Beijing trade talks go into third day; US job openings fall; Canada exports slump; China eyes more stimulus; EU confidence slumps; Aussie trade surplus healthy; UST 10yr 2.71%; oil up and gold down; NZ$1 = 67.3 USc; TWI-5 = 71.4

Here's our summary of key events over the holiday that affect New Zealand, with news markets seem comfortable with risk today.

The Americans and China apparently made progress on narrowing their differences on trade issues in Beijing yesterday according to some reports with movement on the purchase of US goods and services by China, though the two sides are far from striking a deal. Meanwhile, new research shows that "America First' is likely to be significantly inflationary. This research suggests the assumed low level of imports into the US is a cost myth.

The number of unfilled jobs in the US fell in November to the lowest level since June, though openings still exceeded unemployed Americans. There were 6.9 mln job openings on the last business day of November, down from a revised 7.1 mln at the end October. This was a rare piece of official data released during the shutdown. Unreleased data includes data for their trade balance, capital spending, durable goods orders, factory orders and inventories, new home sales, wholesale and retail inventories as the major ones. In these areas, markets are flying blind and may be in for surprises when this data is finally released.

Not that markets seem to mind - they are up +0.8% on Wall Street today. Europe closed similarly higher earlier, and they followed Asia which was up a like amount - except for Shanghai which posted a minor -0.3% fall. It seems risk is back.

US consumer credit data from the Fed will become available at 9am NZT and we will update this item then. Data is here, generally "better" (= higher growth) than forecast.

In Canada, their exports fell -2.9% in November, mainly on lower crude oil exports, while imports decreased -0.5%. As a result, Canada's merchandise trade deficit widened from -C$851 mln in October to -$2.1 bln in November. However, in December, it seems that Canadian oil exports are booming.

In China, the country's top economic planner has said they will introduce incentives to support consumption in key areas while increasing effective investment as part of its efforts to shore up the economy. But international ratings agency Fitch has warned that they could cut China’s A+ credit rating or stable outlook if Beijing reverts to the kind of debt-fueled stimulus programs it has used in the past.

German industrial production surprised everyone with very weak November data, down a massive -4.7% from the same month in 2017 after removing the pricing effect. Gulp.

That will be why EU business confidence fell 'unexpectedly' in December. Consumer confidence in the EU isn't tracking much better and overall economic sentiment is going backwards.

International airfreight growth has evaporated. Momentum has been sliding recently and in November 2018 the best that happened is that volumes came in at the same level as November 2017. The trade wars are starting to bite on trade growth, especially in the Asia/Pacific region.

Australia has recorded a trade surplus in November of +AU$1.9 bln s.a. and a little lower than analysts were expecting. That takes their surplus of both goods and services to +AU$16.3 bln for the year to November and compares with a +AU$15.5 bln in the same year in 2017.

The UST 10yr yield is at 2.71% and continuing the firming trend. Their 2-10 curve however is noticeably lower at +13 bps. The Australian Govt. 10yr has bounced back to 2.37%, up +7 bps. The China Govt. 10yr is -2 bps lower at 3.15%, while the New Zealand Govt. 10yr yield is holding higher at 2.42%. Even famously low-yielding German bunds are getting a yield boost.

Gold is marginally lower, down -US$3 to US$1,285.

US oil prices are still firming and now just under US$50/bbl while the Brent benchmark is just under US$58.50/bbl.

The Kiwi dollar starts today a little softer against the greenback at 67.3 USc. On the cross rates we are softer too at 94.2 AUc, and at 58.8 euro cents. That puts the TWI-5 down to 71.4.

Bitcoin is now just below US$4,000 at US$3,992.62. This rate is charted in the exchange rate set below.

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

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36 Comments

I have a question; NZ and I assume Australia are in the middle of our holidy season, where most activity seems to slide back to almost idle. Does this occur internationally as well over the Christmas- New Year period? If so when does it ramp back up to normal levels?

Not really mate. The big thing here compared to the Londons, New Yorks, Beijings, Tokyos etc is its summer.

Zero evidence to back it up, but I'd say Australia/New Zealand has a higher percentage of people on holidays in December/January than anywhere else in the world.

Ta masher - i appreciate the response. I noted over the break that reports on the US stock markets didn't seem to take a break, even for the weekends and thought i'd ask.

It means if you invest internationally, then there is no real holiday.

Go Aussie. That takes their surplus of both goods and services to +AU$16.3 bln for the year to November and compares with a +AU$15.5 bln in the same year in 2017.

Here in NZ we look with disdain on such productive efforts. When did kiwis lose their self belief and start to see themselves as a weak and unproductive people? Running a modest current account surplus would be so much more sensible. Instead we follow the well worn and fashionable path of more people and more borrowing, choosing shareholder dilution over profitability. Good for management and poor for shareholders (ie citizens).

Well, $5 billion of their $16.3 billion was in repatriated bank profits from New Zealand.

Jacinda's gas ban and Shane's tree planting boondoggle may have been a bit hasty. I guess you won't be seeing this on the Stuff website. "Our reconstruction, which agrees with other estimates for the well-observed period, demonstrates that the ocean absorbed as much heat during 1921–1946 as during 1990–2015." A bit inconvenient for the CO2 runaway warming theory.
https://www.pnas.org/content/pnas/early/2019/01/04/1808838115.full.pdf

Ties in with UEA statements on historic data regarding atmospheric temperature. "As for the two periods 1910-40 and 1975-1998 the warming rates are not statistically significantly different.
I have also included the trend over the period 1975 to 2009, which has a very similar trend to the period 1975-1998."
http://news.bbc.co.uk/2/hi/8511670.stm

How quaint.

Yeah a quaint $1.5 Trillion/year. Nice work if you can get on the gravy train. Not so nice if you're in the 'Naki.
https://www.insurancejournal.com/news/national/2015/07/30/377086.htm

..my new years hope for profile has just been smashed. Perhaps it's just a trump bot posting?

Sorry to disappoint rastus - I just can't turn down the Russian cheques. And the less said about the PNAS 'bots the better,

Hang in there profile, you're right. AGW is bollocks, the MSM never show you articles like this:

Consensus? 500+ Scientific Papers Published In 2018 Support A Skeptical Position On Climate Alarm

In 2018, over 500 scientific papers were published that cast doubt on the position that anthropogenic CO2 emissions function as the climate’s fundamental control knob…or that otherwise serve to question the efficacy of climate models or the related “consensus” positions commonly endorsed by policymakers and mainstream media sources.

http://notrickszone.com/2019/01/03/consensus-500-scientific-papers-publi...

http://notrickszone.com/skeptic-papers-2018-1/
http://notrickszone.com/skeptic-papers-2018-2/
http://notrickszone.com/skeptic-papers-2018-3/

A lot to read here, so those that "know" the science is settled, won't be bothered to read this and stay therefore ignorant.

AGW is bollocks......

because the internet said so.

All I see is on those links is a lot of cherry picked statements bolded to try to form a false narrative. The three papers abstracts I looked at do not indicate there was any refutation of AGW. One was correlating sunspot activity with solar output and attempting to predict future sunspot activity. One was looking at why certain regions in the US mainland don't appear to be warming as fast as the general trend, and one was looking at why warming is higher in coastal regions. None of them (from the abstracts) really seemed to "support a skeptical position" at all.

In fact here is a quote from the plain english summary of one of the papers (https://agupubs.onlinelibrary.wiley.com/doi/full/10.1002/2017GL076463)
"The U.S. “warming hole” is a region in the eastern United States that experienced a broad decline in temperatures beginning in the late 1950s. The warming hole is fundamentally different than global temperature trends, which have been rising since 1880. "

Not sure how that somehow translates to be support for the deniers..

And the other 497+ ? It does warm during an inter-glacial. Even evil deniers know that. As the OHC data initially linked and Prof Phil Jones attest the warming today isn't any faster than the warming since the end of the little ice age. Why do we want to throw money at an attempt to go back to the little ice age anyway?

"And the other 497+ ?"

I tried three pots of this chefs' soup.. and they all tasted like old socks.. And you expect me to go sample another couple of hundred?

Fair enough. The passage you bolded quoted 0.85 degrees warming since 1880 from the AR5. Industrial CO2 didn't rise significantly until after 1945 yet OHC/atmospheric temperatures were already rising at similar rates pre and post 1945. Hardly a ringing endorsement for runaway warming and serves to highlight the flaws in the CO2 theory.

No-one claims CO2/GHG are the only factors in climate change. Yes, there are natural cyclical factors at work too.

That's the problem - if CO2 was the theory's' driving factor then we should see a faster rate of warming at 410ppm than pre-1945 at 310 ppm. Hence published climatic CO2 sensitivities are declining over time.

profile,

I know that nothing I say will change your mind,but I will try anyway. Earth has an albedo of 0.30,which means that it reradiates some 30% of the heat received from the sun. It does so at a different part of the electo-magnetic spectrum and that is important. Greenhouse gases(GHG) absorb and emit photons at specific wavelengths and this leads to a smaller proportion of these gases escaping the atmosphere
In other words,an increase in GHGs inevitably produces a warming effect.I suggest that you look at the Stefan-Boltzmann and Wein radiation laws. You should also look at the Keeling Curve.
I am afraid that basic physics tells us that Global Warming is real. What it cannot yet tell us just how serious the effects will be. With 4 young grandchildren, I would hope that we will take action soon enough to mitigate its worst effects

I'm fully on board with inter glacial warming. Don't be afraid that global warming is real - we can see natural warming rates pre-1945 - be curious as to why the CAGW hasn't shown up as predicted in 1988. Do you really think a bunch of windmills and banning NZ gas exploration will change anything at all? Nice for politicians egos but of little other use.

Pragmatist get you taste-buds into this wee clip.
Cherry picking indeed by the AGW crowd.

The truth about global warming

Dr. Patrick Michaels, director of the Center for the Study of Science at the Cato Institute, provides insight into the debate over climate change and the political games played to create policy.
https://www.youtube.com/watch?v=fA5sGtj7QKQ

Very good interview!
He explains that all models, except the Russian model, are parameterised (meaning fudged).
A lot more important info in the interview.

Nah, after your first "killer-blow" turned out to be a complete dud, I think i'll skip your posts. Also .. Cato Institute.. lol.

How The Federal Reserve Quietly Bankrupted The US Pension System
https://www.zerohedge.com/news/2019-01-07/how-federal-reserve-quietly-ba...

Average UK household debt now stands at record £15,400
The TUC general secretary, Frances O’Grady, said: “Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red. The government is skating on thin ice by relying on household debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.”

https://www.theguardian.com/business/2019/jan/07/average-uk-household-de...

So far the most honest explanation for the Australians house prices falling.
https://www.channelnewsasia.com/news/business/australian-property-market...

But, but foreign, & foreign related buying had nothing to do with Sydney & Auckland house price boom/bubble. Official statistics have ‘confirmed’ this.

It unravels sometimes quickly because it never really got going.

Yesterday and today it is Germany upon center stage. On Monday, DeStatis reported that factory orders sunk at a rate not seen since the last recession in Europe (2011-12). Today, Germany’s statistical agency tells us that current production in that key industrial country dropped at a rate not seen since the Great Recession.

https://www.alhambrapartners.com/2019/01/08/and-get-bigger/

In other news:
"Idiot" stumbles on new way to stoke inflation, succeeds where $ trillions have failed;
Meanwhile, new research shows that "America First' is likely to be significantly inflationary.

Surprisingly, there is an odd logic in this, of balancing inflationary actions with deflationary ones.

Letting Communist China join the WTO on equal terms to the democratic nations of the world (why was that exactly?) has been highly deflationary for the democratic nations. David Goldman even suggests it was as an act of suicide on the part of the Western democracies. Well paid jobs for the average person in manufacturing have been moved to China. Western society has suffered and declined as a result, bingeing on debt to try to compensate.

Maybe, we have another tool to consider, Protectionism. Perhaps this is a technology we have not learned to use well, rather than a "bad thing" in an absolutist sort of way. Exactly as Banking is a technology that can be used well or abused. Food for thought.

Isn't this all the "freemarket" economy Roger? The big global corporates manipulating in their favour? Protectionism will help to restore some of this but there needs to be balance still. I suggest a fundamental reassessment of our economic model is required. Smaller countries like NZ are highly vulnerable, but we need to find a way to build a manufacturing base that provides jobs and export driven income for the country, (as well as supplying our own needs, albeit to a small market) and which cannot be taken over by international conglomerates with the associated loss of capability and technology.

Exactly, it is about being highly skilled in a very competitive and deadly serious game. Its about management and skill levels, strategy and tactics, risks and opportunities, threats and so forth. The people of the countries that have high skill levels do well. We inherited just such a country, but have we rather lost our grasp of what made us well off in the first place?

Protecting yourself is immoral, Roger, you know that.

3.00pm today..what to watch??

Stormy Daniels just put out an invitation on social media: "If you're looking for anything even remotely worth watching tonight at 9pm EST, I will be folding laundry in my underwear for 8 minutes on Instagram live."

OK, this is embarrassing in the land of super-stimulus via the ECB’s negative-interest-rate policy and years of QE that were supposed to perform miracles: Production in Germany’s industry, which includes construction, dropped 1.9% in November from the prior month (seasonally adjusted), the German statistical agency Destatis reported this morning. This drop is also embarrassing because economists polled by The Wall Street Journal had expected a 0.3% gain.
https://wolfstreet.com/2019/01/08/germany-heads-for-a-technical-recession/