Global PMIs more positive than expected; China's factory PMI near 10yr high; eyes on RBA; UST 10y at 0.84%; oil stays down but gold up; NZ$1 = 66.2 USc; TWI-5 = 69.9

Global PMIs more positive than expected; China's factory PMI near 10yr high; eyes on RBA; UST 10y at 0.84%; oil stays down but gold up; NZ$1 = 66.2 USc; TWI-5 = 69.9

Here's our summary of key economic events overnight that affect New Zealand, with news there is no way to avoid the US election today, but there is other economic news.

Today we start with data that shows factories expanding in almost all markets, some strength markets hadn't counted on.

In the US, there were two PMIs released overnight. The widely-watched ISM one came in quite a lot better than expected. But the internationally-benchmarked Markit one was unchanged, recording a modest expansion.

Data for US construction spending (in September) was positive, but much less so than expected.

In China, their private factory PMI survey came in with a better result than the official one, recording a good expansion in their factory sector. In fact, it is now near a ten year high.

Confirming that, excavator sales were up +65% in October on the back of rising investment in real estate and infrastructure. And this sharp jump in orders will help their November PMIs. And the crescendo for their Singles Day retail event (Double-11) isn't hurting either.

The Taiwan PMI rose and is expanding faster; the Japanese PMI also rose but it is still in a minor contraction mode.

Europe surprised with a good expansion returning.

Australia's factory sector lost momentum in October, one of the new regions to do so. But at least it is still expanding. (However, the local version suggested the momentum is not actually being lost.)

And later today, the RBA will release its monetary policy update and there are market expectations a rate cut is likely, down from 0.25% to 0.10%.

Equity markets have risen today. The S&P500 is up +0.8% in early afternoon trade and European markets were up an average of +2% overnight. Those positive PMI reports seem to be behind the improved mood. Also, the Q3 corporate earnings falls turned out to be far less than originally feared. Yesterday, Shanghai ended flat, but Hong Kong (+1.5%) and Tokyo (+1.4%) led the way for the European and New York markets.

The latest global compilation of COVID-19 data is here. The global tally is 46,688,000 and +443,000 overnight. It is still very grim in Russia and Western Europe with serious stress on their hospital systems. Sweden is also getting a new huge spike. The new British lockdown promises a grim Christmas there. Global deaths reported now exceed 1,203,000.

The largest number of reported cases globally are still in the US, which rose +71,000 since yesterday to 9,489,000 in their Sunday tally. The number of active cases is higher at 3,143,000 so many more new cases more than recoveries. And the sharp rise in hospitalisations is a real worry. Their death total now exceeds 237,000 and now rising at +1000 per day.

In Australia, they are not getting any resurgence. There have now been 27,602 COVID-19 cases reported, and that is just +7 more cases than we reported yesterday and all in NSW. Reported deaths are unchanged at 907.

The UST 10yr yield is down -3 bps today at just on 0.84%. Their 2-10 rate curve has flattened to +68 bps, their 1-5 curve is little-changed at +25 bps, along with their 3m-10 year curve, now also flatter at +74 bps. The Australian Govt 10 year yield will start today down -3 bps at 0.82%. The China Govt 10 year yield is still unchanged at 3.21%. And the New Zealand Govt 10 year yield is up +2 bps at 0.56%.

The price of gold has held overnight, up +US$13 at US$1892/oz.

Oil prices have firmed marginally overnight and are now at just over US$36/bbl in the US, while the international price is now over US$38/bbl. But both are still near modern lows.

And the Kiwi dollar is little-changed this morning from this time yesterday at 66.2 USc. Against the Australian dollar we are weaker at 94 AUc. Against the euro we firmer at 56.9 euro cents. That means our TWI-5 is little-changed at 69.9.

The bitcoin price starts today at US$13,516 and -2.1% lower than where we left it yesterday. 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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37 Comments

15
up

Waits for Kiwilad45 to finish the fifth of his ten coffees......

might still be under the grip of Horlicks?

You mean PutinBot45?

21
up

Just fyi, Kiwilad45 has asked us to close his account, which we have done as requested. (Maybe you can follow him on Infowars, Breitbart, Fox or RT - or in a similar rabbit hole.)

noted & therefore I must apologise to GBH for silly musing on a vague notion that there might have been be a connection.

I missed that - but GBH is an interesting story.

As someone who will read this knows.......

:)

Throw in Zerohedge for good measure

Just a reminder folks of my years old prediction of the battle for unearned income. Have a think about what exactly that battle is, the forms of unearned income involved, and how the battle might take shape.

Essentially I see the problem as not enough fat in the system, so current beneficiaries of this unearned income either get consumed or turn to other sources(if they have the leverage or coercive force to do so). It hasn't really started in ernest, but I think we are seeing signs.

What does a council do when debt can't be paid for instance? What do banks do in a negative interest rate environment? What happens when the taxable base shrinks? In the latter they have a unique ability to inflate the problem away, all part of the battle.

While employment is good everyone is distracted and doesn't notice these things. Once they lose their jobs and have time on their hands one things people will do in the down time is talk. I'd suspect that talk could go dangerous places, they might make use of that idle time.

15
up

Sheesh. It's all good. The New Zealand socio-political-economy is a beast of a machine, finely tuned to produce ever increasing house prices. The politicians want it, the bureaucrats want it, home owners want it and the banks want it. No worries sport.

I'm a home owner and I don't want it.

There are some of good character like yourselves, who do not wish to live just off wealth transfers from the poorer.

"Unearned income" - depends on how you define this Scarfie. I own my own home and that is all. It's 'current market value' which is what I assume you mean, is meaningless to me. I do not use it for anything, have not borrowed against it. It is not in my view and usage 'unearned income' for me.

Incentives matter. No wonder influenza has all but disappeared or perhaps been "rebranded" this year.
"Hospital administrators might well want to see COVID-19 attached to a discharge summary or a death certificate. Why? Because if it's a straightforward, garden-variety pneumonia that a person is admitted to the hospital for – if they're Medicare – typically, the diagnosis-related group lump sum payment would be $5,000. But if it's COVID-19 pneumonia, then it's $13,000, and if that COVID-19 pneumonia patient ends up on a ventilator, it goes up to $39,000."
https://www.usatoday.com/story/news/factcheck/2020/04/24/fact-check-medi...

https://www.cdc.gov/flu/weekly/weeklyarchives2020-2021/images/WHONPHL43_...

Ngāi Tahu has lodged legal action in the High Court at Christchurch seeking a declaration that the tribe has rangatiratanga over all rivers and lakes in its area – virtually the entire South Island.

A statement of claim was lodged in the court on Friday and the Crown was served with papers this afternoon, not long after Prime Minister Jacinda Ardern announced her second-term Cabinet with more Māori ministers than any other.

https://www.odt.co.nz/star-news/star-national/ng%C4%81i-tahu-takes-court...

Tino rangatiratanga is a Māori language term that is often translated as "absolute sovereignty".

# Kelvin

11
up

Could be more to do with water restrictions hurting their huge dairy operations.

No. It's the irrigators
The irrigators are sucking so much water out of the rivers upstream, the rivers downstream have run dry

They are not happy about labours new fresh water regulations.

Who is they? The irrigators or Ngati Tahu

Ngai Tahu have a lot of dairy on stoney gravels with irrigation and the new regs will make life difficult.

Ngai Tahu have a strong case, it will be interesting. Fun fact, Ngai Tahu made a breach of contract claim (ie the Treaty) against the Crown in 1849.

"When Ngāi Tahu first took its case to the courts, in 1868, the government passed laws to prevent the Courts from hearing or ruling on the case."

Irrigation pond schemes might start making sense to the govt now.

The arundel scheme has made a noticable change to the water table miles away on the coast where I grew up.

do you know the cost of water to farmers?

Waimea dam costs are blowing out
https://www.pressreader.com/new-zealand/nelson-mail/20201003/28279353886...

A dam is a rather more complex animal compared to ponds which are replenished by floodwater.

The local dam fell over while they were building it:
https://en.wikipedia.org/wiki/Opuha_Dam

Waitaha might have something to say about that. My understanding is they already have counter claims against Ngai Tahu.

Sucks to be non-Maori these days I guess?

Strange year on the farm. Bit more rain last night and still got lots of grass but yesterday I could drive across creeks that normally flow till early December, now bone dry, no frosts lots of apricots on the trees. Grapes are looking good, I read yesterday the wine sales in Europe are back. Local tree nurseries are going gangbusters with I suspect all the covid money and low interest rates, my friend with a sports shop tells me the same, best season ever.
Not much money in these bulls I was hoping for over $1000 and i'm going to be close but buyers are wanting to pay $800ish for this age bull and that's just not going to cut it. I am being quoted young bull calves @ $440 and that is not going to be enough for rearers either.
Big bulls are selling for $ 1600 so the guys selling to the meat works are doing Okay, my options are to sell them all and try and replace after Christmas, but if it rains a lot the grass will bolt and the farm will be an unholy mess, like the side of the road and no guarantee they will be any stock available in the New Year at sensible prices.
Thinking I will start to sell the lighter rising 18 month bulls in a few weeks, then keep the rest to kill in the Autumn or sell into store market when I see a margin, my rates and insurance are close to 200$ a hectare so I need good margins.

Perhaps I will go back to fattening lambs again. There must still be a lot of farmers down on numbers after the drought, so perhaps I could share farm all the cattle through till May but then I have had no income for nearly a year.

I planted 5 hectares in mixed regenerative seed, locally 250$ a hectare for seed I managed to get it out of the South Island for $160 a hectare. At these prices it's hard to see regenerative ag taking off in a hurry it's just too expensive, add in $80 of fert and nearly $200 to plant and it's hard to know what to eat it with that will make me money. Alos family hates roundup but this time of year I don't have a lot of options spraying the old grass out costs as well. I'm carrying two bulls a hectare so the math is easy and not exciting.

Whats your views on the marketability in regenerative ag to the consumer? Enough information or consumer awareness, whats the view in the ag sector currently? There is a growing awareness of the damaging effects of glyphosate not only on our biosphere but also the gut microbiome. This consumer awareness is only going to grow as human health continues to decline at rapid pace (33% of children born in the US expected to have some level of autism by 2035 at current rates, just
16 years), although this is a US statistic we are very close behind in obesity statistics and this is a scary trend for any health system. I doubt consumers are aware of how widely roundup is used and with currently little to no options for a replacement I cant see it disappearing anytime soon. Market opportunity or unfeasible without roundup?

As far as roundup goes, it's behind all the no-till, where I worked in Canada it's all no-till ,two tractors instead of ten but a million dollar sprayer. Roundup was such a massive breakthrough but we have become so dependent. I sometimes spray out a field of grass I don't like, this year it was Brome grass and browntop. That brome grass turns up and it's not called ripgut brome for nothing. I could have worked the field up, brome seed doesn't last much more than a year but I run a risk of it drying up or a flood washing my topsoil away.

If you research Breast cancer in the UK the numbers are horrifying, it's something like 1 in 8 women, someone said it's not that different here. Roundup on weeds I feel is very different to spraying crops to help with harvest and then we eat the seed which is how we all get roundup in our systems, I read that %70 of people in USA have traces of glyphosate in urine. ( even worse)

https://www.ecowatch.com/glyphosate-found-in-urine-of-93-percent-of-amer...

I read that as diet in Asia changes they too are seeing western diseases increase

https://www.businesswire.com/news/home/20200904005276/en/China-Biopsy-Ma...

https://www.cancerresearchuk.org/health-professional/cancer-statistics/s...

I am on the fence regarding marketing regenerative ag, it would most likely crossover with Organic. People want good food what they also want it to be affordable. Regenerative could take a generation to sort out.

In NZ we have very high cost structures and expensive land. If you look at farm debt it was 63,764 million in September 19 at present it is 62.862million, so farm debt is not growing but retracting.

I have a good friends in Chile and they have some good farms but like much/all of Sth America there is always a political risk but at least they have lower costs, the riots in Chile are not getting any press here but I get lots of talk about it from friends and family, ( my wife's step mother is from Chile) In Chile the cost of living increases are out stripping wage growth.

https://edition.cnn.com/2020/10/19/americas/chile-anniversary-protests-i...

I really like low cost operations and now my rates and insurance are close to $200 a hectare i am being forced to intensify, I don't know if that is going to work out for me and I may be forced to manage how much I lose rather that push natural limits.
The reality is that we are not that competitive, my friends in the UK get a grant which often covers the cost of rent, diesel is a lot cheaper and they are close to lots of consumers. Local farmers won't like imported meat competing on quality so you have to tread gently.

The USA is still the farm powerhouse, followed by Brazil and soon Russia. I don't know where we fit in without getting crushed.

the supermarket buyers (gatekeepers) will decide & pocket most margin.
As for food ingredients, do you want a regenerative pain au chocolat.
Restaurant, its more absolute location.

Check these guys out
https://instagram.com/carnimex.nl?igshid=w53vvc9b1wq8

And
https://instagram.com/heritageangus?igshid=16enlzx4ikyoc

Here is some Covid news. More importantly, think about whats not being reported.

https://www.odt.co.nz/star-news/star-christchurch/high-school-student-cl...

Where is the reporting of how the worker became infected. What processes have been found wanting? Why no interest now.

All reporting focus is on will the positive test be placed in quarantine and is there any room in quarantine.

Henry - back the truck up and ask yourself the BIG questions rather than the little tidbits you stress about.
Which Lobby group managed to convince our government that importing 400 "essential" fisherman was a good idea. Who really thought that they would arrive Covid free? Why do our fishing fleet insist that they must have overseas crew....?? Why are they so against cameras on the boats?

I guess most of us can stomach allowing these 400 fishermen in as long as we know the process of training kiwis for future positions has begun and will be closely monitored so that sooner rather than later only a tiny number of these essential foreigners are needed. Pigs will fly.

focus fazzz, focus, being against cameras on boats, how is that got anything to do with a non hotel (MIQ) employee being test positive over Halloween weekend when the joint was pumping.
(Now if you want to chat about being Quarantine Island - but it is what it is now a la OLOTL)

For you:
https://youtu.be/YxMXkUIs_k8
Use how you like, Use it as a metaphor re the new Cabinet.

Henry once again - I never click on your you Tube links - I would rather watch Star Trek reruns.

The positive case, announced on Monday night by the Ministry of Health, is an MIQ staff member working at the Sudima Hotel, near Christchurch Airport, where international mariners are in managed isolation and quarantine. The person is not an employee of the hotel.

Professor Wilson from the University of Otago told Morning Report the government is brushing over the issue by saying we can control occasional border incursions - but they should be seen as system failures.

https://www.newshub.co.nz/home/new-zealand/2020/11/coronavirus-border-ne...

Yep, FaceTime chat only goes so far.