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US factories in healthy expansion; Aussie home lending in frenzy; China's PMIs lose momentum with their expansion now quite modest; UST 10yr at 1.07%; oil and gold up; NZ$1 = 71.7 USc; TWI-5 = 73.4

US factories in healthy expansion; Aussie home lending in frenzy; China's PMIs lose momentum with their expansion now quite modest; UST 10yr at 1.07%; oil and gold up; NZ$1 = 71.7 USc; TWI-5 = 73.4

Here's our summary of key economic events overnight that affect New Zealand, with news the economic expansion in China is losing momentum.

But first, US factory PMIs were a mixed bag in January. The widely-watched local one reported a slower expansion while the internationally-benchmarked one was up at a record high. Both are recording healthy expansions at these levels. New orders, especially new export orders, are a feature.

Canada's PMI pulled back somewhat but is still expanding in a healthy manner.

In Australia, job ads rose for an eight consecutive month in January, although the pace of the gains slowed.

House prices there reached a record high in January. And Australian home lending is running very hot. It also reached a record high in December with AU$26 bln committed, up more than +8% above November and a massive +31% higher than December 2019. (Data releases for New Zealand are temporarily suspended due to the RBNZ data system breach, but is likely that New Zealand home lending ran equally as hot in January.)

Aussie factory PMIs were positive too with the local version expanding at a healthier clip, while the internationally-benchmarked one reports an even faster expansion with new order inflows at a 4 year high.

PMI reports for Taiwan, South Korea and Indonesia all reported fast expanding factory sectors and all very impressive for January. But it wasn't so impressive at all for Japan, Malaysia or Thailand, although Japan is no longer contracting.

In China, the latest PMI survey, the private sector one, points to a sharply slowing factory sector, losing momentum. Operating conditions there improved at slowest rate for seven months. Export orders contracted. This private sector report fell to the same weak level that the official factory PMI reported. Cargo demand out of China is reported to be easing.

And South Korea reported sharply higher trade activity for both exports and imports.

In Myanmar, it seems the coup there yesterday was all about ensuring the country aligns with China, and doesn't fall into the anti-China regional grouping.

The UK has now formally requested to join the TPP mega trade pact and they may be followed soon by South Korea and Thailand. China too has indicated it wants to join. This issues for them include IP protections, environmental protections, and labour standards.

Wall Street has ignored the weekend futures market and come out with strong rises today. The S&P500 is up +1.6% in early afternoon trade. Overnight European markets rose mostly +1.2%. Yesterday Shanghai rose +0.6%, Hong Kong rose +2.2% and Tokyo rose +1.6% at the end of their respective Monday sessions. The ASX200 ended up +0.8%, but the NZX50 Capital Index was the outlier, ending down -0.2% after having outperformed at the end of last week.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now at 103,090,000 and up +332,000 in one day. The variants are increasing their grip and keeping new infection rates high. It is still very grim everywhere except in our region. Global deaths reported now exceed 2,231,000 and +7,000 since yesterday.

More countries (69) have started their vaccination programs. And although 96.6 mln doses have been given so far (+2.7 mln more overnight), nowhere has the tide turned on infections - except perhaps in Israel. However, there is clear evidence the virus vaccines are working to reduce or even eliminate deaths for those who have taken it.

The largest number of reported cases globally are still in the US, which rose +107,000 over the past two days for their tally to reach 26,778,000. The US remains the global epicentre of the virus. The number of active cases rose overnight and is now just on 9,920,000 and +31,000 more in one day, so more new infections than recoveries. Their death total is up to 452,000 however (+1000) and the smallest daily rise in a long time. The US now has a COVID death rate of 1362/mln, awful but made to look 'good' by the disastrous UK level (1565) where deaths are still rising fast.

In Australia, their community control is impressive. Their all-time cases reported is now 28,818 and only +7 more cases overnight, mostly new arrivals and all in managed isolation, but also one community case in Perth. 59 of these cases are 'active' (-7). Reported deaths are unchanged at 909.

The UST 10yr yield is unchanged at just over 1.07%. Their 2-10 rate curve is unchanged at +96 bps, their 1-5 curve is at +34 bps, while their 3m-10 year curve is also little-changed at +101 bps. The Australian Govt 10 year yield is up +3 bps at 1.16%. The China Govt 10 year yield is down -2 bps at 3.20%, while the New Zealand Govt 10 year yield is up a sharp +6 bps at 1.19%.

The price of gold will start today up +US$15 at US$1863/oz. Silver on the other hand is up much more, gaining +4.5% with a Reddit flash-mob surge. The gold/silver ratio is now an unusual 66x and an eight year low.

Oil prices are up +US$1 at US$53/bbl in the US while the international price is now at US$56/bbl.

And the Kiwi dollar will open today little-changed at 71.7 USc. Against the Australian dollar we are just under 94 AUc. Against the euro we are just under at 59.4 euro cents. That means our TWI-5 is unchanged at 73.4.

The bitcoin price has risen overnight but only by +2.1% and is now at US$32,802. Volatility has been a relatively low +/- 3.8%. The bitcoin rate is charted in the exchange rate set below.

(Due to staff isolation, there will be no video version today.)

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

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44 Comments

Logged on to Hatch Invest this morning to invest my monthly pocket money and the first thing I see after logging in is this Important Update:
Industry-wide disruption: Expect delays and outages this week
A massive increase in worldwide share market activity has resulted in widespread outages and delays to most investing platforms, including Hatch.

I don't really understand why people are so bullish on China. They have a demographic timebomb.
And if they keep making aggressive noises it will hardly help their trade prospects.
So both domestic and international challenges for them.

21
up

The media loves to paint a rosy picture of China, while denigrating their own Western countries (including the very freedom they operate under).
Why is every NZ institution mad keen on signing binding partnership agreements with Chinese organisations? Which will include close CCP control.
They keep queuing up to come under China dominance.

20
up

Yeah it's bizarre.
I think a certain mythology has developed. China is the path to the pot of gold...
And it probably *has* been to a certain extent.
I thought our Trade Minister's proclamations on Australia and China were a disgrace.

China is (has been) the path to SCALE ...
but scale is coming undone by resource push back

Isn't it how Capitalism work, following the money?!

NZChineseI haven't seen any actually capitalism lately, have you?

Hey Fritz, how you doing? I think and read about the future of world economies and geopolitics a lot.

And this is where I am at in my thoughts about China atm.

China has a state controlled economy and whilst it is interconnected to the world's financial system, no one is under any illusions that they can really own anything in China, or engage in business there in any kind of free way. Legal property rights are just not protected to the degree they are in the West. It wasn't very long ago that Capital Controls had to be put in place because the wealthy Chinese were racing for the safe exits and trying to get money out of China. Similar happens in Russia and other countries with authoritarian leadership and state controlled economies.

Now of course, authoritarian leadership can be beneficial in times of crisis and certainly current Chinese leadership has proven itself capable of crisis management and all kinds of adept geo-political maneuvers (many straight out of the USA play book). But your question remains valid.

China is getting richer more quickly than any country in history (apart from maybe the Spanish when they stole all the Gold and silver from the Americas), but they are also getting older and fatter more quickly than any Western country did. The West took centuries to peak and then plateau into secular stagnation during the modern era, but China is perhaps going to repeat that same pattern in 50 years. That's not enough time to embed itself, it's language, it's currency and culture as an enduring super power. It hasn't proven itself anywhere near as nimble at technological innovation. It's not leading the charge in renewable energies or inventing new tech, it's just trying to produce cheaper versions of other countries tech. Japan, South Korea and Taiwan were world leading innovators at the stage that their economies were in their comparable boom phases (as was Britain, Germany and America), but China has gone from being a global source of cheap labour and manufacturing to a consumer economy, having skipped any major creative ideas phase. There have been some technological and artistic creativity but NOTHING as compared to other cultural blossomings in history or even as compared to China's own history. In prior cycles of rising prosperity in China they were highly innovative and lead many technological advancement (paper, gun powder, seafaring etc). A lot of China's greatest minds leave China for other countries but the greatest minds of other countries don't move to China for those same opportunities. Nobody sends their children to Chinese universities or schools. Other countries try to profit from China and see it as an area of potential wealth creation, but not an exciting new area of ideas, experimentation and innovation. So whilst yes, follow the money, ultimately, if the money doesn't lead to free thinking and creativity, China may just peak very quickly (or have already done so).

Every trend in humanity at the moment seems to be rapid. The rise and fall of China is following a very rapid pace. The yield greedy are already looking for post-China growth. The financial/corporate world will use China and the move on to the next "emerging market", until there are no "emerging markets" left. Or until there is another world war, which necessitates another technological revolution and a major post-war rebuild and then the whole global power structure will be redefined according to who wins.

Ging; your second to last paragraph about people not going to China is a consequence of the leadership. and yes I think you propose a pretty valid view that i agree with. China's leadership style will ultimately be it's downfall, as is usually the case with authoritarian regimes. Just a matter of 'when'?

I don't necessary think China is doomed to some huge dramatic collapse, or regime change. That could also happen obviously, but what seems very likely, is that they will hit post-development stagnation, having not really built enough cultural and intellectual capital to have achieved significant soft power.

They will have a healthy service sector and a big enough local market to maintain their new wealthier lifestyle standards but they have nothing like the wow factor that previous cultures achieved during their main development phases. They aren't leaving a legacy of inventions, ideas or world altering art. They mostly just seem to have bought a lot of real estate with their wealth hahah.

Good posts. I agree.
I especially agree with your prediction of 'post-development stagnation'. They will be caught in the 'Middle Income Nation' trap.
They are not on a path to world domination at all, and they know it. That's why they are starting to throw their toys out of the cot...

15
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Silver isn't being pumped by Reddit. Wallstreetbets are against it, claiming it's an effort from Citadel to manipulate and distract from GME & AMC. The MSM are reporting this is from WSB and the movement has simply become bored of Gamestop. A quick glance at r/WBSs and you can see this is not true.

Interesting that Citidal are the 5th biggest holders of Silver. Looks like they want to drive the price up in order to establish a 'war chest' for their fight re GME.

Indeed. There was a lot of evidence of bots posting on their Reddit trying to encourage silver. Their mistake is still thinking this is based on greed, and trying to whip up silver FOMO. WSB certainly aren't buying into it.

northman46, it's the same mistake they have been making over the past 8-9 years in dismissing and underestimating cryptos.

I see people in these comments repeat the same mistake over and over. They don't understand that there are now two generations (millennials and zoomers) who had their financial/economic ideas shaped by the GFC and the utter delight we take in subverting major financial institutions.

Much doge, my dude, wow!

Doubt it. Citadel owns more Puts (bets against) than Shares. Disinformation campaign.
(21.5 mill compared to 6 mill)

The silver market has been roiled in recent days after a -- now-removed -- post appeared on Reddit’s WallStreetBets forum that encouraged traders to pile into BlackRock Inc.’s iShares Silver Trust. Many long-standing silver advocates reacted with glee as the price surged to an eight-year high on Monday, spurred on by huge purchases through the exchange-traded fund.

While Reddit posters now seem conflicted about the trade, the hashtag #silversqueeze gained rapid momentum on social media Monday.

As above - lots of bots as well as new posters on WSBs with their own agenda. Nearly all posts on Reddit/WSB are warning people against silver.

Vested interests desperately trying to save their asses

"However, there is clear evidence the virus is working to reduce or even eliminate deaths for those who have taken it."
Maybe it would be best to take the vaccine rather than the virus, :).

Ouch! You are right of course. Fixed now. Thank you.

Aside from that though, there still does not appear to be any data on whether or not any of the vaccines are reducing or hopefully even preventing transmissions? Vital factor globally.

Glass half full, Foxglove. That naughty virus is steathily doing the population cull that the sustainableers have always wanted, but that they could not think of ways to achieve short of war or other organised violence, which paths were, of course Anathema..

The great cull, say 1933 - 195? starting and finishing in China swept thru Europe & Asia, not so much Africa, the Americas, Oceania though except for those that fought if you like. One nuke exchange now could replicate all that and more. It is very much true that there is nothing more equal than death.

Staff isolation???! Everyone ok?

Regarding silver - if you go to Reddit you will see that they are NOT pushing silver.

Interesting discussions around Dogecoin; a dog-based cryptocurrency was briefly one of the best performing investments of 2021 so far. This has lead to all sorts of discussions around the legitimacy of it and the potential for whether it could be adopted for usage outside of Pornhub; e.g. Tesla, Amazon.

At the moment it is seen as a pump-and-dump joke amongst crypto enthusiasts, but Elon Musk remarked last night that 'history loves irony, and sometimes the most entertaining outcomes become the most likely ones'; the most entertaining and most ironic outcome being that Dogecoin becomes "the global currency of Earth". It seems stupid, but no less stupid than say, tulips, or residential rental property.

House prices there reached a record high in January. And Australian home lending is running very hot. It also reached a record high in December with AU$26 bln committed, up more than +8% above November and a massive +31% higher than December 2019.

When wasn't it thus?

Want to protect yourself from Covid then think about your lifestyle. Do you really think a vaccine is going to right the problems with those vulnerable because they underestimated the risk of a sedentary lifestyle (desk job).

V̇O2 max is widely used as an indicator of cardiorespiratory fitness. In 2016, the American Heart Association published a scientific statement[3] recommending that cardiorespiratory fitness (CRF), quantifiable as V̇O2 max, be regularly assessed and used as a clinical vital sign. This statement was based on mounting evidence that lower fitness levels are associated with high risk of cardiovascular disease, all-cause mortality, and mortality rates stemming from various types of cancers. In addition to risk assessment, the AHA recommendation cited the value measuring fitness for validating exercise prescription, physical activity counseling, and improving both patient management and patient health.

https://en.wikipedia.org/wiki/VO2_max

Now the link to a fatty diet and cholesterol from researchers.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7263494/

18
up

Society would rather design a vaccine that provides fitness than get off the couch and stop eating like pigs

I've yet to see anyone grubbing in the ground with their nose looking for titbits...

You'll find them in the beehive, generally gorging on PGFs and the like

Plot = Lost

Calling someone an animal as an insult reinforces the myth that humans are superior to other animals & justified in violating them.
Stand up for justice by rejecting supremacist language.

https://twitter.com/peta/status/1354112418276728832

That's hilarious !!

Thanks BW. I really needed coffee in my nostrils lol

bw.... I wonder if we can call someone a type of food as a supremacist based insult without attracting the ire of these pea-brained, vanilla ice-creams.

I think the average pig would eat a healthier diet than the average kiwi...problem is too many of us eating the whole pig.

Well they definitely get more exercise than us, apart from the caged ones

Some of the vaccine data from Israel is really encouraging

Where's the supporting link for the claim the myanmar coup is all about china and not about the crushing defeat of the militaries political party?

where's Xing when you needed him (or her)

Or xhe or it.....

“ Myanmar was the first stop of a regional good-will tour last month by China’s foreign minister, Wang Yi, who pledged to furnish Chinese-made coronavirus vaccine to Myanmar for free.”
China requires a ‘China-compliant’ neighbour
https://www.nytimes.com/2021/02/01/world/asia/myanmar-coup.html
And Biden holds China responsible
https://www.politico.com/news/2021/02/01/myanmar-coup-biden-china-democr...

"Champa Patel of the Chatham House thinktank said: “China will not welcome news of the coup. The Chinese have warm relations with [Aung San Suu Kyi] that have deepened as western countries criticised her civilian government’s response to the Rohingya crisis. The military, on the other hand, is perceived as having a more independent streak that sought to balance against Chinese influence.”

Thailand, Cambodia and the Philippines largely followed China on Monday by saying the issue was internal to Myanmar."
https://www.theguardian.com/world/2021/feb/01/myanmar-coup-us-and-china-...