China goes all out but is ignored elsewhere; US data weaker; China GDP growth slows, house prices stable, retail sales rise; Italy rating cut; UST 10yr at 3.19%; oil and gold slip; NZ$1 = 65.5 USc; TWI-5 = 69.9

Here's our summary of key events over the long weekend that affect New Zealand, with news the China 'home team' is putting on a spectacular display.

Firstly, if you were following our weekend service, you may find some of this was covered there.

Wall Street and American equity markets closed flat on Friday. But that was in contrast to Shanghai which was up a spectacular +2.6% on the day. It sprang to life in the afternoon session, all happening in the one hour to 2:15pm their time. It had all the hallmarks of a stage-managed pump by the 'home team'. Then yesterday, it rose even more spectacularly, up another +4%. Some of that spilled over into Hong Kong with their markets up +2.3% yesterday. All this comes after the Chinese State Council said it will 'support' the private sector, following up with the central bank issuing the credit. Public sector stimulus isn't doing the job, it seems. The effect of all this on other international markets? Not much.

Meanwhile, the S&P500 is a little lower on Wall Street this morning, and that follows a similar trend in European markets earlier.

In the US, home sales volumes fell in September by -4.1% from the same month a year ago and the most in over two years. The median existing-home price for all housing types in September was US$258,100 (NZ$391,600), up +4.2 percent from September 2017. The US national economic activity index has slipped more than expected.

In Canada, they had a surprise fall in their rate of inflation. It came in at +2.2% in September, down sharply from +2.8% in August. Easing petrol costs were behind the reduction. A surprise fall in the level of retail sales in August was also reported, a surprise because a rise was expected.

Chile's central bank has raised its policy rate by +25 bps to 2.75% and that is despite inflation easing there. A strong labour market and rising growth were behind the decision to tap the brakes a little at this stage.

China’s economy grew at a slower-than-expected +6.5% in the third quarter, the weakest since the global financial crisis.

Retail sales however rose faster than expected, up +9.2%. With that retail sales data is something of a milestone, from an outsiders point-of-view anyway. In the first nine months of 2018, national online retail sales amounted to 6.3 tln yuan, which means in US dollars that is more than US$1 tln, a year-on-year increase of +27.0%. In 2017 it took all twelve months to achieve US$1 tln level.

Home prices in major Chinese cities were stable overall in September as local government tightening property curbs weigh on markets, especially the large ones. On a month-on-month basis, four first-tier cities - Beijing, Shanghai, Shenzhen and Guangzhou - saw declines in prices for both new and existing homes. Second- and third-tier cities are still posting gains however.

Moody's has reduced Italy's credit rating to the lowest investment grade Baa3, one step away from a junk rating. This downgrade is a direct reaction to the Italian government’s decision to accept higher budget deficits in coming years.

In Australia, a key by-election has brought a 20% swing against the current conservative Federal Government, removing the slim majority the Government had in Canberra. 

And petrol prices there have reached their highest since 2008, A$1.593/L (NZ$1.719/L or NZ$1.779/L if we equalise the differential on GST.) Tax takes 40% of Australian pump prices, compared with 42% in New Zealand. The oil company component is also less there.

In the US, benchmark yields rose as investors increasingly accept that the Fed will keep raising rates over the next year. The UST 10yr yield will start today at 3.19% with their 2-10 curve now under +29 bps. The other yields we follow were basically unchanged; the Aussie Govt 10yr is at 2.71%, the China Govt 10yr is at 3.59%, while the NZ Govt 10 yr is at 2.69%.

Gold is at US$1,222/oz and down -$4 overnight.

US oil prices are marginally lower at just under US$69/bbl. The Brent benchmark is now just over US$79.50/bbl.

The Kiwi dollar will start the week softer at 65.5 USc. On the cross rates we are also higher at 92.5 AUc and that's its highest in 16 weeks, and at 57.1 euro cents. That puts the TWI-5 at 69.9.

Bitcoin is now at US$6,447, little-changed from yesterday. This rate is charted in the exchange rate set below.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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30 Comments

The manipulation of the stock markets in China by the Government and Central bank can't go on forever.

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....as opposed to the Fed, EU, BoE, BoJ etc manipulating the Western stock markets since the S&P hit 666 in March 2009? And, yes, forever is a long time....

They can't either. I have a feeling this manipulation will all come to an end soon.

I think it will come to an end too but then what? The voices that want to allow things to correct/collapse are very quiet and drowned out by the common interventionist narrative.

Actually it can. Its called nominal prices.

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i will be interested to see if national vote yes on this after revelations of donations, with our high immigration levels this should have been done years ago
Bill proposes 20 years residency to get NZ Super

The previous National-led government had proposed increasing the minimum residency requirement to 20 years before it was voted out of power.
A 2016 review of policy by Retirement Commissioner Diane Maxwell recommended it increase to 25 years.
In her report Maxwell said the change would bring New Zealand's policy more into line with other countries and mean New Zealand would not have a comparatively low criteria to qualify for a full government pension
He also pointed to research from BERL which estimated changing the residency requirement to 20 years would generate savings over 10 years of $4.4 billion.
https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&obj...

Isn't that a stupid response? Do we want these people or not? If we do then we should pay up. If not, don't invite them in the first place. Talk about nasty, vindictive, and mean bureaucratic muddle and fudge. Why can't these people think?

...you got me? We have been stupid for a long time....the Bill might change that a little...or do you see something I don't?.

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Some popular destinations among high-skilled migrants offer little or no benefits to new arrivers or permanent residents (US, UAE, Singapore, etc.).
The ones who succeed in those countries migrate there with the intention of a fast-track career growth and high pay. Most are confident enough about their talent and its future earning ability that they wouldn't worry about access to public welfare.

or even Kiwis going to Australia

It should not be 20 years and you are in (the equivalent of winning about half a million) and 19 years and 11 months and you are out. It ought to be a sliding scale with the usually immigrant but could be expat Kiwi paying a lump sum to cover the period short of 20 years - it would work out at about $25k per year but allowing for compound interest actually far less.
BTW I though about this when I arrived just 11 years before qualifying for super.

I agree, a sliding scale would be fair. Also, maybe a test that people are actually working and paying tax during their 1-20 years as well.

We should also raise the age to 67 and make KiwiSaver compulsory.

Oh, and while we are making changes let’s review the investor category of the immigration rules to make sure those investments are making a real contribution to the economy.

Sliding scale seems reasonable.

Ten years (how unsurprising it's half the OECD norm) seems unfair to locals. Why should working Kiwis have to fund the retirement of people after just ten years contributing to NZ?

And given super is looking ever less sustainable, it makes no sense at all to ask working Kiwis to pay it out so easily in order to attract more recipients.

“after just ten years contributing to NZ”

Take a look around - in many cases the quantity and quality of any such “contributing” would be somewhere south of nil.

It should be pro rata on the basis of a 35 to 40 year working life in NZ. Similarly health care.

I agree with the Super payments on a sliding scale, although I'm not sure what the starting age should be. I was in full time paid work at the age of 18, so why are some talking of 20?. Also, get rid of the early entry provision based on the partner's age. As it stands I could be taking Super as early as 63.

20 years paying tax to get super is common sense. Would expect this bill to fly through.

Id add healthcare and Education to that as well. Its wrong to arrive recently and expect to consume those tax funded services (DGZ house owner anyone) with no tax contribution. That applies to Kiwis living overseas who return for medical operations and pension but have put nothing in (aka those working in Aussie).

Great link, Andrew, thanks!

What Kate said.

Chile is getting the Western world disease, but it's started to get out of hand this year.
https://tradingeconomics.com/chile/housing-index

Spot electricity prices getting ordinary. Must be some big winners and losers out there.

http://www.em6live.co.nz/PriceImpact.aspx

One of my clients runs Landfill Gas generation plants among other renewable energy sources.

He keeps an eye on the spot prices, when it gets up to (i think he said) $700 - $800 /mwh they fire up all their diesel generators. Gotta make the money!

worth a listen you can skip to 2.00 mins in if you want
https://wolfstreet.com/2018/10/21/the-wolf-street-report-why-do-these-ma...

David P Goldman, over at Asia Times, on the China-US kerfuffle. The punchline - China can afford a few concessions now, because it will be the world's biggest economy in 2035 or thereabouts.

How demeaning that the States have to put up with cheap McMansions...we am so lucky, we is twice the price...and worth every single centX1billion.

Interesting happenings in the Toronto mayoral elections and a candidate called Faith Goldy, it's on RT so if you don't like RT don't click on the link.

https://www.rt.com/news/441884-faith-goldy-toronto-mayor/

Yes, interesting, if to be believed. Who'd have put Canada in that kind of media control/censorship camp?.

I have a friend who has an elder sister who followed her love back to America almost 40 years ago. She married & raised a family and then, you guessed it, they divorced. When she enquired as to her rights & pensions available she discovered there weren't any. She was still a Kiwi living in America, according to the USA authorities. She now returns to NZ every summer (ours) to 'appear' on her daughters books as an employee so she can hopefully qualify for a pension in NZ Inc at some point. I think she said she had to do 5 years. I also know that she is not the only one doinf something similar. So it's not just the immigrants scamming the system. The N in NZ is for naive.