Here's our summary of key economic events overnight that affect New Zealand, with news there has been no progress in the US Congress to extend pandemic support that will expire at the end of this month. It will be dire for many if that doesn't happen.
The rise in consumer debt in the US tailed off quickly in October. It was up only +US$7.2 bln, about half the gain expected and about half the September rise - which itself was revised lower. Revolving credit (mainly credit cards) actually shrank.
Last week, retail sales dipped rather noticeably from the prior week (-2.4%), but they do seem to be above year-ago levels (+2.1%) even if that year-on-year progress is slipping away.
In Germany, the latest business sentiment surveys reflect an improving outlook, although the same survey reports the current situation is very negative.
In Australia, both businesses and consumers are increasingly confident about their prospects. Business conditions and confidence rose in November, continuing to suggest a rapid rebound in the economy as restrictions are eased and state borders open up. Consumers surveyed show that their current confidence is now higher than a year ago.
And China has widened its ban on beef imports from Australia to a sixth supplier. And this time they have chosen one of Australia's largest beef exporters to China. Bans on sheepmeat are also expected.
In New Zealand, infrastructure investment company Infratil (IFT) has received an unsolicited takeover offer from AustralianSuper, another investor in infrastructure assets, valuing the company at NZ$5.4 bln, or a +30% premium over its recent share price. Infratil is New Zealand's 10th largest listed company. They have been a major force bringing overseas owned businesses back into New Zealand ownership (Z-Energy, Vodafone, etc). AustralianSuper already has $1.3 bln invested in New Zealand businesses.
Globally, there is little sign the air passenger market is recovering. It remains a massive -70% lower than for the same month a year ago. The only bright spot is the Chinese domestic market which is -1.4% lower than a year ago. At any other time a Chinese market down -1.4% would be seen as a disaster. But the next 'best' market is Brazilian domestic market which is down -45% year-on-year. Everywhere else is much worse.
In the last-minute Brexit negotiations, leader-to-leader talks are now about to happen in Brussels.
After starting the day in negative territory, the S&P500 has now moved slightly positive, reporting a +0.2% gain in early afternoon trade. Overnight European markets closed mixed with Frankfurt and London unchanged and the rest lower by about -0.2%. Yesterday, the very large Tokyo market ended its session down -0.3%, Hong Kong was down -0.8%, while Shanghai was down -0.2%. The ASX200 closed out yesterday with a +0.2% gain which the NZX50 Capital Index closed with a +0.5% rise.
The latest global compilation of COVID-19 data is here. The global tally is 67,803,000 and a +553,000 rise in one day. It is still very grim in Russia, the UK, Brazil, Turkey and Indonesia. It does seem to be easing further in Europe generally. Global deaths reported now exceed 1,549,000 and up a very sobering +9000 in a day as death rates spike everywhere.
But the largest number of reported cases globally are still in the US, which rose +196,000 overnight to 15,389,000. The US remains the global epicenter of the virus. The number of active cases is surging and now at 6,103,000 and that level is up +73,000 in just one day, so many more new cases more than recoveries. The rise in 'active cases' by about +100,000 in one day has been normalised. Their death total now exceeds 291,000. The US now has a COVID death rate of 877/mln, the same as Argentina.
In Australia, they are not getting any resurgence. There have now been 27,987 COVID-19 cases reported, and that is just +15 more cases yesterday. Now 44 of their cases are 'active' (+2). Reported deaths are unchanged at 908.
The UST 10yr yield will start today softer again, now at just over 0.91% and a -2 bps dip. Their 2-10 rate curve is flatter at +76 bps, their 1-5 curve is also flatter at +28 bps, and their 3m-10 year curve is flatter too at +83 bps. The Australian Govt 10 year yield will start today down -4 bps at 1.00%. The China Govt 10 year yield is -2 bps lower at just over 3.30%, while the New Zealand Govt 10 year yield is also down -2 bps at 0.94%.
The price of gold is up again today, gaining +US$4 to US$1869/oz.
Oil prices are slightly softer at US$45.50/bbl in the US, while the international price is unchanged at US$49/bbl.
And the Kiwi dollar has softened marginally to 70.4 USc. But against the Australian dollar we have firmed, back up to 95.1 AUc. Against the euro we are unchanged at 58.2 euro cents. That means our TWI-5 is still at 72.6, a level it has been at for about two weeks now.
The bitcoin price has fallen -2.0% today and is now at US$18,851. 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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42 Comments
The rise in consumer debt in the US tailed off quickly in October. It was up only +US$7.2 bln, about half the gain expected and about half the September rise - which itself was revised lower. Revolving credit (mainly credit cards) actually shrank.
On the opposite end of consumer credit from student loans, suddenly there’s now too little credit being extended – for the same reasons. A mixture of supply side contraction, banks and other financial firms becoming reluctant to make loans, while demand for credit has waned for these troubling economic perceptions.
Aggregate declines in outstanding credit card balances are pretty clear signs that consumers in the upper ends of the income spectrum are uncertain – at best – about their own near and intermediate-term prospects. Credit cards at times like these get paid down rather than charged-off, widespread repayment of non-discretionary revolving loans a defensive measure, a sign of prudence and risk-aversion.
According to the most recent data compiled by the Federal Reserve, the latter, revolving, keeps declining while, forever upward, student loans are newly minted by the federal government at a near-constant rate no matter what (thus, this loan “crisis”). Total revolving credit declined by more than $5 billion during October 2020 from September, a rather steep monthly contribution to the seasonally-adjusted estimates already illustrating seven months of the same to this point. Link
We have reached escape velocity.
https://fred.stlouisfed.org/series/M1
Remiss of you to not link this chart as well:
https://fred.stlouisfed.org/series/M1V
Even scarier in my opinion.
They were just parasitic. Mopping up access-rights to resource/energy flows, as do landlords.
The pension fund(s) are an extension of that problem; they are just a further-forward bet on resource/energy flows. With ever-less likelihood of being underwritten.
This is a game of musical chairs, with a twist; there are exponentially-more chairs being removed every music-stop.
renewable energy...
ah yes
https://ourfiniteworld.com/2020/07/17/why-a-great-reset-based-on-green-…
"as the world economy continues to head downhill, it will be increasingly difficult to make new renewable devices and to repair existing systems. Wholesale electricity prices can be expected to stay very low, leading to the need for continued subsidies for wind and solar."
https://ourfiniteworld.com/2020/12/02/humans-left-sustainability-behind…
"Wind and solar certainly cannot meet today’s energy needs. Together, wind and solar amount to about 3.3% of the world’s energy supply, based on BP estimates for 2019. Furthermore, wind and intermittent solar certainly cannot be sold at a price high above their cost of production, the way grain, coal and oil have been sold historically. In fact, wind and solar invariably need the huge subsidy of being allowed to “go first.” They actually are reliant on a profitable fossil fuel system to subsidize them, or they fall completely “flat.”"
Yes - the trouble being the "do with LESS" part you refer to
This is the part that the financial system (DEBT or wealth claims) cant "allow" ... its basically a massive shrinking of the economy and will cause supply chains to break
Already the Oil price is too low for producers (without trying to prop up more renewables ...)
Renewable energy as people refer to cant underwrite the complex supply chains / financial system we have
the alternative is less, local, tougher and far smaller population
Watch the feeding frenzy
Companies with large holdings of hard-assets, particularly land-holdings, are now on the radar and on the table. ie. The 6 retirement villages embedded in the NZX50, with tax-free capital gains, together with government bestowed tax-deductible low-low-interest rates on borrowings yet to be reflected
Watch the NZX50 index
..not to overlook the tax free imputed rent the occupant gets by lending the rest home money and in lieu of interest, getting accommodation.
The rest home business is our tax avoidance version of google/facebook.
Rymans profit for year 2019 $329,415,000. Income tax $3,429,000.
Who is Joel Pollak but what a good read.
https://www.amazon.com/Neither-Free-nor-Fair-Presidential-ebook/dp/B08P…
Spent a bit too much time in the Kimbell pub last night, love talking to other farmers, we all have the same problems, NAIT tagging a joke, Councils and Consents to farm and worries about competition and a feeling we are being falsely labeled as the bad guys.
It's odd to us that in Europe there could be as many as 75 million vegetarians ( I doubt the figures), that half the milk sold in coffee shops is milk alternatives. Either way it's hard not to notice things are changing with the younger generations, especially how they vote.
I talked yesterday about how my daughter thinks the next war will be fought with technology, trade and economics, she also thinks it may have begun and we are already losing.
They have a problem here with Wallabies one Station had a cull and shot 5000. Wallabies can have young on the ground one in the pouch and pregnant with the next. They used to have wallaby boards and they got numbers down to 12-1400, they then were disbanded and now they have spread over a huge area. I talked to farmers last night who said they eat more than a sheep and they are all over all any of their country that has cover. They have also apparently spreading to Northern Hawkes bay, they have been in the Bay of Plenty for years so slowly taking over as the 'most wanted pest.'
I sold more cattle, bulls I paid $520 for in early August I got $1100 for. The markets are very much an unknown at present and lots of rumours that times are going to get tough. Lambs are selling for less than last year, I have a friend who sold lambs recently for $50 less than last year, thats still not bad money, the past few years prices have been very good, good lambs have been making $100 in the store but lighter lambs have been as low as $50. I don't have much lamb feed and a week of Nor-westers can change our place from green to brown and they have been forecast for this week, also a cyclone up by Vanuatu.
The bulls I have on are all heavy so I will keep them on and kill then in the autumn.
The rise and rise of vegetarians
https://www.livekindly.co/75-million-vegans-vegetarians-europe/
There's a comprehensive report, covered in Stuff. Tags are fragile (come off in fences, yards, trucks, races), easily lost (down tomos and gullies along with the beast), are absent (bush births) and can be non-machine-readable (meaning slow, error-prone manual entry is needed). Plus the two-legged concept (every movement recorded at both ends) stems from accounting (debits equal credits) and is just too idealistic in the first place, to survive the practicalities of farm life.
Traditional premiums for lamb, chilled Xmas markets UK & the Continent scuttled by CV19 lockdowns etc. Probably not much brighter prospects for Easter either but some exporters may nonetheless ship and hope. Those two festivals account for about 66% of that trade and the rest buttons off as NZ’s season tails off.
Can you tell me how big an issue this is going to be? My agent tells me is flooded with calls from farmers wanting to sell animals.
Looks like a lot of farmers are seeing a lot of downside,bit would be nice for some more info, there is a lot of money at stake, or steak.
The seasonal supply of chilled lamb to the UK and the Continent, has been set since it was perfected in the 1980/90s to a third each Xmas, Easter and the rest of the year. So this year the procurement and processing of spring lambs, needed to be shipped by mid November has been scuttled by consumers unlikely to be out and about at either H&R or ready retail and especially for an expensive product. This conveyed to me by a chance meeting with a draughter in Nth Canterbury a month ago. But that’s hardly the point as it is as explainable as it is inevitable if the market for a perishable high end product gets the wobbles then expect the schedule to reflect that relatively/accordingly. And so the next one third, Easter remains under the same cloud. Full stop.
The council continues to handout millions from ratepayer funds to consultants instead of tackling the housing issue. This worsens the ongoing crisis, forcing the government to spend more taxpayer money on emergency housing.
Those without the capital to become slumlords in the capital can choose to set up consulting firms instead.
https://www.nzherald.co.nz/nz/wellington-city-council-considers-tenancy…
"...something a little bit explosive here. It's just because we have people at the top."
Why the elites fought tooth and nail to have Trump removed and Beijing Biden installed so business as usual could resume.
https://www.msn.com/en-us/news/us/tucker-americas-political-elite-have-…
Jenée - not sure if you read all the comments but if you do, the next time you might have question time with the PM could you ask:
A recent poll indicated that 75% of kiwis want house prices to fall in order to improve affordability (per the poll in the news last night). How and why do you have the view that the majority of kiwis want house prices to rise if it appears that simply isn't true?
(based on the poll, the PM is basing her political stance off a false narrative - which is a very dangerous thing to do....we'll end up like the United States if we head down that path. Not sure who is advising her on this but she needs to get some better advice...pronto).
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