Markets cheer Yellen appointment; US retail sags; China bond issues worsen; India hits Chinese digital again; Victoria makes huge stimulus bet; UST 10y at 0.89%; oil firmer but gold drops again; NZ$1 = 69.7 USc; TWI-5 = 72.4

Markets cheer Yellen appointment; US retail sags; China bond issues worsen; India hits Chinese digital again; Victoria makes huge stimulus bet; UST 10y at 0.89%; oil firmer but gold drops again; NZ$1 = 69.7 USc; TWI-5 = 72.4

Here's our summary of key economic events overnight that affect New Zealand, with news investors are looking well past the current troubles, trusting the 'new direction' will be better than the 'old direction'.

Everyone from Wall Street to the progressive left of the Democrats is applauding Joe Biden's reported choice of Janet Yellen as Treasury Secretary. There has been a noticeable impact in most financial markets.

But ahead of their important Thanksgiving retail season, the American retail impulse is flat lining. Redbook data shows last week was a tad softer than the same week a month ago.

And that is mirrored by the US Conference Board consumer sentiment survey which dipped in its early November reading that straddled the election and its chaotic aftermath. Consumers are less optimistic about their short-term prospects and that doesn't bode that well for holiday retail levels. And this confidence fall came as American house prices rose at a faster rate.

In China, their bond debt crisis is being described as "historic". The spotlight is on more SOEs at risk. And worse, accusations are flying that some of these companies have deliberately breached their bond covenants. And in the even longer term, it could get worse further as Beijing may not be able to resist a wholesale bailout, something that would set back its plans to regularise this end of their financial markets maybe a decade or more. More here.

While shipping capacity is tight and freight rates are rising ahead of deliveries for end of year holiday retailing, more Chinese companies are complaining of the impact of the higher yuan - and noticing a sharp falloff in orders, especially from European clients. Not only is demand lower, some are shifting orders to other Asian countries.

In South Korea, consumer confidence is rising - or at least was in October before the November surge in the coronavirus and the impending restrictions.

In India, they are making a second strike on Chinese interests, clamping down for a second time on Chinese digital offerings in the country.

In Australia, their October merchandise trade surplus rose to +AU$4.8 bln to AU$30.5 bln for the month, up from +AU$4.0 bln in October 2019. But October 2020 exports declined -AU$0.9 bln (or -3%) on October 2019, driven by gas, down -AU$1.7 bln (-43%), coal down -AU$1.2 bln (-27%) and petroleum down -AU$0.6 bln (-52%). A big increase in iron ore exports saved the day, rising +AU$3.6 bln or +37% year on year. Meanwhile, their October imports fell -10% or down by just under -AU$3.0 bln to AU$25.7 bln. Some of this may come to an abrupt end if China doesn't relent on much of its trade retaliation.

And in Victoria, their State government is cutting stamp duty and will borrow and spend close to AU$50 bln on other concessions, subsidies and projects in a bid to get hundreds of thousands of people back to work and breathe new life into a state economy battered and bruised by the pandemic.

In New York, the S&P500 opened today with another good gain and up +1.6% so far. Overnight in Europe, they posted similar rises of about +1.3%. Yesterday, Tokyo was jumped +2.5%, Hong Kong was up a lesser +0.4%, but Shanghai fell back by -0.3%. In the end, the ASX200 rose +1.3% and the NZX50 rose +0.4%.

The latest global compilation of COVID-19 data is here. The global tally is 59,401,000 and a +581,000 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. The accelerating rise in Sweden has them worried too although the recent surge in deaths seems to be abating there. And although tiny by comparison with Europeans, both Japan and South Korea are on edge as their clusters grow again. Global deaths reported now exceed 1,401,000 and up +10,000 from yesterday.

The largest number of reported cases globally are still in the US, which rose +196,000 overnight to 12,802,000 and at their higher pace of infection. The US remains the global epicenter of the virus and the consequence of a very bad public health response. The number of active cases is surging at 4,980,000 and that level is up +91,000 in one day, so many more new cases more than recoveries. Hospitalisations are up very sharply, and everywhere now. Their death total now exceeds 264,000. The US now has a COVID death rate that now matches Brazil of 796/mln.

In Australia, they are not getting any major resurgence. There have now been 27,848 COVID-19 cases reported, and that is +13 more cases overnight. Now 96 of their cases are 'active' (+4). Reported deaths remain unchanged at 907.

The UST 10yr yield will start today up +3 bps at 0.89%. Their 2-10 rate curve is steeper at +72 bps, their 1-5 curve is also steeper at +30 bps, with their 3m-10 year curve is steeper too at +82 bps. The Australian Govt 10 year yield is up +5 bps at 0.93%. The China Govt 10 year yield is up +2 bps and now at 3.33%, while the New Zealand Govt 10 year yield is up +10 bps at 0.91%.

The price of gold is has fallen again today, down another -US$33 to US$1804/oz.

Oil prices are higher again today and strongly, up by another +US$2 or so to just on US$45/bbl in the US, while the international price is now just on US$48/bbl.

And the Kiwi dollar has risen firmly to 69.7 USc this morning and a gain since this time yesterday of more than +½c. Against the Australian dollar we are holding at 94.9 AUc. Against the euro we are firmer at 58.7 euro cents. That means our TWI-5 will start today up at 72.4.

The bitcoin price has risen again overnight, now at US$19,255 and a strong +5.0% rise. It is now almost touching the record US$19,343 price it hit on December 16, 2017. 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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28 Comments

So .. Janet Yellen .. the woman who believed 'there would never be another financial crisis in her lifetime' - must be rolling out her corpse.

Sold down my gold positions a few days ago. The rising NZD and declining gold price looks to make for a double whammy. This is the first time I haven't owned bullion in years.

Agreed. She was out of ideas chairing the Fed, she's 74, and this is an attempt to re-create the un-recreatable.

Ugh accidentally reported, sorry.

Her comment: 'there would never be another financial crisis in her lifetime' ?

It's not an entirely actuate representation, but I'll stick with it.

Hope you're transferring at least some of that gold into BTC Zack. The bull run starts at US$19,343

19,343.77

It looks like the Biden administration is back to the future - probably treading water to the real issues implode in 2021.

I think the real issues start for them tonight our time. All eyes on Georgia.

Well done. Gold will likely go much lower.

I'd probably start dollar-cost-averaging back in at US $1,300 oz. I have done well with gold. The Brinks Banks were also charging an-arm and a-leg in storage fees. The International Bank Transfer fee was unpleasant too, but have already made that back by cashing out before this recent downturn.

TBH, and I'm sorry, I respect gold .. but Bitcoin is far more secure and convenient. BTC is becoming a Fonterra Cow Bolt Gun to Gold's head.

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Great story on Stuff - the jobs Kiwis can't or won't do - essential skills shortage areas:

Here's a selection:

Accountants
Solicitors
Engineers

Never mind that we have universities dumping out thousands of grads each and every year and have done for decades - the skills shortage list being used as a pressure valve to keep wages low for traditionally safe middle class professions. The sooner middle NZ wakes up to this rort, the sooner we can start paying our own what they're worth and retaining more Kiwis.

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The main focus in the tertiary sector is recruiting international students for financial reasons.
The focus for Immigration NZ is using the post study visa as a portal for increasing immigration with less evaluation.

Plenty of international graduates are taking their job search grievances to social networking sites and blaming recruiters for their 'bias' towards NZ residents and citizens when making hiring decisions.

Here's a quote from an accounting jobseeker with an essential skills work visa one I saw just moments ago: I don’t understand what is happening to the market. I am really wondering if I made a wrong decision coming to New Zealand and struggling like this

Turns out paying tuition fees in a foreign currency to an NZ institution entitles you to a struggle-free transition into a suitable job and permanency even in the middle of a recession.

18
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How can an accountant be a essential skilled worker?

Universities should be pumping out plenty of home grown Bcoms.

No more international students! We don't need them. Stick to your 2 year working holiday then bugger off please.

Accounting firms like to be spoiled for choice with heaps of migrant accountants to choose from. Many of these successful candidates have overseas certifications, years of experience and no issues in starting in NZ as grads.
INZ has no qualms in approving visa applications from older, overqualified migrants working in entry-level jobs.

FYI The wage suppression tactic seems to be working well in the industry - the starting pay at a big-4 was 44k in AKL/WLG when I graduated in 2013; offers in 2020 went out for 48-50k.

12
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Yes and this has been happening to heaps of industries. It's hamstrung our worker productivity. Add to that the realisation that many of these people will be on minimum wage as that ends up catching more and more people.

Will be interesting to see how many people in NZ have been on the minimum wage at the time. Guarantee that percentage has been increasing quite significantly.

Why we cannot train our own grads into this I don't know. We had 3 IT grads in our office, they were fantastic young people. When I asked them though their pay was pitiful, worse than mine in my first IT job 20 years ago. It was basically minimum wage plus 1k.

This might answer your question.
The number of Asians aged 30-34 in NZ's employed workforce has increased by a-third to about 62k workers between 2015 and 2019. Over the same 4-year period, their median hourly wage was flat at around $25.

http://nzdotstat.stats.govt.nz/wbos/Index.aspx?DataSetCode=TABLECODE7470#

Just double-checked those salary guides and holy cow, my grad wage from a decade ago is still within the bounds of grad wages today.

G.V..you shoulda just left school at 15, got a job at McDs or Countdown and bought a few rentals. Could have retired before 45, probably earlier. Over the last 40 years the system has almost rendered studying, getting qualifications and working hard a fools errand. Sad but true.

Young friend new grad just started out as an engineer at one big firm. Paid $50K. And probably charged out at $250 per hour.
And apparently the industry claims we are short of engineers so need imports.
The big firms need to meet the market and pay better money to attract the New Zealanders they need. They can afford it.
(and it might take a while, but the university provision and students would gravitate to engineering if the wage was better.

5 day quarantine when returning from Australia coming soon?
So we are seeing Obama-lite starting soon, with US Last?

Now that she’s out of office, Yellen’s thinking a bit differently about it – though she’s careful not to come out and say they failed. It’s more like maybe possibly the Fed failed to fully succeed. As Reuters puts it (thanks to M. Simmons):

But Yellen is urging them to go a step beyond, adopting some metric — whether a measure of lost output, the sum of below target inflation, or some other measure — that it would hit before raising rates too high, if at all.

If only there was some measure of lost output, to display with perfect clarity just how far behind we’ve all fallen economically. I’d hate to think the Federal Reserve (as well as its global cousins) has been less than completely successful all this time because it doesn’t have the capability to manipulate a spreadsheet. Link

Everyone from Wall Street to the progressive left of the Democrats is applauding Joe Biden's reported choice of Janet Yellen as Treasury Secretary. There has been a noticeable impact in most financial markets.

Dow Jones crosses 30,000 for 1st time ever as stocks stage a V-shaped rebound. Link

Totally crazy. #Tesla is now worth as much as the listed German Mittelstand (medium-sized companies) listed on the MDax. Mkt Cap of Tesla has risen to €417bn while total mkt cap of 60 MDax comps at €468bn. Link

That's my fault. When it crossed $500 I decided it was time to go short, so obviously it had go up another 10%. TSLA market cap also approximately = the next 6 largest automakers combined.

Could it be an example of the glorious ends requiring the sordid means.

https://youtu.be/KpT2Rz4rTWM
Has anyone got any popcorn left?

1 pm er. But didn't need the PM.

https://i.stuff.co.nz/national/health/coronavirus/300167206/covid19-eigh...

https://www.health.govt.nz/news-media/media-releases/8-new-cases-covid-1...

Looks like it is 3 days to get a covid test turned around in managed isolation.
No mention of how the Air NZ operative may have obtained it.
Question 1: the sales assistant in A to Z Auckland, has there been any word how she picked up the brew from the Armed Forces?
Question 2: what was the case that passed through at the massage/wellness place in Auckland?

MoH are not strong on the how.... how was it gotten.

The accelerating rise in Sweden has them worried too although the recent surge in deaths seems to be abating there.

There is no pandemic - it's over. Look at the raw data! https://www.euromomo.eu/graphs-and-maps