US factories in healthy expansion; ditto global factories; global airfreight up +5.9%; Japan has momentum; China bans violent debt collection by payday lenders; UST 10yr yield at 2.36%; oil and gold up; NZ$1 = 68.9 US¢, TWI-5 = 71.6

Here's my summary of the key events over the weekend that affect New Zealand with news the expansion in world manufacturing just keeps rolling on.

Firstly in the US, a key gauge of factory activity cooled modestly for the second straight month in November, but the index is still very positive. A second PMI is not quite so elevated, but it is still expanding well.

That same survey feeds into a global survey and that is very positive indeed. In fact, it is at an 80 month high. The global manufacturing sector has strengthened, with rates of expansion in output, new orders and employment all hitting multi-year highs. Price pressures are high too, however, with input costs and output charges rising at accelerated and above long-run average rates. Both Japan and Europe helped push the trend higher, although China is a laggard.

This broad expansion shows up in world trade. Global airfreight grew by 5.9% year-on-year in October, the first month of the traditional strong period for demand seen every Q4. It was up +5.0% in the Asia-Pacific region. Reports from the industry indicate that freight demand has been very strong in November too, amid tight supply conditions. However, the rate of growth is slowing and may indicate the peak is nearing.

It may seem odd, but it is true; globalisation is pushing Trump's American prosperity. And it is driving the same elsewhere, including New Zealand.

In Japan, inflation rose in August, industrial output rose more than expected, and demand for labour was high, its strongest in over 40 years. Japan is is on a bit of a roll and we should not forget it is the world's third largest economy and our fourth largest export destination, one that grew by +7% over the past year.

Over the weekend and as expected, China issued new rules for payday lending; banning over-lending, repeat borrowing, violent debt collection, abnormally high interest rates, and privacy violations. They also ended issuing any more licenses for the industry.

In Australia, big news. The Australian National Dictionary Centre has chosen "kwaussie" as its word of the year. The word refers to a person who is a dual citizen of Australia and New Zealand, a New Zealander living in Australia, or a person of Australian and New Zealand descent.

In New York, the UST 10yr yield sank back a bit at the end of last week and is now at 2.36%.

The price of crude oil is a little higher, now just over US$58 / barrel, while the Brent benchmark is just over US$63.50.

The price of gold is up +US$7 to US$1,280 oz.

The Kiwi dollar ended last week a little firmer. We are now at 68.9 US¢. And on the cross rates we are at 90.5 AU¢, and against the euro at 57.9 euro cents. That puts the TWI-5 back at 71.6. And bitcoin is sharply higher again today, now at US$11,730 which is another record high and just over NZ$17,000. Over the weekend, the American derivatives regulator said it would allow CME Group and CBOE Global Markets to list bitcoin futures. If you thought you had seen it all, now you can have 'tulip' derivatives. Bitcoin is a "currency" that virtually no-one uses.

If you want to catch up with all the 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 ».

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20 Comments

Bitcoin smashes through USD 10k mark...now and nzd
$17,034

OMG Q.V. figures show the DGZ has been hit. Mayday, mayday, she’s going down.

If you are referring to the NZ Herald story, just note that that data is for September.

Oh. Dirty Herald. I wondered why they were talking about June. Why publish an article about September now on the day the monthly Q.V. stuff is due out.

Actually isn’t Q.V. already our. I’m so confused.

Now not due till Thursday

Thank you David
Herald Vs Reality

Reserve Bank warns: 'It's not our job to protect you from the housing market

Deputy governor Geoff Bascand says the central bank's job is to monitor the health of the financial system, not protect consumers. Read more

Equally, it's duty does not extend to transferring wealth from one cohort of society to another.

Bascand could better serve the nation if he took time to comprehend instruction from his betters at BIS.

A monetary policy regime narrowly focused on controlling near-term inflation removes the need to tighten policy when financial booms take hold against the backdrop of low and stable inflation. And major positive supply side developments, such as those associated with the globalisation of the real side of the economy, provide plenty of fuel for financial booms: they raise growth potential and hence the scope for credit and asset price booms while at the same time putting downward pressure on inflation, thereby constraining the room for monetary policy tightening. Borio page 12 of 38.
And:

More importantly, the banking system does not simply transfer real resources, more or less efficiently, from one sector to another; it generates (nominal) purchasing power. Deposits are not endowments that precede loan formation; it is loans that create deposits. Money is not a “friction” but a necessary ingredient that improves over barter. And while the generation of purchasing power acts as oil for the economic machine, it can, in the process, open the door to instability, when combined with some of the previous elements. Working with better representations of monetary economies should help cast further light on the aggregate and sectoral distortions that arise in the real economy when credit creation becomes unanchored, poorly pinned down by loose perceptions of value and risks. Borio Page 17 of 38

If it were to happen, a sharp correction could be "uncomfortable" for the economy, as it would be likely to hurt consumer confidence, which could hurt business confidence, which could further hurt the housing market if people lost their jobs

This is not a smoke signal. This is the central bank talking about the link between asset prices and consumer spending. If asset prices fall, consumers feel less "confident" on spending money like drunken sailors or the new car, which impacts the revenue and viability of business who may have to get rid of staff, which puts further downward pressure on house prices.

Dear Mr Bascand
The NZ people know you are not tasked with protecting NZers from the ponzi housing market created in large part by elected National party politicians who allowed open foreign speculation in kiwi homes
Thanks for your sympathy

The Ex Southern Clueless MP - the gift to National and NZ that keeps on giving (taking actually)

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11951474

This article would have caused the billshitter to choke on his weetbix yesterday morning.

What did turdy have on the Double Dipper to not have been cast aside ruthlessly by his "strong and fearless" soon to be "two time loser" PM - possibly the straw that consigned farmer to the wilderness once again.

Small-town. Despite the heroic efforts of the MSM to keep the story of this born to rule twat alive, it really is yesterdays boring news. That all MP's receive the same benefits on termination, including other leftie pollies who also finished under a cloud, appears not to diminish the obsession of media with how this particular one spends his.

Meanwhile we have crown minister Shane Jones in diametrical opposition to the coalition on work for the dole, yet the same media obsessed with Barclay have little to say about this obviously serious philosophical divide within the coalition.

All unemployed MPs get a pay out after the election. But how many MPs decided to stop working 3 months before the election?

You're talking to the wrong person if you are looking for a Barclay defender. But in fairness, the story of his allegedly 'deciding to stop work' is a contested one, not the factually proven scenario you assert. And the English 'double dipper' tedium is by now just infantile name calling. Almost as silly as the ancient Devoy fattie nonsense the media is currently click baiting us with.

Kwaussie sounds so like quasi, a word which truly represents the true residential status of kiwis in Australia.

Big Wall Street banks have begun to rebuild their trading arsenals under the lighter-touch regime of Donald Trump, who has promised to rip up Obama-era rules designed to rein in risk-taking.

The likes of Goldman Sachs and Morgan Stanley spent the years since the crisis winnowing their inventories of stocks and bonds held for trading, as new constraints on capital, and new rules such as the Volcker ban on proprietary trades, bit hard.

But over the past nine months the trading arsenals of the big six banks have grown by more than $170bn, bringing the total to $1.71tn, the highest level since the end of 2012, according to an FT analysis of public filings. Read more

Will greater US bank trading activity alleviate the global dollar shortage?

The Chinese have lent Angola, or at least banks within that impoverished African country, at minimum $20 billion (the exact balance isn’t known and is of some debate depending on the source) since its long civil war ended in 2002. Repayment of those loans has become very difficult for the oil producer, what with dollars in short supply due only in part to the mercantile effect on that supply due as the oil price crashed (and failed to recover).

Repayment has increasingly taken the form of crude oil, which for Angola only makes their situation that much more unbearable. Dollars never make it to the real economy, one which is starved for them as the primary means of exchange inside and out.

“They [the Chinese] have, in fact, turned a virtual currency into a real commodity by pawning it off on those more desperate for it. In other words, they conjured “dollars” that they themselves don’t really have so that they could position trade factors financially in their favor…From that perspective, the eurodollar is like a highly contagious virus with a long incubation period. Everybody just creates “dollar” IOU’s and spreads them everywhere, leaving behind the contamination of now being ‘short.’”

We entered the systemic situation on August 9, 2007, where global banks who used to conjure and redistribute unreserved dollar IOU’s to every corner of the planet no longer want the job. That makes these IOU’s a far less fluid medium of exchange, and in plain economic terms acts as a clear and present danger for global economic demand – showing up in demand for crude that “somehow” hasn’t yet balanced with ongoing massive inventory stocks. Read more and more

Barfoots must be due to release its monthly numbers. There was no November bounce. Peter's commentary will be an essay of a balanced market, where vendors and purchasers are settled in this new paradigm, with a hint of its a good time to buy.. In the run up to Xmas I wonder how the agents , feel about this new balance

....you forgot the bit about Plateauing...

And underlying demand remaining strong

So the Chinese have banned'''violent debt collection'''.
Pretty sure that there must be a way around this ban. Hmmmmmmm