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China and US on holiday; Canada data positive; Japan signals better outcomes; ditto Singapore; EU still struggling; UST 10yr at 1.21%; oil up and gold down; NZ$1 = 72.3 USc; TWI-5 = 73.7

China and US on holiday; Canada data positive; Japan signals better outcomes; ditto Singapore; EU still struggling; UST 10yr at 1.21%; oil up and gold down; NZ$1 = 72.3 USc; TWI-5 = 73.7

Here's our summary of key economic events overnight that affect New Zealand, with a sense that more positive economic data is starting to assert itself.

Today is a public holiday in the US, President's Day (or what used to be known as Lincoln's Birthday). Markets are closed there. Parts of their Mid-West are also closed due to a very cold blast of winter weather. And that is raising global oil prices along with rising Mid-East tensions. Markets are closed in China as well for their Spring Festival break. So the big international news flow is muted today. But there is some we should take notice of.

Canada's housing starts came in positive for January and their December data was revised higher.

Canada's manufacturing sales were also positive, this data was for December. And it was better than expected and reversed the decline for November, and more. Sales of wood, coal and oil led the improvement, so perhaps it isn't be a long-lasting uptick.

Japanese industrial production slipped much less than expected in December and this is being seen as a bit of a turning point. They were still lower to be sure, but remember we have previously reported the icon machine tool order levels for January were positive.

And Japan has surprised analysts with a much better Q4-2020 economic performance than expected. There was growth (actually) when a decline was expected. More interesting was that private consumption grew well and didn't fall away as much as expected from the strong Q3 jump. Overall, these are quite encouraging results for the world's third largest economy. (The world's fourth largest economy, Germany, didn't bounce back quite as robustly as Japan, so slipped on a relative basis.)

Singapore also reported Q4 GDP results overnight and they too were better than expected, even if they were tamer than the Japanese improvement. They say they expect a "4% to 6%" level of economic growth in all of 2021.

And Singapore home sales rose to their highest in more than two years in January, with buyers rushing in amid speculation that the government may take steps to cool the market.

Going the other way and getting worse was EU industrial production in December in a disappointing but not unexpected reversal.

New York equity markets are closed, but European markets were open and they rose a positive +1.5%, with London up +2.5% and Frankfurt the laggard, up just +0.4% overnight. Yesterday Shanghai and Hong Kong were closed for Spring Festival, but Tokyo set the positive tone for the Europeans, up +1.9%. The ASX200 ended up +0.9% but the NZX50 Capital Index was down on struggling earnings reports, -0.6%.

The latest global compilation of COVID-19 data is here. The global tally is still rising but at a slower pace, now at 108,970,000 and up +315,000 in one day. The pandemic seems to be easing in some places now although that may just because it is the weekend and counting systems are delayed. Global deaths reported now exceed 2,403,000 and +7,000 since yesterday.

New research shows that Beijing, Russia, Iran and Donald Trump were all key purveyors of COVID conspiracy theories, designed to destabilise public perceptions of what was actually happening.

More countries (88) have started their vaccination programs. About 160.7 mln doses have been given so far (no update over the weekend). There is clear evidence the 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 +59,000 over the past day for their tally to reach 28,269,000. The US remains the global epicentre of the virus although there is clearly some easing. The number of active cases fell sharply overnight and is now just on 9,546,000 and -14,000 fewer in one day, so less new infections again than recoveries. Their death total is up at 497,000 (+1000) in one day. The US now has a COVID death rate of 1497/mln, and that compares to the disastrous UK level (1724) where deaths are also still rising (117,000) but a bit more slowly now their vaccinations are rolling out.

In Australia, their community control is impressive but Victoria is in a snap 5-day lockdown again as the UK strain may be in the community there from a border breach. Their all-time cases reported is now 28,898 and only +6 more cases overnight, +2 in the community and the rest new arrivals and all in managed isolation. 41 of these cases are 'active' (+8). Reported deaths are unchanged at 909.

The UST 10yr yield is unchanged from yesterday at just on 1.21%. Their 2-10 rate curve is unchanged at 110 bps, their 1-5 curve is still at +43 bps, while their 3m-10 year curve is holding at +118 bps. The Australian Govt 10 year yield is up +6 bps at 1.33%. The China Govt 10 year yield is unchanged at 3.26%, while the New Zealand Govt 10 year yield is up +7 bps at 1.38%. Markets are clearly looking past the current lockdown and still seeing an RBNZ that will focus on rising inflation pressures in 2021.

The price of gold will start today down -US$4 at US$1820/oz. Platinum rose above US$1300/oz for the first time in six years.

Oil prices are up a bit more than +US$1 and are now at just under US$61/bbl in the US, while the international price is just under US$63.50/bbl.

And the Kiwi dollar opens today little-changed at 72.3 USc. Against the Australian dollar we are lower at 92.9 AUc. Against the euro we are at 59.6 euro cents and unchanged. That means our TWI-5 is little-changed again, now at 73.7.

The bitcoin price is down -1.3% from this time yesterday and is now at US$48,483, although it is still flirting with the US$50,000 level even if it didn't reach a new high in the past 24 hours. Volatility remains high at +/- 3.7%. 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 ».

Daily exchange rates

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End of day UTC
Source: CoinDesk

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28 Comments

The Aussies, like us and every other country mentioned above, know how to de-risk an economy.

The Australian property market is booming, but the gains are based on 'massive' debt

https://tinyurl.com/259c2avk

"Massive" Debt might be fine in theory as long as (1) you can productively work to pay it off over time (the debt reduces) or (2) someone else will take it off your hands by buying what you have at a higher price (the debt isn't 'worked off' just transferred to another party). In a World where every $3 worth of new Debt translates into $1 worth of Productivity (goods and services) which one of those two are we relying on, and how likely is it that it will continue?

As John Key quite rightly told us (before that thought was beaten out of him by the Collective of Debt Issuing Central Banks):
"You don't get out of debt by borrowing more money"

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massive is something of a understatement. then again what adjective would describe it sufficiently? self reproducing pyramid of debt, on a foundation sitting on quicksand.

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I'm not a conspiracy theorist, but I just can't avoid this. As an analyst and with the levels of debt being generated, I keep asking the why questions, and some turn into who and where. But looking beyond the superficial aspect ask who holds all that debt? Banks in one form or another, so one must ask is this by design? As PDK, BW and yourself have intimated on occasion this debt is at levels where it can never be repaid. but it can be used to exercise control. Selectively it can be called in.

Following the money trails who/what (it really will be a "who") holds all this debt at the end of the line, and what is their purpose? More importantly what can be done about it? An article pointed to on this site a couple of years ago indicated that just over 20 individuals essentially owned all the major banks in the world (if I remember it correctly). Troubling questions.

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Perhaps not precedent but nonetheless a precursor. John Pierpont Morgan, during the financial crisis of 1907, was obliged to bail out the US government of the day.

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As an analyst and with the levels of debt being generated, I keep asking the why questions, and some turn into who and where. But looking beyond the superficial aspect ask who holds all that debt?

Bank depositors as unsecured creditors have the largest claim on bank debt - hence they are complicit co-conspirators. No?

According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.

Gotta laugh - "Risk free yield is, yield free risk"

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Ah NO Audaxes, bank depositors, and I am one myself, have virtually no power over the bank. Indeed the law says my money on deposit at the bank is actually the banks property and I am just an unsecured creditor (as you indicated). I did use the wrong term and said debt when the concern is who are the Creditors? Anyway if I rocked up to the bank tomorrow and demanded all my money in cash they can, and possibly would tell me where to get off. So Bank depositors don't get to dictate bank policy, and I suspect most minority shareholders couldn't do that either. Besides as I indicated even our banks are in debt to overseas banks, not just the RBNZ. So where does that money trail lead, and why do those big international banks keep lending into an ever increasing debt mountain? What is their agenda when it is pretty much obvious even to laymen such as myself that much of the debt can never be repaid.

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Besides as I indicated even our banks are in debt to overseas banks,..
Unhedged? I doubt it. Check out cross currrency basis swaps and supranational NZD Kauri bond issuance.
Furthermore, it is documented by BIS- page 3 PDF that Australian banks operating out of London etc are significant lenders of USD (eurodollars) via cross currency basis swaps. Lending to their NZ subs?

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Cannot wait till all my TDs mature this year and I can move them to countries with a bank guarantee.

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"As John Key quite rightly told us .. "You don't get out of debt by borrowing more money"

Youre having a lauf right?

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yes, of the hollow kind.

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Have a real chuckle and re-read one of his "State of the Nation" speeches - extolling the same sentiment:

Growth over the last decade was built on all the wrong things - debt, consumption, and government spending.

People borrowed heavily to buy houses and farms, property prices soared and New Zealanders felt wealthier as a result. They spent a lot on consumer goods, which led to a bubble of economic activity.... As a country we imported far more than we exported, leaving a gaping balance of payments deficit that persisted for year after year.

All this could never be a solid basis for growth.....It would be better for both investors and the economy as a whole if people had the confidence to save more and invest in a wider range of assets, not just in property....We have to increase our own savings and reduce public sector debt.

https://www.stuff.co.nz/national/politics/4584114/PM-John-Keys-State-of…

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And he came in and turned it all up to 11.

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RBNZ estimated the total cost of the CHCH Earthquake to be $40 Billion, with $26 billion having been paid out by insurers by 2015 (page 5 of the bulletin). $40 billion includes $7 billion of infrastructure as per page 3 of the bulletin. So the Government is on the tab for ~$14 billion.

https://www.rbnz.govt.nz/research-and-publications/reserve-bank-bulleti…

Yet somehow they added $50 billion of Government debt......

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Reminds me of the kid that went to school and said to his friend, "my dad is poor. He only has $100 in the bank." His friend replied, "my Dad is really rich. He owes the bank $3 million dollars."

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The entire Alt Coin market collectively pooed itself yesterday as BTC did weird stuff. It was quite a day of up and downs. Still, we are back, for the most part, where we left off on Saturday, if still about 10% down.

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Interesting term of phrase? Much like share markets and gold ups and downs.

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What is this!? A dip for ants??
BTFD mate, get in on any flash sale we get :)

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New research shows that Beijing, Russia, Iran and Donald Trump were all key purveyors of COVID conspiracy theories, designed to destabilise public perceptions of what was actually happening.
Irrelevant postulation as far as Russia is concerned:

" Lavrov said. "We don't want to isolate ourselves from global life, but we have to be ready for that. If you want peace then prepare for war."Link

“The dogs bark, but the caravan goes on”.

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Positive, positive, better, positive, better, growth, grew well, encouraging, better, growth, disappointing, positive, positive,

https://www.theautomaticearth.com/2021/02/heal-the-planet-for-profit-re…

Sigh

Oh, and an 'Educational Website' popped into the bottom of my screen. It isn't; it's a propaganda-piece from the FF lobby. Just sayin.....

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I think that there is something that many don't take into account when they look at BTC volatility. Today for example at +/- 3.7%. I can see how that can scare some investors, as it seems a lot compared to traditional markets, yet for someone who has been in the space for a while that barely even registers as a move, it's noise. The reason being that the trading timeframes are massively different.

For example; the NYSE is open 9.30am-4pm each day, 5 days a week. Once you take out the public holidays that's 1882.5 official trading hours per year. BTC and Crypto markets are 24/7, they never stop. Almost everyone underestimates how much of a difference that is. It's 8760 hours per year, a multiple of 4.65! In rough terms you could say 1 day in BTC is like a week in the stock market. So that +/-3.7% in the last 24 hours is like a 0.74% daily move in the S&P, nothing.

The cycle where the block reward halves is approximately every 4 years, that's almost 20 years in normal equities trading! I think everything starts to make more sense when you look at it like that. Suddenly big drops don't phase you, it's actually less stressful than being in an overheated stock market where recovery could be years (A difficult situation if you are near to retirement).

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For example; the NYSE is open 9.30am-4pm each day, 5 days a week.
A pimple on the back of global bond and FX swaps markets which trade around the clock in various global banking locations dotted on the globe.

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I have also pointed out that you cant look at the Bitcoin market through the old school system lenses. It just keeps all of the people that cant adapt stuck in their way of thinking. Volatility of 10% is nothing, everyone just needs to lengthen their time horizon.

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You seem to think that it's the trading itself that drives the value of the assets being traded? Stock-markets could be open 24/7 but it wouldn't change the amount of activity the companies being traded do.

Besides, you never heard of after-market trading or dual listed entities?

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and CFDs should be more volatile that the underlying stocks?

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More false green shoot nonsense
EU is in deep do-dos. That is 35% of world GDP
UK too.
Canada is a minnow.
Please quit Japan GDP growth for Q4 and Q3?

World is emerging from Cv19 recession but double dip more likely than linear recovery.
This was merely postponed rather than avoided, by all monetary and fiscal measures.
The world and people's behaviour and habits of spending and work patterns, are not just going to go back "to normal" as commentators keep chanting ad nauseam. History does not revert. We are in a new paradigm but as yet we do not realise it in great numbers. The "crisis" is still before us, not in past. The credit crunch and wealth destruction comes later, in late 2021 and 2022. Margin debt and corporate debt and government debt all at stratospheric levels. This will go down, but not in a controlled way: inflation or defaults only way. Other scenarios are dream world

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MK29,

Just 2 days to go now and you still haven't told us what major event to expect on the 18th. You indicated that this would in some way, presage the collapse to come in Oct.
Still waiting to be enlightened.

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MK29,

Just 2 days to go now and you still haven't told us what major event to expect on the 18th. You indicated that this would in some way, presage the collapse to come in Oct.
Still waiting to be enlightened.

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