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US inflation high, factories working hard; Container rates out of China drop; growth lame in east Asia; Aussie house prices strong in September; UST 10yr 1.47%, oil soft and gold unchanged; NZ$1 = 69.4 USc; TWI-5 = 73.1

US inflation high, factories working hard; Container rates out of China drop; growth lame in east Asia; Aussie house prices strong in September; UST 10yr 1.47%, oil soft and gold unchanged; NZ$1 = 69.4 USc; TWI-5 = 73.1
Hunua Falls
Hunua Falls, Hunua Ranges Regional Park, Auckland

Hunua Falls, Hunua Regional Park, Auckland

Here's our summary of key economic events overnight that affect New Zealand with news there may be some early relief ahead for very high container shipping costs.

But first, the US released its PCE inflation data overnight, the preferred measure of the Fed, and it was higher at +4.3% in August, the fourth straight month it has been above 4% pa. On a core basis its was up too, but at 3.6% pa it is still its highest in 30 years.

This same data shows consumer spending edged higher, and separate data shows consumer sentiment edged up in late September as well, but the real surprise overnight was on factory floors.

The widely-watched ISM PMI for September came in reporting a strong expansion, better than for August and better than expected. Order backlogs remained high as did pricing pressures.

The internationally-benchmarked Markit PMI for the US was equally positive, showing the same attributes even if it did pull back from an even stronger August. Orders and prices both rose in this report at a record pace.

There were factory PMIs reported for most of the main global economies released overnight and the US was the strongest. Overall, the global result was held up by the American result. China struggled to show any expansion. Japan's recent expansion eased off a bit. The EU's faster expansion in August fell back even more, mainly because of a slowing in Germany. Australia jumped out of a sharpish August contraction to a strong expansion in September.

In Congress, they approved kicking the can down the road until December on their debt-limit standoff, confirming bond markets who had dismissed the market risks as actually eventuating.

Meanwhile, the US Fed's balance sheet shrank by -US$41 bln this week (-0.5%), and the record high reverse repo balances eased back as well, by -US$219 bln (-14%).

There are signs the extreme cost of shipping containers is easing, and fast. An executive with a Shanghai freight company said overnight that the cost of shipping a 40-foot container from China to the US West Coast dropped by nearly half in the previous four days, going from about US$15,000 to just over US$8,000. The spot rate for shipping to the US East Coast had fallen by more than one-quarter from over US$20,000 to less than US$15,000. The shipping off-season is almost here, the Chinese power crunch has slowed Chinese factory output, and seeing this, speculators are rushing to sell-off their hoarded shipping spots.

In the more broad east Asian region, the World Bank has said that while China’s economy is projected to expand by +8.5% off a very low base, the rest of the region is forecast to grow at just + 2.5%, nearly 2 percentage points less than forecast in April 2021. Employment rates and labour force participation have dropped, and as many as 24 million people will not be able to escape poverty in 2021.

The EU reported its CPI inflation data for September overnight and that came in +3.4%. Without the energy component it was +1.9%. Both were as expected and both the highest in twelve years.

In Australia, new borrower-accepted home loan commitments fell -6.6% from August, but for the year they are up +34% and so remains very strong. In fact, investor lending is continuing to grow and is now at a six-year high.

And Aussie house prices have surged at the fastest pace in more than three decades, but looming lending restrictions are expected to slow the breakneck speed of growth in the months ahead.

Staying in Australia, there has been an explosion of Delta cases in Victoria with 1143 cases reported there yesterday and more than 10,000 active cases in the state. In NSW there were another 864 new community cases in NSW reported yesterday with another 645 not assigned to known clusters. They now have 9,841 active locally acquired cases which is lower, but they had a record high 15 daily death toll yesterday. Queensland is now reporting two new cases. The ACT has 52 new cases. Overall in Australia, more than 54% of eligible Aussies are fully vaccinated, plus 24% have now had one shot so far.

In equity markets, Wall Street is ending their week firmer with the S&P500 up +0.6% in its final Friday afternoon session and limiting its weekly loss to -2.2%. Overnight, European markets were mostly negative, with London down -0.8% but Paris ended its day largely unchanged. Yesterday the very large Tokyo market dived -2.3% on the day and ended their week with a very sharp -5.0% loss. Shanghai and Hong Kong were both closed for their week-long national holiday and will reopen next Friday. The ASX200 gave up all of its strong Thursday rise and more, falling -2.0% on Friday to cap a -2.1% weekly retreat, and losing nearly as much in a day as it did in all of September. The NZX50 Capital Index didn't suffer the same sinking feeling, ending flat on Friday, for a weekly gain of +0.2%.

The UST 10yr yield opens today at just over 1.48% and down -5 bps from this time yesterday and nearing the levels of a week ago. The US 2-10 rate curve is marginally flatter at +121 bps. Their 1-5 curve is a much flatter at +86 bps, while their 3m-10 year curve is much flatter too at +139 bps. The Australian Govt ten year benchmark rate is unchanged at 1.49%. The China Govt ten year bond is at 2.89% and also unchanged. And the New Zealand Govt ten year is now at 2.02% and up +1 bps since this time yesterday but that locks in a weekly rise of +13 bps.

The price of gold will start today little-changed, up just +US$1 at US$1760/oz. But that is a +US$13 rise in a week.

And oil prices marginally softer overnight, down -50 USc to just under US$75.50/bbl in the US, while the international Brent price is just under US$79/bbl.

The Kiwi dollar opens today +½c firmer at just on 69.4 USc, which pegs back the weekly retreat to -70 bps. Against the Australian dollar we are unchanged at just on 95.5 AUc. Against the euro we up +40 bps to 59.9 euro cents and back to week-ago levels. That means our TWI-5 starts today at 73.1, and back at the middle of the 72-74 range of the past eleven months.

The bitcoin price is sharply higher since this time yesterday, up more than +10% to be now at US$47,496. That is also +13% higher in a week and it is now back above its 200-day moving average. Volatility in the past 24 hours has been extreme at just over +/- 5.7%.

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

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53 Comments

Wasn't there somebody commented on here a week ago that bitcoin looked dead?  Might need that crystal ball retuned.

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Wasn’t me, but I’m still very bearish on crypto. Takes more than a one-day price recovery to change my mind, lol

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Amazing that people are still “bearish” on crypto when even central governments are trying to enter the space. Disruptive technology is always met with resistance 

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Bullish on blockchain, bearish on tulip currencies

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This sort of comment has been around for a long time and it's nonsensical. One cannot exist without the other. Otherwise it's just a centralised database. There is no bitcoin blockchain, without bitcoin the asset.

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Central bank digital currencies aren’t ‘crypto’, they’re money. If well executed they render a large part of the current crypto ecosystem obsolete.

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Can you define "well executed" ? 

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If they provide the benefits a digital currency can bring - speed, transparency, inter-operability- while also being legal tender.

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And centralised..no cap on total issued..so same really as status quo

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All that "it's so easy" stuff is how they will sell CBDCs, but it's so trivial compared to the huge problem with sovereign issued currencies - debasement.  Assuming they implement CBDCs the same (economy slow --> print) then they will make no difference worth having.

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So in other words, exactly what crypto is doing without institutional manipulation and interference

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Saddim Hussein ...

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Crypto, disruptive since 2012...oh wait 

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Wasn’t me, but I’m still very bearish on crypto. Takes more than a one-day price recovery to change my mind, lol

At the neighborhood BBQ, you'll safely be in the 80% and the local property prices will be the hot topic (and the reason why you might have bought the flash bottle of wine instead of el cheapo). A few years back, you wouldn't even have bought up the subject at the BBQ.   

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The dogs bark as the caravan moves on. 

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The barking is a warning about the washout ahead

 

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It's all in your head. People like you were predicting Ice Age in the 70s. All you care about is remaining in a state of impeding doom. 

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Rosenstein,

I sometimes wish that I could live like you-with my head firmly buried in the sand. It would make life so much simpler not to have have to think about things. Little things like global warming or the huge challenges of moving on from a fossil fuelled economy.

Sadly, I'm not an ostrich.

 

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9

I'd rather live in ignorance than project my subconscious existential anxieties on the world and people around me in the absence of any meaningful emotional self management. You have a head full of 'facts' but you're just running scared. 

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Bark! Bark! What’s that Lassie? There’s people stuck in a long position in crypto? Jeepers! We must go help them.

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Yes now that you can send $$ instantly to anywhere in the world via Twitter using BTC in the backend (at no cost) would rate a story?? Technology is marching on but you wont read much about it on these pages.

 

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Wasn't there somebody commented on here a week ago that bitcoin looked dead? 

Literally days ago. Ol' ratty gets the boot laid into it more than any asset class you'd hear of. The catalyst for its price movement was the Fed coming out to say it will not ban Bitcoin and crypto. But how's this? Visa is building a new platform for blockchain interoperability that will link fiat currency with bitcoin and ethereum, stablecoins and CBDCs. Quite simply, businesses and consumers can seamlessly exchange value, no matter the form factor of the currency. This is what Visa calls the “Universal Payment Channel” (UPC). And no. This is not a test.

https://gadgets.ndtv.com/cryptocurrency/news/cryptocurrency-transaction…

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by CWBW | 29th Sep 21, 4:06pm

Looks like Bitcoin is heading towards an old hole. I wonder how many times can a dead cat bounce before taxidermy.

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There's no point in trying to convince people if they don't get it after a decade. That genie is not going back in the bottle, period. They'll get on board unknowingly in the future, when they don't even realise that a lot of the financial products they are using, are actually powered by bitcoin / lightning at the back end. Good money replaces bad. Low cost and high convenience, replaces high cost and low convenience. It's inevitable now.

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For those who are thinking that any diversified portfolio should now have a small % allocation, you're absolutely correct. I understand that holding yourself is difficult for many to manage. It may interest many to know that from Monday you'll be able to use INVESTNOW to invest in a PIE fund.  https://vaultdigitalfunds.com/

"Vault International Bitcoin Fund provides investors with exposure to Bitcoin, by investing in funds (ETFs and trusts) which are listed on foreign sharemarkets, and invest directly in Bitcoin.The Fund is owned and operated in New Zealand, giving Kiwis access to digital investment assets without having to move their money abroad.  The Fund has elected to be a Portfolio Investment Entity (PIE fund)." https://iisolutions.co.nz/fund-hosting/our-funds/vault-international-bitcoin-fund/

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....from Monday you'll be able to use INVESTNOW to invest in a PIE fund.

Not your keys, not your coins. No thank you. 

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That's a stupid comment J.C. You know enough about this to understand that. Your 'coins' cant be lost as you're not buying any BTC, you're investing in funds (ETFs and trusts) that invest in bitcoin. Its for people who want to track the returns, without all the hassle and effort. There's also significant tax advantages involved in this. As well as allowing you to allocate a portion of your kiwisaver to this... This will appeal to a much larger group than those wanting to hold directly, as well as those who already do.

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Your 'coins' cant be lost as you're not buying any BTC, you're investing in funds (ETFs and trusts) that invest in bitcoin.

What do you mean? Of course they can be 'lost'. They are not in your possession. Nor do they belong to you. 

Similarly, any money in your bank account does not necessarily 'belong' to you. You're a creditor to the bank. 

Nothing stupid about my comment at all. I'm 100% correct. 

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Worth noting that overseas crypto etf values often don't track the value of the underlying assets they own very well, so the funds are often massively overvalued in comparison to the value of the crypto they actually own. 

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Guarantee shipping costs were/are being gamed by speculators and futures traders. Now most likely being shorted as well, expect volatility that has not much to do with fundamental shipping costs... 

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https://www.oneroof.co.nz/news/40245

In February house prices went up by $100000 and now in August  by $74000.

Is this the definition of Orr and Robertson when they say that housing market is cooling.

Hence wait and watch - maybe tweak little bit to potray the concern.

Yesterday headline on same website was going up nationally by $14000 and this is 5 times more.

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Good Morning from #Germany where financial repression perpetuates. Real yields (10y Bunds-inflation) remain at -4.31%, near All-Time low, despite recent spike in nominal yields as inflation jumped to 4.1% in Sep from 3.9% in Aug. Real yields now NEGATIVE for 64 consecutive mths. Link

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Same in US at reduced repression rates.

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Ian Woolford from the RBNZ discusses the significant monetary ‘innovations’ surrounding digital assets. Not particularly enlightening and I suspect the RBNZ is playing catch up. What is disappointing is that Woolford not once talks about NZD as a 'store of value' for people to save. This is concerning when kids are told saving is virtuous, but the central bank doesn't care about the value of your savings. 

https://spoti.fi/3l1DPu5

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I thought the most interesting news was Chinese power companies being told to buy fuels "at all costs" [link] by the CCP.

Will it be Western Europe or China that freezes this winter?

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Oh dear.  Will that Huntly coal now divert to China?

Put your jackets on Aucklanders. 

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Expecting a cold summer?

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Yes, there is a good vid on China's power woes here:

https://www.youtube.com/watch?v=eONGlAKxJzs

Looks like there are widespread power disruptions affecting industry and households, caused mostly by a shortage of coal.  Sounds like China shunning Oz coal (due to politics over Oz calling for Wuhan investigation) has done some damage, and they are struggling to find sufficient other coal sources, and what they are finding is lower quality and hard to adapt plant to consume.  Also, the combination of power prices being centrally mandated, with a rising cost of coal is squeezing power producers and they are having to cut back production to avoid going bust.

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Bond Investors Brace for Worst Year in Decades on Hawkish Fed - Bloomberg

When you realize it isnt about real money or even buying assets and creating bank reserves, rather the pageantry and puerile mysticism of the "policy surprise." Link

"We haven't decided to taper yet." - Jerome Powell, Centimillionaire  Link

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You won't often see me quoting from Granny Herald but I do glance at it. The announcement of the closing of Auckland's Euro restaurant will be sad for many of the city's 'need to be seen' crowd. The article I saw though had a much concerning prediction from Leo Molloy saying up to 50% of NZ's hospitality joints could close. That is a staggering claim but I wouldn't write it off. That would send shockwaves throughout the whole economy and the property bubble would literally be toast. 

https://www.nzherald.co.nz/business/covid-19-delta-outbreak-auckland-re… 

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Leo Molloy is the Paul Henry of hospo.

and yeah, it could be rough, but hospo is like weeds - they’ll pop back up again quickly when conditions are friendly.

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and yeah, it could be rough, but hospo is like weeds - they’ll pop back up again quickly when conditions are friendly.

I see. It will have no impact on the economy and everything will be hunky dory until people are ready to get into the business again.

Sounds like the ol' NZ exceptionalism. 

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Hospo: the majority of profits go into a wealthy couple's holiday account & the dregs go overseas into the staff's family food allowance

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A huge number go bust every year even in the best of times, and there's always another one that pops up.

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People might have to revert to home meals, pot luck dinners and communal cooking, shared kai.

Hello fresh etc and delivered ready made meals might boost "the economy".

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90% looks like fantasy if people at actual risk are only at 80%

'Not much more than 80 per cent of even the 75+ population have had two doses, many months into the programme. And this is the demographic most exposed to serious illness death, and the demographic that thus poses the greatest threat to the health system if/when Covid gets more established here.'

https://croakingcassandra.com/

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“if/when covid gets established here.” For Auckland at least,  believe the horses are out of the stable on that one, well and truly.Daily infections announced are quite obviously well short of what is actually filtering through society right now. Base  that on those that are presenting at hospital in a steady stream, infected but unaware and the extra curriculum interaction between households and the activities of the underworld, including but not limited to such as the big gathering of car loads of gang members, that has not ever reduced its trade(s.)

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Don't worry, we awake this morning confident in the knowledge that our Lord Protector Bloomfield will see us through this...gulp. Christmas likely to be cancelled.

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Aye it was during the time of the great Lord Protector Oliver Cromwell that the Punch & Judy show got on their little stage in England. He tried to suppress it but did not succeed. Hence, it could be argued, that is why we are getting one daily, on a similar little stage,  at 1.00pm or thereabouts.

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Twitter is abuzz with news from the US that Merck and Pfizer have developed a pill for covid treatment... wait for it... based on their studies of Ivermectin.

Merck originally developed Ivermectin but the patent expired a long time ago.

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BBC today, https://www.bbc.com/news/health-58764440

 

An analysis of 775 patients in the study found:

  • 7.3% of those given molnupiravir were hospitalised
  • that compares with 14.1% of patients who were given a placebo or dummy pill
  • there were no deaths in the molnupiravir group, but eight patients who were given a placebo in the trial later died of Covid

Still better and cheaper to have the vaccine,   but could be good if approved, unlike worm medicine

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for a moment i thought that read "patient expired"

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Good link  Profile, it's going to take a while to turn those woeful stats around.glad I don't work at Middlemore.

They do not reflect the fact that uptake in lower socioeconomic areas is lagging the wealthier areas, and the ethnicity is not accounted for, eg it is thought that 95% of Asians(includes Indian xc) have had at least one dose, so other groups are way behind.

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