Here's our summary of key events overnight that affect New Zealand, with news of more signs the current global expansion cycle is running out of steam.
In the US, a measure of confidence among American households fell in November. The Conference Board said that its index of consumer confidence dropped from its highest level since 2000. The 'expectations' part of the survey fell particularly sharply. And all this came in a survey taken before the major GM cutbacks announced yesterday.
And it is becoming clear that businesses are holding back on capital investment, uncertain that the public policy settings in the US make it a good time to invest.
And the US President has indicated new tariffs on imported cars are likely to be imposed soon. And it also indicated that new tariffs aimed at China are also likely to be imposed. History's lessons are lost in the current US Administration and the consequences for them - and us - are unlikely to be positive.
The respected Case-Shiller home price index released data today showing that home price growth is running at its slowest in two years in September.
The United Nations issued an Emissions Gap report today, continuing the warnings of the consequences of underachieving the needed reduction in heat-inducing emissions. But this report made zero reference to New Zealand; we are not even mentioned in any footnote. Whatever we do seems to be inconsequential to any global outcome.
China industrial profit growth in China is still sliding. It was up just +3.6% year-on-year in October, the second lowest in more than a year. Private company profits grew even slower, and foreign company results were lower still. The Shanghai stock exchange closed unchanged yesterday, but that is down -23% for all of 2018. Wall Street is only marginally lower this morning but leaving it down -1% for 2018.
In Australia, regulator ASIC has warned low-doc (or "non-confirming") lenders about their practices saying the idea of supplying a loan provided to a consumer after taking less than reasonable steps to verify the consumer’s financial situation is "fundamentally incompatible with responsible lending".
The UST 10yr yield is lower at 3.05%. Their 2-10 curve is now under +23 bps. The Aussie Govt 10yr is at 2.63% (down -1 bp), the China Govt 10yr is at 3.44% and up another +1 bp overnight, while the NZ Govt 10 yr is at 2.67% and down -1 bp.
Gold is down -US$10 at US$1,212/oz.
US oil prices have settled lower and are now just under US$51/bbl. The Brent benchmark is now just under US$60/bbl, both about a -US$1 fall.
The Kiwi dollar is starting today little changed against the greenback at 67.8 USc. But on the cross rates we are a little firmer at 94.1 AUc, and at 60.1 euro cents. That has the TWI-5 at 72.6.
Bitcoin is now at US$3,685 which is -1.6% lower than this time 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 ».
Daily exchange rates
Select chart tabs
31 Comments
"History's lessons are lost in the current US Administration and the consequences "
Doesn't it depend on which bit of history one is reading?
History will tell us that failure to stand-up to Germany in the 1930s led us to World War 2.
Similarly, China is currently mirroring the path of Germany over that time in the opinion of some ( "Re-education Camps in far-flung provinces, for instance?). Does the USA let China continue on that path, and to steal it's IT and manufacturing base; does New Zealand allow it's primary industry to be swapped for manufactured CCP fiat currency and financially annex it as a quasi Sudetenland?
Future history ( is there such a thing!) might just write that the USA Administration's current actions stopped recent history repeating itself.
Shades of William Joyce?
"The English language propaganda radio programme 'Germany Calling' was broadcast to audiences in the United Kingdom and the United States. The programme began on 18 September 1939 and continued until 30 April 1945, when the British Army overran Hamburg."
It's debatable if China could even invade Taiwan let alone annex the country.
https://www.lowyinstitute.org/the-interpreter/why-china-isnt-planning-s…
and a different view
https://www.lowyinstitute.org/the-interpreter/has-pla-really-overlooked…
It's conceivable that China could peacefully annex Taiwan much like Austria and the Anschluss. This would be a major development as it would require China to have achieved social, economic and military dominance of the region. Already the Kuomintang are mainland friendly.
Well, when you consider how close the people of Taiwan and the PRC are it is in fact highly conceivable.
Once it was inconceivable that the Kuomintang would be be friendlier to the PRC than the opposition but today we see this.
Also the Chinese have conceived a plan to build a tunnel between China and the mainland. This would be three times longer than the Chunnel so quite conceivable.
Main question I would have is why would Taiwan want to give up it's freedom for rule under the PRC. I would expect a similar result to Hong Kong if China "annexed" Taiwan. A tunnel would be good for commerce - not so good for an invasion - talk about a choke point.
PS China is the mainland.
China will never persuade Taiwan until China's GDP per capita matches Taiwan (about double). Whatever your politics nobody likes being that much poorer. Expect China to keep growing and attempt to sabotage Taiwan's economy then they have a chance.
gime
I have to admire China's long term game - if Hitler had invaded just one place at a time he might have created his 1000 year regime.
waymad posted this yesterday
http://www.atimes.com/article/united-states-engage-china-russia/
(Missed it yesterday, so thx to you both. Worth repeating for those who, like me, missed it - it's all about History, and which bits)
European and American elites spoke of a collapse of the American empire after the fall of Vietnam….Few expected the United States to come roaring back under Ronald Reagan, win the Cold War, and emerge as the world’s only “hyperpower” during the 1990s.
China is the most unified culture in the world, requiring years of effort on the part of children to acquire the written culture. At another level China never was unified. It is the perfect Ciceronian state, held together by common interest, namely the need for domestic peace and order. ..What gives cohesion to states is a common love. That is what China lacks. Its families, tribes, clans and peoples tolerate the Emperor who sits in Beijing, but they do not love him, or each other. He is necessary to prevent chaos… China fears Western attempts to promote independence in Tibet, or to radicalize the Uyghur Muslims in its extreme west, or to build up Taiwan as an alternative state. China will go to war to preempt any attempt to dismember it. Its fixation on the South China Sea, where its historic claims to sovereignty are dubious, reflects the old Chinese proverb, “Kill the chicken while the monkey watches.” If we are willing to go the brink for a few empty reefs, Beijing is saying, think of what we would do for Taiwan or Tibet.
Great article. this one is too, although far smaller in scope:
http://www.atimes.com/article/a-neo-conservative-coup-against-trumps-fo…
That's my guess too. That US foreign policy has not changed with the president, just the style of presentation. Obama was a smiles in public and knife in private chap, Trump is a bully in public and private. So Obama was more French in style and Trump is Prussian. The aim is to do to China what Reagan did to the USSR and Japan. So, lend them trillions of $$$ and then put the interest rates up and impose a tariff wall. The tariff wall makes it very hard for the Chinese to earn the $$$$ to pay the interest on the loans, and when the loans come due for repayment they are buggered. The US says;
"Of course you can roll over your loans, we understand you need to feed your people, here are our terms".
One of the best articles I ever read:
http://www.aei.org/feature/the-soviet-collapse/
Secret police study finds crime networks could have laundered over $1B through Vancouver homes in 2016 https://globalnews.ca/news/4658157/fentanyl-vancouver-real-estate-billi…
I don't suppose anything like that could happen here.
"Overseas turmoil never turns out to be just overseas because it is global turmoil. The cycle has already started up again, another downward leg, the fourth, sitting right before us. Markets and financial data have been picking up this trend all year. It’s now hitting the economic tape, too."
https://www.alhambrapartners.com/2018/11/27/the-direction-is-globally-c…
Wall Street Mega-Landlord Blackstone Turns Screw on Spanish Government & Property Market
https://wolfstreet.com/2018/11/27/wall-street-mega-landlord-blackstone-…
Shale fail. "By the end of 2019, total U.S. oil production -- including so-called natural gas liquids used in the petrochemical industry -- is expected to rise to 17.4 million barrels a day, according to the U.S. Energy Information Administration. At that level, American net imports of petroleum will fall in December 2019 to 320,000 barrels a day, the lowest since 1949, when Harry Truman was in the White House. In the oil-trading community, the expectation is that, perhaps for just a single week, the U.S. will become a net oil exporter, something that hasn’t happened for nearly 75 years."
https://www.rigzone.com/news/wire/opecs_worst_nightmare_permian_ups_pro…
I just had a talk to a friend in rural realestate. He tells me that young farmers are being pushed out of buying traditional hill country blocks because of NZ firsts forestry scheme. He told me and I haven't had it confirmed, that the scheme is giving forestry companies a taxpayer handout eqiv to 6k plus per hectare.
Wouldn't that be better spent on education?
Just how much money is being wasted on this forestry initiative may not be known for a while. I heard a chap telling how much funding he got for planting trees up in a reasonable sized wasteland. The area is over run with goats and pig but the planting went ahead - and there's not a boundary fence around the place. No one went to check on the place after it was planted, or before.
But of course goats and pigs won't do any damage to young seedlings... Yeah right
We can add this to the list of all the things going wrong in October. If it felt like a wave of renewed deflation built up and swept over markets and the global economy, it’s because that’s just what had happened. I don’t think it random coincidence the WTI curve went contango and oil prices globally crashed when they did. Golden Weeks in China are always interesting, especially on the reopen."
https://www.alhambrapartners.com/2018/11/27/they-warned-us/
AndrewJ - going back to your comments re forestry. I know around our area the forestry companies are offering around $6k per plantable ha. Not the same as a subsidy but is pushing young guys out. Doing the maths on marginal land carrying around 8su/ha equates to $800 per su or more by the time they cut the house off and resell as lifestyle. Impossible to finance with the bank unless wealthy parents. I told my bank manager to value one of our beef propertys as a potential forestry block - made it worth more. Sad but true. Probably not a smart time to buy shares in a meat processor - sheep and beef cattle numbers are going to disappear off the hills and over capacity going to get worse.
my stock agent tells me there are still lots of ewes getting killed as farmers move to beef, sheep just too much work past 50yrs, or in my case 30.
It always comes back to short term thinking, we need to move to at least medium term thinking. My forestry mate tells me we should all avoid planting pines, he thinks gums will be a much better bet, the company he works for is planting loads of them. Even poplars sold around here for $150 a tonne unpruned. He told me last year that farmers are slow to realise that the Asian market will take almost all logs not just pine, story around here is of a farmer selling pines, the buyer also wanted the Elms planted down the drive way which he sold tool then he wanted to look at a gum plantation. Chinese demographics should be enough of a warning, they won't be needing new houses much longer.
A local builder is always complaining about low quality building products, he's in his seventies, tells me modern kitchens will be pushed to last 15 years, modern housing will need substantial maintenance at 50 years. Timber quality is about as low as you can go, lots of cheap fittings, buildings standardised at very low quality. Friend built cattle yards, H3 treated pine 6x2 has started rotting after 6 years, my old yards were gum, built between the wars and still as good as new.
On a different note, local purchased a great wall ute, now on his second, got a great deal around the 22.5 k mark, Rodeo body, Mitsubishi triton motor, no issues in 120k. China is going to shake our world, lack of buyers is behind GMs troubles, who's next?
Curve balls everywhere, Im trying to avoid digging holes in the rain, waiting for some sun.
https://www.wbtv.com/2018/11/23/swine-fever-adds-china-economic-headach…
https://www.factsbehindsnews.com/2018/11/23/china-reports-h5n6-bird-flu…
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.