Here's our summary of key economic events overnight that affect New Zealand, with news the surging Chinese economy is putting new strains on the global system that supplies it.
But first in the US, the Federal Reserve released its November Beige Book survey at 8am NZ time. Although most areas on the country went into the month in an improving state, this Report says optimism has waned – many citing concerns over the recent pandemic wave, mandated restrictions (recent and prospective), and the looming expiration dates for unemployment benefits and for moratoriums on evictions and foreclosures.
The ADP Employment Report rose what looks like a very healthy +307,000 in November but in fact markets were disappointed in this gain. They had expected a +410,000 gain to match the October rise of +407,000. This is the pre-cursor report for the official non-farm payrolls report for November which will be released on Saturday NZT. Analysts are expecting a +480,000 gain then (and down from the October +640,000 rise), and today's ADP report suggests there may be some disappointment ahead.
And speaking of disappointment, the regional ISM New York PMI fitted that description with a sudden plunge back into contraction on the back of renewed lockdown orders in the face of a raging virus that wasn't tamed by earlier weak and short lockdowns.
Nationally, mortgage applications dipped as well last week and off their recent high levels.
Also dipping were US vehicle sales in November, falling to a rate of 15.6 mln/year and down from a rate of 16.2 mln in October, a -4% decline.
The Australian economy bounced back in the Q3 quarter, up +3.3% in the quarter but that still leaves it -3.8% lower over the past twelve months.
In global shipping, container freight rates are rising, and rising fast - basically doubling since September. Of special concern is the back-hauling of empty containers for fresh loads, a real problem for New Zealand. Everyone is prioritising exporting, and the holiday gift rush is making things very tricky logistically. The situation isn't quite so extreme for bulk cargoes.
Also at new highs are commodity prices. Copper and aluminium are starring. and iron ore is the latest, but steel-making coal is rising fast now too on strong Chinese demand and their block on Aussie imports. It's a non-tariff barrier that is hurting them the most. All this is based on sharply rising Chinese demand. It is spilling over into world grain prices, even dairy prices.
And global temperature monitoring is recording what we now all know, that the rise is relentless with the hottest-ever temperatures all in the most recent years. There seems little doubt this is essentially a consequence of that Chinese economic growth as well.
After starting much lower, Wall Street is back level-pegging in Wednesday trade for the S&P500. Overnight European markets were generally flat although Frankfurt fell -0.5% and London rose +1.2%. Yesterday, Tokyo and Shanghai closed little changed and Hong Kong was down a minor -0.1% on the day. Both the ASX200 and the NZX50 Capital index also closed little-changed on the day.
The latest global compilation of COVID-19 data is here. The global tally is 64,097,000 and a +619,000 rise overnight. It is very grim in Russia, the UK, Brazil and Italy with great stress on their hospital systems. It does seem to be easing further in Belgium, France and Spain. Global deaths reported now exceed 1,485,000 and up +12,000 in one day.
The largest number of reported cases globally are still in the US, which rose +206,000 overnight to 14,140,000. The US remains the global epicenter of the virus. The number of active cases is surging however at 5,509,000 and that level is up +80,000 in one day, so many more new cases more than recoveries. Hospitalisations are becoming a very major concern. Their death total now exceeds 278,000. The US now has a COVID death rate of 836/mln and the seventh highest in the world.
In Australia, they are not getting any resurgence. There have now been 27,923 COVID-19 cases reported, and that is just +11 more cases yesterday. Now 52 of their cases are 'active' (-8). Reported deaths are unchanged at 908.
The UST 10yr yield will start today up again at 0.95% and a +3 bps rise. Their 2-10 rate curve is much steeper at +79 bps, their 1-5 curve is also steeper at +32 bps, with their 3m-10 year curve is again much steeper at +89 bps. The Australian Govt 10 year yield is also higher, up +4 bps at 1.01%. The China Govt 10 year yield is up +1 bp at 3.33%, and the New Zealand Govt 10 year yield is up +6 bps at 0.91%.
The price of gold has recovered further today, up another +US$18 to US$1829/oz.
Oil prices are again a little firmer today, and now just over US$45.50/bbl in the US, while the international price is up a full +US$1 at just on US$48.50/bbl.
And the Kiwi dollar has stayed up 70.6 USc this morning and still its highest since April 2018. Against the Australian dollar we have fallen back -½c to 95.5 AUc. Against the euro we are also a bit soft at 58.3 euro cents. That means our TWI-5 will start today at 72.8 and little-changed.
The bitcoin price has been relatively settled overnight, now at US$18,940 and only a +0.5% rise from this time yesterday. The bitcoin rate is charted in the exchange rate set below.
And finally, please note that the interest.co.nz team is taking the day off for its end of year function. There may not be a 4pm wrap-up later this afternoon. If not, you will know why.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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49 Comments
I've been calling it the battle for unearned income, Ray Dalio does a good outline of a part of that in Part 8 of his series. Great explanation for the current woes in the US election also, gives it context. Part 9 is through this morning but I haven't read that yet.
Obviously the recent movement in the internal order has been toward greater disorder (especially in the United States)—i.e., people and politicians are now at each other’s throats to a degree greater than at any time in my 71 years—and these struggles over wealth and power are becoming more vicious.
https://www.linkedin.com/pulse/archetypical-cycle-internal-order-disord…
It's a great article, but I wouldn't call it 'unearned income'. It is however, the age old human problem of continually seeking supremacy over others. Those who achieve inevitably come to believe in their own infallibility and that somehow they are truly superior to others around them. This has morphed over the centuries and today can be seen currently and in a historical context in cultural imperatives, national identities, religious doctrine and racial divisions. All designed to divide and conquer to the benefit of a few, but the harm of all.
In the US though their leadership is truly failing when they chose to forget the words of one of their own, Abraham Lincoln in his famous Gettysburg address when he spoke of a 'Government of the people, for the people, by the people'. To lose sight of why they are in power and who they truly serve has dire long term consequences which history spells out for us very clearly. Importantly those words are true for every democracy, and arguably non-democracies, around the world.
To fail to heed the lessons of history will no doubt sooner or later start the music to play, and it has begun in places around the world already;
"Do you hear the people sing?
Singing the song of angry men.
It's the music of a people who will not be slaves again!
An explanation of the battle for unearned income is perhaps necessary, that as the extractable wealth runs out (because of inequality or contraction of the pool) those at the top turn on each other. There will be those that thought they were in the 1%, in the club, that will find they are not anymore. I'd say that is exactly what Dalio is describing, except he goes further and shows that historically this pattern is the norm.
Democracy is an illusion.
Democracy is most certainly an illusion when politicians seek to feather their own nests and further their own means. An example in NZ that is current is the call to lengthen parliamentary terms. Should not happen unless there is a more robust way to hold Government to account.
More time to put a case together to argue for five year terms you mean. When you mention 'many of us' have you actually polled? I find the discussion on this topic extremely superficial and most people have not considered the ramifications at all. This approach to this is why we accepted Rogernomics (free market policies) without question, failing to understand what the lack of Government regulation actually meant, is largely why housing is such a mess because in depth analysis of the problem never occurred while interest groups drove the debates and lobbied the politicians.
Do you think that a 3 year term is ideal? Perhaps you'd prefer a 2 year or 1 year term? Only about two thirds of the 3 year term is really usable, with Governments getting up to speed at the start of their term and distracted by electioneering for the last few months of the term.
I think that a 4 year term would strike a good balance between getting stuff done and still offering the electorate the possibility to change Government fairly regularly.
I don't think there is an ideal. Your four year argument is just the sales pitch given by the politicians or those who have an interest. Politicians are good at convincing the public to vote for them, and now you (and they) are saying they cannot convince the public that their policy processes and intents are in the best interests of the public and the country? Yet they are not offering in return, a means that they would be more accountable to the public other than the next election. That's just rank BS arrogance. They just need to get on with the job, with the understanding that to retain it they need to prove to the country that they were and are effective, and what they did was of benefit to the people. So far all of them have been dismally ineffective, and I don't believe the three year term is and effective excuse. In the real world with a real job their employer would not accept that excuse.
I suppose you also brought into Helen Clark's description of the security of an MPs job as the most insecure job in the country, and that justified the high pay rate? Also rank BS. Any MP. unless they screw up royally, is guaranteed their job for the next three years after an election. At that election they have to re-interview for the job, but in between they are totally secure, plus their retirement benefits after only nine years in the job are of a level that no other ordinary Kiwis can expect!
In practice NZ Labour Party had 9 years to plan their vision for the future. Government is not in the business of 3 year projects. More like 10 year projects. If they have done their planning they should be able to get the wheels turning the minute they get into power, implement the big projects, usually the first year, then cruise for the next 2 years while they monitor the progress. If their vision is sound they'll get a second possibly a third term. The 3 year limitation is a furphy
What is a Furphy?
But yes in context I agree with your comment, they don't need longer terms, they need to sell the milestones. Any project will have time frame components to be met. any project manage should be able to tell you that. Any democratic Government should be transparent and the pollies should understand that they not only need to sell the project to the public, but also keep them up to date on it's progress. No excuses. They impose these conditions on those who work for their departments, why don't they have to live up to themselves?
https://en.wikipedia.org/wiki/Furphy
A furphy is Australian slang for an erroneous or improbable story that is claimed to be factual. Furphies are supposedly 'heard' from reputable sources, sometimes secondhand or thirdhand, and widely believed until discounted.
At the end of the day whether they are politicians or bureaucrats their role is that of public service, as per Lincoln’s famous speech quoted above. But when that service, and particularly bureaucrats because politicians can be voted out, becomes opinionated, unaccountable and self serving then the viability of society and democracy is always going to be under threat. Nowadays it is under siege.
Hypervaluation and the option value of cash
"Look. When you eat, sleep, and dance on a zero-interest rate monetary accelerator... – perpetually encouraging yield-seeking speculation that drives reliable valuation measures to the most extreme levels in history – guess what? You’ve created a bubble."
"Activist monetary policy is certainly not worth the speculative distortions, malinvested savings, financial crises, and employment losses that inevitably follow"
Thanks Andrew for the link. What could possibly go wrong? She'll be right, kick the can a bit further. Hussman adds: "Presently, I expect that the completion of this market cycle is likely to involve a loss in the S&P 500 on the order of 65-70%. I realize, of course, that this sounds insane. The problem is that this projection is fully in line with a century of evidence, and is consistent with the extent of market losses that would be run-of-the-mill given present valuation extremes."
I am heading to Rangiora with the cyclists, raising money for mental health.
Managed sell a truckload of bulls over the phone yesterday, happy with the money, good old farmers with grass.
We are getting falling prices for lamb but in UK prices are up £20 ove last year as people go back to shopping local butchers.
Body count
https://www.epsilontheory.com/body-count/?utm_campaign=website&utm_sour…
GV 27 There is a general misconception that NZ's best red meat heads overseas. Its not true.
The best beef grades are NZ sourced 'local trade' cuts either at the supermarket or butchery. As a farmer the selectin criteria to supply local wholesale is way harder than supplying export and lamb is similar. The specs are way tighter.
What happened years ago is some bright marketing guru thought they would appeal to NZers' snobbishness by creating a "export quality' branding and it stuck. All that means is the meat was processed through an export certified plant and is suitable for export - it is no reflection of quality.
For some of the best cuts in the world (but expensive) try Silver Fern Farms' prepacks. The lamb product is outstanding.
Or anyone else. How long can we stay separated from the world in this scenario is the question? A matter of when, not if.
What he calls the MAW I called pretty early on in Covid as a propanda campaign if you recall. I likened it to McNamara's strategy of publishing a daily body count. So I agree with him.
With the obesity problem in China I think it also highly unlikely they have controlled it, the same issue (poor lifestyle choices) knocks the immune system. However if they have there will be a next one.
You part-timers have a ball...Then come back and start a Finance Bank. I am sure we could Trust you World Wide far better than any other Bank.........And I am not joking.
Go back to the good old days...Cannot go wrong.....Perhaps start a Laundry Business...too. I could help Finance that....Wash, rinse, repeat....Plastic Munny is so resilient...but of course would have to use...Cash. Ha Ha... Have a Merry Party...and remember a hangover Ladies and Gentlemen....may be remebered 9 months later, when all is said and done...Thats the Spirit of Christmas...for you....Talks cheap, Babies Ain't......Cheers, Santa and his Reindeer.. ....HO HO HO HO HO.
Cost ovruns..Yay. Awklanders expected to another 5 % in Rates....Wonder why>
https://www.nzherald.co.nz/nz/auckland-council-development-agency-panuk…
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