China's company profits rise; Aussie wine targeted by China; US holiday shopping twists but growth expected; EU pessimistic; Swiss reject bans; UST 10y at 0.84%; oil unchanged and gold down; NZ$1 = 70.3 USc; TWI-5 = 72.7

China's company profits rise; Aussie wine targeted by China; US holiday shopping twists but growth expected; EU pessimistic; Swiss reject bans; UST 10y at 0.84%; oil unchanged and gold down; NZ$1 = 70.3 USc; TWI-5 = 72.7

Here's our summary of key economic events overnight that affect New Zealand, with news that with Trump's reign about to end, the world is left cleaning up the mess and finding out who were the winners or losers.

Firstly in China, industrial profits in October for their major companies, including their SOEs, have now recovered back to year-ago levels. In fact, they were +0.7% higher than for October 2019 and rose at their fastest pace in nine years.

Meanwhile, China is tightening its pressure on Australia, slapping import duties of between 107% to 212% for Aussie wine and intensifying trade tensions between the two countries.

And don't forget, off the Chinese coast a fleet of 82 ships carrying blacklisted Australian coal worth more than NZ$1.2 bln is held up as Beijing tries to coerce Canberra into kowtowing to its policy positions.

Australia is now readying a trade dispute case against China in the WTO, this one over a earlier ban on barley.

Investment bank analysts at Citibank say that if iron ore were to be drawn into the trade stoush, Australia could lose up to -20% of their exports worth more than AU$76 bln in a year, hit their nominal GDP by -3.8% and take -16c off the value of their currency. It seems an unlikely scenario and most other analysts don't see anything like this actually happening. But that does seem to be the downside risk of standing up to China.

In the US, there are reports that some shopping malls are deserted as the pandemic pushes retail online even faster. Amazon is reported to be trying to hire more workers at the rate of about +3000 per day, and courier deliver companies are struggling to find the drivers to respond to this unprecedented shift. Amazon alone now has more than 1.2 mln employees and has added +427,000 this year alone.

American holiday spending is expected to rise by at least +3.6% this year and surprisingly about the same as the average for the past ten years, but boosted this year by more than a +20% rise in online shopping.

In the EU, they are suffering a new round of pessimism, with sharp falls in both consumer and now business sentiment. Being unable to shake the pandemic as the holiday season approaches is knocking the stuffing out of them, and having to isolate indoors in winter is a grim prospect.

In Switzerland, yet more referenda over the weekend, the first one is aimed at making Swiss companies liable for human rights violations and environmental damage by their subsidiaries abroad. Another referendum sought to ban investing in weapons companies. Both failed at the polls.

The latest global compilation of COVID-19 data is here. The global tally is 62,448,000 and a +1,159,000 rise in the past two days. 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. Global deaths reported now exceed 1,456,000 and up +18,000 in the same past two days.

The largest number of reported cases globally are still in the US, which rose a sharp +361,000 over the weekend to 13,628,000 and picking up the pace if infection again. Holiday travel won't be helping. 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 5,313,000 and that level is up +168,000 in two days, so many more new cases more than recoveries. Hospitalisations have pushed up to 100,000. Their death total now exceeds 272,000. The US now has a COVID death rate of 821/mln and is approaching the Argentine level.

In Australia, they are not getting any major resurgence. There have now been 27,893 COVID-19 cases reported, and that is just +19 more cases over the weekend. Now 68 of their cases are 'active' (-10). Reported deaths remain unchanged at 907.

The UST 10yr yield will start today unchanged at 0.84%. Their 2-10 rate curve is also unchanged at +69 bps, their 1-5 curve is marginally flatter at +26 bps, with their 3m-10 year curve faller too at just over +75 bps. The Australian Govt 10 year yield is unchanged at 0.91%. The China Govt 10 year yield is also unchanged at 3.34%, and the New Zealand Govt 10 year yield is also stable at 0.89%.

The price of gold fell sharply on Friday but has held over the weekend staying low at US$1788/oz. A week ago it was at US$1875 so since then it has declined by -4.6%.

Oil prices are little-changed today at US$45.50/bbl in the US, while the international price is now just under US$48.50/bbl. OPEC and Russia are apparently close to agreeing to keep oil production cuts for another two to three months, a move they hope will keep markets tight even as prices start to recover.

And the Kiwi dollar has stayed high, rising slightly to 70.3 USc this morning. That is a full +1c higher than this time last week. Against the Australian dollar we are unchanged at 95.1 AUc. Against the euro we are also holding at 58.7 euro cents. That means our TWI-5 will start today at 72.7.

The bitcoin price has recovered sharply over the weekend and is now at US$18,064 and that is up +7.5% from where we left it on Saturday. 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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35 Comments

11
up

107% to 212% tariff on wine! Does global trade have any commercial integrity or viability whatsoever if politics can sweep the feet out from underneath with a stroke of pen. Add insult to injury, the bottle itself was probably made in China. Trump certainly got a snowball rolling when he started flaying about didn’t he!

Cheap Aussie wine coming our way!!

I for one will do my part to support our bros across the Tasman - will be increasing my Barossa Shiraz intake and taking one for the team.

Yes it just goes to show how damaging Trumps failed presidency has been. With his tariff war that's given countries like China far more leverage on the global economy. Lets hope things settle down once Biden has settled in.

Let's really hope we see these vaccines start to get rolled out en masse in the next month. If they are effective, as they appear to be, we could have the world starting to look a bit more normal by February.

Pfizer and AstraZeneca have already started manufacturing while awaiting approval. The latter reporting they'd have 4 million doses available in the UK before the end of the year (if approved of course.) I don't know about Moderna.

The bottleneck will be logistics and administering shots in most cases.

Aye the temperature requirements on the Pfizer alone will require much sophistication in distribution and storage. Some parts of the world will just not be sufficiently resourced or equipped.

Is New Zealand prepared to innoculate the entire population, possibly every 6 or 12 months? I would suggest that getting our own house in order should be our foremost concern, we are unlikely to be able to assist anyone else if we are incapable of administering our own rapid vaccination program.

who cares - the infection fatality rate is ~0.02% for under 70s according to the CDC, and that's likely an overestimate. Getting the seasonal flu is more dangerous for that age cohort.

One of the lessons we could take from this epidemic is that we can with a bit of effort, substantially the cost of in dollars and even lives of the effect of flu. Vaccines are all very well but stopping the needless spread of virus by killing a culture that says we must work or must shop or just must go out no matter how infectious would be way more cost effective in the long run.

Nice link. Similarly the Herald published this disparaging piece about Sweden on the weekend, but the actual data shows they've got normal baseline levels of mortality right now.

Lockdown in NZ saved us 1600 deaths vs baseline due to reduced flu, car and workplace deaths. So other countries who locked down (or applied social restrictions in the case of Sweden) and are at baseline have just substituted COVID deaths for other deaths. If they had not locked down it would look doubly worse.
https://www.stuff.co.nz/national/health/coronavirus/122476223/coronaviru...

Shutting down the economy reduces workplace deaths! Sheesh, you're seriously making that argument? Lockdown's done very little, perhaps nothing to reduce the spread of the virus, and yet it's been incredibly damaging to the economy causing irreversible and long lasting changes like reducing the OCR & blowing up government debt. The lockdown was predicated on nonsense SIR modelling from the likes of Neil Ferguson who's been ridiculed in the scientific community for the inaccuracy of his models. The most upsetting thing for me is the contradiction between the empirical data and what the media and politicians are saying. Look at what the former chief scientific officer of respiratory drug development at Pfizer says see here. I'm not saying he's right because of who he is but seriously.. the CSO of the 3rd largest pharmaceutical company in the world, responsible for thousands of employees... perhaps that guy knows a thing or two about respiratory illness, and what's his expert advice? Normalise the economy, and stop widespread PCR testing immediately.

Its hard to know what to believe these days. I have always said the real truth is somewhere between the two arguments: Covid is bad and it is killing people, but it isn't as bad as the media make out.

Sky news, Helen Clark has given the WHO a free pass

Australia having pressed for covid origin examination, now find Helen Clark looking the other way, NZ press dropping reporting & rewriting material.
Meanwhile China at its bully best.

https://youtu.be/T_yoJIYGVmA
Sky news, Helen Clark has given the WHO a free pass

Add to this the genius of the Foreign Minister

https://www.iheart.com/podcast/211-heather-du-plessis-allan-24837940/epi...

The Foreign Affairs Minister has not spoken with China yet since taking the role. - about Hong Kong.

Check out her words on Multilateralism.
Multilateral rules based system..

Yeah, when I think of Mahuta I think Genius.........
She was so ready for her portfolios that when this came out she had to wait to be told what to think.
When Tenby Powell resigned, having given Mahuta - the local government minister - 2 days notice of his plans, she didn't even have a comment ready, as "officals" were going to take a week or to give her advice on what to say.
She's out of her depth, and showing the lack of meritocracy or competence in Labours caucus for such critical roles.....

And carrying on this theme of legging over the Australians ...

This is epic because them all, the PM the foreign minister, Helen Clark all say. Trust us, Rely on multilateral agreements multilateral rules multilateral organisations...

https://www.rnz.co.nz/news/political/431737/australia-plans-wto-action-a...

The Australian government is giving its strongest indication so far that it will take action against China at the World Trade Organisation, but New Zealand's leader says it's too early to say whether we would back them.

But get this, the PM is opposing expert advice..

A professor of international law is calling for New Zealand to back Australia in its claim at WTO if it proceeds.......
Prof Gillespie said that backing Australia was likely to anger China, "but if you don't stand up for the rules of international law and order right now, you could be the next one in line."

This is a direct hit on the PMs doctrine. This cuts deep on many levels.
We sure as hell can't have Australia return the favour.

We need a Dashboard showing % of population immunised by country to see which are leading, which are struggling and what impact the immunisation campaign is having on cases/deaths by country.

More rain , over 10mm in the gauge last night, it just keeps coming antithesis of last year when it hardly rained at all and we lost big trees. It was a cold night, it fogged which could have saved us from a ground frost, the mixed crop I planted will be fine, we often fog in this valley, makes for a beautiful morning.

I have been topping but stopped as I have worries about eczema, facial eczema is one of the worst things on a farm, when you top it just makes it worse, potentially much worse. It’s caused by a spore and needs wet humid, conditions, the fungus grows on dead plant material if I top I create a lot of that.
We need rain and humidity before Christmas to really kick it off, it doesn’t like cold or dry weather, very much a mid summer wet season problem, it’s always in the back of my mind especially if I have sheep on ,although cattle can get it too but they don’t graze as close to the ground as sheep.

Had another night on the phone, all the schedules fell at the week end, beef back $30-40 a head and lamb back another $2. It’s knocking confidence, no one wants to buy heavy cattle, my good cattle have no buyers so I will be forced to keep picking away at the bottom taking off the light animals and keeping the best. When you have a $400 margin and they start dropping schedules $40 a week it won’t take long to hurt, I think I will take Belle’s advice and keep moving animals, banks will be getting twitchy.

Agents told me that they have no buyers for lambs, not many want to buy sheep in these tumultuous times, markets are just too unknown, prices that were good ten years ago are no longer enough after huge cost increases. The sheep industry is going to struggle, we could end up, with mostly Wiltshire sheep which shed wool and all season lambing rather than spring only.

The other issue that needs addressing is councils, that’s a country wide issue, we live in a world today where politicians care most about doing no harm and become paralysed, that inactivity won’t work if we get a big recession, I suggest getting rid of the second arm of local government, Regional councils are no longer relevant, often just doubling up and nothing local councils couldn’t do better, hell how could they do worse?

RUC. Taxes for trucks $431 for 1000 kms on big stock truck

https://www.nzta.govt.nz/vehicles/licensing-rego/road-user-charges/ruc-r...

On eczema

https://www.vetent.co.nz/dairy-disease-management/facial-eczema.html

I thought you were off on holiday Andrew?

Was talking to a friend who farms in from Opunake yesterday, she's taken over the family farm and it's the wettest Nov in the 60 years they've been keeping records. My partners family farm is more around towards Stratford, they hadn't tallied the numbers but said it was also extremely wet there (and raining again now).

Looking like a La Nina pattern this year, I assume you get more rain than usual if those troppies drop down over us?

We've had 11mm rain so far on orchard and still raining. Expect the choppers to be out in force once it stops to dry cherries as the early cherries are just starting to be picked. If this weather keeps up, as more rain is forecast this week, it could be devastating for some orchards who rely on early season varieties.
We completed putting out our rain covers last week over part of the orchard. The rest has hail net cover as we are trialling the cost effectiveness of the rain covers we have. The act as our birdnet as well over that part of the orchard, so will be out all season now, and pulled in again in Feb.
Family member has recently planted some lucerne which was needing moisture, so is happy to see the rain.

I never realised you had to dry them before picking. How badly does the chopper cost eat into the returns?

Cherries are a rain/water sensitive summerfruit crop, especially if it gets to sit in the top where it's stem is, as rot will set in quite quickly. Early season varieties can be more susceptible to damage. There are new varieties out there but they aren't widely planted here.
Choppers can be a bit of a necessary evil - you need them to dry the cherries, but they can cause damage from the down draft - the smaller choppers are less damaging. We have always had raincovers, so can't speak to actual experience of chopper costs. Every time we get reasonable rain (10mls is considered reasonable here) they have to call them in. So if you have a stop start day of rain the choppers could be in the air twice in the one day. Rain is only a real threat to cherries that are close to being harvested.

I think you've got it the wrong way around re Councils. The District Councils should be amalgamated into the Regional Councils to form Unitary Authorities across the country. Having 60+ District Councils in a country the size of NZ is madness.

12
up

A long succession of immigration policies tried to increase productivity and attract highly skilled migrants and entrepreneurs, but with very little effect, said NZIER associate Julie Fry.

Finally, an economist with the courage to call a spade a spade on immigration.

https://www.stuff.co.nz/business/industries/123541263/nzs-welcomed-a-lot...

YES! Of particular note:
"New Zealand’s Global Impact Visa, which aims to attract “pioneering entrepreneurs and investors” with a three-year visa has created just 114 jobs since the pilot began in mid-2017."... combined with:

"For example the United States government had invested in research for decades, and Stanford University at the heart of Silicon Valley was world-leading."

The NZ government barely even thinks about funding research - they spend pitiful amounts on it every year mainly through the Crown Research Institutes. Thankfully Labour gave them a boost this year, but they are focussed on very specific areas (mainly farming and earth sciences), without any "moonshot" type research (for instance in the space sector, which seems to have taken the government by surprise). We should also have a massive grants system in this country for start-ups, but Labour pretty much did away with all grants to start ups and replaced them with R&D tax credits (as if start-ups already pay lots of taxes??). This favours existing corporates heavily... meanwhile I know of 2 excellent FinTech startups doing it hard and another startup that could be producing high value wool products. None can get any government funding and have to go private, one has just managed to secure some private funding

Robotic fruit picking for instance should be getting massive funding in this country. AI research (some in AUT and Canterbury, but nothing substantial), space research... none of this appears to get any funding. The Deloitte report on the space industry for instance found that "New Zealand is a unique example of a space sector almost entirely driven by commercial activity". Why? Because consecutive governments don't think we should be interested in the future. Instead they are betting the house on importing cooks and bottle store workers as "skilled immigrants" who then have to get million dollar loans to buy a house in Auckland.

Meanwhile, China is tightening its pressure on Australia, slapping import duties of between 107% to 212% for Aussie wine and intensifying trade tensions between the two countries.
And don't forget, off the Chinese coast a fleet of 82 ships carrying blacklisted Australian coal worth more than NZ$1.2 bln is held up as Beijing tries to coerce Canberra into kowtowing to its policy positions.

Will #China's huge #Indonesia coal deal hit #Australia?
China to buy 28.72 million tones (US$1.5 billion worth) Indonesian coal in a new three-year supply pact.
Indonesia aims to attract investment in processing technology, according to the Indonesian Coal Mining Association. Link

I'd say this guy in qualified and reputable enough to be making the statements he does here about immunity. You'll need google translate.

https://www.medischcontact.nl/opinie/blogs-columns/column/covid-19-en-de...

10
up

"Australia could lose up to -20% of their exports worth more than AU$76 bln in a year, hit their nominal GDP by -3.8% and take -16c off the value of their currency" - kind of seems worth it for independence doesn't it?

more wine to drink
more coal to burn
less trinkets
yeah, not a bad trade off

If you've ever wondered why the US is so adept at getting other nations to align with it, this is why. Australia is not aligned with the US to protect itself from China. Australia is aligned with the US to protect itself from the US. #auspol Link

Here is how you too can play the victim.
This is shabby and shameful.

Jacinda Ardern says public bears some responsibility for housing crisis after failed taxation attempts

https://www.tvnz.co.nz/one-news/new-zealand/jacinda-ardern-says-public-b...

And we have elements of misdirection too.
Turning the housing crisis, stimulas fueled property bubble as a question of tax only.
Last week it was debunked that cgt would halt a property bubble.
Australia has had cgt since 1985 and roaring property bubble too!

https://en.m.wikipedia.org/wiki/Capital_gains_tax_in_Australia

All the news this morning crowds out the big question

https://www.rnz.co.nz/news/political/431716/christchurch-terror-attack-r...

However, Rahman said the suppressions would not allow the public a clear view of any opportunities to stop the attack that may have been missed, and by who.

https://rnz.co.nz/article/e7c3a07d-758c-4ce6-9655-af55aa1ada81

Christchurch terror attack accused's gun licence obtained without proper checks - former police officer