Here's my summary of the key events over the weekend that affect New Zealand, with news of a weekend of dramatic changes.
Firstly, our thoughts are with today's earthquake victims in North Canterbury and Kaikoura. Wellington has suffered damage.
In weekend economic news, which has also seen some dramatic changes, banks are well placed to profit from them. On Wall Street, the banking sector's dramatic rally post Election Day is likely just a taste of bigger gains to come, as investors expect banks to reap huge benefits from rising interest rates and lighter regulation under a Donald Trump presidency.
Part of the 'optimism' is that there are early signs the new US administration may be full of Washington and industry insiders.
In a sign of how far the world has shifted in recognising the need to tackle global warming, Beijing - once seen as an obstructive force in UN climate talks - is now leading the push for progress by responding to fears that Mr Trump would pull the US out of the landmark accord.
And in China, Singles Day has gotten even more enormous this year. It's the Chinese equivalent of the American Black Friday. Orders worth US1.5 bln were placed in the first seven minutes on Alibaba, China's e-commerce giant. This one platform garnered almost 70% of all online trade, and more than 80% of this trade took place on mobile phones. In the 24 hours of the retail event, more than 1 bln delivery orders were placed. That is truly enormous.
In India, there have been chaotic scenes outside banks, two days after 500 (NZ$10) and 1,000 NZ$20) rupee notes were withdrawn as part of anti-corruption and tax evasion measures. Some banks ran out of cash. At others police were required to manage queues of anxious customers hoping to change their savings for legal tender. Million of people who don't have bank accounts are now in a very tenuous situation.
The IMF has approved a three-year NZ$15 bln loan to the military government in Egypt to help the country out of its deep economic crisis. They will receive NZ$4 bln immediately, with the rest subject to its economic performance and further reforms.
In Australia, former Labor prime minister Paul Keating has called for a major publicly funded program of infrastructure investment (something akin to New Zealand's current efforts in roading and high-speed internet).
In New York, the UST 10yr yield will start today at 2.14%, and near a new one year high. Our wholesale rates rose sharply on Friday and may get another push up today, especially at the long end.
The US benchmark oil price is lower yet again, and is now just over US$43 a barrel, while the Brent benchmark is on US$44.50 a barrel. Falling energy prices will hurt the coal and oil industries championed by the President-elect - and his Russian allies.
In contrast semi-precious metal prices are surging dramatically higher.
The gold price is very much lower however, now -US$40 down at US$1,225/oz. It has actually been a stunning retreat in a very short time. Lower gold prices will also hurt those states who have bought up large recently, including Russia.
The New Zealand dollar will start this week lower than this time on Friday, at 71.3 US¢. On the cross rates it is now at 94.5 AU¢, and against the euro at 65.7 euro cents. The NZ TWI-5 index is at 75.9.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
14 Comments
Surely what Trump does and does not do next is of great interest. I think the opposite to you, we should keep the momentum going. I was even thinking of starting a Trump Fan website for NZ in the hope of firing up Trump Movements across the Anglosphere. Every town can have a chapter, Make Eketahuna Great Again! SRSLY.
I can't recall where I got this link, but I think from the comment stream on this site over the weekend.
http://creditbubblebulletin.blogspot.co.nz/2016/11/weekly-commentary-wh…
When a marketplace significantly hedges against a perceived low-probability event – and the unexpected actually occurs – contemporary markets face dislocation. Markets simply can’t hedge themselves. To offload risk, someone has to be on the other side of hedging trades – and these days that someone generally has a sophisticated trading model requiring selling/shorting to build positions capable of generating the necessary cash-flow to offset derivative losses. Significant derivative-related selling risks a ('87 “Black Monday”) portfolio insurance debacle of selling betting selling, begetting illiquidity and panic.
Tuesday’s election outcome was at the cusp of creating a very serious test for global derivatives markets. It was not, however, meant to be, as another one of those well-timed miraculous reversals transformed potential panic selling into manic buyers’ panic. Instead of those on the wrong side of derivative trades forced to sell into illiquid markets, it became a frenzy of bearish hedges and speculations unwinds. Another memorable short squeeze.
Someone better versed than me in these things might better understand this. Seems to me he is saying that taking profit on hedged short positions reversed the meltdown and turned it into a meltup. But the effects may be short lived is what I also picked up by other commentators over the weekend.
So what should investors do now?
The fundamental underpinnings of the long term bull market are at risk: Global trade and the free movement of people through immigration. That is a long term negative. Investors need to understand that. Yes, the market could trade up or down, based on what the trading algorithms decide is the story for this hour versus the next hour. But until we get a clear vision of how much at risk globalization and the free movement of people are, I would be defensive. So I think interest rates have gotten way ahead of themselves and I would look for them to peak and probably start to move down.
I thought that an interesting point on the macro scale. Put yourself in the shoes of a capitalist, you don't really care where you make stuff you just want to do it as cheaply and reliably as you can. International movement has been easy, but the world is shifting away politically from that ease of cross border activity. Looking at the potential effects of this could mean less overall production. Less production in a world swimming with excess money could make things interesting.
http://www.zerohedge.com/news/2016-11-12/interview-jim-bianco-elite-opi…
An interesting perspective on Globalisation and free trade here Scarfie from my favourite economist Steve Keen.
"..........like most conventional economic theory: it’s neat, plausible, and wrong. It’s the product of armchair thinking by people who never put foot in the factories that their economic theories turned into rust buckets.
So the gains from trade for everyone and for every country that could supposedly be shared more fairly simply aren’t there in the first place. Specialization is a con job—but one that the Washington elite fell for (to its benefit, of course). Rather than making a country better off, specialization makes it worse off, with scrapped machinery that’s no longer useful for anything, and with less ways to invent new industries from which growth actually comes.
Excellent real-world research by Harvard University’s “Atlas of Economic Complexity” has found diversity, not specialization, is the “magic ingredient” that actually generates growth. Successful countries have a diversified set of industries, and they grow more rapidly than more specialized economies because they can invent new industries by melding existing ones."
http://www.forbes.com/sites/stevekeen/2016/11/11/trumps-truthful-heresy…
Yes I like Steve Keen and it is a good piece. I understand completely what he says because as a generalist as I have been on the end of the machinery he speaks of. To qualify this, and many things I say, I have worked with everything from concrete to industrial sewing of textiles. Along the way I have held a welding ticket, and even changed a piston as big as me in a ship. Three months thermite welding copper tails to steel cathodes at the Aluminium Smelter gave me a great insight into that business and region. Not everyday you get to walk around on aluminium buzzwork with 96,000amps pulsing through it! Big industry in amazing and I love seeing things happen at scale. Do you know that there are three engineering firms in Invercargill that have greater industrial capability than any factory in Auckland, won't be much use if the smelter goes though. Not the only 1000+ personnel engineering workplace I have been in either. New Plymouth must have some pretty big gear also from what I have seen, it may have some of the largest industrial capacity in this country. What happens as the gas there declines?
I suspect this first hand knowledge of production gives me an edge over a lot of the bullshit that swims around this site. A bit of practical knowledge helps when it comes to being an inventor and designer also:-) I am busing struggling to get a technology developed where the engineering capacity simple doesn't exist in New Zealand. In fact only perhaps six countries do have it.
China now "leading the push for progress". Yeah right. "China’s coal power generation capacity will grow as much as 19 percent over the next five years even as the world’s biggest energy consumer expands use of non-fossil fuels.
...Coal consumption growth over the next five years is projected to be stronger than previously expected,” Helen Lau, an analyst at Argonaut Securities Asia Ltd., said by phone. “That implies that coal production must not be reduced further, otherwise, the coal market will be in deficit.” China will need to cut about 150 gigawatts of coal-fired power from projects that are either approved for construction or already under construction to maintain the 1,100-gigawatt limit, Huang Xuenong, director of the power generation division of NEA said during the webcast. Without restrictions the country’s coal-fired power capacity could reach about 1,250 gigawatts by 2020, he said."
And from the linked FT article in the Top 9. "But neither they nor China were willing to offer extra cuts in greenhouse gas emissions to fill the vacuum a US withdrawal would create, nor additional money for an agreement requiring billions of dollars in public and private funds to be channelled from rich to poor countries to tackle climate change."
There is a big difference between renewable capacity and actual generation.
http://www.bloomberg.com/news/articles/2016-11-07/china-coal-power-gene…
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.