Here's my summary of the key events over the weekend that affect New Zealand with news Chinese consumers may be taking over the role American consumers have of driving the world economy.
Firstly in the US, consumer sentiment slipped sharply in early November, and unexpectedly, though the index remained at the second-highest level of the year so far. The University of Michigan's index fell to 97.8 in November, well below the expectations of a level higher than the 100.7 index at the end of October.
Over the weekend, China announced that foreign financial institutions can set up there independently. It is a major step toward opening of its financial system, saying it will remove foreign ownership limits on banks while allowing overseas firms to take majority stakes in local securities ventures, fund managers and insurers. China is raising its foreign ownership cap from 49% to 51% and said it will scrap the limit altogether in three years. It's being claimed a 'big bang' moment, one Wall Street has waited a long time for. Others doubt its importance, noting how hard it is to operate in China profitably given the sector is dominated by State-owned enterprises.
China 'Singles Day' sales have reached gigantic proportions. Alibaba said it sold more than US$25 bln of merchandise through their Alipay payments platform on November 11, 2017, an increase of +39% compared to 2016. Mobile Alipay accounted for 90% of total Alibaba sales that day. Think about that. $25 bln plus in just one day. Its a monumental level. US$1 bln in one year is huge; US$25 bln in one day is in another sphere altogether. And that's not all: JD.com said it booked US$19 bln in sales over an 11 day period, stretched so it could handle the logistics. Other rivals also booked huge increases this year. This sort of activity is certainly large enough to think that the Chinese consumer could replace the American consumer as the driver of the global economy. As a point of reference, the whole US economy books activity of about US$50 bln per day.
And staying in China, their major (SOE) banks are in trouble with regulators, lending more in the nine months to September than for all of 2016. The four large one are having to get waivers from those regulators and that is putting a crimp on second tier banks. The central bank is trying to restrain runaway lending growth. At this rate it is up more than +30% pa. The Chinese media is calling this a "tightening".
The financial crisis in Venezuela is getting severe now. The state electricity company defaulted. And the International Swaps and Derivatives Association is to decide soon whether late and partial payments of US$1.2 bln due last week from their state-owned oil company constitutes a default. It probably does. The creditors can now take legal action to confiscate Venezuelan assets abroad, such as oil tankers or even refineries owned by the US-based Venezuelan subsidiary Citgo.
In Australia, Fonterra's new status as Australia's largest dairy company after the stumbles and auction of Murray Goulburn, is going to come under quick challenge from Canadian giant Saputo which is close to acquiring MG. Saputo announced it is ready to pay "leading prices" to dairy farmers for their milk. Game on, and Fonterra's new-found profitability there could be short-lived.
In New York, the UST 10yr yield ended last week up sharply at 2.40%.
The price of crude oil is slightly lower at just under US$57 / barrel, while the Brent benchmark is just over US$63.50.
The price of gold is also quite a bit lower, down -US$11 at US$1,275 oz. The bitcoin price has fallen very sharply, down -$1,100 and now at 'just' US$6,076. That is a -15% drop in just two days and in NZ dollars bitcoin is now priced at NZ$8,776 and a long way from the NZ$10,600 it was at the end of last week. Fast up, followed by very fast down.
The Kiwi dollar ended last week on a slightly softer note. We are at just on 69.3 US¢. And on the cross rates we are at 90.5 AU¢, and against the euro at 59.4 euro cents. That puts the TWI-5 index at 72.5.
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».