90 seconds at 9 am: Chinese rebound?

90 seconds at 9 am: Chinese factory output expands for first time in 13 mths; European and Asian stocks up; US on Thanksgiving holiday; NZ$ up a tad

23rd Nov 12, 9:01am by Bernard Hickey

Here's my summary of the key news overnight in 90 seconds at 9 am, including news Chinese factory output expanded in November for the first time in 13 months, according to the HSBC Markit flash Purchasing Managers Index (PMI) released yesterday.

The index reading of over 50 raised hopes that China's economy may be bottoming out after a slowdown over the last year from economic growth rates over 10% to closer to 6%.

European stocks and Asian stocks rose on talk the Chinese slowdown may be turning around. US stocks were not traded because of the Thanksgiving holiday.

See more here at Bloomberg.

This talk also boosted the New Zealand and Australian dollars. The New Zealand dollar was up around 81.5 USc in morning trade from around 81.3 USc yesterday.

Meanwhile, Euro-zone area services and manufacturing output shrank for the 10th month running in November. See more here at Bloomberg.

Closer to home, New Zealand wholesale interest rates rose slightly yesterday. However, financial markets are still pricing in a 85% chance of a cut in the Official Cash Rate over the next year.

Markets see a 15% chance of a cut on December 6 when new Reserve Bank Governor Graeme Wheeler releases his first full Monetary Policy Statement.

See my fresh views on Fixing vs Floating here.

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24 Comments

by Learn to Socia… | 23rd Nov 12, 9:21am 1353615683

I wish some of the doom and gloom people posting on this site could take a leaf out of David Ross' positive approach to economics. Ross appears to have a profound undertstanding of the nuances/complexities of international finance. Maybe a job for him at IMF or at Treasury??? A finance spokeperson for National? We certainly want to keep him here jn NZ and not let him get snapped up by the Americans. Maybe a 7 figure salary offer is in order?

by David George | 23rd Nov 12, 9:27am 1353616061

Priceless!

And just think of the sheer waste of talent with the likes of Petrecevich rotting away in a jail cell. It's criminal!

by Andrewj | 23rd Nov 12, 9:54am 1353617655

He has a lot in common with our MP's, they all spend someone elses money, they rort their expense accounts and give themselves generous pension plans, while screwing everyone else over. He would have serious competition if he ever tried to enter politics.

by Andy Rodgers | 23rd Nov 12, 10:07am 1353618451

Brilliant.

by scarfie | 23rd Nov 12, 10:10am 1353618617

In this dog eat dog world Ross was definitely on top of the game, well for New Zealand anyway. In any other western country he would be small fry. But in terms of his local achievements I think everyone is just jealous, classic tall poppy syndrome.

by Andrewj | 23rd Nov 12, 10:19am 1353619176

scarfie, tell me why people who live conservative lives, the sort of people who have money but would never splash out on a Ferrari, Racehorse or a flash bit of expensive skirt, the sort who own a Commodore with 200+k, and need to paint the house, then go and invest their life savings with someone who does?

by scarfie | 23rd Nov 12, 10:25am 1353619537

Indeed. In the earlier companies to go under they were in cases only chasing an extra 1%. Just massive miscalculations(or ignorance?) of the risk.

by Stephen Hulme | 23rd Nov 12, 10:19am 1353619163

I think everyone is just jealous, classic tall poppy syndrome.

Not the regulator - they welcomed him into the fold.

The collapse of Ross Asset Management is a big setback for the newly formed Financial Markets Authority as it approved David Ross as an Authorised Financial Advisor (AFA) and the regulator is supposed to have oversight of investment management companies. Read Gaynor's full article

by Andy Rodgers | 23rd Nov 12, 11:28am 1353623298

This once again proves that it is impossible for a public body to adequately supervise the financial markets. Why don't we just scrap these organisations and save a lot of public expense (and private savings) and put in big letters at the top of every financial prospectus - CAVEAT EMPTOR. Too many people put their faith in these public institutions thinking they will be protected when in reality they are just lambs to the slaughter. How many more investment scandals will there be before this is finally realised.

by Stephen Hulme | 23rd Nov 12, 12:10pm 1353625807

Yep, and one could be forgiven for believing the regulators are captured by the the industry they supposedly regulate - but how else to employ the children of those who believe they are deserving and thus entitled?

by JB | 23rd Nov 12, 11:40am 1353624032

NZ Runs the biggest Ponzi of them all ..

We spend more than we earn then borrow to pay the interest on our massive debts. What's the difference between us and Ross except his clock stopped a little early for the poor lad ?

by Stephen Hulme | 23rd Nov 12, 12:04pm 1353625475

Bingo - where's the regulator?

by Andrewj | 23rd Nov 12, 12:40pm 1353627623

The fiscal policy outlook constitutes a major negative for the NZD J.P. Morgan forecasts the NZ budget deficit to come in at an unsustainable 4.4% of GDP in 2013 (down only 0.3 ppts from 2012). Table 7 shows that NZ’s 2013 budget deficit is expected to be four times larger than Australia’s and even worse than Europe’s. However, NZ is gearing up for a serious spell of fiscal tightening, with the worst part of austerity set to bite in 2014 (chart 23). The government is bravely projecting a return to surplus in 2015, but the risks seem skewed to significantly later. Regardless, government spending is projected to decline for several more years, constituting a major headwind to growth through at least 2015. However, such aggressively contractionary policy is required to prevent further downgrades by the rating agencies. Further, it seems quite possible that such aggressive fiscal tightening will provide the RBNZ with a convenient excuse to postpone hikes well beyond H2 of 2013.

by prosperopink | 23rd Nov 12, 10:09am 1353618570

Not everyone thinks china is looking good.

Hopes for an early recovery in the global economy may be overoptimistic, according to CLSA's Russel Napier, as he notes the expansion of China's reserves, which has been an engine of global economic growth, is about to come to a shuddering halt. As eFinancial News notes, Chinese reserves have decelerated dramatically over the last five years and are now close to zero.

by Happy123 | 23rd Nov 12, 10:32am 1353619965

Learn to Social...

Couldn't agree more, I wonder how some people get the courage to get out of bed every morning. China has bottomed out (if you can call 6% annual growth 'bottoming'). USA homes, manufacturing and oil all on the up. Little bad news coming out of Europe. And the NZ housing market picking up again.

Sounds like a recipe for more than a recovery to me.

by scarfie | 23rd Nov 12, 12:18pm 1353626328

And yet the rate of population growth still marches steadily towards zero, has been doing so for fifty years.....all must be well then as the human race finds an equilibrium with the planet. I mean we have all the systems in place to make sure we don't use resources beyond the ability of the planet to supply them right?

by Happy123 | 23rd Nov 12, 4:14pm 1353640453

population growth 0 for fifty years ? ? What planet are you on?

"equilibrium with the planet..." "beyond the ability of the planet to supply them..." You must be fun at parties.

by scarfie | 23rd Nov 12, 4:34pm 1353641679

Ahh now I see the problem, you have comprehension issues.

by midgetkiwi | 23rd Nov 12, 1:15pm 1353629726

"And the NZ housing market picking up again.

Sounds like a recipe for more than a recovery to me."

Love this one ;) I *fully* agree, with the housing market picking up, we just have to wait for those bricks to start producing something we can export, or maybe the mortar may develop a revolutionary invention. this will provide lots of employment and growth and we'll be back to booming

by Happy123 | 23rd Nov 12, 4:21pm 1353640905

Or the increase in spending that comes with higher equity, the inevitable boost to the domestic economy from said spending, subsequently the increase in turnover in Kiwi companies, leading to increased employment of Kiwis in Kiwi compaines, creating the ability for Kiwi compaines to invest more (possibly in exporting).

Back to bed Midget.

by rastus1 | 23rd Nov 12, 12:11pm 1353625918

.....anyone have any idea if there is potential for the Ross Mngt Fund investors to make claim against the FMA as it did approve them as an AFA? Another claim against the general tax-payer on the way maybe?

by Stephen Hulme | 23rd Nov 12, 12:33pm 1353627182

Another claim against the general tax-payer on the way maybe?

Always - goes with the territory - the darlings cannot be parted from their money despite the fact there were gambling - they hardly coveted the 'Blue Chip' stocks.

by Chairman Moa | 23rd Nov 12, 12:32pm 1353627155

Did a certain house in Epsom sold and to an imigrant..??? you know soon or later some REs will bleep...

by Rumpole | 26th Nov 12, 5:47pm 1353905256

China needs about 7% growth to maintain its economy against its population growth and wealth increse, Chinese electricity production down/Baltic dry index down./Chinese house prices skyrocketed/Banks lending to loss making SOE's some accounts now 3years overdue - yes 3 years not months - China has same problems as the West and result will be the same - pain and lots of it.