US mortgage rates fall; China loan growth slips; Japan machine tool orders recover; EU gets looser; Aussie sentiment roars back; UST 10y at 0.96%; oil up and gold down; NZ$1 = 68.7 USc; TWI-5 = 71.8

US mortgage rates fall; China loan growth slips; Japan machine tool orders recover; EU gets looser; Aussie sentiment roars back; UST 10y at 0.96%; oil up and gold down; NZ$1 = 68.7 USc; TWI-5 = 71.8

Here's our summary of key economic events overnight that affect New Zealand, with news a global bond yield rebound seems to be working against regulators' desire for lower rates to boost economic activity.

But first in the US, mortgage rates have fallen to record low levels. Their benchmark 30 year is now below 3% for the first time ever (plus points). And that is despite benchmark bond rates rising sharply since the US election. Mortgage applications were soft last week.

In China, loan growth in October came in lower than expected and that was something of a surprise. Growth undershot by -¥110 bln (NZ$25 bln) but it still rose year-on-year by almost +13%.

China's Singles Day sales event is now over, probably breaking records.

To keep things pumped up, China’s top banking regulator has relaxed requirements for licensed consumer and car finance companies to boost consumer lending by cutting reserve requirements.

In Hong Kong, China is clamping down even harder on internal dissent. It is now very dangerous to question Beijing now, and their opposition MPs have all resigned in protest.

Japan machine tool orders made a good comeback in October to be now only -6% lower than the same month last year. In September the year-on-year decline was -15%.

The EU is extending its suspension of its budget rules so that larger deficit spending for longer can proceed. A top official there says a V recovery is an illusion.

In Australia, the latest consumer sentiment survey is very positive, pointing to a 'normal' end-of-year holiday shopping season.

China has pulled out of investing in a large Australian gas field development, a quarter stake in a AU$16 bln project. It is being seen as another rejection by China of Australian policies toward the Middle Kingdom.

Negotiations have concluded in the 15 country RCEP trade deal with ministers expected to sign it on Sunday.

Wall Street is rising again today. It may be a public holiday (Veterans Day) in the US, but the financial markets are still open. The S&P500 is up +0.8% in early afternoon trade after flatlining yesterday. Overnight, European markets rose again, mostly by about +0.5% although London rose +1.4%. Yesterday's Shanghai fell another -0.5%. Hong Kong fell -0.3% and the very large Tokyo exchange rose an impressive +1.8%. Locally the ASX200 ended up +1.7% and the NZX50 Capital Index was up +0.4%.

The latest global compilation of COVID-19 data is here. The global tally is 51,684,000 and a sharp surge of +771,000 rise in the past day. It is still grim in France, Russia, the UK, Spain and central and southern Italy with very serious stress on their hospital systems. But there is some suggestion of an easing in some other European countries. Global deaths reported now exceed 1,276,000 and up +13,000 in just one day.

The largest number of reported cases globally are still in the US, which rose +145,000 since this time yesterday to 10,584,000. The US remains the global epicenter of the virus and has gone leaderless and rogue. Hospital stress is severe in many places now, particularly in the Midwest. The number of active cases is surging at 3,735,000 so almost +100,000 more new cases more than recoveries in just one day. Their death total now exceeds 246,000 and continuing to rise by more than +1000 a day.

In Australia, they are not getting any resurgence. There have now been 27,686 COVID-19 cases reported, and that is just +8 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. Their 2-10 rate curve which is marginally steeper at +78 bps, their 1-5 curve is also a little steeper at +33 bps, while with their 3m-10 year curve is unchanged at +87 bps. The Australian Govt 10 year yield is unchanged at 0.96%. The China Govt 10 year yield is also unchanged at 3.26%. But the New Zealand Govt 10 year yield is another sharp +15 bps higher, now at 0.88%.

The price of gold has fallen back today, down -US$20/oz from this time yesterday, and now US$1864/oz.

Oil prices have risen again today and are now at just over US$42/bbl in the US, while the international price is now just under US$44.50/bbl. These are rises of about +US$1.50/bbl. But OPEC has cut its expectations that world crude oil demand will rise anytime soon, seeing only declines now.

And the Kiwi dollar is a firmer yet again, up another +½c at 68.7 USc and its highest since March 2019. Against the Australian dollar we are also much firmer at 94.6 AUc with a rise of almost +1c. Against the euro we are up at 58.4 euro cents. That means our TWI-5 will start today at 71.8 and near its high for the year.

The bitcoin price is up +3.0% this morning at US$15,748. The bitcoin rate is charted in the exchange rate set below.

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36 Comments

For all intents and purposes Hong Kong can no longer be considered separate from China. A strong demonstration of China's lack of trustworthiness and adherence to international agreements and treaties.

Will our government be prepared to speak up? I doubt it, our current dependence on them is too much. Hopefully with Biden in office NZ will be able to shift some of it's markets away from China.

US won't be our saviour. We produce commodities directly in competition with US which has high levels of protection policies.
If China catches a cold, we go on life-support.

surely what China needs is higher wages= more internal consumption and savings?

Yes, and stated as their plan, but, the growth phase requires large vol of commodities - enter NZ/AU etc.

looks more like Russia and Iran with USA as a backstop, Trump did a cracker of a deal with China

'Corn: Outstanding sales of U.S. corn to China are at an all-time high of 8.7 million tons.
Soybeans: U.S. soybeans sales for marketing year 2021 are off to the strongest start in history, with outstanding sales to China double 2017 levels.
Sorghum: U.S. exports of sorghum to China from January to August 2020 totaled $617 million, up from $561 million for the same period in 2017.
Pork: U.S. pork exports to China hit an all-time record in just the first five months of 2020.
Beef: U.S. beef and beef products exports to China through August 2020 are already more than triple the total for 2017.
In addition to these products, USDA expects 2020 sales to China to hit record or near-record levels for numerous other U.S. agricultural products including pet food, alfalfa hay, pecans, peanuts, and prepared foods.

Andrew..you are not seeing the big picture..
US trade deficit up to $67.1 billion in August, 14-year high
The Commerce Department reported Tuesday that the gap between the goods and services the United States sells and what it buys abroad climbed 5.9% in August to $67.1 billion, highest since August 2006. Exports rose 2.2% to $171.9 billion on a surge in shipments of soybeans, but imports rose more — up 3.2% to $239 billion — led by purchases of crude oil, cars and auto parts.
https://apnews.com/article/donald-trump-global-trade-north-america-china...

They US is also paying out record subsidies to farmers, not a very good system:
https://www.npr.org/sections/thesalt/2019/12/31/790261705/farmers-got-bi...

On Pork, China culled 25% of the worlds pigs due to swine flu and needed the pork from somewhere. Hardly political savvy.

"higher wages= more internal consumption and savings..."

Only an economist would agree this makes any sense

This is not about the US being our saviour, but a total change of tone across the world to enable other markets to be tapped. I know it needs much more than that, such as our Government getting out there and doing some work to expand our markets into areas Not China. But I am ever hopeful.

HK was stolen from China at the point of a gun. What go around come around.

12
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Headline in NZherald.....Mr Orr will be very happy that he has given enough ammunition to see that house price goes sky high as if were not already high...ponzi continues

https://www.nzherald.co.nz/property/auckland-house-prices-buying-frenzy-...

Correct, Mr Orr will be very proud of himself - Mission Accomplished.

I'd bet the mission will be continued too.

14
up

I don’t think he’ll be proud. He’ll be frustrated that people refuse to behave like the rational actors of economic textbooks. The expectations game has backfired. The RB has a serious case of the observer problem — they want to stand back and only intervene noiselessly, but now everyone knows what they do and their very presence distorts the market. It’s like an anthropologist who wants to observe chimp society, who finds that their very presence is altering the behaviour of the chimps.

12
up

The mission only ends when his term is over.

He's still got to try and inflate the regions further. Why not push for $1 million houses in the likes of Reporoa, Kawarau, Patea, Wairoa etc? You know, really stimulate the economy and help these depressed regions out. He obviously knows the answer to all of our economic woes is perpetually inflating asset prices. He's clearly a genius who thinks outside the box! Bravo Mr Orr.

20
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Reserve Bank has been out of control for the last 8 months now, just proving what we have been saying on this site. Acting outside their mandate of financial system stability by removing LVRs exactly at the time when we needed financial system stability.

Orr and his cohorts need to be held accountable. They need to resign or be pushed.

10
up

He's doing what the Poly's want.... keep masses acquiesced and we maintain power. Shit will only fall on him when populace wake up and demand Poly's do something.

Yeah, Labour need to own this too. I think the patience of the young will wear pretty thin if this isn't reined in soon.

Those who wish to play politics just deflect the blame, up until recently it was the Boomers fault. Shows a lack of ability to actually think, no real understanding of the market and issues and of course misplaced rank jealousy. Pretty normal really.

Even our government doesn't get it they think just building more houses will fix the problem, but I think it will just flood the market with more expensive properties. The potential return of ex-pats may be an issue, but may also drive a discussion that has been needed but avoided; that of supportable population size. what resources we have v what we need, and how do we keep people employed? Plus will all those ex-pats returning home settle for the low wage economy that we have? If they are returning, then pollies can expect some very clear expectations on what they deliver, and it won't be BAU.

“supportable population size,” aye therein lies the crux of a problem that has lain a long time, in the bottom of all governments’ too hard basket for all of this century.

Oh longer than that. Remember the totally unnecessary cuts he made around September 2019. Couldn't wait to get another housing boom underway.

Perhaps we the people should mount a insurrection on the RBNZ.

With the changing harder political/social line in China is it still safe for foreigners living/working/visiting in China? It seems to be a different place from even 3 years ago.

Hell No. Personally it is not worth the risk for me to go anywhere near China, especially since I dabble in Cryptocurrency. Pitty since Hong Kong looks like a nice place.

China did a deal with Iran for a lot of gas. Whether this will be a good thing for Iran only time can tell but there is no doubt USA sanctions are pushing Iran into China's arms for better or worse. I always thought Persia would be the country closest to the west, but oil got in the way.

I read yesterday that Audio books were %30 of book sales in 2016 I wonder what they are now, I always thought it would be sad if books disappeared but the reality that many now listen to podcasts and books while driving or doing stuff where you don't need full concentration, got to be a good thing. It takes up to two days for someone to create an audio book, while audible control the market there must be a fortune for Amazon selling an audiobook for $16, especially as it looks to be hitting %50 of book sales soon.

Lost a friend to suicide last night hadn't seen her for a few years, i will always remember her as a really pretty bubbly young girl when going to primary school together.

14
up

People are loosing Jobs and many businesses are are finding it tough to survive, if not already shut BUT speculators and so called investors are making fortunes all because of people in power like Mr Orr and his type.

This is receipe for disastor economically and socially but who cares.

If you stiff the Majority, do not expect a brighter future.....long term.

We all ain't stuuuuuuuuuuuuuuuupid.

Wages are for idiots
we need to drive all wage earners out of business
they are holding us back from our brighter future ... where we all passively become wealthy

Cool, universal benefit for all and ever rising house prices. Woohhoo.

Eh? What do you mean it won't work? It's been tried before, you say? It leads to all sorts of bad outcomes? Watch Mr Jones on Netflix? It only forces the state to be more and more authoritarian? Phht. Rubbish. They just didn't do it right, everyone knows that, the wrong people took over.

well one place it leads is this ...

https://www.nzherald.co.nz/nz/auckland-council-cash-saving-methods-likel...

Turns out Incomes matter ... not just house prices

Happy (short lived) 16k bitcoin bulls!

Go Down!! I want more :)
Long term conviction has never been higher.

Good work from
The Goodfellows

https://youtu.be/iIyduEPrfOE
Steady, steady hold.

Lockdown & print money just digs deeper.

Wall Street is rising again today. It may be a public holiday (Veterans Day) in the US, but the financial markets are still open.

It's a federal holiday - Fed closed, so is bond market.