimum necessary to keep it going. Funny thing is the Euro has made Germany the master of Europe, not France.

The Euro countries will soon have to choose whether to pool their debts under a fully fledged imperial bureaucracy, or try to reclaim their sovereignty by having their own currency again. One option is for the hard currency block to leave, but that rather wrecks the German export economy, so they will put it off as long as they can.

Roger,

I was one of the first Scottish members of New Europe-Britain in Europe but Not in the Euro. It was set up by Anatole Kaletsky and others. I still have some of the pamphlets they produced such as Joining The Euro, the Constitutional and Economic Questions-a debate between Malcolm Rifkind and Kenneth Clarke. I see that Stiglitz has a book out on the imminent demise of the Euro.
Yes, it should fail, but what I think you underestimate is the willingness of the elite to preserve the dream of a united Europe-whatever the consequences may be.

Beware the Paris Mob. So far the elite Europhiles have managed to convince (con?) the populace of their expertise and exceeding wisdom, principally by the widespread adoption of exceedingly eloquent and grandiose elocution to confuse them. Their clothing is starting to slip. Historically the populace have not dealt kindly with tyrants.

https://editorial01.shutterstock.com/wm-preview-1500/7401554a/552ee7b8/i...
https://ak1.ostkcdn.com/images/products/is/images/direct/d776c8fa4e40373...

the whole EU will collapse one day, and it may be coronvirus that finally does the deed
https://www.bbc.com/news/world-europe-52135816

https://www.rnz.co.nz/news/business/429428/shipping-lines-bypassing-nz-m...

Initial contraction due to Covid followed by unanticipated increase in demand. NZ a loser to keep schedules. Will get worse apparently.

Time for a nationalised merchant shipping fleet?

there are thousands of container ships parked up so there are plenty of ships, the problem with the NZ trade lanes is to make them profitable the shipping lines are using fewer bigger ships ( they space share onboard) , and they want to stop at fewer ports, has been going on for years, it is not a new thing. that is why the fight is on between ports of auckland and tauranga for deeper channels and wider berths , bigger faster cranes
https://www.transport.govt.nz/assets/Uploads/Research/Documents/7405314d...

"I'm just waiting for my prison shuttle," he said.
Plucked after a negative test, plucked from the commuity after a negative test.

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

How Laura sees it.
https://mobile.twitter.com/IngrahamAngle/status/1321497173926830082
- what VDH says.
Luckily they don't say
- First lockdown with no law basis
- Police able to enter house no warrant
- people with negative tests are put in quarantine.
- Covid diary app has daily use monitored, daily site qr codes zapped and diary entry logs known & published.

Why need James Shaw climb in?
https://www.newshub.co.nz/home/politics/2020/10/greens-co-leader-james-s...

Greens co-leader James Shaw has criticised US TV network Fox News over speculation that COVID-19 patients in New Zealand are thrown into so-called "quarantine camps".

For James he can rebirth and put distance between himself and his Green school Green sleaze funding, acting like a Labour defender if the PM (more so than real Labour people like Kelvin Davis).

Great Joe Rogan with Gad Saad

https://youtu.be/4ugp6FBq6E0
Joe has been tested, 48 times.
Listen to why Joe left California...

Joe Rogan is already letting Alex Jones spread misinformation on his Spotify show
https://www.theverge.com/2020/10/28/21538165/joe-rogan-experience-alex-j...

Classy Frazzz, you know better than that

Best the folk see how Joe does it weave his magic
The real thing.
https://youtu.be/jdVso9FSkmE

In RL what upsets you about Gad Saad?
Hint: thinking Alex Jones is Gad Saad is irrational.

If Joe had one guest that upsets you, it doesn't follow that every guest is upsetting. Or are you pretending to work at Spotify?.

Henry I ignore your comments and links..you live in another dimension to most of us.

the good thing about our response is we are learning, are we slow in using what we have learnt yes we are, are our DHB and health board slow, yes they are, case in point the are only just now rolling out full scale testing of the covid card, the testing at the borders
as for your led story the guys highlighted statement was a joke, but he was right to be pissed off as he was worried about his mum and by rights he should have been allowed to take her as a close family contact,
but on balance we are a lot better off than other countries especially australia whom require business owners to keep track of whom comes and goes (not happening) and do not have a central covid QR code scanning, each state has its own and they are not compulsory

Are you thinking the ends justify the means?

Have you watched Joe & Gad yet.

How dare a local politician challenge Fox News, the fountain of all truth!

Agree. If you watch fox entertainment (no one who is educated could never call it news), you are a minion of the right wing extremists propaganda machine. Hitler was a master at this as well. And its all out there for everyone to see, they are not even bothering to hide it. That is their view and they have mass appeal. Such is the makeup of millions of Americans. Americans will reap what they sow next week. If trump gets back in you will see an inept, disgusting, immature, pathological lying, macro economically uneducated, corrupt, environment destroying dictatorship progress in which the likes have never been seen in a so called free democracy. If that's what Americans want, who are we to challenge it?

10
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The initial wave was horribly mismanaged by many countries but there is absolute no excuse for that this time.

All northern hemisphere governments of the globe have known about the risks of a winter Covid wave for months and months. They should be very well prepared, we have become much better at treatment and there is no excuse if they f%$k up again. There can be no excuses about insufficient beds or PPE. They have had time.

Yes I hope they are prepared, but I fear they are not. Winter in Europe and north america is shaping up to look pretty scary right now.

It's also going to mean more people coming through our facilities with Covid and flaws in the system that might not matter at our current baseload may become a huge problem once a solid number of quarantees with a higher portion of Covid start coming through. Known acceptable risk may become unacceptable very fast, the question is will we be told it is being managed, or will it actually be managed?

that is already happening, you only need to look at the daily figure of people testing positive on day three, and many of these people had to show a negative test to get onboard a plane.
i have always wondered why we never created a dirty airport and a clean one, we have whenupai sitting there, it could be used for reparation flights from high risk countries

It might be said that since the worst rates of death happened is where symptomatic patients were put into rest homes. Therefore the worst cause of death for Covid so far has been caused by management of it.

And application of ventilators....
O2 the better measure as per Boris.

Poor gold, I had to dump mine a while back. Gold and bitcoin were looking good this year when Gold jumped above its previous ATH of 1,920, and bitcoin surged to $9,000. Then gold broke $2,000, and Bitcoin broke $10k. Now gold has fallen below $1900, while bitcoin is knocking on the doors of $14,000.

Gold is still up 24.8% in NZD in 2020. OK, that might not look too impressive comparative to other assets, but do you have any idea how much by and the extent to which NZD is being debased? Nobody really understands that yet.

A bluetooth-powered Covid-19 contact tracing card is being trialled in a small suburb of Rotorua.

Truly stupid, Stuff's idiot reporting.
https://i.stuff.co.nz/national/health/coronavirus/123250748/covid19-one-...

Blue tooth is yet to be a power source. No wonder the Progressives are so deluded as to how the physical world works.
Great to see they apply the same wit & intelligence to the Climate Change phenomenon.