US retail sales slip; Singles Day swamps China; China CPI dips unexpectedly; German business sentiment drops; Aussie business sentiment rises; UST 10y at 0.96%; oil and gold rise; NZ$1 = 68.2 USc; TWI-5 = 71.3

US retail sales slip; Singles Day swamps China; China CPI dips unexpectedly; German business sentiment drops; Aussie business sentiment rises; UST 10y at 0.96%; oil and gold rise; NZ$1 = 68.2 USc; TWI-5 = 71.3

Here's our summary of key economic events overnight that affect New Zealand, with news that despite a sharply recovering economy, China seems to be challenged by deflation again.

But first, the latest assessment of US retail sales shows them softening quite noticeably and down -1.2% from the prior week. And that means the year-on-year gain of +3.2% has fallen away to just +1.1%. A lot now hangs on having a good Black Friday and holiday season, and in turn that depends on the pandemic.

In China, today is Double-11, or Singles Day, a major retailing event. Although the buildup has been massive, it is expected to reach a crescendo today with unreal sales numbers. Alibaba alone has contracted 3000 chartered freight flights to move its sales, and more than 2 bln individual orders are expected today requiring a monumental delivery effort. The day's sales are expected to top US$32 bln and that is double what the US's Black Friday and Cyber Monday combined will generate.

China’s consumer inflation slumped to their lowest level in more than eleven years, just +0.5% year-on-year, dragged down by the first drop in pork prices in 19 months. However, beef (+7.0%) and lamb prices (+3.6%) are still rising. Petrol prices fell sharply. It is such a sharp shift lower than deflation is a real possibility before the end of 2020 and that is quite an unexpected situation.

Deflation is already the story at the factory. It is the ninth straight month of deflation and a situation they can't seem to get out of. Current policies aren't addressing this imbalance at all.

Growing worries the German economy may be heading back into recession has seen the ZEW sentiment index there fall sharply in November, undermined by the second pandemic wave washing over the country.

In Australia, the October business sentiment survey from NAB is reporting a sharp improvement following the lockdown easing in Victoria.

Locally, all eyes will be on the RBNZ Monetary Policy Review this afternoon. International investors are seeing a central bank that now controls a third of our bond market and see 'Japanification' here suddenly. That is such a distorted market, those investors will likely lose interest in it all together, hastening its demise.

Wall Street is marking time today after reaching new highs. The S&P500 is down -0.2% in early afternoon trade after having dipped more earlier. Overnight, European markets rose again, mostly by about +1%. Yesterday's Shanghai fell by -0.4%. Hong Kong gained another +1.1% and the very large Tokyo exchange rose +0.3%. Locally the ASX200 ended up +0.7% and the NZX50 Capital Index was up +0.4%.

The latest global compilation of COVID-19 data is here. The global tally is 50,913,000 and up +322,000 rise in the past day. It is still grim in France, Russia, the UK and central and southern Italy with very serious stress on their hospital systems. Global deaths reported now exceed 1,263,000 and up +5,000 in just one day.

The largest number of reported cases globally are still in the US, which rose +137,000 since this time yesterday to 10,439,000. The US remains the global epicenter of the virus. The number of active cases is surging at 3,639,000 so many more new cases more than recoveries. Their death total now exceeds 245,000 and continuing to rise by more than +1000 a day.

China is facing a winter coronavirus threat, but claims it sees no signs of a renewed outbreak yet. It is applying "strict measures" to ensure it doesn't happen.

In Australia, they are not getting any resurgence. There have now been 27,678 COVID-19 cases reported, and that is just +10 more cases than we reported yesterday. Reported deaths remain unchanged at 907.

The UST 10yr yield will start today very similar to yesterday at 0.96% and holding the big recent gains. Also holding their recent steepening is their 2-10 rate curve which is unchanged at +77 bps, their 1-5 curve is also unchanged at +32 bps, while with their 3m-10 year curve is up marginally at +87 bps. The Australian Govt 10 year yield will start today up +6 bps at 0.96%. The China Govt 10 year yield is unchanged at 3.26%. But the New Zealand Govt 10 year yield is a startling +13 bps higher, now at 0.73%.

The price of gold has gained back +US$26/oz from this time yesterday, back up to US$1884/oz.

Oil prices have held up today and are now at just on US$41/bbl in the US, while the international price is now just on US$43/bbl.

And the Kiwi dollar is a tad firmer this morning at 68.2 USc and staying relatively elevated ahead of today's RBNZ Monetary Policy Review. Against the Australian dollar we are firmer at 93.8 AUc. Against the euro we have stayed up at 57.8 euro cents. That means our TWI-5 will start today at 71.3 and near its high for the year.

The bitcoin price starts regaining +1.2% at US$15,277. 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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73 Comments

18
up

Love em or hate em, China have incredible Covid success. Busy working to prevent a winter outbreak, while the Trump administration was chaotically denying they had much of a problem and making up fairy tales dates about when the virus would magically disappear. American soft power has been diminishing for some time, but Trump has hastened its demise (exactly what China and Russia hoped for, I expect).

Sorry, Ginger, but praise for China on covid is a nonsense. They stuffed up on multiple fronts. Sure, they may have handled it effectively, domestically, eventually, but...

Fritz, they have the world's biggest population, but only the 59th highest number of infections. I'm not saying they had a perfect response but compared to America? The numbers speak for themselves. And I have plenty of criticisms for China but the issue of soft power is manifest.

Citizens and governments of other countries are experiencing the power vacuum that Trump created when he waltzed off and negated America's decades long position as global role model (again i'm not saying America has ever been perfect or beyond criticism, no one is, and there have been plenty of flaws in American foreign policy) *BUT* America has lost so much soft power, respect and influence geopolitically during the Trump administration and are continuing to do so.

Meanwhile, the world looks at China and sees stability, successful Covid control etc. And they are gaining soft power.

I'm not making a value judgements on whether that is good or bad (in this particular comment but I have done previously, as you know).

We've had plenty of discussions on here as to which Imperial Overlord we would prefer (America or China) and neither of them are without blame or flaws. But if you are someone who doesn't want a Chinese global super power and increased Chinese power and domination on the world stage, then the rapid decline in American prestige since the Trump administration may be of concern. The terrible handling of the pandemic is a big part of it.

Youngdumbandbroke, i'm not commenting on them spreading it and their behaviour at the beginning of the pandemic (which I was very critical of), i'm referring to how they have managed to keep the pandemic under control subsequent to that, while it has run roughshod over America and continues to do so.

It looks bad. Both Putin and Xi are delighted by the optics and using it for maximum propaganda wins.

I should also add, before someone accuses me of it, I am also not suggesting that America doesn't have a problem with China or that globalisation hasn't disadvantaged the American working class and hollowed out the American middle class.

I am always surprised by how totaliarian, hyper-partisan and extremist views on this are. From my perspective, it is possible to acknowledge that globalisation has led to some highly undesirable socio-economic impacts on American citizens over the long term *and* that China has been playing at globalisation to their own maximum advantage. Whilst at the same time, acknowledging that Trump has damaged America's global reputation and soft power, leaving a vacuum that China are more than happy to fill.

What Trump says and believes vs what actual exists and achieves have often been widely divergent. Although, in fairness to him, that's not uncommon in politics, Trump is just harder on the rhetoric and "alternative-facts" in a way that has divided the American people, amplified hyper-partisanship and degraded the dignity of the office of President.

Trump has damaged the US's reputation for sure, but the CCP's bullying tactics and handling of Covid has damaged their reputation also, with majority of people in advanced economies now having a negative view.

https://www.pewresearch.org/global/2020/10/06/unfavorable-views-of-china...

14
up

Apart from the bit where they let it spread to the rest of the world, sure.

Seems like that's more the fault of the rest of the world rather than China. It's our responsibility to look after ourselves.

It's their responsibility to have proper biosecurity measures to prevent such disease outbreaks

It is worth reflecting that sewage samples from multiple places in the world indicate that CV19 was circulating well before its presence was apparent in Wuhan. When everyone calms down and all the evidence is assessed, then the judgement may well be that the virus originated somewhere else than Wuhan - possibly further south in China or possibly in somewhere like Myannmar where relevant wildlife assocaitions with humans are more prevalent. History may well decide that the Wuhan market was the first super-spreading event rather than the origin of the disease. We simply don't know.
But with hindsight, if the rest of the world had initiated lockdowns and control systems by say mid February (which was when I first wrote in some frustration at this site that coronavirus was going to be a much bigger event than was recognised) and by which time it was already evident that the Chinese were getting it under control themselves, then outcomes would have been very different. It is worth acknowledging that the Chinese had already made public the genomic sequence of the virus by January 10, and it was also totally evident about that time that it was indeed able to transfer between humans.
KeithW

IMO their interference in the WHO and its initial investigation is mostly to blame for the skepticism.

You really are a China apologist Keith.

Fritz,
If you think I am an apologist then there must be, in your opinion, a flaw in my logic.
Can you identify that flaw for me?
KeithW

How many countries do you know that scan all travellers for diseases on their way out?

This is the danger of the modern world where everyone can fly anywhere within 24hrs. It's literally what epidemiologists have been saying for decades - it won't matter where the next pandemic starts, it will be out of control before we can respond due to humans being able to travel anywhere they want so quickly. I suggest you are suffering from hindsight bias...

We created an environment where rapid spread of viruses is inevitable and we were OK to live with the risk because of the benefits it bought. We can't suddenly be all upset and blame each other when the inevitable happens. Really it wouldn't have mattered where the virus started - would you be OK NZ taking all the blame if it came from a possum trapper here, after it jumped species and spread around the world within a week, before we knew it was a real problem?

Then why don't pandemics start in countries that have solid biosecurity management and legislation to protect against disease transmission from animals?

Biosecurity management is generally only on inward produce and not for people (only the things people are carrying in NZ for instance). Given enough time, you would see pandemics come out of any country given the current environment. The more people a country has and the more exposure it's people have to animals (whether they are skunks/horses/pangolins/cows/sheep/birds etc), the more likely we will get virus transmission between another animal and humans. China has a lot of people and a lot of people interacting with animals. Hence it's more likely they will be the source of a pandemic.

Legislation doesn't protect against disease transmission from animals. If a farmer in NZ catches a disease from a sheep he is shearing and it get's passed onto another human, legislation hasn't helped him. If that human then takes a flight to another country, biosecurity hasn't helped either.

You will literally have to interrupt transmission of viruses to stop the next pandemic. Which means you would have to have zero interaction of humans and animals AND you will have to stop human viruses from mutating. Both of these seem unlikely (the Flu virus constantly mutates and causes thousands of dead every year, hence epidemics from the flu are very common).

Blaming China for having lots of people or being unlucky with a virus mutation is ill thought out. As I said (which I note you don't answer), would you be comfortable if NZ accepted responsibility from a virus transmitted from a possum to a human which then quickly spread around the world?

Viruses are just doing what they do, our response is the only thing we can control. We can only do that within our borders. Hence individual countries have to bear their own responsibility for how they controlled the virus.

Here in NZ, we have controls in place for when people interact with animals such as vaccines, traceability programs, food safety rules, livestock welfare rules etc. To answer your obvious question, it wouldn't happen in NZ because of our biosecurity systems. Tell me again how many pandemics have started in NZ vs China? I'll wait

32
up

Bernard Hickey:
https://www.stuff.co.nz/business/opinion-analysis/300155251/government-s...

"It is bizarre that a Labour Government and a Reserve Bank that talk a big game on their social responsibilities and sustainability are choosing to pump up to $150b into increasing housing market valuations for the richest half of New Zealanders who own homes, but don’t think they can afford increasing benefits at a cost of $5.2b for the hundreds of thousands of kids and their parents living in poverty."

24
up

The cult of personality continues but for how long? Unless Labour use some of their political capital to actually help those without a house, who watch real wages decline year on year, there will be a significant backlash. We are heading towards a society with deep inequalities that will take generations to resolve.

14
up

The cult of personality continues but for how long? >

Unfortunately, most people have no idea what is happening and how it is happening. So JA has side-stepped the ire for now. But I don't think she is entirely to blame and she is reading from a manual. Basically she has no idea economically, which means she just follows what she is being told is the right way to do things. But this is also true of the Minister of Finance: another Labour leader who essentially knows very little of how to operate outside the neoliberal framework.

I was aware that this govt was not as socialist as they pretend to be. They have the t-shirt, but their credibility rings hollow.

You can't really expect politicians to be economic experts, that's why the people at Treasury and the RBNZ get the big bucks.

Hopefully they read this website including comments to get a better handle on things.

And it will be infecting more than just those at the bottom, as those halfway up get dragged down by those further down who can't afford 'things'.

(eg: Stepson; who we managed through a breakup a month odd back. Sold their family home as neither could afford to buy the other out, and a defined amount is easier to divide than some notional 'value'. RIngs last night, "Can we 'lend' him $300k so he can bid at an auction this week, as he can't afford the whole lot on one set of figures". How many other parents are going to put their savings at risk because 0% in the bank is the only alternative to 'lending' it to the family? NB: Experience tells me that 'lending' to the family ends up being a gift. Words like "What do you want it back for? You can afford it" and that, wasn't from a child but an ex-father in law!)

Hickster, well put. Ardern is a phoney, a flake. That was my first impression, I should have stuck with that rather than being seduced by her charm.

12
up

Brilliant article and shows what I have been saying for a long time. This government and RBNZ are both acting stupendously stupid.

The $100b of printed would be way more inflationary and would juice the economy a hell of a lot more if it was given out as helicopter money. $100b is $1,000,000 for 100,000 kids in poverty. Or broad based it's $20,000 for every man/woman/child in the country. Instead, we give it to banks and landowners - who are/have already benefitted massively over the past couple of decades. Utter madness. At the same time the two dumb arses doing this are claiming social responsibility. It is idiocy and groupthink of the highest order, they need to be shaken out of their thinking.

Edit: maths was off!

They believe in trickle down?

Or they are acting in their own interest and the interest of those who support them.

It has done as much as it can with its current Large Scale Asset Programme (LSAP) to print up to $100 billion to buy Government bonds. It is running out of bonds to buy, mostly because the Government hasn’t borrowed much in the past and is not borrowing as fast as it planned in March.

NZ Government net new debt issuance in the quarter ending 30 September 2020 was $17.99 billion, the RBNZ purchased a $15.16 billion nominal amount over the same period.

Audaxes
This demosntrates very nicely and very simply how the RB is totally dominating the bond market.
Can you put together a similar series for say each of the quarters since the start of 2019. I think you must have that data readily at hand.
KeithW

Why - the RBNZ was not executing the LSAP program then?

Regardless, here is a graphic depiction of net NZDM issuance or redemption going back to start of the John Key government.

For the three months ending 30 June the RBNZ bought $18.347bn bonds versus government net issuance of $24.405bn

sign of deflation growing stronger

https://www.straitstimes.com/business/invest/warning-signs-of-deflation-...

Fear a deflationary spiral

https://www.ft.com/content/7a0e882e-700b-11e4-bc6a-00144feabdc0

https://www.telegraph.co.uk/business/2020/05/22/britain-sliding-deflatio...

“The market is shit. Sorry for my French,” said Hugo De Stoop, CEO of Euronav, the world’s largest listed crude-tanker owner.
https://www.zerohedge.com/markets/crude-vs-product-tanker-debate-advanta...

which is what Gail Tverberg has been blogging on .... peak DEMAND

https://ourfiniteworld.com/2020/11/09/energy-is-the-economy-shrinkage-in...

Where is the bounce.
Talking to industrial sales folk - clever kit, some running at 30% of budget.

Question - Re DC's comments on the RBNZ and the Bond market; what will be the consequence if the investors lose interest? Does the dollar collapse? Real question as I do not really understand those influences.

Here's the Bloomberg piece DC was likely referencing: "Japanification Stalks New Zealand Debt That’s 37% Owned by RBNZ" https://www.bloomberg.com/news/articles/2020-11-09/japanification-stalks...

I suspect these fears are overstated - global banks remain keen buyers of sovereign debt - ownership of such pristine collateral secures the risks attached to not so pristine repoed assets and they have a zero RWA capital rating . They remain liquid despite the threats issued by the RBNZ last March, hence NZDM syndicated sovereign debt issues are oversubscribed up to 4.5 times.

I have pigeons all over my crop, anyone want a days shooting? Guk is sick of it. ( my family call me Guk) Rained all night got a days topping in yesterday, we top to stop the grass going to seed and push it back to a more vegetative state, if I do too much a couple of weeks of Nor wester and i'm in trouble but if it keeps raining cattle get pumping. decisions, decisions, i'm doing half a paddock at a time.

Cattle store market has strengthened, hopefully these cattle will be sought, after always a gamble when you deal with the store market.

I need a grammer checker

Pigeon populations have exploded recently - I wonder what's causing it? Food availability? Lack of council control programmes? Same goes for peacocks

Over here in Taranaki plenty of observation on increasing rabbit numbers the last 2 years. The theory being that the predator free programme is having good success on its objective of getting on top of the predators. But this has let the rabbits start to get away.

Also, the latest RHDV1-K5 virus release was a bit of a failure so that has helped skyrocket rabbit numbers. Populations quickly become resistant, hence the need for new strains to be released. But I agree the significant reduction in feral stoats, cats and ferrets has unintended consequences.

For budding rabbiters.
www.trapping.com.au

You'd have to be sure they're compliant with the animal welfare act. Leghold traps are far too labour intensive to be effective for rabbit control

we have had two fantastic breeding seasons, never seen so many mallards, pigeons too, I cannot get close to the pigeons any more, so going to borrow a mates heavy barreled 22-250 which should get the job done.

At 6.30 am in pouring rain, forgot the ear muffs, my brain was like what the hell, concussion and noise, why aren't we cuddled up to warm wife. I got back at 7.15 and my hands were frozen.

My brother is keen to come and smoke some pigeons for you if your interested. Ill post my number if you actually want someone, cheers.

yep it would be great

They are living in my barns, well a lot of them.

what about alphachloralose treated wheat?

I just got back from Farmlands and apparently you are best with peas to poison pigeons

Responsibly used, lasers can help in keeping birds away. We had a neighbour that used one when the birds came in to roost in the shelter belt trees. Was quite effective.
Andrew, If you have large numbers of dead poisoned pigeons how do you dispose of them? Would a hole dug to bury them in, become hazardous land because of the poison used?

i think this poison just makes them sick, they fly away and don't come back, not like the old nicotine stuff with dead birds everywhere. I would imagine hawks would get poisoned too if you killed them.

Would be more effective than trying to shoot 100s of them

ordered some due here tomorrow.

flick me a message: 0273859162

We have the most rabbits I have seen up north as well

Have you been dry? We've had 2 going on 3 dry years and a plague of rabbits. Dry weather increases the survival of the young.

Worst drought for 70 years, virus came through late and nailed the rabbits

Queenstown area has had a similar response to Predator Free initiative - success at ridding mustelids etc and now a population explosion among rabbits. The problem with wanting to exterminate certain species completely, without looking at the whole issue, is there can be unintended consequences. Perhaps it is time for Predator Free NZ and Predator Free 2050 to review how they are measuring success. By destroying one 'most damaging species' it can simply allow for another species to become 'most damaging'.

Any wallabies seen crossing the Cromwell bridge yet?

Not that I have heard of but they aren't too far away. Possums will be the next big threat this side of the river if they don't get them under control. They can do serious damage to hort and viticulture blocks if they get too established - something I don't think the powers that be, really understand. Ospri was responsible for possum control until recently. Were they effective - well if the increase in possums in the last few years is the indicator - no they weren't.

dp

London is falling ...
https://www.youtube.com/watch?v=Dd2-VY6roL0

This gives a good sense of the financial carnage continued lockdowns is having..
No wonder the stockmarket is at record highs

Interesting. Though I take a lot of that with a pinch of salt. I used to live and work in all the areas filmed and it didn't seem that unusual in the day time, especially when much of the city is work from home and there's no tourists. The shops closed was striking and grim, but there always was a high rotation of shops, especially restaurants. And ambulance and police everywhere is a sign of nothing in London.

for sure
no tourists will empty things out and if theres not much open then no real reason to head into the big smoke
But the number of shops closing looks grim

Another investing legend falls for the ol' rat poison (Bitcoin). "I think every major bank, every major investment bank, every major high net worth firm is going to eventually have some exposure to bitcoin or what's like it, which is gold or some kind of commodities,

While in NZ, BTC still doesn't have the stamp of approval from Granny Herald, Mike Hosking, or Ashley Church; therefore it will remain little more than a curiosity for most. That might be a good thing but it may also be a tragedy for many to miss the opportunity in possible the greatest investment of our times.

https://www.forbes.com/sites/billybambrough/2020/11/09/wall-street-legen...

Not to mention Stan Druckenmiller coming out yesterday saying he owns some BTC, a lot more gold but some BTC. That has opened it up other hedge fund managers. Slowly then all at once...
https://twitter.com/APompliano/status/1325877011831721984
Only 21 million BTC will ever exist...do the math

Gosh it's Armistice day and we don't even notice, one of the great tragedies the world has ever had and it's ramifications still impact our lives. I remember when I was young, the fire sirens went off at 11 and everything stopped even the cars for a minutes silence, today it just slips by, yet it destroyed a generation.

a good watch
https://www.youtube.com/watch?v=gmr6fWhhyaM&feature=youtu.be

Actually a generation destroyed itself arguing who was to be the next Empire.

The US won that (due to local energy, mainly) but her time is over. The problem is that there isn't enough planet left for China to pick up the baton.

The guys in the trenches didn't get to argue much about empire building, just to do or die.

Do the bidding of the would-be emperors ...

Deflation in China, very interesting indeed.
What's the opposite of stagflation? Boom-de-flation?

Re China: Know dollars, know growth. No dollars, no growth.

Australia will have to find other importers for its exports as China may not have need for them irrespective of growing tensions between the two nations.

Standing Up to China Comes at a High Price for Australia

China will continue to need imports to meet its lack of natural resources - minerals to drive its infrastructure programme which still has quite some way to go, and either animal-based foods, or the grain to grow its own animals. In other sectors of the economy, imports will continue to be increasingly modest.
KeithW