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US incomes rise, data positive; Japan factories slow, South Korea improves; China faces higher food prices; Wall Street slumps; UST 10yr at 1.08%; oil unchanged and gold up; NZ$1 = 71.9 USc; TWI-5 = 73.5

US incomes rise, data positive; Japan factories slow, South Korea improves; China faces higher food prices; Wall Street slumps; UST 10yr at 1.08%; oil unchanged and gold up; NZ$1 = 71.9 USc; TWI-5 = 73.5
Oban, Halfmoon Bay, Rakiura (Stewart Island)

Here's our summary of key economic events overnight that affect New Zealand, with news 2021 is starting with both hopeful and concerning signals, unclear which way it will go.

Financial news is being dominated by the GameStock saga today, but there is real news out there that will have a much bigger impact on our economy.

First, Americans’ incomes climbed for the first time in three months in December as a new round of government-aid efforts kicked in, priming their economy for stronger growth this year. But personal spending fell, minorly, but is for a second consecutive month and bears watching.

Also improving is the Chicago PMI, a closely-watched heartland measure that came in better for January than expected.

The latest consumer sentiment poll, this one from the University of Michigan, is largely unchanged.

US pending home sales also improved on a year-on-year basis in their latest data, this lot for December.

The first Presidential approval poll data is out. Obama ended his presidency with a 55% approval rating. Trump started his with a 42% poll level and managed to burn political capital before even earning any, ending at a 34% approval rating. Biden has started his presidency with a 62% approval rating, although not quite as high as the Obama start of 67%. Interestingly, the same polling shows that 61% of Americans want the Electoral College abolished. The radicalised conspiracy-based right-wing may look prominent in "the news", on Fox, and social media chat (even in our comment stream), but it is a rump that is having a hard time realising it doesn't represent 'real America', and probably never did.

Across the Pacific, Japanese industrial production remains weak and ended 2020 down -3.2%.

But South Korean industrial production is on the rise with a better than expected result for December. But the same isn't true for South Korean retail sales.

Remember China's HNA conglomerate? It is about to disappear, with creditors filing to force it into bankruptcy. It couldn't escape the consequences of too much debt, no matter how low interest rates were. A the end of the day, if a business isn't profitable, no matter now low market interest rates are, they can't access them. Lenders want their money back.

Sovereign governments however get more slack. But they had better watch out on food inflation. Vegetable prices have more than doubled in China from a year ago, and that will be an undoubted talking point during the Chinese New Year as families gather in the traditional homecoming. It is not a problem "more debt" can solve.

On Wall Street, shares are in full sell-off mode today with the S&P500 down -1.9% in mid-afternoon trade after being down -2.2% at one stage. If it ended here, that means the S&P500 capitalisation has lost US$1.1 tln for the week or -3.1%. Since the start of the year, this index is in loss territory now, down -1.2%. Overnight European markets also fell about -2%, Yesterday, Shanghai ended the day down -0.6% and for the week down -3.4%. Hong Kong ended yesterday down -0.9% and for the week down -4.0%. Tokyo ended Friday down a rather hefty -1.9% and the week down -3.4%. In fact it was probably the Tokyo exchange that has triggered the worldwide selloff. The ASX200 ended yesterday down -0.6% for a weekly loss of -2.8%. The NZX50 Capital Index was an outlier, rising +0.3% yesterday, capping a weekly decline of 'only' -1.5%.

The latest global compilation of COVID-19 data is here. The global tally is rising faster, now at 101,688,000 and up +620,000 in one day. The UK variant is increasing its grip, and other variants are in full flight too. It is still very grim everywhere except in our region. Global deaths reported now exceed 2,196,000 and +16,000 since yesterday. More countries have started their vaccination programs. And although 86.2 mln doses have been given so far (+4.5 mln in a day), nowhere has the tide turned on infections or deaths yet - except perhaps in Israel. (There has been an interesting failure in the UK to update their pandemic data for two days now - not sure what is going on there.)

But the largest number of reported cases globally are still in the US, which rose +175,000 over the past day for their tally to reach 26,368,000. The US remains the global epicentre of the virus. The number of active cases rose overnight and is now just on 9,851,000 and +45,000 more than yesterday, so more new infections than recoveries. Their death total is up to 444,000 however (+4000). The US now has a COVID death rate of 1338/mln, awful but made to look 'good' by the disastrous UK level (1515) where deaths are still raging.

In Australia, their community outbreak is over. That takes their all-time cases reported to 28,800, and only +6 more cases overnight, all new arrivals and all in managed isolation. 84 of these cases are 'active' (-8). Reported deaths are unchanged at 909.

The UST 10yr yield will start today up +2 bps at just over 1.08%. Their 2-10 rate curve is steeper at +96 bps, their 1-5 curve is unchanged at +35 bps, while their 3m-10 year curve is fractionally steeper at +102 bps. The Australian Govt 10 year yield is up +4 bps at 1.11%. The China Govt 10 year yield is up +1 bp at 3.22%, while the New Zealand Govt 10 year yield is up +4 bps at 1.13%.

The price of gold will start +US$15 higher today at US$1853/oz. Silver is higher today.

Oil prices are unchanged at US$52/bbl in the US while the international price is still at US$55/bbl. The oil majors are turning in terrible financial results.

And the Kiwi dollar will open at just on 71.9 USc. Against the Australian dollar we are up +½c at 94 AUc and the highest of 2021 so far. Against the euro we are little-changed at 59.2 euro cents. That means our TWI-5 is lower at 73.5. Given these markets know a fairly radical Climate Change Commission report is coming tomorrow, their bidding up of our currency shows they doubt it will hurt our economic prospects.

The bitcoin price has recovered further and is now at US$36,343 or a rise of +13% since this time yesterday. A week ago this price was US$33,368. Volatility in the past 24 hours is however exceptionally high at +/- 10.3%. The bitcoin rate is charted in the exchange rate set below. Ex NZ Treasury boss Gabriel Makhlouf is now an ECB governing council member as part of his role heading up Ireland's central bank. He said overnight that bitcoiners "could lose all their money".

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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48 Comments

Robinhood’s explanation for why it needed to suspend trading is complex, making it harder for the company to rebuff allegations of Wall Street cronyism

https://www.theguardian.com/business/2021/jan/29/robinhood-to-restore-ga...

10
up

Never in my 3 days of trading have I seen anything like this!

Robinhood Fallout Sweeps Market After $1 Billion Lifeline

One key consideration for brokers, particularly around high-flying and volatile stocks like GameStop, is the money they must put up with the DTCC while waiting a few days for stock transactions to settle. Those outlays, which behave like margin in a brokerage account, can create a cash crunch on volatile days, say when GameStop falls from $483 to $112 like it did at one point during Thursday’s session.

“It’s not really Robinhood doing nefarious stuff,” said Bloomberg Intelligence analyst Larry Tabb. “It’s the DTCC saying ‘This stuff is just too risky. We don’t trust that these guys have the cash to be able to withstand settling these things two days from now, because in two days, who knows what the price could be, it could be zero.’”

The trouble on Thursday began around 10 a.m., when after days of turbulence, the DTCC demanded significantly more collateral from member brokers, according to two people familiar with the matter.

A spokesman for the DTCC wouldn’t specify how much it required from specific firms but said that by the end of the day industrywide collateral requirements jumped to $33.5 billion, up from $26 billion.

Literally the world's dumbest f**king people - the absolute dumbest, can't get dumber - are those who don't just claim but really believe Wall St. firms pay powerful politicians gigantic sums for banal 45 minute speeches because they want their wisdom rather than their servitude: Link

Interesting to see that the single dose Johnson&Johnson vaccine New Zealand ordered was only 66% effective in clinical trials. Time to order another vaccine? It would be a pity for New Zealand to take a risk on an inferior vaccine after the effort put into controlling the virus this far.

Full article: https://www.bbc.com/news/health-55857530

And 57% effective against the South African variant.
KeithW

Yeah, I think I recall Dr. Bloomfield saying after the BioNTech/Pfizer clinical results where released (showing circa 90% effectiveness) they thought 70% of people would need to be vaccinated. Hopefully Dr. Bloomfield will be able to provide commentary this week on next steps regards if we needs to buy one of the more effective vaccines.

With the EU pinching supply from other countries/organisations we might have to insist it be manufactured somewhere else as well adding a new complication.

Novavax has also come out with preliminary data that their vaccine is only 49% effective against the South African variant. Also, the evidence from South Africa is that previous previous strains of the disease itself do not give full immunity to the South African variant; i.e. you can get coronavirus again, with many cases of this now cropping up. .
The mRNA vaccines (Moderna and Pfizer BioNTech) are likely to be able to tweak their vaccines a lot quicker than the vaccines using other technologies.
KeithW

Good point.

Dr. Bloomfield and his team have provided sound advice so far, I have no doubt that their recommendations will be well judged. It is disappointing that the single shot vaccine does not confer the levels of immunity we have seen from other vaccines.

Surely a vaccine doesn’t need to be that effective to get the r value below 1. Same with reinfections - if it only happens occasionally it’s not going to prevent herd immunity.

True but governments will be nervous of opening the door to even a small failure rate. Years ago the USA insisted on a smallpox innoculation otherwise you would be turned away. At some point NZ govt will have to decide what innoculations new arrivals must have and how effective the vaccines used must be.

given that this particular virus is likely to be around for many years -- and like the flu we will need vaccinated annually -- does it nto make sense fo the governmentto fund and own our own manufacturing complex that could produce the 6 million we would need -- plus our own normal flue -- and be in a position to export and sell product globally.

We all know that Covid will not be the last of its type --and that there will be future demand -- so why not use some of this massive COVID borrowing to at least develop a business opportunity - create some high paying jobs, and give us the security of knowing we can provide the vaccine -- recent events in EU have shown exactly how rich countires intend to proceed - and we are a LONG LONG LONG way down any queue -- despite Hipkins insistence we are not -- the promise that we had secured vaccines was given several months ago - but yet now we are getting told - June at best -- maybe by the end of the year - - Lets simply produce our own - bloody sound investment and use of the money we borrowed!

I can imagine a lot of people asking the question, "which one?" Before receiving the vaccine. I know if i was told J&J, I'd say I will wait for another one.

Yeah, given the option I'd definitely go for one of the better vaccines even if it means a double jab and repeat trips and I'm not even in a very high risk group. However on a national pevel we also need to make sure the vaccine is fit-for-purpose.

Let's see what The Ministry of Health and Dr. Bloomfield say next week. After seeing what is going on in the northern hemisphere OECD countries I'm sure they'll place due weight on making sure we get the vaccine rollout correct.

Trump and his numbskull followers are probably injecting J&J baby shampoo into their veins (the ones that survived the bleach that is)

David, as a long time lurker on this site who only recently subscribed I'd like to say thank for all the interesting (pun intended) and useful things I've learned here over the years (and thanks to all in the comments section too), but one thing that always bugs me is Interest.co.nz's use of subjective adjectives for financial reporting e.g.
"But South Korean industrial production is on the rise with a *better* than expected result"
"The oil majors are turning in *terrible* financial results."
You could easily argue that the oil majors having lower financial results is actually great news!
/pedantry
(How do you insert quotes? Make things bold etc?) Edit: i found the guide for this now, thanks

I must agree Fe.

Reporting on the human economy largely disregards the environment on which it is totally dependent.

“Growth” in any component of GDP (C+I+G+(x-m)) inevitably results in a reduction of nature and an increase in waste. The exponential nature of the “growth” means we head towards our own oblivion at ever greater speed.

Why on earth should this ever be reported as “good”?

Because before modern economic growth came along our lives were nasty, brutish and short?
"History is replete with episodes where much smaller human populations accounted for environmental destruction at large scales. Early North Americans in the paleolithic era cleared most of the continent’s forests and hunted mammoths and other megafauna into extinction. Across human history, roughly three-quarters of deforestation in temperate forests occurred before the Industrial Revolution, when the human population was less than a billion people, almost all of whom lived in deep poverty compared to today’s industrial standards.

More recently, economic crises in relatively developed regions, such as Southeast Asia, the former Soviet Union, and Greece have led to serious environmental consequences, as economically struggling populations turned to forests for firewood and to illegal hunting and fishing for food, to devastating effect.

For this reason, degrowth offers no guarantee that environmental impacts will decline.

...Indeed, all over the world, poor populations dependent on low-productivity technologies often require surprisingly large per capita resource footprints to sustain their meager consumption. One 2012 study in PNAS, for instance, found that the average West African requires the same amount of land as the average Northern European to support a diet that is much poorer calorically and offers much less dietary protein."
https://www.thenewatlantis.com/publications/must-growth-doom-the-planet

God I wish you’d expand your reading list.

Yes, read the history of China during the 1960s - the great famine and leap forward - a scorched earth by starving people.

Well aware of communism failing. The Soviet Union is refered to in the quote.

Huge difference. Trees can grow back, earth surface can repair all in a relatively short time. The energy and carbon for growth coming from FF can not be returned.

You make a valid point profile. In some ways we need a thriving economy to pay for the "luxury" of looking after the environment. The unfortunate flip side to that is that in other ways a thriving economy trashes the environment it needs to thrive. It's a hell of a catch22 we find ourselves in with no painless way out...

Looks like NZ going to be in competition with the UK to attracting fleeing wealthy Hong Kongers, watch UK house prices go up.

BBC article: UK BNO visa: Can Hong Kong residents now live in the UK? "The UK is introducing a visa system that will give millions of people from Hong Kong greater opportunities to live and work in the UK from 31 January. It will also provide them with a route to British citizenship". https://www.bbc.com/news/world-55825479

Watch for riots if that happens.

"the disastrous UK level (1515) where deaths are still raging." in context. Where are the bodies? For example:

Age-standardised mortality rate (per 100,000 population)
2020 1043.5
2008 1091.9
or pick any other year prior to 2008. And of course the UK had extra deaths in 2020 due to people not being able to access healthcare for non important illnesses like cancer.

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarri...

I personally know someone who was mis-diagnosed with cancer and is now terminal. Heartbreaking stuff considering he has a young family and mortgage on a family home. It would be unfair to conclude that a correct diagnosis a year ago would have saved him, but it doesn't make it easy listening to all the hysteria around covid while others with serious health concerns are pushed to the back of the queue.

They may have had less deaths due to people staying at home in lockdowns (not being hit by a car etc). But yeah amazing that the whole world has pretty much shut down for a virus that doesn’t seem to kill that many people.

That's slightly misleading there profile...the age standardised rate has been coming down since 1944 due to improved healthcare etc. From your link....
2020 1043
2019 925
2018 965
2017 965
2016 966
2015 993
2014 953
2013 985
So a big jump UP last year against the overall trend downwards (plus 2020s data is provisional at this stage)
I'd urge people to look at the data in the link themselves. Far right column on the Table tab.

Every year prior to 2008 had a death rate greater than 2020. Given we are in a "raging" pandemic that is incredible. Prior to 2008 why did we not go batshit crazy and deny people freedom, jobs, education and healthcare? For an illness with a median age of death greater than average life expectancy.

Population adjusted we need global deaths of 5.5 million to even match the '58 Asian flu - back when the average global population was much younger.

Hard to know what would have happened had the world not gone “batshit crazy” though. I’m sure there would have been a lot more deaths in the UK without lockdowns, face masks, social distancing, etc. could have got nasty once the hospitals were full.

For something that is "hard to know" a lockdown is a very, very expensive experiment in terms of health, education, livelihoods etc. . Plenty of papers out there show lockdowns are ineffective in controlling the virus.

https://www.aier.org/article/lockdowns-do-not-control-the-coronavirus-th...

how can anyone who lives in NZ think that lockdowns are not effective? Our number of cases was growing rapidly, then we had a lockdown, then we had no cases. In fact we did that twice. I doubt it was a coincidence.
I do however agree that the world may have overreacted (I’m a bit 50/50 on that). I wonder if life expectancy would have actually been higher without lockdowns if you exclude the time people were in lockdown from their lives.

From the links above:
"We examined the approach up to August 2020 taken by two jurisdictions which had successfully eliminated COVID-19 by this time: Taiwan and New Zealand. Taiwan reported a lower COVID-19 incidence rate (20.7 cases per million) compared with NZ (278.0 per million). Extensive public health infrastructure established in Taiwan pre-COVID-19 enabled a fast coordinated response, particularly in the domains of early screening, effective methods for isolation/quarantine, digital technologies for identifying potential cases and mass mask use. This timely and vigorous response allowed Taiwan to avoid the national lockdown used by New Zealand. Many of Taiwan's pandemic control components could potentially be adopted by other jurisdictions."
https://www.thelancet.com/journals/lanwpc/article/PIIS2666-6065(20)30044-4/fulltext
Also
"Forecast deaths from epidemiological models are not valid counterfactuals, due to poor identification. Instead, I use empirical data, based on variation amongst United States counties, over one-fifth of which just had social distancing rather than lockdown. Political drivers of lockdown provide identification. Lockdowns do not reduce Covid-19 deaths. This pattern is visible on each date that key lockdown decisions were made in New Zealand. The apparent ineffectiveness of lockdowns suggests that New Zealand suffered large economic costs for little benefit in terms of lives saved."
https://www.tandfonline.com/doi/abs/10.1080/00779954.2020.1844786?journa...

So I think you are saying there are other measures that are just as effective rather than that lockdowns are ineffective which is obviously incorrect as lockdowns were very effective here.

Perhaps you conflate border closure with lockdown? UK locked down but didn't close it's border. If lockdowns are effective why the number of cases in the UK or the lack of cases in Taiwan? If Cindy shut the border 6th March - when MOH advised, rather than dithering for memorial photo ops, we may have done a Cook Islands.

The key question then is: what would the 2020 death rate have been if there hadn't been any lockdowns/social distancing etc?

Is housing and climate change a distraction to really what's currently happening in NZ?
Higher food prices, shortages of goods, shortages of labour (Word on the street is the SI meat industry is having significant staffing issues at some plants, which will have impacts in autumn kills unless addressed), food shortages etc. Or is this mainly a South Island issue where the North Island is kept supplied so that the majority can continue to believe the emperor is clothed?
https://thewanakasun.co.nz/news/14515-shortage-plantbased-milks.html
https://www.thenews.co.nz/news/product-shortage-if-you-see-it-buy-it-ret...

Higher food prices? Evidence please. I am not categorically saying you are wrong, but the CPI is showing minor food inflation.

I've heard that meat has fallen in price significantly due to supply chain and demand issues. One person told me of his butcher friend sold beef fillet steak for $8/kg recently, so imagine what he's paying for it...

Probably the butcher friend had a chiller fall over and needed to get rid of it quickly.

Could be a possibility. But he seemed to think that finding frozen/chilled cargo space to export was the reason, as he had also been selling cheap lamb products too. Correlates with lower farmgate meat prices also. It is puzzling though as food prices in China are soaring so you'd think they'd be shipping in plenty of NZ produce??

We are basically self sufficient in meat so we buy very little. Logistics are causing offshore issues - accessing chilled containers, access to ports, changing shipping schedules and distribution network disruption on arrival offshore, are all areas of concern. There is some heavily discounted meat on some online sites.

Yes food is being diverted to the North Island
, but please keep this a secret if word gets out it will be riots in Gore

The scale of the vaccination program is becoming evident. Even producing 5 million a day, that's 1400 days before everyone in the world gets their first round. That needs to be ramped up to 20m a day for everyone in the world to get their first dose within a year. Most require a booster as well, so 40m a day...

In short, it's impossible given the pace at which the corona is mutating.

It seems to me that some people think that "the right" is equivalent to "the far right".

Stuff does an article that acknowledges rental subsidies for what they are
Almost 370,000 people receive the accommodation supplement
A continuing cost with a built in inflator
https://www.stuff.co.nz/business/opinion-analysis/300217564/37m-a-week-i...