Here's our summary of key economic events over the holiday that affect New Zealand, with another quick news wrap-up so you can get back to 'time-off'.
American inflation has proved more sticky than markets had hoped, up to 3.4% in December, a rise from a five-month low of 3.1% in November. Market had expected a 3.2% rate. Energy prices went down at a slower pace as did food prices and rents. Core inflation came in only marginally lower than the prior month at 3.9% when a fall to 3.8% from the prior 4.0% was expected.
US equities retreated on the news and bond yields rose marginally, with investors less certain a US Fed rate cut is coming soon.
Meanwhile the signals from their labour market remain strong. US jobless claims fell last week from the low seasonal level the prior week. This data is still not revealing the long-expected labour market stress market bears have been warning about.
Meanwhile we should note that Hertz is selling down its EV rental fleet in the US, reverting to ICE cars. Hertz previously set a target for 25% of its fleet to be electric by the end of 2024 but high operating costs mainly related to collision damage, and very weak resale values have them reassessing the move. They will take a -US$250 mln witeoff related to the move.
The latest US 30 yr bond auction brought a median yield of 4.16%, down from the prior 4.28% a month ago. Both were well supported with competitive bidding.
In China, December vehicle sales data is out revealing a record high 3.15 mln units sold in the month, and taking the annual total to just over 30 mln and also a new record high. NEVs accounted for 9.5 mln units for the year (no, China is not an all-electric market yet). Even for December NEVs sold almost 1.2 mln but that was only just over a third. (You may recall, New Zealand NEV car sales in December were more than 80%.)
We will get China's December CPI inflation rate today at 3pm. Expect deflation again of -0.4% for the year after a -0.5% retreat in November.
In Norway, with an 80:20 approving vote, their parliament pushed ahead with commercial plans to open the Arctic Ocean to seabed mineral exploration. That was despite environmental groups and the fishing industry’s warnings that the move would put the biodiversity of vulnerable ecosystems at risk.
Globally, containerised shipping freight rates rose again last week to be +15% higher than the surge the prior week, again all about the Red Sea risks. China to Europe rates were up almost +25%. Transpacific rates to the US barely changed. Going the other way, bulk cargo rates retreated rather sharply this week.
Australian exports rose to AU$46.3 bln in November, +1.7% higher than October but -8.2% lower than a year ago. Meanwhile imports slipped rather sharply, down almost -8% from October, so their trade surplus got a boost to +AU$11.4 bln for the month.
Locally we should note that the new head of the Insurance Council is Kris Faafoi, replacing retiring Tim Grafton. Faafoi is an ex-minister in the previous Labour Government. He will start in the role in April.
The UST 10yr yield starts today at 4.03% and up +3 bps from this time yesterday. The key 2-10 yield curve is less inverted, now by -29 bps. Their 1-5 curve inversion is little-changed, now by -85 bps. And their 3 mth-10yr curve inversion is also less inverted, now by -135 bps. The Australian 10 year bond yield is now at 4.12% and down -2 bps. The China 10 year bond rate is now at 2.51% and down -5 bps and and its lowest since 2002. The NZ Government 10 year bond rate is +2 bps higher at 4.72%.
Wall Street has started its Thursday session with the S&P500 down -0.4% from yesterday. Overnight, European markets were all down -1% except Paris which fell -0.5%. Yesterday Tokyo ended its Thursday session up another impressive +1.8% and near its highest since 1990. Hong Kong was up +1.3% and Shanghai was up +0.3%. Singapore ended its Thursday session up +0.7%. The ASX200 ended up +0.5%, and the NZX50 booked a +.03% gain.
The price of gold will start today down another -US$9/oz at just on US$2017/oz.
Oil prices have risen +US$1 to be now just over US$73/bbl in the US. The international Brent price is now just over US$78/bbl.
The Kiwi dollar starts today at 62.1 USc and -10 bps softer from yesterday. Against the Aussie we are little-changed at 93.3 AUc. Against the euro we are marginally softer at 56.7 euro cents. That all means our TWI-5 starts today still just under 70.7.
The bitcoin price starts today slightly firmer, now at US$46,017 and up +1.1% from this time yesterday. Volatility over the past 24 hours however has been very high at +/-4.3%. At one point bitcoin got up to US$49,000 but has retreated most of that since. In a 3-2 split vote, the SEC has approved the establishment of Bitcoin exchange traded funds. Now rather than storing Bitcoin in online wallets, speculators in Bitcoin ETFs would own shares in funds containing the digital currency. Even though they voted for it, under some court pressure, the SEC noted that Bitcoin is a “speculative, volatile asset” used in money laundering, terrorist financing and other crimes.
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58 Comments
The latest US 30 yr bond auction brought a median yield of 4.16%, down from the prior 4.28% a month ago. Both were well supported with competitive bidding.
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Keyu Jin is a professor of economics at LSE (London School of Economics) and serves on the board of companies like Credit Suisse. She’s also the daughter of Jin Liqun, former Vice Minister of finance of China so she’s a rare West-based academic (maybe even the only one) who actually has insight into the Chinese system from the inside. Essentially what she’s explaining is that a key reason why China was so successful economically is because of its decentralized nature, which creates two mutually compounding loops of competition, as opposed to one loop in the West. Link
A Russian diplomat speaks. West has yet to grasp that without cheap Russian energy their economies face serious challenges because energy is the lifeblood of a nation. The cost of everything depends on what energy costs. Link
Indeed, something the economic growth cult never seems to grasp. On the other hand letting the Russian mafia state call the shots would be condemning the planet to the dark ages even sooner. Hopefully once the wheels have completely fallen off Vlad the Greats empire building fantasies, we can aknowledge limits and get on with living within them?
Provided Russia can retain the bulk of their captured territory Putin can tread water for the time being. May not even risk a spring offensive in case it fails to markedly increase territory. Putin would view Trump’s return to power as being the ace up his sleeve and if there was Russian electoral interference before, it will pale into insignificance compared to what happens next.
Problem is Trumps following really is a cult. There's nothing Trump could do to shake his followers out of the mesmeric trance they're stuck in, except maybe declare he worships satan? In ordinary times Haley would be a strong candidate and she may be the thinking Republicans choice, but there just aren't enough thinking Republicans. The only thing stopping Trump will be health, or if he's legally prevented.
Agree with that assessment, although never mind a spring offensive, there's a winter one going on right now. The only reason it's not really making headlines, is it's falling pretty flat. In the North near Kupiansk Russia is applying pressure and achieving nothing. Just north of Bakhmut Russia has made gains, retaking a small area of territory Ukraine liberated a few months ago. Avdiivka, again Russia is making minimal gains with huge loses, same with Marinka and Robotyne. Russia is in top gear, but it's wheels are spinning, trying to take advantage of declining Ukraine stockpiles.
I'm not sure even with more western weaponry Russia can be shifted from occupied territory, but life can be made really uncomfortable for them.
The thing about authoritarian regimes is they appear solid, until they collapse overnight. Little Vlad must be feeling a little uneasy with his reconstitution of Stalins Smersh.
After the history of WW2, immense fighting in this same territory, it seems to me that those lessons were largely ignored. The Wehrmacht & the Red Army didn’t fight four huge battles for Kharkov for no reason. Possession should have been Russia’s priority objective, it is the gateway to the south and west. From there with the Dnieper protecting the west flank the territory could have been mopped up southwards and the connection with the Donetsk region achieved. To the west Kharkov is the loading ramp fr Kiev.
All 11 or so bitcoin ETFs are not available on Hatch for NZ buyers.
Big opportunity for the likes of Hatch and Sharesies. I guess it will take some time. Sharesies is able to access certain mining stocks like Riot and Iren (of which I'm a proud owner).
USD4.7 billion trading volume in the ETFs on first day. 50% of that was in Grayscale.
My guess is that if ships have to take the long way round, then shipping stuff will cost more labour time and fuel, the price of shipping stuff will go up, and this will be reflected in the price we pay for shipped goods. Until the ships can go the short way again.
That's what would happen if the conflict drags on for years.
In the short term, it is uneconomic to take ships off a local route and onto a distant route. Ships are tailor made for routes and while they look similar to the untrained eye their characteristics can be very different. So for now - goods that would have shipped through the Suez / Red Sea get socked with higher prices while everyone else gets normal pricing. If the conflict goes on for another 6 months we'll see a slow shift of capacity but a full shift will take years.
The cost of shipment increased drastically mid covid due to labor disruptions (people getting sick or trying to avoid getting sick) along multiple points along the supply chains. At the same time as governments were handing out cash directly to people who had the propensity to spend it. Therefore too much money chasing too few goods = inflation. At the same time the companies that manufacture and or import and sell goods to the people who had money burning holes in their pockets were ordering like crazy to cash in on the boom. They could stand the increase in shipping costs because their pricing power was enough that they could maintain healthy profits.
Do the same conditions exist now for the worlds consumers? Then how long do you think the shipping lines can maintain their increased rates without affecting the overall demand?
HFL comments basically disappeared when it became clear NZ's GDP was so low we're almost certainly in a recession and have been for over a year.
Sure, NZ businesses are pretty hopeless in managing costs so the uncreative and lazy way out is to simply increase prices so inflation in NZ will prove sticky, ergo RBNZ will hold the OCR too high for too long and the recession will become real thing and unemployment will rise.
Kiwis don't learn fast so we repeat the same mistakes over and over again.
My one hope for NZ Inc is that RBNZ's MPC, led by Orr, will realise repeating past RBNZ's mistakes does NZ Inc no favors and the first cut will be sooner, and bigger, with a message they'll hold for some time to monitor results. Maybe 0.75% with a message that'll be all for 6 month and any hint of inflation will see a return to 5.5% immediately. A hawkish stance, but extremely helpful.
anyone that big self insures,
higher purchase price, lower reselling price , lower demand , all makes sense to focus on what makes a dollar
I would have thought they would keep a smaller fleet of EVs .
there is a comment in the press release about matching supply and demand, which indicates to me , that in the US people want to rent a petrol car
I am pretty pro-EV but every time I have been offered an "upgrade" to an EV from a rental car agency I have declined. They seem like an awful fit for most of what I want to do with a rental car, due to the difficulty charging when staying at motels, etc and having to return them pretty much fully charged along with the higher cost of fast charging. EVs make much more sense for an every day commuter car in my opinion
EC noted that Bitcoin is a “speculative, volatile asset” used in money laundering, terrorist financing and other crimes.
How do criminals launder money?
Criminals exploit weak points in the financial network. For example, they target businesses or professions that don’t confirm customers’ identities, or don’t have the right checks and balances in place to detect suspicious transactions, activities, behaviour or financial arrangements (the financing of terrorism uses similar techniques).
Criminals use different methods to launder the proceeds of their crimes. They may buy and sell assets like property and expensive goods like cars or jewellery, or channel funds through financial structures such as companies or trusts.
Money laundering often involves complex series of transactions. By moving funds around different parts of the financial system, they disguise who and where it came from – making their illegally earned ‘dirty’ money appear legitimate or ‘clean.’
Criminals may:
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try to hide their identity by using companies and trusts to own or buy assets
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carry out a series of transactions with a bank or business that are below the monetary thresholds that trigger money laundering ‘red flags’
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buy foreign currency or send money overseas to move it through accounts and financial products, which makes it hard to trace
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pay cash for a house or car, then sell it and use or bank the money
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buy gambling chips then redeem them in different currencies or denominations.
What comes next...? What will the unintended consequences be?
https://www.aljazeera.com/news/2024/1/11/any-us-attack-on-yemens-houthis-will-not-go-without
Houthis upping the ante...
If only it were so simple...
Iran is huge. Cant possibly invade without a situ worse than afģan/vietnam or iraq. Cant drop nukes on it without risking war with mideast/russia/china/North Korea etc. Let alone the precedent it would set eg for russia to use nukes in ukeaine.
It has a huge armed forces... and a ton of proxy terrorist groups that do its bidding together with a remote hacker army .
No.. war with iran is not desirable for us at all and iran is aware of that... however iran will also want to avoid a war and will instead want to stir more trouble in the region to reduce the usa power and allies un the region which was one of the primary goals of the hamas attack.
The current stage is the US and UK bombing Yemen and then Yemen (Ansar Allah) striking back against every US, UK or saudi asset they can find within range. I have yet to find anyone who thinks the US has anywhere enough AA missiles to stop even a fraction of retaliation. With the added bonus of Iraq getting in on the anti US action.
Yemen has the anti-ship to sink US military ships and have reportedly used them in response. If they work it's the end of the US in the ME. If the US can do this safely then they will take out Hezbollah after this and Israel is safe.
Iran and Israel going at each other with a very nuclear WW3 but neither side is really involved in this current conflict. Iran's only involvement here is supplying arms and technology, and under the Ukraine precedent this does not count.
Edit: I think there's enough noise about US ships being struck (not sunk) that I think some missiles must have hit.
https://beehive.govt.nz/release/nz-support-strikes-against-houthis
We support it but did not participate in it. See editors notes at bottom.
But contrary to that statement, guess how much trade is going though the Red Sea in short term after the actions taken? Given that it turned it into an active war zone.
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