US PMI data very positive; trade pressures build; Taiwan production shines; Singapore slips into deflation; Aussie PMIs good too; UST 10y at 0.86%; oil firm but gold drops; NZ$1 = 69.1 USc; TWI-5 = 72

US PMI data very positive; trade pressures build; Taiwan production shines; Singapore slips into deflation; Aussie PMIs good too; UST 10y at 0.86%; oil firm but gold drops; NZ$1 = 69.1 USc; TWI-5 = 72

Here's our summary of key economic events overnight that affect New Zealand, with news of some surprisingly strong trade and American data.

In the US, their early PMI readings for November have come in much better than expected. Their factory PMI came in at a six year high, while their services PMI was just as strong.

And that improvement has been reinforced by the Chicago Fed's National Activity Index for October.

On both sides of the Pacific, authorities are investigating why their traders can't get access to shipping containers. China sees its exporters with major issues hitting them hard, US authorities claim the same. A sharp spike in global seaborne trade seems to be behind the stress. But it isn't just a feature of the Pacific trade, it is an issue spreading worldwide. And freight rates are rising fast too.

Taiwan released a set of key data late yesterday, most of it quite positive. Industrial production was up more than +7% year-on-year in October

Singapore confirmed its economic decline in the Q3 of 2020 was marginally less than first estimated. But they have posted consumer price deflation again in October and that has dragged their year-on-year down below zero.

In Europe, their preliminary PMIs are signaling a steep downturn there. France and the UK are the main laggards, Germany was positive, even if only just.

In Australia, the first of their PMIs have been released and they are positive. Their factory PMI rose to nearly a three year high, and their services PMI is at a 4 month high. Both are at good expansionary levels.

In New York, the S&P500 opened the week with a good gain, but it has evaporated now and that market is flat. Overnight in Europe, they posted marginal declines. Yesterday, Tokyo was closed, Hong Kong was up a marginal +0.1%, but Shanghai had a very good day, up +1.1%.

A third COVID drug has now been trialed with promising success. This one is slightly different because it prevents infection rather than the disease. And it can be stored at normal refrigeration temperatures.

The latest global compilation of COVID-19 data is here. The global tally is 58,820,000 and a +478,000 rise overnight. It is still very grim in Russia, the UK, and Italy with great stress on their hospital systems. It does seem to be easing in Belgium, France and Spain. And although tiny by comparison with others, both Japan and South Korea are on edge as their clusters grow again. Global deaths reported now exceed 1,391,000 and up +7,000 from yesterday.

The largest number of reported cases globally are still in the US, which rose +135,000 in their Sunday count to 12,606,000 and at their higher pace of infection. The US remains the global epicenter of the virus with its leadership in denial and resisting any proper response. The number of active cases is surging at 4,889,000 and that level is up +85,000 in one day, so many more new cases more than recoveries. Hospitalisations are up very sharply especially in the Mid-West. Their death total now exceeds 263,000. The US now has a COVID death rate that now matches Brazil of 792/mln.

In Australia, they are not getting any major resurgence. There have now been 27,835 COVID-19 cases reported, and that is +14 more cases overnight. Now 92 of their cases are 'active' (+2). Reported deaths remain unchanged at 907.

The UST 10yr yield will start today up +4 bps at 0.86%. Their 2-10 rate curve is a little steeper at +69 bps, their 1-5 curve is also marginally steeper at +28 bps, with their 3m-10 year curve steeper too at +78 bps. The Australian Govt 10 year yield is up +1 bp at 0.88%. The China Govt 10 year yield is down -4 bps and now at 3.31% while the New Zealand Govt 10 year yield is unchanged at 0.81%.

The price of gold is has fallen sharply today, down -US$33 to US$1837/oz.

Oil prices are slightly higher again today and by another +US$0.50 or so to just on US$43/bbl in the US, while the international price is now just on US$46/bbl.

And the Kiwi dollar has slipped marginally to 69.1 USc this morning. Against the Australian dollar we are holding at 95 AUc. Against the euro we are also stable at 58.4 euro cents. That means our TWI-5 will start today, unchanged at 72.

The bitcoin price is also down just marginally, now at US$18,346 and a -0.8% dip. The bitcoin rate is charted in the exchange rate set below.

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80 Comments

XRP is up 76% in five days.

The irony with XRP, is its perfect for the crypto sceptics. A lot of banks around the world already use it.

Is a currency that volatile of any practical use aside from speculation? What do the banks use it for?

XRP is not volatile. Its been dead on 23 cents or so for 3 years. It just had a momentary burst of life.

Ripple, and the majority of others, are in a full on bull run. Wonder if it, and the rest, will reach previous highs (or surpass them)?

This is my problem with crypto currencies: While there might be scarcity of coins in a currency, there is absolutely no shortage of alternative currencies.

You wake up one day and find there's a new shiny out their and no one wants to buy your one any more. All crypto currencies will eventually have bag holders that were not paying attention when they fell out of favour.

Andreas nails this very issue. TLDR = Bitcoin is the apex predator and all other crypto currencies are junk. The only exception would be coins that have no "currency" aspect to them (e.g. a gold backed token) https://www.youtube.com/watch?v=p0ftZgCEZos

The problem with that interpretation is that bitcoin's architecture is too poorly designed to be widely used as a medium of exchange. Hence all the others, and hence the problem.

Correct - BTC is the store of value aka Gold 2.0. There'll be hundreds of crypto-currencies for daily use to transfer currency in micro-seconds, and XRP will be one of them. But there will only be one hedge that underpins them all - Bitcoin. It's architecture is designed specifically for that purpose, and it's arguably the most elegant piece of software ever written.

I'm not sure that one crypto for store of value and a slew of others for medium of exchange is a system which can be described as "elegant"...

Why not? That's the exact purpose of gold, and was the model up until the gold standard was removed due to the inability of the central banks to adequately manage the levers of monetary policy. Same incompetence is happening now with QE proving central banks are not fit for purpose. Gold works historically because it is hard money, but Bitcoin is the hardest money that's ever existed in history period.

Although to be fair to gold, it isn't as stranded when the lights and/or internet go off.

Totally irrelevant. If the lights go off you better have a gun and a tribe, because there'll be bigger problems afoot than how to transact your Bitcoin/Gold.

I guess you win with that one.
Because if the power goes off and/or the internet goes down, then I won't be able to come back with 'I told you so' on this or any other forum.

Lol. You can mail me a txt file on a USB stick. I'll mail you back a complete copy of the bitcoin ledger with every transaction in existence on it :D

If you don't have the means to secure/defend it, it's irrelevant

"the gold standard was removed due to the inability of the central banks to adequately manage the levers of monetary policy.."

ie To set us on the path to leveraging the hell out of everything ... to provide Growth & Jobs & Income

Going back to some miracle "gold standard" anchor sounds great .... its just that it comes with that nasty LESS jobs / incomes / growth kicker...
And that dear sir, is why Bitcoin is a red herring
It cant fix overshoot

Now we're talking fundamentals, and the hard bounds of a finite resource supply. Are you suggesting we can continuously flout these bounds creating MORE jobs, MORE consumption, MORE population, MORE growth indefinitely without consequence? We've done that for the last 40 years and look where it got us - it's time to pay the piper unfortunately.

For me these reasons are precisely why Bitcoin will be the new standard - it obeys the laws of the universe and finite supply with a difference: it's outside of any individual or collective's control, yet democratically used by the entire world.

No
the point being the "limited supply" concept of Bitcoin is correct in the same way Gold was used as a limiting factor (to try and recognise finite resource bases)
But there was a clear reason they abandoned the Gold standard ... To keep the party going when they hit limits
This enabled ever more complex supply chains to HARVEST every possible corner of the globe through leverage and financialization
Going back to a restricted standard now wont save those supply lines blowing apart

Agree mostly, but trade will continue as it has since Adam was a boy through all the shocks and pandemics that have ever occurred. Aside from that, I'm not sure what your point is.

another way of looking at it
Debt = Wealth
if you want to clear the debt overhang, you need to clear the wealth claims
And this decimates jobs and consequently complexity of supply

"elegant piece of software"

That's a Raoul Pal-ism.

What's the estimate on how many years left before computational power catches up with cryptography from 2009?

Quantum computing is here already https://research.google/teams/applied-science/quantum/. Bitcoin is already under active development for a post-quantum environment. The worst case scenario is Bitcoin will need a hard fork (where they make a copy of the code with new operating software). Technology is fluid not fixed.

Wild west..

XRP is junk I'm afraid. Ripple the company does have interesting technology, but only some of it uses the XRP tokens. And founders hold zillions of tokens, which they continually dump. Not just that, but the Ripple company is still raising funds via equity now - so the new shareholders won't have any regard for the XRP token value.

Ethereum on the other hand.... already hit $600 this morning. It was $150 in Jan, and sub $100 in March. And ETH 2.0 will bring perpetual staking rewards - so passive income for life.

Anything (XRP) that volatile has no useful purpose - other than taking excitable keyboard traders off the streets

The same banks that accept various currencies that can be used immediately in all sorts of trade?
What is the compelling case for XRP over these other bank traded currencies?

If your in it to make some epic gains really fast, then alt coins (aka shitcoins) are for you. If your in it for sound money principles and wealth preservation then Bitcoin the the one and only option. No reason you cant do both but don't even think about comparing Bitcoin to all the other several thousand pieces of shit out there. Some will have a use case but 99% are absolute crap (but that doesn't mean I wont trade them)

What's your bull case for btc over eth? I hold both but to me bitcoin seems like a stagnant technology even vs current ethereum, let alone v2.0 which if successful would be a huge leap forward for the technology as a whole. A more scalable and efficient, more generalised blockchain with many tokenised versions of real world assets as well as its native currency seems a far more likely success story than btc. But btc continues to out perform my expectations so what do I know.

ETH supply isn't hard capped like Bitcoin so it's highly likely ETH will rise to a point of full adoption then plateau IMO. Bitcoin will continue to get scarcer as the supply dwindles and the price will follow accordingly with the market cap rising to be the most dominant asset class bar none. Tokens built on top of ETH will range from 1c to $1B.

Three vaccines ready for the market. That’s great but even better, unlike many many products pharmaceuticals included, not dependent upon manufacture in China. Perhaps a hint of a harbinger that the world should think along these lines a bit more now?

You've got about the same chance of solving Covid 19 with a vaccine as you have of fixing overpriced housing in NZ (an asset bubble). ie: there will be endless talk but it isn't solvable in the current paradigm.

As an astute cousin of mine state to me recently. Solving Covid 19 rests solely with convincing wrinkly grey people that they need to change their lifestyle. So pretty much the same problem as overpriced housing really, entrenched behaviour that won't change.

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Sure, cos a vaccine could never work like it did with Polio, Diptheria, Smallpox etc.

Tell your cousin to loosen off the tinfoil hat a bit.

DP

Admit unclear myself, are these vaccines going to be stop em dead variety as per say smallpox,polio,TB or more like say the jab our cat gets each year that should do the job, but possibly might not?

How about measles? You probably look at a graph like this for your propaganda: https://www.historyofvaccines.org/content/graph-us-measles-cases

Whereas I look at this one: https://commons.wikimedia.org/wiki/File:Measles_cases_graph.svg

Further, half the declines attributed to vaccines happened in the first two years. 19 million doses were administered in the first thirteen years, so assuming an even distribution along those 13 years it was only possible for 1.6% of the population to have been vaccinated by 1965. Assume a double dose was really required, as was introduced, and that really drops the potential effectiveness amongst that 1.6%.

I've seen data elsewhere that shows the deaths per 100K was around 18-10 at 1900, and had dropped dramtically before vaccines. There is also the report that 2% of the population was contracting measles per annum for the 50 or so years before the vaccine, so a huge herd immunity already in place.

But you believe vaccines work if you want to, I thought you were supposed to be the pragmatist?

Wow. You think the measles vaccine is a conspiracy?

There's some discrepancy in your numbers.

Approximately 15 million children were given one of the new measles vaccines starting with their licensing in 1963 and continuing until mid-1966, and the reported incidence of the disease fell by half

Some 11.7 million doses of measles vaccine were distributed in 1967–1968, and the estimated number of cases of measles fell from 900 000 to 250 000

https://tinyurl.com/y4h7ybxg <-- Note this is a logarithmic scale not linear.

Do you have a source for that?

So if the vaccine was only given the children, why did the incidence of measles occur across all age groups.

How do you also explain the downward trend already in place before vaccines? A 20x reduction in deaths since the turn of the century. What is your evidence that it was simply the trend continuing?

1) https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4007870/

2) Sorry, could you repeat your question I don't quite follow. Adults would often have immunity through measles through previous exposure so it makes sense to target the immune naive (i.e. children). Children also serve as good vectors for pathogens (in particular viruses) due to high numbers mixing, less distancing and poorer hygiene practices.

3) The downward trend in death was due to modern medicine improving over those decades. For example, a common cause of death from measles was pneumonia via bacterial superinfection. If you consider penicillin was invented in 1928 and impose that on your graph what do you notice?

Penicillin was only available as a treatment in the 1940s. Sulphonamide antibacterials were developed in Germany in the 1930s.

Wow.. Tin foil hats for the whole family it seems.

Do you mean porkers?

I am amazed that they came out so fast, so am a little worried about the side effects. If they get forced through the medical hurdles quicker than they should... would you want to be first in line to receive them? The Oxford vaccine was tested on 20k people, which is a good start. Crazy that they reckon they will be able to produce 1 billion of them next year.

What it does show that if humans really really want to solve a problem, we throw resources at it and it get's done. How about we solve Climate Change then?? Nah, too hard.

It's definitely worth letting the vaccines go through the live clinical trial that will inevitably happen, and then looking at the data for mortality rate and side effects (if it isn't stuffed).

It's prescient to remember that if you're under 40 then you have a 1/10000 chance of dying from Covid. That's less than the rate of death for RotaShield® vaccines (1/5000) for rotavirus (which were withdrawn in 1999). I'd rather not get Guillain-Barré syndrome as per 2009 H1N1 seasonal vaccines (1/500k). And these are stats from vaccines that went through the full timeline without rush. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4599698/

Anyone who's worked in a large Org knows when management rush things through, the people on the tools are usually vindicated in their concerns that got brushed aside in the name of a deadline. I'm all for vaccines, but I'll be taking the 1/10000 chance of COVID death until I see the figures from the first round of vaccinations.

Because " solving" climate change means LESS
Vaccines means MORE

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Just listened to an absolute nonsense on Morning Report. Dann is a complete economics-believer; hook line and blinkered.

There is a finite number of acres. There was also a one-off store of old acres (coal being old sunlit trees, etc) underground. It takes a sunlit acreage to support life, human life included. Cities therefore require an external supporting acreage, on a per-head basis. We've expanded into the farming-support acreage, it has in turn expanded into rainforest (via PKE, for example). And meantime, we extracted the one-off underground acreage at exponentially-increasing rates, using this temporary increase in acreage to support many time the long-term supportable population.

The only valid approach is to reduce population; it will happen anyway, and voluntary is better than nature doing it for us. This isn't a Housing Crisis, it's a Population Crisis. And this tells us that the current Government (and PM, by her ignorant comments re land-banking) are, like the current Opposition, clueless.

But Dann didn't know enough to ask the question. Totally swallows the economics bull---t about unlimitedness and indefinite substitutability. Can we do better please RNZ? We have you because others may well need to pay homage to the peddled mantra (with words like improvement, strong, good, positive) but you don't. We expect investigated, ascertained truth from you.

We didn't get it with that 'report'.

https://consciousnessofsheep.co.uk/2020/08/14/why-dont-lions-chase-mice/

Calories out, calories in. In a similar way this explains why we don't get green tech replacing non-renewable fuels. Those non-renewables fuel a system that requires money in, and money back out at a return on investment. So even under the flawed assumption these energy flows can be replaced, you have a structural flaw in a system of declining yields. Who is going to invest for no return? Ain't going to happen.

Who is going to address the inevitable impasse?

Ain't happened yet.

:)

I think Germany is showing the way that doesn't work. Japan trying to go off Nuclear also an example of the addiction.

Nobody is. It's a natural process unfolding at a pace driven by too many variables to list, measure and model. The only actual real model is the whole system itself.

Most of my environmenally leaning friends are anti Trump. However Lacalle is saying the energy markets are betting on a fracking boom from a Biden win.

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Yep. Not a housing shortage, it's a population problem.

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More of an unmandated immigration problem. Has any other country ever tried a one immigrant per newborn policy in the past century?

Births are around 30,000 p.a. and NOM has been running up to 75,000 p.a. A ratio of 2.5/1.

Yeah, I get an uneasy feeling when aid money incl food floods into countries when they have a drought. It stops mass starvation but it actually encourages people to have more children which in the long run will make the population way too high when the next big drought hits..
But to not give that aid is obviously not politically correct....

So would it be fair to summarise the US election thus. Trump is taking a scatter gun approach to challenging the vote in key swing states. He needs two or three strikes, so far he has recorded misses. 50/50 chance for Trump IMO. If the electoral college doesn't report 270 votes for Biden to Congress, for whatever reason, before Dec 23 then the odds for Trump prevailing go up considerably.

50/50, you're dreaming. So far they've got absolutely nothing, and little prospect, and need 2-3 huge wins.

Could well be, but would you write it off? I see it as a lose/lose regardless.

zinc deficiencies were more common in Maori and Pacific Island communities and up to 20 percent of New Zealand’s adult population suffered from zinc deficiency

Inadequate zinc intake can cause behavioural, learning, cognitive skill problems inducing major depressive disorder (MDD), which is a serious psychiatric illness associated with an increasing rate of suicide

High-quality meat is an excellent source of zinc. We exported 160kg of premium meat per capita in 2019-20 but there isn't any for us here.

NZ's market policies: we subsidise tourism, filming and house-flipping but not nutrition!

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NZ's market policies: we subsidise tourism, filming and house-flipping but not nutrition!

It's not on the FIRE industry menu of financialisation.

So true.

Even if there was more, it's unlikely those with poor zinc would benefit much as they would still need to consume a lot of expensive beef each day (which has it's own health drawbacks). A simple multi vitamin would go a long way for many people and groups. Who knows how many ailments could be prevented.

This Government is about to further entrench Maori separatism. https://www.rnz.co.nz/news/national/430010/mahuta-vows-to-clear-obstacle...
Democracy gone, the Elites know better.

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The rising tide of multiculturalism will eventually absorb Maori.

This is what bothers me the most about NZ's embrace of diversity - it dilutes Tikanga Māori. Some migrants have complete respect for the native populations and their customs, but many do not.

Our immigration policy is in fact a breach of the Treaty of Waitangi. In the preamble to the Treaty it specifically acknowledges that more immigrants would be coming to New Zealand from the United Kingdom, Europe and Australia. The preamble reads:

Her Majesty Queen Victoria of the United Kingdom has deemed it necessary, in consequence of the great number of Her Majesty's subjects who have already settled in New Zealand, and the rapid extension of Emigration from both Europe and Australia which is still in progress, to constitute and appoint a functionary properly authorized to treat with the Aborigines of New Zealand for the recognition of her Majesty's sovereign authority over the whole or any part of those islands.

Māori have been pointing this out for many decades;

https://www.thesocialcontract.com/artman2/publish/tsc0402/article_316.shtml

White Australia in treaty form?

Simply a refinement of democracy which is a pretty blunt instrument. Particularly applies when the original agreement was to work as a partnership.
Councils have never been great at working with or for Maori, so a bit more emphasis won't hurt. Certainly doesn't appear to have been detrimental to those that have. Perhaps Tauranga could be better of.

Helen Clark foundation suggests that the key to solving poverty, low productivity and low income redistribution in NZ is a big minimum wage boost.

For some reason, a 27% hike in minimum wage over 4 years doesn't register as 'big', we need to do more.

https://www.stuff.co.nz/business/300165450/big-minimum-wage-boost-would-...

Just as long as its not spent on tickets for concerts at Eden Park.

When the cost of housing has increased by more than that 27% hike over the same 4 year period it really doesn't register as big.

When the cost of housing has increased by more than that 27% hike over the same 4 year period

That's incorrect - As per Stats NZ, housing costs were up by less than 17% between 2015 and 2019.

I understand that working classes are getting squeezed by these costs but businesses that usually hire low-wage workers aren't even the ones that benefit from rising house prices.
The right way as I see it would be to ensure housing speculation gets taxed appropriately. The tax take can then be used to rapidly expand social housing development and housing infrastructure. Higher tax on speculation should also divert capital into more productive ventures, raising wages and productivity for all.

A culture we can no longer tolerate and one which most of us cannot afford.

I hope it's not a big surprise that America is now a rigidly two-tier society and economy. If you're an executive at a big Wall Street investment bank, you can rig markets and embezzle billions and you'll never face any personal legal consequences such as being indicted for fraud and being imprisoned.

As we wait for a set of imponderables all the way to January 20, 2021, perhaps an angular approach to what may lie ahead for the world economy is best offered by fiction.

Enter Billions, season 5, episode 2, dialogue written by Andrew Ross Sorkin.

Axe: “You know they call us traders ‘gamblers’. The world’s economy is one big casino, fueled by a giant debt bubble and computer driven derivatives. And there’s only one thing better than being a gambler at a casino.”

Wags: “That’s being the house.”

Axe: “That’s right. There’s a systemized machine out there, sucking capital from localities and injecting it into the global markets, where it can be used to speculate and manipulate. And if something goes wrong there are bailouts and bail-ins, federal aid and easing. Where the government doesn’t hunt you down, but instead gives you a nice soft net to land in.”

Wags: “That’s your answer to the fireside chat: You want to become a bank.”

Axe: “I want to become a bank.”

Wags: “In order to rob it?”

Axe: “In order that I don’t have to.
Source: Pepe Escobar

A very good point and a case of history repeating itself over and over again unfortunately. History also tells us what comes next...

Went to Ray white Auction yesterday on Bucklands Beach and houses going 50% above RV and that too in not so good area of pakuranga.

Crazy a house with CV of 880000 with land of 600 sqmt went for 1.3 million as house was fiber cement do up so now anything with 600 sqmt land is on the way to 1.5 million to 2 million as a result Auckland median by next year will definitely be 1.3 million to 1.5 million, if not more.

Is this the inflation that Mr Orr was targeting....2% and to achieve that 2% targeting 200% in housing.

Jacinda.. Jacinda..... Where are you ?

Stupid report button. sorry.