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US sentiment and growth recover strongly; US and China demographics change rapidly; Japan gives up on 2% inflation target; South Korea expands fast; UST 10yr at 1.62%; oil and gold little-changed; NZ$1 = 72.1 USc; TWI-5 = 73.8

US sentiment and growth recover strongly; US and China demographics change rapidly; Japan gives up on 2% inflation target; South Korea expands fast; UST 10yr at 1.62%; oil and gold little-changed; NZ$1 = 72.1 USc; TWI-5 = 73.8

Here's our summary of key economic events overnight that affect New Zealand with news the economic recovery in China and the First World faces long-term demographic challenges that just got much more severe.

But first, the latest survey of American consumer sentiment, this one by the Conference Board, is much more upbeat than was expected. It rose sharply again in April, following the substantial gain in March, and is back to pre-pandemic levels. Consumers were more upbeat about their income prospects, perhaps due to the improving job market and the recent round of stimulus payments. Vacation intentions posted a healthy increase.

The next regional Fed factory survey, this one from the mid-Atlantic states, is solidly expansionary, but not more so in April than March. However, the standout feature of this survey was the sharp rise in inflation trends, with most of these rising costs being passed on to customers.

We should also note that the latest Q1-2021 growth estimates for the US are even more bullish than previously estimated.

There was another huge US Treasury bond auction today, this time US$62 bln of 7 year Notes. It was also well supported with $143 bln in bid tenders. The median yield was slightly higher than the last equivalent event at 1.25%.

Eyes are now turning to the imminent US Fed policy review.

The results of the 2020 US Census have been released, and most coverage centers on the political redistricting. But it also brings news that the US is suddenly growing older, with immigration limited and birth rates falling sharply. One of the great features of the US was its 'melting pot' demographics, something was set to give it a huge long-term advantage over a sharply aging and relatively poor China. But unless the 2020 trends turn around, the US will face the same demographic struggles as China, Japan, and the EU, and that is an unexpected development.

In China, they are readying their own census results - and that is expected to report its first population decline ever. (Actually it's not 'ever'; its the first in 50 years.) And it will also likely report a sharp aging of their demographics.

And still in China, industrial profits at their major firms in March rose strongly again. Of course, the year-on-year comparison is pandemic affected, but the 2021 results are +23% higher than the 2019 results and so this is a very positive outcome.

China's Huarong Asset Management firm, the 'bad bank' in severe financial stress, repaid an offshore bond yesterday in full - but with funds loaned to it by state-owned ICBC. So Chinese officials are just kicking their endemic debt problems down the road.

In Japan, with their latest monetary policy review, the Bank of Japan seems to have given up on ever achieving inflation at their target 2%.

South Korea’s preliminary Q1-2021 GDP showed that their economy is now above its pre-pandemic size. The recovery gained momentum, helped by strong exports and a recovery in domestic demand. Despite expected headwinds (like the virus returning), South Korea is on track to be the first in this region to get back to normal monetary policy.

The iron ore price is still moving higher. Shipping rates are too.

In London, HSBC has reported a return to good profits after a year of painful restructuring. The bank is preparing to shift its headquarters back to Hong Kong as it prioritises its business in China.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 148,063,000 have been infected at some point, up +713,000 in the day, largely driven by rises in India where nationwide super spreading events are underway featuring a "double mutant" strain - and a huge global risk. Global deaths reported now exceed 3,125,000 and up +13,000 in a day. Vaccinations in the world are also rising fast, now up to 1.044 bln (+18 mln) and in the US more than half of their population (229 mln) have had at least one dose as they keep up their fast rollout. Almost 30% have been fully vaccinated (97 mln people). The number of active cases there remains stubbornly unchanged at 6,820,000 with just 41,000 more recoveries than new infections yesterday.

On Wall Street, the S&P500 is down a fractional -0.1% in afternoon trade. Overnight, European markets ended down about -0.2%. Yesterday, Shanghai and Hong Kong ended their sessions essentially unchanged, but Tokyo fell -0.5%. In Australia the ASX fell another -0.2% and that was mirrored on the NZX50 Capital Index.

The UST 10yr yield starts today at 1.62%, up +5 bps overnight. The US 2-10 rate curve is a little steeper at 143 bps. But their 1-5 curve is also steeper at +82 bps, as is their 3m-10 year curve at +159 bps. The Australian Govt 10 year yield is up +2 bps at 1.71%. The China Govt 10 year yield is up +1 bp at just on 3.22%. But the New Zealand Govt 10 year yield is also up +1 bp at 1.62%.

The price of gold starts today at US$1777/oz and that is down a minor -US$3 since this time yesterday.

Oil prices are still little-changed at just over US$62.50/bbl in the US, while the international price is just under US$65.50/bbl.

The Kiwi dollar opens today at just on 72.1 USc and a small slip since this time yesterday. Against the Australian dollar we are unchanged at 92.8 AUc. Against the euro we are slightly softer as well at 59.7 euro cents. That means our TWI-5 is at 73.8.

The bitcoin price is now at US$54,995 and up +1.8% since this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.6%. 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

Big blockchain news out of the EU this morning also - the EU are issuing €100 million worth of 2-year bonds on Ethereum.

https://u.today/ether-his-new-all-time-high-as-european-unions-bank-choo...

My first reaction to issuing bonds on the Ethereum blockchain is 'so what'? What does this achieve?

Nothing in terms of product, everything in terms of network effect given the EIB is the bank for the European Union. Network effect determines speed of adoption. And an event like this demonstrates that government level adoption is much closer than we realise, as long as the outcome of the 2 year trial is a success, delivered for a fraction of the cost of a typical bond issuance. From there it's foreseeable all bonds in the EU will be issued on blockchain. And from there the entire global bond market at a parabolic rate over 2-5 years. At that time $ETH is likely to be in the 10s of thousands lacking any unforeseeable derailments.

It's a meaningless application though. Their existing system works fine. No need for a blockchain. All you have pointed to is a cost saving which you cannot verify then gone off on your own narrative.

Obviously you know more than the EIB great Khal. Perhaps you should take it up with them?

21
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Fantastic news regarding China and US demographics. May the rest of the world (and NZ in particular) follow suit as soon as possible. Then we may see a world where GDP per capita growth and productivity growth takes precedence over gross GDP growth. Maybe then each human life will valued as more than a mere economic unit of which more and more must be endlessly added to fuel the fires of consumption.

Yeah, would be good. Interesting how birthrate initially sank to 2 with combination of birth control and female education, and now sinks further due to cost of living.
I wonder what is next? Perhaps steady automation making more of us useless except the adaptable and the geniuses? Would that push births up or down?

38
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New Zealand followed suit long ago, we have a fertility rate of 1.61. We have systematically priced our own people out having enough kids. Then "demographics" is used as an excuse for flooding the country with mass immigration to make it even worse.

The so called "housing shortage" is just a euphemism for what's really happening in this country.

The responsible ones are curtailing....those that see breeding as an income stream are going hard out.

No doubt.

Projecting these trends forward another decade or two paints a pretty picture of where this country is headed doesn't it.

My daughter the social worker will vow for some single mothers deliberately getting pregnant so they can have better housing and avoid working.

Another daughter with an above average wage job choosing to take 10 months maternity leave went from an average income to virtually nothing. She wanted to stay on leave longer but had run up debts of over $20k so was forced bck to work. She failed to get most benefits because she admitted to having a partner - he works lowpaid and lives in another city so he can keep access to his 10 year old daughter from a previous relationship.

Why not universal child benefit? Why means test accommodation benefit?

So successive NZ Govts have chosen quantity over quality - that explains a lot and provides the solution - quality up quantity down, no need to point out which sections of NZ qualifies for either.

Population news has been around for a while. Absolute population growth peaked in 1987... Though still waiting for the population bomb/infinite growth types to come on board.
https://www.rnz.co.nz/news/world/421284/fertility-rate-jaw-dropping-glob...
https://ourworldindata.org/grapher/absolute-increase-global-population?c...

Stop spinning, eh?

There is sort of lag-time, with population.

Yes, the lag is detailed in the handy RNZ link for you.
'Researchers at the University of Washington's Institute for Health Metrics and Evaluation showed the global fertility rate nearly halved to 2.4 in 2017 - and their study, published in The Lancet, projects it will fall below 1.7 by 2100.
As a result, the researchers expect the number of people on the planet to peak at 9.7 billion around 2064, before falling to 8.8 billion by the end of the century.
"That's a pretty big thing; most of the world is transitioning into natural population decline," researcher Prof Christopher Murray told the BBC.

"I think it's incredibly hard to think this through and recognise how big a thing this is; it's extraordinary, we'll have to reorganise societies."

Silo thinking and extrapolation.
The population doesnt exist in a bubble.
This is where the petri dish is headed

Trade-Off – Financial System Supply-Chain Cross-Contagion: a study in global systemic collapse.

https://www.feasta.org/wp-content/uploads/2012/10/Trade_Off_Korowicz.pdf

It’s all in there; from supply-chain break-down contagion, to non-linear math, to new currencies, to the Minsky moment, deflation, hyperinflation, Black Swans, capital flight, derivatives, bankster fears, bond crash, no-bid seller’s market, etc.

I recall reading that a reproduction rate less than 1.9 had no historical evidence of a population recovering and with Europe at approx 1.5 , Japan less and China with their one child policy yet to see what distortion it brings it appears that the populations that have been responsible for most improvements through science and invention are destined for ultimate extinction.

Just this morning I was thinking we might need to start thinking which roads to not build. We can barely pay to maintain the ones we already have.

News just in.
https://www.stuff.co.nz/national/politics/300287913/government-may-axe-p...

DC. Low or no population growth is a good thing. Sure it's a different age profile, but different is not a problem.

Just over 2% of the world population infected from COVID and 3m people dead from it. That's all we pretty much need to know when you hear from people that we have over reacted.

The CCP claims COVID-19 caused 150 deaths a day in China at its peak. We are to believe the same virus that wreaked havoc in countries with far superior health infrastructure and lower population densities than China's left its country of origin relatively unscathed.

Do you also believe the Uighurs live with respect and dignity in Xinjiang?

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When you are willing to weld apartment doors shut, your lockdown becomes pretty effective at containing it. The health system is picking up the pieces after the virus has spread, if you stop the spread in the first place you don't need much of a health system. (Just as bloody well for us, if we had had rampant spread our hospital system would collapse like Indias')

It is incredible that the CCP can wield such massive power and control over such a massive population. Subjugation leads to compliance undoubtedly. Guess that has certain advantages, case in point CV19. Still it has never been explained when that control was exerted, Wuhan and surrounds isolated and enclosed, why international flights were still outbound from there?

It is not all about rampart control. China has a people who can work in the common interest and that's what beat covid there.

Ahhhh... China locked down it's whole country for about 3 or 4 weeks, NZ saw how effective this was and followed suit. Do you really think that it is running out of control around China? As I have quite a few friends and family there, I can tell you that is definitely not happening. You sounds like that crazy professor who claimed NZ was locking people up in quarantine camps: https://www.newshub.co.nz/home/new-zealand/2020/10/covid-19-us-tv-host-m... (which, incidentally, is almost exactly what the US is doing to people coming into it's country on it's southern border).

Uighurs are almost certainly being abused in China. As there has been a Muslim insurgency in China for quite some time, it does not surprise me in the slightest that the Chinese government would treat them badly and try to re-educate them. While we can be all upset at the Chinese government, I suspect if the same was happening in the US or Australia, they would do the same thing. In fact Australia has a long history or trying to re-educate and "civilise" it's native population as does the US, both of who continue to abuse them to this very day.

While I do not condone the Chinese treatment of the Uighurs, it is interesting how apoplectic NZers get about the treatment of one people by a nation who is not our ally, while turn a blind eye to the treatment of another people by our allies.

it is called double standard.

no Chinese gives a sxxx about what the US is farting about nowadays.

just work hard and smart for a better life.

...In a free society like Hong Kong. Oh no wait, the CCP kind of ruined that. If ever there was need a for "re-education" in this country we'd be doing God's work to make Xing its first pupil.

all Chinese feels extremely great about HK is no longer free for the US and UK spies but even far more prosperous for people who truely love her.

great job for the CCP to crack some bad eggs.

Thumb up.

Thumb up what precisely!

On the official CCP figures Covid 19 deaths - 4636 - covid only only lasted 31 days in China - 4636/150, I am sure these figure are 100% and have just bought the EiffelTower off Micron for 100 Euros.

You still living in fear bobbles? How about you get your head around some real science instead of the fear mongering propaganda being spouted by MSM.

Try this, and her other videos, for some science. https://www.youtube.com/watch?v=wzGxKTzuDv0

Also Dr McKendrick has been a sceptic from the start since this doesn't actually qualify as an epidemic (needs to be across all age groups). https://drmalcolmkendrick.org/2021/04/24/covid19-taking-stock/ Scientists told the UK government it wasn't high risk before they quarantined, but they did it anyway.

Not living in fear in NZ no, because we took the appropriate measures.

Interesting video, not really that informative as I understand 90% of what she is talking about anyway.

That link from Dr McKendrick is pretty horrific. A stream of consciousness full of emotive self fulfilling "told you so's" and emotionally cherry picked out of context quotes to back him up. Honestly, he sounds unstable. If you are looking to this person for guidance, I would suggest looking elsewhere. I mean listen to the summary:

"The truth about the actions taken, and the true effectiveness of lockdown, and the damage of lockdown. This will not emerge for many years. By which time, the likes of Boris and Angela and Emmanuel, and Scott and Jacinda will be long gone, and won’t care."

He is putting all of these people in the same boat, when they all led very different lockdowns in timing and severity. They is because they all lead very different countries with multiple attributes making them operate lockdowns very differently. For instance, the UK couldn't close it's borders like NZ because they import 45% of their food. Not even mentioned, Boris and Jacinda are exactly the same apparently. There is no counterfactuals to his argument, what would have happened if nobody had locked down and COVID had gone crazy? Because when that happened, the hospitals in the UK were full fairly quickly even with severe restrictions in place. Currently aid is being sent to India because they are overwhelmed, all because the virus there is out of control.

Kendrick frames this as a "pro lockdown vs anti lockdown" and clearly falls into the "anti lockdown" brigade. And like all brainwashed drones, then spreads propaganda disguised as truth. Which appears to be much like his other research which shows a pattern of anti authoritarianism apparently to make himself look like a martyr. I would listen to him at your own risk.

"since this doesn't actually qualify as an epidemic"... uhhh OK. Babies/toddlers have died from it, teenagers etc etc. But hey, just keep telling yourself mistruths, that will definitely help.

Several chemicals found in everyday use products including plastic and electronics are lowering fertility in men, women and even some non-human species
One of the telling things is that it's not just older people that are having trouble. Young women today at 25 are less fertile than their grandmothers were when they were 45. And we see that with men as well. Their sperm counts are below what their grandfathers' was.
https://www.pbs.org/newshour/show/chemicals-in-plastic-electronics-are-l...

'It has nothing to do with sperm counts or the usual things that come to mind when discussing fertility.
Instead it is being driven by more women in education and work, as well as greater access to contraception, leading to women choosing to have fewer children.'
https://www.rnz.co.nz/news/world/421284/fertility-rate-jaw-dropping-glob...

You are right but we are just slow to admit the simple truth: women just don't like men.

And the antics and attitudes of women to men are putting men off women - check out the sale of sex dolls and as they get more realistic sales will escalate especially as they don't answer back and can switched on & off as required.

So successive NZ Govts have chosen quantity over quality - that explains a lot and provides the solution - quality up quantity down, no need to point out which sections of NZ qualifies for either.

Indeed

Maybe I'm a masochist and elderly but I enjoy having a wife who interrupts me and disturbs me with unpredicted antics - reminds me I'm alive. However children with an on/off switch would be perfect.

Wrong - Women putting off having kids once financially secure then find out they have little chance unless they go down IVF route. Flipside more men shooting blanks.

Interesting to hear Yale's Robert Shiller draw parallels between the current market and 1929 on Bloomberg:
https://youtu.be/vAKYgiUqQo4

Current Schiller PE ratio is actually higher than thay event:
https://www.multpl.com/shiller-pe

Edit to add the famouse quote before the crash:
“Stock prices have reached what looks like a permanently high plateau."

But does it matter? Showing how irrational it is in surreal times and in market with plenty of irrational players

But we haven't beat the excesses of the dot com bubble, we have a way to go yet !!

You going to buy it? If so, make sure you have an objective. Any speculative play on a digital representation of a fiat currency doesn't make much sense (to me anyway).

Nope....I don't have faith as yet.
A lot of chatter going on in crypto. ... The Fed coin, Official Chinese crypto Yuan etc. Seems the race is on.

Excellent they will all sit under BTC - your choice to convert into for day to day payments. NZ needs to get onto the Kiwicoin!

All CBDCs are somewhat meaningless until whatever replaces the USD as global reserve materialises IMO. The 50 year experiment of currency providing transactional functionality without any proper asset backing (gold standard) is fast coming to a close. Better to shoot for digital utilities in the crypto space that will underpin the space and serve as a store of value, Bitcoin being the only one with any serious certainty around it.

...that didn't take long. BTC lol.

The design of BTC means that it will never, ever, never operate as a means of exchange at any useful scale. It is not a currency - it is a speculative investment asset. Those who pretend it is a currency are either (a) very stupid or (b) trying to boost the price of BTC.

The design of BTC means that it will never, ever, never operate as a means of exchange at any useful scale

Irrelevant. Even the BTC maxis know it's irrelevant. Means of exchange will exist on another layer. They already do.

Another level? Do you mean with an unregulated third party agent that you have to rely on and trust to facilitate the exchange? An exchange in a 'currency' that regularly fluctuates in value by several per cent per day. BTC only exists whilst the bubble does.

Another level? Do you mean with an unregulated third party agent that you have to rely on and trust to facilitate the exchange?

Yes, another level or 'layer' as a payment solution. You can start with reading about layer 2 solutions such as the Lightning Network. As a P2P payment solution, BTC already works fine. It doesn't make any sense to buy coffee with BTC. Never really has.

Then you simply have to ask yourself the question, if Bitcoin cannot even buy you a coffee, what use is it ? I agree with others as soon as the governments or the Fed moves to a digital then Bitcoin is dead. It will either die a sudden natural death or the Government will ban and kill it, either way its doomed. Better make hay while the sun shines on Bitcoin, its not going to last. When the top 10% of Bitcoin owners see the writing on the wall and head for the exits all at once, all hell will break loose.

...if Bitcoin cannot even buy you a coffee

Historically speaking the more likely scenario is that very soon 100 USD won't be able to buy you a coffee. Hyper-inflation is coming.