Here's our summary of key economic events overnight that affect New Zealand with news there is new energy emerging in commodity price rises, driven by the good US and EU economic recoveries.
But first, overnight data shows that American factory orders rose at a slightly faster pace than expected in August, confirming the recent strength in their manufacturing sector reported by other measures like the PMIs.
This is all the more impressive because their vehicle manufacturing sector is stuck in the slow lane, stifled like everyone else by the shortage of computer chips. Sales in September ran at only 9.7 mln vehicles/year, another sharp drop from August, itself a reduction from the 18.5 mln annual rate they were running at in April.
The key problem is that cars use old-style basic chips, the really cheap versions. And chip-makers have moved on and don't want to invest billions in old tech to sort this problem out. And vehicle makers don't want to pay for the new-style chips. It is hard to see when this standoff ends, but almost certainly carmakers will have to reengineer their products to accept updated technologies. It won't be a short process.
Meanwhile in Canada, building permit levels really disappointed in August data released overnight. They have been on a downward slide since March. A pickup of +3% was anticipated in August, but another decline eventuated, down -2.1%.
In China, they are using their holiday week to ensure the Evergrande collapse doesn't have economy-wide consequences. Almost 30% of China's GDP relies on the property sector, and Evergrande is just one of many drivers in that sector in shaky financial shape. But Evergrande itself, as large as it is, only represents 2% of their GDP. So Beijing's energy is going in to save the rest, not Evergrande. Likely, bond holders will lose all their investment.
In Japan, their new Prime Minister has said he doubts China can qualify to be a CPTPP member. This comes as China offers up promises of "unprecedented market access" if it is let in. But China expects some rule-bending for that prize to be won.
Commodity prices are rising sharply in October. Yesterday we noted the rise and rise of coal prices. Today it is oil prices. And there may be more to come because OPEC has declined to raise output significantly into a market with rising demand. Prices are now at seven year highs. The inflationary impacts won't be minor. Some American analysts see US$100/bbl oil over this coming northern winter. Natural gas prices are already at 13 year highs and they are just getting started and that has caught some sceptics short.
In NSW, business owners will face fines of up to AU$5000 if they do not take “reasonable measures” to stop unvaccinated people entering their premises. Also, watch for the infection echo among the unvaxxed from the NRL Finals parties Sunday night. (It was a Labor Day holiday in parts of Australia yesterday, although the ASX was open.)
Staying in Australia, there has been an explosion of Delta cases in Victoria with 1377 cases reported there yesterday and more than 12,711 active cases in the state. In NSW there were another 623 new community cases in NSW reported yesterday with another 480 not assigned to known clusters. They now have 9,020 active locally acquired cases which is lower, but they had 6 daily death toll yesterday. Queensland is now reporting zero new cases. The ACT has 28 new cases. Overall in Australia, more than 57% of eligible Aussies are fully vaccinated, plus 23% have now had one shot so far.
The UST 10yr yield opens today at just over 1.47% and up +1 bp from this time yesterday. The US 2-10 rate curve is marginally flatter at +119 bps. Their 1-5 curve is little-changed at +86 bps, while their 3m-10 year curve is softish at +137 bps. The Australian Govt ten year benchmark rate is marginally softer at 1.49%. The China Govt ten year bond is at 2.89% and unchanged because they are still on holiday. And the New Zealand Govt ten year is down -2 bps at 2.00%.
Equity markets have started soft on Wall Street, with the S&P500 down -1.5% in early afternoon trade in the Monday session. Tech is being hit. Overnight, Europeans bourses slipped about -0.7% across the board. Yesterday, the very large Tokyo market fell -1.1% and Hong Kong fell -2.2% (hurt by the Evergrande demise). Shanghai is closed until Friday, and that is lucky for them. The ASX200 ended yesterday up +1.3% on strength by commodity stocks. The NZX50 rose +0.4%.
The price of gold will start today firmer, up +US$8 at US$1769/oz.
And oil prices are up sharply, up +US$3 to just under US$77.50/bbl in the US, while the international Brent price is just under US$81.50/bbl. These levels are a seven year high.
The Kiwi dollar opens today slightly firmer at just on 69.6 USc. Against the Australian dollar we are unchanged at just on 95.6 AUc. Against the euro we still at 59.9 euro cents. That means our TWI-5 starts today at 73.2, and still in the middle of the 72-74 range of the past eleven months.
The bitcoin price is higher again since this time yesterday, up another +2.1% to be now at US$48,618. Volatility in the past 24 hours has been moderate at just over +/- 2.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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43 Comments
Some American analysts see US$100/bbl oil...
Now they see it? Not back in June when it was obvious to most of us.
Also China isn't really a big prize yet for TPP, they just don't consume enough goods yet.
This time last year diesel was $1.039/litre. The other day it was $1.599/litre. Where's the outrage? Death by a thousand cuts?
I note my comment in that thread about being half-way through a 16 week wait for a custom trailer. Still waiting for it - the engineer can't get brake parts into the country.
This is a pretty damming article, thank you for sharing.
Unbelievably we still have commentators on here promoting the capital gains and how it inflates their egos with the "everyone is envious of my hard work" attitude.
Man, I wish property investors could feel the contempt I hear from the younger generations I do business with. I have owned numerous properties in NZ (only one at at time :-)),
and I think this article highlights the sobering reality of the sh*t show that bad asset policy has created. Hang your heads Labour & National.
Labour should be ashamed. So should the Greens. Prioritising identity politics issues over the welfare of a huge part of the population. Maslow Hierarchy of needs puts food, shelter, warmth and safety well ahead of self actualisation. Get the basics sorted first and then worry about the minority issues. This should take up far more parliamentary time and media space than it does. But no-one cares about the poor and transient as they don't vote.
This is why I think we should get a whole bunch of homeless people together and use parliament grounds and carparks as their sleeping arrangements. AND we should go down there and protect them from police/security services harassment telling them to leave. After all, we all pay for it and I bet many others are in the same mind - that we wouldn't mind the homeless using it for shelter while nothing is done to house them.
Guarantee after the first collective winge fest by pollies of all colours, effective policies will start to be rolled out. But when the homeless are a minority that is invisible to them, they are safely ignored.
Where were you when National were selling off state houses?? Neoliberalism ripped the guts out of the public service c/- the State Sector Act 1988 under the guise that public servants acted out of self-interest. Institutional memory was discarded, records shredded (Labour dept and others) to prevent govt from making policy - because the 'market' knew best. Oh yes and then the Commerce Act allowed the new owners of infrastructure to price-gouge the hell out of us.
But go ahead and lazily blame the last cab off the rank. This is a crisis yes, but 40 years in the making.
I did blame National, that is why I have voted Labour in the last 2 elections. Labour have been in power for long enough to make some impact but they seem to have a reverse Midas touch, with everything they touch turning to Sh8te. We need a centrist party that understands economics, there should be a plan for growth as well as a plan for those that get left behind through no fault of their own. Personal responsibility and reward but with a safety net for the vulnerable in society.
If only we had a radical centre party whose policies were written by a worldly economist. Oh wait, we do, it's called TOP, but "wasted vote" because of self fulfilling prophecy espoused by the major parties.
If you keep voting Labour and National and expect things to change when the ideology of both has screwed everything up for the past few decades, you are truly in la la land.
New Zealand 2021: People sharing dilapidated shacks and tents with monster rats.
*Flashback*
ELECTION 2017: The policies at a glance:
Labour
Building homes people can afford to buy, and restoring the Kiwi dream of owning your own place through the KiwiBuild programme and the Affordable House Authority; A three-point plan to crack down on speculators by banning offshore speculators from buying houses, taxing speculators who flip a house within five years, and ending the speculators' tax loophole; ensuring homes are healthy to live in and building state houses for families in need.
Don't forget this little gem from key 2015 -
One of the biggest and most longstanding issues is the supply of new housing, particularly in Auckland.Previous governments have put this in the too-hard basket. We're actually doing something about it.
We're taking steps that will result in more houses being built, and more affordable homes in the market.
We've passed new legislation and signed housing accords with six councils, including Auckland, to fast-track new housing and release more land for residential development.Last week, Nick Smith outlined significant changes to the Resource Management Act to improve the supply and affordability of housing.Already you can see signs that our approach is working.
And it would have worked until the Labour-aligned councils decided to play political games over funding of infrastructure.
People love to decry John Key for 'doing nothing' but he was positively decisive compared to the near total inaction of the current mob who spent years bitching about how little he was doing.
And their acolytes who like to pretend that John Key doing something that they complained about somehow makes it OK for their favourite political party to do even less once in power. For God's sake, have some spine and demand better.
Follow the money. This is the real story.
The Economist: How do people and companies avoid paying taxes?
https://www.stuff.co.nz/business/world/300422949/how-do-people-and-companies-avoid-paying-taxes
By that same dumb logic, Labour had all that time in opposition to come up with an actual plan. They didn't.
And prices rose faster under Helen Clark's Labour govt than they did under Key. But sure, John Key personally invented the housing crisis, right?
How many years of Labour failure under the current administration will it take before you start focusing some of this apparent concern over the housing situation on the current government, who could actually change it if they wanted to?
Facebook not just down, but could be gone for good. Along with Instagram and WhatsApp.
https://twitter.com/benjaminenfield/status/1445104389014835213?s=21
And people wonder why energy needs to be expended to protect the Bitcoin network. In the future anything not truely decentralised can be hacked. For example, Waikato DHB, Kiwibank, etc.
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