Here's my summary of the key events overnight that affect New Zealand, with news of China's coal mis-steps.
Firstly in the US, the Trump transition team said today that they are mulling the creation of an "infrastructure bank" to tackle their big infrastructure investment plans.
American factory output rose for a second straight month in October from gains in business equipment, construction equipment and 'materials', according to the latest Fed survey.
US carmaker Ford said it is proceeding with plans to move some production to Mexico despite a threat by the president-elect to impose hefty tariffs. Ford said it was still "going forward" with its plan to shift production of small cars from its Michigan plant.
China is getting a harsh lesson in unintended consequences. Official plans to cut coal production capacity have backfired, according to analysts, driving up prices, encouraging production and increasing the risk of mining accidents in the rush to produce more of the fuel. Just how much of a blind track that is, was made clear by the IEA Review out today.
We should also keep an eye out for what is happening in Indonesia. We basically ignore Australia's largest neighbour, but its stability is crucial for Australia. However, the recent signs are not good. An attack on the popular mayor of Jakarta has shown how deeply racist and religious sentiments run in Indonesian society, and how easily they can be mobilised politically.
In New York, the UST 10yr yield is now 2.22%, and little changed from this time yesterday, but in the interim it climbed as high as 2.29%.
The US benchmark oil price is basically unchanged today too, and is now just over US$45.50 a barrel, while the Brent benchmark is over US$46.50 a barrel. the Chinese cut retail petrol prices today in response to the lower crude prices. It is their fifth cut in 2016 and their largest of the year.
The gold price is also unchanged at US$1,224/oz.
The New Zealand dollar will start today essentially unchanged from this time yesterday as well, at 70.8 US¢ but trading has been quite choppy in the interim. On the cross rates it is now at 94.5 AU¢, and against the euro at 66.1 euro cents. The NZ TWI-5 index is at 76.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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26 Comments
"For example, those who view themselves as "insightful" will find that their motives for both self-verification and self-enhancement encourage them to seek evidence that other people recognize their insightfulness"
https://en.wikipedia.org/wiki/Self-verification_theory
you know who you are.....
USD reached a 13 year high overnight. Roubini wrote in February 2009, about the 'mother of all carry bubbles', and the unwind that would inevitably occur at some point. Anyone believing that Auckland house prices are immune , because they believe themselves to be geniuses should have a read some time. Next week Auckland listings on Trade me should hit 10000.
With "stupidity" like this around... you KNOW a "re-adjustment" is round the corner
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=117…
Cowpat's a bit busy at the mo but here's the FT version..
https://www.ft.com/content/9a5b3216-c70b-11de-bb6f-00144feab49a
American factory output rose for a second straight month in October from gains in business equipment, construction equipment and 'materials', according to the latest Fed survey.
Hmmmm...
.. total industrial production in October was 0.9 percent lower than its year-earlier level. Capacity utilization for the industrial sector edged down 0.1 percentage point in October to 75.3 percent, a rate that is 4.7 percentage points below its long-run (1972–2015) average.
While that is an indication of the current weakness and its frustrating stubbornness, it also expresses the growing costs of being so far behind from where the economy “should” be, or at least what it would have been had the Great “Recession” actually been a recession. As a reflection of just how bad this depression has been for consumers above all other parts, the production of consumer goods is only 6.6% (total) above the trough registered in June 2009, more than seven years ago! That remains more than 9% less than the peak of February 2007, a comparison that is agonizingly approaching a full decade. It cannot be a recovery or even business cycle where production for consumers is not even halfway back after so many years. Read more
It is going to be interesting watching what happens with trade between the USA and China.
2015 exports to China 116 billion imports 483 billion
You can understand why the States are concerned, but if they slash their imports would it push an already wobbly China over the edge?
Australia should follow India’s lead and scrap its biggest bank notes, UBS Group AG said.
“Removing large denomination notes in Australia would be good for the economy and good for the banks,” UBS analysts led by Jonathan Mott said in a note to clients on Monday. Benefits would include reduced crime and welfare fraud, increased tax revenue and a “spike” in bank deposits, he said. Read more
Is this a case of fiddling while Rome burns?
Circulation currency at AUD 72,259 millions is a small fraction (~3.62%) of total deposits recorded at AUD 1,998,197 millions.
Admittedly, this fraction is more than double the 1.71209% level reported for NZ. Is it possible that cash dedicated to clearing recreational pot sales (now legal in California) are a magnitude greater than here?
Fancy the Bankers wanting to eliminate cash - who would have guessed.
The Indian cash purge looks to be causing huge problems - obviously very poorly thought out if not fatally flawed in principle. https://www.bloomberg.com/view/articles/2016-11-16/india-s-strike-again…
With something as vital as the monetary system you would think that, in the event of a meltdown in the computer systems, having a back-up (cash) would be vital. God help us if anything goes wrong!
Remove large denomination notes = reduced crime. Brilliant. Or maybe they just got carried away with cause and effect when looking at hyperinflation events around the world?
I have an equally simple approach to reducing crime. Just reclassify high volume crimes to be non-crimes and hey presto, crime just went down.
UBS suggesting the elimination of cash to make it harder for criminals - epic hypocrisy- they ARE the criminals. Try googling 'UBS money laundering' - 378,000 results.
They are constantly in trouble for money laundering, helping avoid taxes and international sanctions, helping terrorists, corrupt government officials, gun and drug smugglers etc.
How they are still operating beggars belief.
The biggest financial crook of the day ...
After the 1929 depression, President Roosevelt appointed Joseph Kennedy as secretary to the treasury based on the theory that you appoint the biggest financial crook in charge because he knows all the hidey holes and who all the other crooks are
Josie Pagani with some very pertinent observations on the US election and its implications for our political scene.
"Bernie and Trump are both right that the gains of globalisation have not been fairly shared with the people who have paid the highest price, and the establishment has given up even trying to make gains for them. But Trump will never be able to deliver on his promises to that community because his diagnosis is wrong. Foreigners are not really stealing our wealth. The one per cent is.
Here's the crisis: if you are working for a living, and you are not in an elite middle class job, you are getting less and less likely to vote Labour or Democrat anywhere in the world. These voters are motivated by issues like law and order, immigration and wages. Trump and Brexit managed to link them all. The left hasn't developed a narrative and economics that makes a better, more obvious emotional connection with these voters. Until it does, it'll keep losing."
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=1…
Possibly they are but generally cash is only held short term and there are several highly liquid cash like alternatives - foreign notes and precious metals for example. In the Indian example only 6% of seized assets were in the form of cash.
"The demonetisation of Rs 500 and Rs 1,000 banknotes is unlikely to help the government suck out black money from the economy as hoarders keep a tiny portion of their ill-gotten wealth in hard cash, going by income-tax data.
Cash recovery has been less than 6% of the undisclosed income seized from tax evaders, shows an HT analysis of data from tax raids from financial year 2012-13 onwards.
The actual proportion of cash would be even lower as the tax department’s classification of seizures considers currency and ornaments [gold?] as one unit."
http://www.hindustantimes.com/india-news/cash-has-only-6-share-in-black…
Re infrastructure Bank story , I have signed up for Trumps tweets , better to get it straight from the horses mouth because I can no longer believe the media which is all over the place.
Trump is now in every print media , every news broadcast , and continues to have every event on the planet linked in some way to him
I have signed up for his tweets , because I am getting conflicting opinions from every media source , and I cant see the wood for the trees
Economists for decades thought that money was money, end of story. In the real world, that just isn’t the case, and for longer than I have been in this business money had been transforming through banking into different conceptions that we (those who bother to look past the “settled science” of QE and Economics) still haven’t fully discovered or mapped out. Alan Greenspan’s June 2000 admission should finally sink him and all the rest who have followed in his ideological footsteps. Read more and more
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