US transition actually happens; US economy insecure; Canada warns of shrinkage; China FDI rises; Taiwan exports surge; BHP slashes coal values; UST 10yr at 1.10%; oil unchanged and gold up; NZ$1 = 71.6 USc; TWI-5 = 73

US transition actually happens; US economy insecure; Canada warns of shrinkage; China FDI rises; Taiwan exports surge; BHP slashes coal values; UST 10yr at 1.10%; oil unchanged and gold up; NZ$1 = 71.6 USc; TWI-5 = 73

Here's our summary of key economic events overnight that affect New Zealand, with news an adult is back in charge in Washington.

Firstly, we must note that the US has a new President, with the previous one slinking out of Washington in a huff and interestingly, reversing the only move he made to "drain the swamp", a swamp he made much deeper. Expectations are high for Biden, but he has probably the biggest challenges to face of any incoming President. He does seem to have some stocks of goodwill however.

One challenge is the American economy which is stuttering and insecure. Retail sales are sliding, down -2.5% month-on-month in a growing trend. That is similar to the -2.6% we noted last week.

US mortgage applications fell last week while mortgage interest rates turned higher for the first time in two months. Homebuilder sentiment has turned lower, and is now back to August levels.

The central bank of Canada issued its Monetary Policy Report overnight. It sees their economy shrinking in first quarter of 2021 as the second pandemic wave delivers a 'serious setback'. They said their 0.25% policy rate will stay that way until their inflation target is achieved.

In China, foreign direct investment into the country climbed +6.2% in 2020 to an all-time high of ¥1 trillion, or NZ$215 bln. Much of it was for service sector investment.

China also reviewed its prime lending rates yesterday but made no change. That takes the run to nine consecutive months of official rate stability, right through their pandemic stress period.

Taiwanese export orders surged again in December and by far more than expected. There were up +38% from the same month a year ago, building on the +30% rise on that basis in November. Analysts had expected a +27% December rise. For the full 2020 year they are up +10%.

In Europe, the practical difficulties of maintaining post-Brexit trade are mounting, and pointing to some rather severe separation pain.

In Australia, the latest review of consumer confidence sees a small pull-back but still maintaining its higher recovery level.

BHP has slashed the value of its remaining coal reserves, a move that will cost it about -AU$1.5 bln. At the same time it raised its estimates for iron ore production.

Wall Street has started today up +1.3%. Overnight European markets were up about +0.5% (although Frankfurt was up +0.8%). Yesterday, Shanghai ended its session up +0.5%, Hong Kong continued its good run, up +1.4%, but Tokyo shed -0.4%. The ASX200 ended up +0.4% but the NZX50 capital Index gained an impressive +1.1% on the day and recovering some earlier-in-the-week weakness.

The latest global compilation of COVID-19 data is here. The global tally is rising faster, now at 96,397,000 and up +671,000 in one day. We are heading for 100 mln early next week now mainly because the UK variant is increasing its grip. It is still very grim everywhere except in our region. Global deaths reported now exceed 2,064,000 and +19,000 since this time yesterday as death rates rise everywhere. No-where yet are vaccines turning the tide.

But the largest number of reported cases globally are still in the US, which rose +202,000 for their tally to reach 24,830,000. The US remains the global epicentre of the virus. The number of active cases rose overnight and is now at 9,628,000 and a slight dip from yesterday, so more recoveries than new cases yesterday. Their death total is up to 412,000 however (+3000). The US now has a COVID death rate of 1241/mln, awful but made to look 'good' by the disastrous UK level (1370) where deaths are surging.

In Australia, their community resurgence is back well under control. That takes their all-time cases reported to 28,740, and only +10 more cases yesterday with all in managed isolation. 86 of these cases are 'active' (-9). Reported deaths are unchanged at 909.

The UST 10yr yield will start today unchanged at 1.10%. Their 2-10 rate curve is up +1 bp at +96 bps, their 1-5 curve is still at +35 bps, and their 3m-10 year curve is also up +1 bp at +102 bps. The Australian Govt 10 year yield is unchanged at 1.05%. The China Govt 10 year yield is also unchanged at 3.19%, while the New Zealand Govt 10 year yield is up +1 bp at 1.03%.

The price of gold is up +US$26 today in New York and now at US$1866/oz and a +1.4% gain. Silver is up a similar amount.

Oil prices are slightly on the firmish side and now just over US$53/bbl in the US while the international price is now just over US$56/bbl.

And the Kiwi dollar is firmer today from this time yesterday at just over 71.6 USc and a +½c net rise. Against the Australian dollar we are firmer as well, but only marginally, at 92.5 AUc. Against the euro we are up to 59.1 euro cents. That means our TWI-5 is now back up at 73.

The bitcoin price is notably lower this morning compared to this time yesterday. It is now at US$34,434 and a drop of -8.0%. Volatility has been high at +/- 6.1% in between. 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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55 Comments

10
up

Life in China - make the most of your freedom before it evaporates..
Alvin Zhou leaves early for work in the morning. Although traffic has improved in his hometown of Hangzhou, getting on the road before 8am cuts his commute by 30 minutes. He parks his beloved burgundy 2020 SAIC in a lot close to his office, before popping in for the obligatory steamed bun breakfast and soy milk at the convenience store one door down. Not to interfere with the series he is watching on Youku, he glances up to the cashier who scans his face to pay for his food.
As Alvin is the first to the office, he reads and shares his views about cat breeds on Weibo, which reminds him that it is his Burmese's birthday tomorrow. He jumps on Taobao and sees a recommendation for an educational cat toy that he recalls from a livestream and taps 'buy' so it will be delivered before he gets home in the evening. With no one else still in the office, he uses the opportunity to check his investments online. It's been a prosperous 6-months, so Alvin decides to splash out and spoil his girlfriend with a trip to tropical Sanya. Although he is feeling flush with cash, his credit status means he gets a super deal on a deferred payment on the holiday booking, in addition to the 'his&hers' beach towels which popped up when he locked in the beachfront hotel. As his colleagues start to roll in he gets to work, before feeling a little peckish so he orders an early lunch delivery.

It's been a productive and satisfying morning for Alvin Zhou, and not unlike the morning of many other Chinese consumers. What makes it all interesting is everything that Alvin did was tracked by a single company 8 kilometres down the road, Alibaba. The SUV he drives is fitted with Alibaba's helpful smart-car operating system, Banma. The purchases in the physical store and online store, the facial scan, online video, social media, the investments, the travel booking, the loan, the food and pet toy delivery - all fed into Alibaba's enormous vault of data to be analysed by sophisticated AI-based algorithms. Even his movements around the streets of Hangzhou are tracked by CityBrain, another Alibaba innovation deployed across many of China's biggest cities.

We have this in the West, except it's mostly Facebook algorithms that try to sell boomers T-Shirts about how legends were born in 1964, love the Beatles, fishing and who support "TEXT=ProfileData&'SportsTeamName' /END"

Pretty cruisey life for this guy Alvin. And of course for those who made his lunch and who shuttled it down the road.

At the end of the day, consumption is work

And unfortunately therein lies the problem, sure it increases GDP but more consumption does not mean it is the best use of our limited resources.

Best comment I have read today, mate.

And Alibaba is.to be controlled by the State which has access to all that data, which can be used to keep Alvin in line, should it become necessary. Not very different from what Companies do to increase business, but with a sinister turn.

Biden does have some stocks of goodwill but it will be interesting to see how quickly the honeymoon dissipates. Prior to this role he had a profile of being hesitant and vacillating punctuated with gaffes. The Democrats themselves had being rejecting him as being presidential material for over twenty years. The good news is that it appears the Republicans want to oust Trump so he can’t disrupt their bid 2024. That drama may then be less viewed as a Democrat vendetta? But regardless of anything CV19 still runs amok and there is a problem. emerging in that some of those being vaccinated are tending to regard themselves as flame proof and abandoning socialising protective measures accordingly. If the vaccines are reducing or better still preventing transmission no problem, but nothing has been made public in this regard? Yep the Biden team has it all before them uphill, headwinds!

I wonder what the left wing media including this one will focus on now?

People who mistakenly believe they're centrists?

You mean Murdoch Enterprises...?

Take your pick from this site https://mediabias.co.nz/home

Uninterested...the media will proberly continue along the same lines as before...you know...debunking the lies, bullshit and fat white guy couch conspiracy theories from such as fox and foreign influencers as Murdoch scum...you know... ....with actual facts and news.

worst Biden gaff - "poor kids are just as bright as white kids", still he overwhelmingly got the afro/american vote...

It's not like we've never seen a gaff-prone President before.

https://en.wikipedia.org/wiki/Bushism

"I know the human being and fish can coexist peacefully."
"Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people, and neither do we."

The one and only reason the Dems and Pelosi want to ensure Trump can never run for the Presidency again is fear - fear he will threaten their reign on power.

12
up

Not sure about you but I never want to see that guy (or his family and motely crew) run again...call me old fashioned

tradersam,

And just how do you know that to be a fact, or is it simply a projection of your presumably right-wing biases?

When you look back over last 4 years the whole focus of the Dems (particularity Pelosi) was to rip the skin off Trump from day one at every opportunity. They are career politicians - Trump
wasn’t.

'Biden does have some stocks of goodwill,'

except for the Black guy who he said wasn't Black enough https://www.youtube.com/watch?v=UzxpjIGOp_w

and Kamala Harris https://www.youtube.com/watch?v=T_FuG13z0bQ

but other than that....

It will be nice to see a Presidential debate between Pence and Harris for the 2024 election.

Repeat comment, edited:
The GOP better rally behind Pence, when he has earned some goodwill by his conduct in the last days of the previous Administration.

Repeat comment, edited:
Kamala Harris also has a long way to go before the Dems fall behind her.

Democracy, but at what cost?

some lyrics come to mind

Doesn't matter what you see
Or into it what you read
You can do it your own way
If it's done just how I say
Independence limited
Freedom of choice is made for you, my friend
Freedom of speech is words that they will bend
Freedom with their exception

Thought those lyrics looked familiar :) One of the greatest bands ever - \m/

The Normal is Back.
It is now the New Normal.

Nice having hay in the barn but we are very dry again, trees are struggling.

My daughter turns 35 today, time rushes on, I met my wife when she was twenty so we started young, had five children all daughters. All sort of professional, it's great they can all stand on their own feet. Two grandchildren also both girls, but granddaughters are the best thing ever.

I mentioned farms being sold to carbon credit operations, then read a good article on Newsroom

https://www.newsroom.co.nz/pro/why-we-cant-plant-our-way-out-of-climate-...

The day is going to be spent down a Well trying to understand why the foot valve isn't working.

but granddaughters are the best thing ever. there it is.

5 Kids..well done (I come from a pack of 6). Bit of luxury to have them now days what with housing, student loans, inflation, stagnant wages.....TIME!

DP

Yes, undoubtedly.

https://www.bloomberg.com/news/articles/2021-01-20/south-african-study-i...
Looks likely that the current lot of vaccines is not going to be effective against the South Africa variant 501.V2.
Not to be alarmist but this is terrible news. This variant will out compete the others & become dominant over time especially as the other variants will naturally struggle to spread due to the population getting vaccinated.

NZ really needs to devise a long term strategy to manage COVID19, I don't think we can stay isolated indefinitely. Or can we? I would have to leave anyway. There certainly needs to be a national discussion of sorts about this.

We might actually get some action on house prices now that the market is getting too hot for Wellington civil servants. Up until now, it's been an Auckland problem, i.e. not something that directly affects them.

17
up

Well, we got Labour's BIG HOUSING ANNOUNCEMENT today: more details about where the already promised extra 8000 state houses will be built.
No mention of CGT, LVT, wealth tax, anything of substance. Thanks Jacinda, we desperately needed more of that sweet f*** all you've been doing...

was there any word on the other 92000 promised ? less the 590 they have already built of course!

Ahahahah that's it? This is the old 'announcement about an announcement' gag again isn't it. "$20b of infrastructure, but we won't tell you what $12b of it is being spent on' all over again.

In the Stuff article they are not referred to as “state houses” but “public homes or public houses”. I thought the latter were drinking places. Why the name change?

But the good news is Public Toilets will now be called State Toilets, so it evens out.

How can the moderates help Biden stand up against the radical left agenda?

What radical left agenda..be specific?

10
up

The groups that rioted and burned Portland, OR (unchallenged) almost every night for 3 straight months last year?

AH I see - they the same people that stormed the capitol last week?

With difficulty. Biden is going to have the likes of AOC and the new progressives to deal with unless he morphs into one of them.
Also he'll have to contend with half of South America flooding in once he repeals most if not all of Trump's immigration executive orders. USA between a rock and a hard place.

My prediction would be that Trump Junior returns next election, unless the Democrats can make meaningful change it will be back to the Trump dynasty, but this time smarter and better organised.

If enough Republicans in the Senate enable Trump to be found guilty then that should kaput any likelihood of any Trump connection standing. Looking at McConnell’ s rhetoric on this, that is the aim and it is a distinct possibility. The Trumps likely will have enough negative financial and legal issues in their own right let alone raising $ billions to create a creditable political party under their flag. My pick would be Jeb Bush on a platform of back to the old normalcy. The Bush clan is already cozy with the Obamas and GW has extolled Biden as a good man. Heck even Karl Rove is being Biden positive. Four year Bush positioning strategy underway already.

The Bush legacy is over, Middle America losing its wealth is a crisis, rule buy the Elite for the Elite is never going to last, ( I meant the Buy ).

The US government is seen as deeply corrupt by many Republicans and Democrats, this is not going away as Democrat cities go from one disaster to the next.

During the first impeachment McConnell was supportive of Trump. From then until the 2020 election McConnell continued support for Trump in a muted tone. Between the 2020 election and January 6th McConnell's tone changed to silence. After the Riot McConnell became the reluctant GOP spouse. After the House impeachment McConnell became balanced and thoughtful saying he would listen to the evidence in the Senate. In the following week McConnell changed his tune, accusing Trump of responsibility for the RIOT. Something changed. The obvious is Trump rang McConnell in a fit of rage and accused him of disloyalty plus personal attacks. In doing so Trump threw the very hand-grenade time bomb that will see him impeached. McConnell has had enough of Trump's personal vitriol

74 million Americans gave their votes to Trump while 80 million people did it for Biden. Tbh, it's not a democracy but polarisation.

Except, unlike China, no one was thrown in prison in the US for political speaking.....even though I think many of them should have been, as the far right were throwing out death threats...so there is your democracy...vs china.

It doesn't matter what China did or does... E pluribus unum, a deeply polarised United States is weak and dangerous...

That depends on the exact nature of the CCP’s empirical objective(s.) If they become overtly, territorial ambitions, then there will be reaction, neighbouring and global.

Make no mistake. If it comes to the crunch where the USA is put in a position to retaliate to naked belligerence, the country WILL pull together as necessary on that front, along with its long standing allies of democracy, as relations with them will be repaired now the fat, orange faced nappy boy is gone.

Aye, far too many in Western society ignore just how vital that is.