US consumer confidence retreats; house prices dip; US-China trade talks get harder; Huawei indicted; iron ore prices up; AU jobs growth in focus; UST 10yr 2.72%; oil and gold up; NZ$1 = 68.3 USc; TWI-5 = 72.4

US consumer confidence retreats; house prices dip; US-China trade talks get harder; Huawei indicted; iron ore prices up; AU jobs growth in focus; UST 10yr 2.72%; oil and gold up; NZ$1 = 68.3 USc; TWI-5 = 72.4

Here's our summary of key events overnight that affect New Zealand, with news key trade negotiations took a sharp turn away from likely agreement today.

But first, American consumer confidence fell to a 1½ year low in January as the partial government shutdown and financial markets turmoil left households nervous about the economy's near-term outlook. The result was way below analysts already low expectations.

And US home price growth is slowing, and in fact may have turned down. The Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the country, rose +5.2% in the year ending in November, down from a +5.3% increase reported in October. But there was a -0.1% fall in November from October, the second month-on-month dip in a row.

The US trade hawks are in ascendance and they have ramped up pressure in the Chinese trade negotiations, indicting Huawei in two separate legal cases (fraud and theft). These legal moves unseal hard evidence that many countries will find useful. China is requiring suppliers to Huawei to move production to China. This pressure will also be felt in Wellington. The New Zealand decision to side with China over the the issues in Venezuela may get an echo in the Huawei case, even though we have already blocked Huawei access here for out 5G network. The American moves will unrestrain China's diplomatic pressure which will come in the form of trade threats and access. Trade negotiations from here will get even more difficult.

World bond and equity markets are in a pause mode today with investors unable to decide what the direction should be.

In China, iron ore prices are rising following the Brazilian iron ore mine disaster. This is a tragedy that will benefit Australia - a lot.

In Australia, the upcoming election will be contested over 'jobs growth' - and that will be a non-subtle contest over population policy. The current government has delivered on its jobs promise to create 1 mln new jobs and will promote that heavily in the upcoming campaign to create another 1.2 mln new jobs. Unlike in most other areas of public policy, it has credibility here. But behind the claims are the fact that these targets can only be achieved via higher population growth. It's a debate that may empower anti-immigrant populists on the hard right of politics.

The UST 10yr yield is unchanged today to be just under 2.72%. Their 2-10 curve is now under +15 bps. The Australian Govt. 10yr yield is at 2.23%. The China Govt. 10yr yield is also unchanged at 3.16%, as is the New Zealand Govt. 10yr yield is at 2.35%.

Gold is up another US$7/oz to US$1,309 and that is a seven month high.

US oil prices have risen today, up about +US$2/bbl to just on US$53.50/bbl while the Brent benchmark is just on US$61.50/bbl. The reversed yesterday's drop. The US has sanctioned the state Venezuelan oil company.

The Kiwi dollar starts today holding at the 68.3 USc level. On the cross rates we are little changed at 95.8 AUc, and at 59.8 euro cents. And that has the TWI-5 still at 72.4.

Bitcoin is only marginally lower today at US$3,403. This rate is charted in the exchange rate set below.

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48 Comments

22
up

Come on David, while true, isn't this a tad unhelpful:
It's a debate that may empower anti-immigrant populists on the hard right of politics.

Immigration is a debate we need to have, as do the other democratic nations of the world, and such comments tend to stifle that debate at birth. It is a bad habit we all fall into. There are genuine issues here and until we encourage an open debate we are unlikely to make much progress with them.

As I see it there are a number of difficult areas, the most obvious being how many new people can we cope with without stuffing the place up? For example, too many people means the roads seize up and we all suffer from a form of shareholder dilution as a result. Next, there are cultural issues, some people bring bad habits with them, long standing blood feuds ("terrorism"), honour killings, FGM, or just not moving aside on the pavement for women. Also, some groups do not integrate so well and tend not to play nicely with others. Third, some groups may be particularly susceptible to influence from a foreign power, either by threats or bribes. I have no idea how to think about these issues, they are difficult.

New Zealand is a nice place, and we have time to look at these issues before they get out of hand and we all become polarised in our views. Your most excellent website, with it's engaged group of fairly sane commenters can lead the way. These are difficult, delicate issues. We need to cross the river by feeling the stones.

13
up

Agreed Roger. Part of why interest.co.nz is my most frequented news outlet is the neutrality that is typically displayed.

Perhaps insignificant? But we aren't Number 1 anymore!

"the Danes first with a score of 88 out of 100, one point better than last year’s top dog New Zealand"

http://cphpost.dk/news/denmark-again-the-least-corrupt-country-in-the-wo...

Darn, those bloody vikings and their nice furniture are beating us. I jest, but this is not by chance, our heretical ideas of democracy came from Scandinavia with the Viking Danes. Historians tend to focus on the bloodshed, their intellectual heritage being more sympathetic to a structured society where everyone knows their place. This is the Brexit debate, which system to favour, hierarchy under Roman Law written by our betters, or equality under common law (previously known as Danelaw).

Presumably the survey ignores foreigners resident in NZ. Prof Christina Stringer's report three years ago was shocking because it found 'worker exploitation' that verged on modern slavery and found it was widespread. The fact that often (but not always) the exploitation is by businessmen who are from the same country of origin does not mean NZ has no corruption just that we blame it on others. While NZ encourages low wage immigration we will always risk workers paying for jobs and job titles.

One aspect that not many people join the dots on is these immigrants (and tourists) power consumption while in NZ is coal based.

The last time I looked international air travel was ignored in our carbon emission measurements. It would be about 10% of total. Until it is included the whole concept of zero carbon is a joke.

I agree, its ok to want to keep NZ awesome!

Agreed Roger. Immigration is the debate they are scared to have. Visible immigrant families like mine can state we want NZ to remain low population but native New Zealanders are terrified of being called racist.

Obviously bigotted racists don't like muti-national immigration. But if you deduce only those who are for high rates of immigration are not racist then you might as well say only vegans can assert they are not cannibals.

Cameron Bagrie refuting the arguments of the bulls:

"I think there's too much sugar-coating of what's going on in the Auckland market. Let's call a spade a spade. House prices are falling," he said.

"People have placed to much weight on supply and demand imbalance in Auckland. They say there's a shortage of houses so house prices can't fall – that's baloney."

That was borne out by the fact that the region with the biggest supply/demand imbalance was also the region in retreat, he said.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=121...

Interesting that when an economist goes it alone, his rhetoric sounds radical compared to his former peer bank economists.

Cameron always has had a gruff grounded edge to his commentary, even venturing so far as to say such things as you can't grow credit faster than GDP without causing trouble before the last crisis struck. A sackable offense you would think. So, while slanted in the banks favour, their commentary often contains criticism if you can decode the language.

Yea, I agree.
But it has always been relatively sugar coated and 'toeing' the line, I thought. Obviously not Tony Alexander level, but healthily kept in check.

Perhaps it is just confirmation bias on my part. I dunno. His rhetoric just sounded much more direct and bolder in that article.

Yes, it is now in his interests to be bolder and state his personal views more forcefully. This is what makes our society work. I think a clear and forceful argument is much better. Bureaucracies, corporate or otherwise, tend to smother discussion that threaten the status quo power arrangements, but this tendency does help maintain stability and continuity, so it also has its good side.

Indeed, Roger, the PR staffing (complete floors of 'em sometimes) of bureaucracies are adept turd-polishers.....the Narrative is what's sacred, never mind the facts.

Teehee. Gotta love the power of the old short Viking words, turd, law, f..., and c.... . So much forceful than the verbose Latin equivalent of the bureaucrat or academic.
https://en.wikipedia.org/wiki/List_of_English_words_of_Old_Norse_origin
https://en.wikipedia.org/wiki/Fuck
https://en.wiktionary.org/wiki/turd

Fun or what?

Totally agree. A sensible middle ground on immigration can be landed on. It doesn't have to be a polar 'either or' debate

One roof has published this interactive piece that can tell you what you area will be worth all the way up to a 20% correction

https://www.oneroof.co.nz/news/what-a-housing-correction-would-look-like...

Why would they post that? Property only goes up in New Zealand.

Or the USA:

Edward Gibbon wrote in his Decline and Fall of the Roman Empire about the son of Marcus Aurelius and how he set in motion the collapse of Rome. He wrote of Commodus (177-192AD):

“distinction of every kind soon became criminal. The possession of wealth stimulated the diligence of the informers; rigid virtue implied a tacit censure of the irregularities of Commodus; important services implied a dangerous superiority of merit; and the friendship of the father always insured the aversion of the son. Suspicion was equivalent to proof; trial to condemnation. The execution of a considerable senator was attended with the death of all who might lament or revenge his fate; and when Commodus had once tasted human blood, he became incapable of pity or remorse”

https://www.armstrongeconomics.com/armstrongeconomics101/understanding-c...

Most folk look at the social interactions during the decline of an empire, and miss the resource/energy/complexity angle

https://www.resilience.org/stories/2019-01-24/why-do-societies-collapse-...

Yes, I guess I tend to think about things like the price of wheat being the reason for the popular revolts that the deluded media called the Arab Spring. They were more in the nature of food riots as democracy is widely seen as a colonial construct. Spengler at Asia Times put it more forcefully - that the people of the Middle East suddenly realised that Chinese pigs got fed before Arab children.

Resource allocation by price is pretty messy and sub optimal, it is an evolutionary system, brutal at times, but adaptive. These are difficult and distressing issues.

Big Green forced cars to be filled before children got fed you mean. But I 'spose at least the climate got saved. "Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian."
https://www.theguardian.com/environment/2008/jul/03/biofuels.renewableen...

Extraordinary. If it wasn't from the Guardian I would say it looked like propaganda:
"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," says the report. The basket of food prices examined in the study rose by 140% between 2002 and this February. The report estimates that higher energy and fertiliser prices accounted for an increase of only 15%, while biofuels have been responsible for a 75% jump over that period.

It argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of US corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of biodiesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher.

So, not only does the EU have a tariff against Africa, it actively acts to starve people. You couldn't make this up.

The serious thinker in the sustainable energy space doesn't advocate a switch to biofuels, but a reduction in energy consumption. Simple mathematics says it will come down. It could be managed down, but likely won't be.

The serious thinker in the sustainable energy space doesn't advocate a switch to biofuels, but a reduction in energy consumption. Simple mathematics says it will come down. It could be managed down, but likely won't be.

Energy consumption in developed economies is coming down already. "Measured on a per-capita basis, electricity use is in clear decline, and is already back to the levels of the mid-1990s."
https://www.bloomberg.com/opinion/articles/2018-03-01/americans-electric...

CO2 emissions in 2016 were around 381MtCO2, Carbon Brief analysis suggests. Outside the 1920s general strikes, this would be the lowest level since 1894, when the Manchester ship canal opened, Nicholas II became Tsar of Russia and Karl Benz patented his gasoline-powered car.
https://www.independent.co.uk/environment/uk-carbon-emissions-fall-1894-...

UK only and a comparison with when it was No1. Now is it is less than 1% if world population and the other 99% wants what UK has had for 120 years. World CO2 emissions will increase.

Is China’s Debt Crackdown Hitting California’s Commercial Real Estate Bubble?

https://wolfstreet.com/2019/01/29/china-debt-crackdown-hitting-californi...

I never heard of the leaning tower in SF

https://wolfstreet.com/2016/10/04/condo-owners-leaning-tower-of-san-fran...

How China acquired mastery of vital microchip technology

https://www.ft.com/content/7cfb2f82-1ecc-11e9-b126-46fc3ad87c65

Thanks Andrew. Outline works!
https://www.outline.com/PMKk7a

The sale of ARM to Softbank was a massive technology transfer from GB to China, silly Brits just didn't see it coming.

Softbank is Japanese. What's the China link to Arm?

In order to gain access to China, Softbank gave it's Chinese subsidiary full access to all ARM internal knowledge. It's that easy, apparently.

Scary but that's the way to do it. NZ could learn, but we don't have the capital to put to it.

We seem to have no problem loaning money into existence to pay inflated prices for houses that already exist.......

David, I think it a little misleading to claim NZ has sided with China over the Venezuela issues. Winnie said that NZ doesn't make statements of support for governments so we are on the sideline.
I don't however see the value in MFAT's no comment policy. Bit of a cop out.

New Zealand is not siding with the USA or China over the Venezuela thing. There are regimes that are truly odious but when the Yanks decide on regime change a few politicians get killed first, followed by tens of thousands of civilians. The chaos continues for years, millions die, and the Yanks don't get what they wanted anyway.
Let New Zealand stay away from all that murderous stupidity.

With roots in Latin America, Hezbollah is the real terror threat in our hemisphere

https://www.miamiherald.com/opinion/op-ed/article210889749.html

Venezuela, Iran and Hezbollah - all hostile to the US - forge closer ties

https://www.foxnews.com/world/fervent-ties-remain-between-iran-and-venez...

Who is Tareck el Aissami?

http://infodio.com/141113/who/is/tareck/el/aissami

https://www.bbc.com/news/world-latin-america-45610738

Andrew. That Singer piece from the Miami Herald is rather odd. How do you fit into his theory that Hezbollah was one of the main providers of manpower to crush ISIS in Syria. And in Iraq related Sunni (PMU) did much the same
So the Hez helped crushed ISIS, and ISIS in recent years in France and Belgium was the origin of the terrorist murders.
(Noting of course that Hamas was an ISIS supporter, and Israel poured milions into Syrian nutjob groups resulting in tens of thousands of dead in places like Douma.

Hezbollah gets a lot of funding from Iran, the USA is paranoid about Iran. I suspect it's the Jewish lobby that is pushing the anti Hezbollah agenda both in the USA and Russia.
Israel has been bombing Iranian forces in Syria many could have been Hezbollah sites, Hezbollah soldiers appear well armed trained and effective, hence scary as hell to Israel.

anyone watched Vice yet?
https://www.imdb.com/title/tt6266538/

MIT Professor Erik Brynjolfsson starts 13 min in

https://www.youtube.com/watch?v=8akySjXuOAs

$2,000,000,000,000 in Proceeds of Corruption Removed from China & Taken to US, Australia, Canada and Netherlands | Duhaime's Anti-Money Laundering & Financial Crime Law “Bigger than the economies of most countries.” Unfathomable.
http://www.antimoneylaunderinglaw.com/2017/01/qa-on-the-2-trillion-in-pr...

Corruption can have a lot of meanings. In this case it sounds like all money the CCP felt they didn't get a big enough cut out of. Or it might mean money belonging to those who disagree with Emperor Xi. It is an easy way to demonise your enemies.

“In Australia, the upcoming election will be contested over 'jobs growth' - and that will be a non-subtle contest over population policy.”

Um, don’t forget the tanking housing market that’s been, like NZ, a national obsession. Equally important as jobs in the eyes of Aussies, especially if the big Melb and Syd decline continues, which is predicted by most analysts now.

Akld listings update

Trade Me up to 12098 up 802 in the last 2 weeks
Interest.co up to 12644 up 414 in the last 2 weeks