Here's our summary of key economic events overnight that affect New Zealand, with news about just how hard international investment flows have been hit.
A UN agency is reporting that foreign direct investment "collapsed" in 2020, falling by more than -40%. It was a sharp pullback by US investors that is a stark feature. In fact, the US made less foreign investment in 2020 than did China, a first time that has happened. Investment out of the UK fell to zero. For the EU it was worse than that with a shrinkage.
In the US, the Chicago Fed's National Activity Index points to an uptick in economic growth in December.
And in January, the Dallas Fed's regional factory survey showed Texas factory activity continued to expand in January, but at a markedly slower pace, and especially for new orders.
In China, there are definite signs that commodity prices have reached their top and may be starting to trend lower. Prices for rice, palm oil, corn and hogs are definitely lower this week. Prices for coal and iron ore are showing small dips too.
In Taiwan, industrial production picked up slightly in December and is in a healthy rising trend. But their retail sales growth turned lower.
In Germany, sentiment among business managers has deteriorated. Companies assessed their current situation as worse than last month. Their expectations were also more pessimistic. The second pandemic wave has brought the recovery of the German economy to a halt for now.
Today is Australia Day (or in some circles, Invasion Day). Markets there are closed today. They were pretty quiet yesterday too as it has become an effective long weekend over the ditch.
The Australian December merchandise trade surplus of AU$9 bln was released yesterday, and a significant increase, up +AU$7.4 bn from the November surplus. Exports of iron ore and cereals are the strongest in history, resulting in the fourth highest goods trade surplus ever recorded there. Their strong surplus is heavily influenced by trade with China. Imports from China fell -7% in December, while exports to China increased +21%. Australia’s goods trade surplus with China alone stands at +AU$5.2 bn for December. Despite Beijing's attempt to use trade to punish Australia, it just isn't working.
Last night, the Australian Securities and Investments Commission said it was hit by “cyber security incident affecting a server used by ASIC”. This is the exact same vulnerability that caught out the RBNZ, the same third-party vendor. Clearly the risks are continuing. The result is that banks now have no effective way to transfer large amounts of data to their regulators.
Equity markets have opened in New York drifting down -0.2% for the S&P500. Overnight, European markets were much harder hit, mostly down about -1.5%. Yesterday, things were much more positive in Asian markets with Shanghai up +0.5%, Hong Kong was up a very impressive +2.4% while the very large Tokyo market was up +0.7%. In Australia, their Monday session managed to post a +0.4% gain in very light volumes, while the NZX50 Capital Index managed a +0.5% rise.
The latest global compilation of COVID-19 data is here. The global tally is rising faster, now at 99,346,000 and up +422,000 in one day. We are virtually at 100 mln mainly because the UK variant is increasing its grip, and other variants are emerging too. It is still very grim everywhere except in our region. Global deaths reported now exceed 2,132,000 and +8,000 since yesterday. Only a few countries have started their vaccination programs. And although 66 mln doses have been given so far, nowhere is the tide turned on infections or deaths yet - except perhaps in Israel.
But the largest number of reported cases globally are still in the US, which rose +141,000 over the past day for their tally to reach 25,724,000. The US remains the global epicentre of the virus. The number of active cases rose overnight and is now just on 9,884,000 and +62,000 more than yesterday, so more new infections than recoveries. Their death total is up to 430,000 however (+2000). The US now has a COVID death rate of 1294/mln, awful but made to look 'good' by the disastrous UK level (1447) where deaths are still raging.
In Australia, their community outbreak is back well under control. That takes their all-time cases reported to 28,777, and only +11 more cases overnight, all new arrivals and all in managed isolation. 122 of these cases are 'active' (-13). Reported deaths are unchanged at 909.
The UST 10yr yield will start today down -4 bps at just under 1.05%. Their 2-10 rate curve has dipped -4 bps to +92 bps, their 1-5 curve is also flatter at +32 bps, and their 3m-10 year curve is flatter by -4 bps as well at +97 bps. The Australian Govt 10 year yield is down -3 bps at 1.03%. The China Govt 10 year yield is little-changed at 3.16%, while the New Zealand Govt 10 year yield is down -2 bps at 1.07%.
The price of gold will start virtually unchanged today at US$1856/oz.
Oil prices are firmer by +US$1 at just under US$53/bbl in the US while the international price is now just under US$56/bbl.
And the Kiwi dollar will open marginally firmer at just under 71.9 USc. Against the Australian dollar we are also firmer at 93.4 AUc. Against the euro we are now at 59.2 euro cents. That means our TWI-5 is up a tad at 73.3.
The bitcoin price has recovered further and is now at US$33,834 and up +6.0% since this time yesterday. Volatility is high again at +/- 6.3%. 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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31 Comments
Why Vaccines Alone Will Not End the Pandemic
https://www.nytimes.com/interactive/2021/01/24/us/covid-vaccine-rollout…
To a hammer, everything is a nail. There are so many variables in the course of this pandemic, and that article is good, but it assumes complete compliance. It completely misses the oddities associated with human behaviour and it's effect on the rollout. YMMV but many people I've talked to are going to take a "wait and see" approach to the vaccine. With a fast tracked rollout, people are wary, especially given if you're under 40 the risk of dying from COVID is close to 0. We're so far away from being out of the woods here, but we don't see it.
Straits Times Singapore article suggests it could be 4 or 5 years before this is all over:
https://www.straitstimes.com/singapore/covid-19-pandemic-could-last-fou…
Quite. The Spanish flu took 2 years to run it's course from 1918–19. There's still a possibility that we faff about for 2-3 years with lock-downs and short lived/ineffective vaccines trying to nail an ever increasing number of virus variants down, only to capitulate and let it run it's course. Albeit in a global economy that is completely gutted.
It's an awful scenario to think about, but may actually solve many of the impending issues on the horizon with entitled asset greedy boomers retiring in waves.
It is worth noting what is absent from the narrative, & to question how this might also affect outcomes.
Two sides to the spread of a virus, the relative strength of the virus & weakness of the host. That no one is talking about poor lifestyle choices, if they don't change neither does the path of viruses.
The reversal of the long term trend of reduced mortality & how Covid fits into this picture.
The general nutrient content of our foods.
Obesity.
That these new variants are only the start, Covid is here to stay.
Yes, COVID is here to stay but it's worth recalling the "Hong Kong" flu epidemic of 1968-70. That killed as least as many people as COVID has so far and still reappears to this day as a seasonal flu. But current flu vaccines deal with that plus the other strains we've been dealing with for years. COVID will be relegated to the same status, in time.
https://www.stuff.co.nz/national/politics/124012148/jacinda-ardern-decl…
Looks like the PM has moved away from the elimination strategy as well (at least on a long term basis)
From the article: “Our goal has to be though, to get the management of Covid-19 to a similar place as we do seasonally, with the flu. It won’t be a disease that we will see simply disappear after one round of vaccine across our population,” Ardern said.
Glad to see that PM hasn't opted for the isolate ourselves indefinitely strategy, which I guess is her other option.
In other words, 16-year-old Robinhood traders 1 - "star" hedge fund portfolio manager 0. In yet other words, hedge funds are now bailing out other hedge funds (in which they have invested money), who have been steamrolled by the Robinhood Gen-Z "buy everything" juggernaut.
https://www.zerohedge.com/markets/first-casualty-big-short-squeeze-melv…
It is Australia Day. No one I know calls it Invasion Day. I grew up in a multicultural suburb and no matter where people are from or their parent's come from they all call it Australia Day. These so called woke comments appeal to a small minority. A true multicultural society embraces and celebrates the differences of All nationalities to create a new, truly diverse nation. This Us vs Them nonsense is divisive, and encourages rascism and discrimination. Rant over.
'After Skyrocketing in Majestic Short Squeeze, GameStop Shares Collapse 54% in Hours: The Zoo Has Gone Nuts
by Wolf Richter • Jan 25, 2021 • 6 Comments
What a show! Smallish traders, by colluding on Reddit, have fabulously succeeded in what famed big short-sellers have done for years in the opposite direction. And it’s pump & dump for both.'
https://wolfstreet.com/2021/01/25/after-skyrocketing-in-majestic-short-…
“I thought it was pretty odd,” said Saluzzi, co-head of equity trading at Themis Trading. “I’ve been around for a long time, I’ve seen people in chat rooms and retail investors saying ‘we can make some money – it’s easy.’ There’s a risk it may not end well.”
https://www.epsilontheory.com/off-wall-street-and-off-off-wall-street/?…
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