Here's our summary of key economic events overnight that affect New Zealand, with news global trade seems to be less of a driving feature of the international economy even if it remains important and there are plenty of shifts. And despite that, the NZD is rising.
But first up today, US mortgage applications bounced back last week after the prior week's large -7.2% fall, to rise +3.7% year-on-year. And that was even though mortgage interest rates were virtually unchanged.
Also rising strongly was the US logistics managers index (LMI), driven by freight rates. It been almost two years since the rising cost of freight has been a factor in this monitoring.
Meanwhile, as expected US exports rose a bit more than imports but their overall trade deficit (goods & services) was little-changed in December. But for the whole of 2023 the deficit was the lowest in three years at 2.7% of GDP. (That is down from -3.0% in 2020.) The 2023 deficit with China shrank to the smallest total since 2010 while trade gaps hit records with Mexico, the EU, South Korea, Taiwan, and India. In fact the US imports more from Mexico now than China. Logistics are easier and safer too.
China's foreign exchange reserves slipped in January to just over US$3.2 tln, but the slip was less than expected.
Although they were up year-on-year, Chinese January vehicle sales fell more than expected from December, especially NEVs which were down almost -39% in the month. The recent economic travails are biting car demand quite hard now in China. Having said that they are running at a 24 mln pa pace, and still easily the world's largest car market.
We should perhaps note that the price of lithium, cobalt and nickel are now all at multi-year lows.
Meanwhile, Beijing is replacing some senior officials in its struggle to control the economic gloom enveloping parts of their economy. But still no word yet of the expected big stimulus.
In Europe, German industrial production fell in December from November to be a full -3.0% lower than year ago levels on a volume (real) basis. The December retreat was its seventh straight month of falls.
And staying in Europe, ex-coal company and now renewables giant Ørsted, the world's largest offshore wind farm developer, has cut 800 jobs, lowered renewable development targets and suspended a dividend after a difficult year of trading. It will also withdraw from the Norwegian, Spanish and Portuguese markets and its chair is to stand down after a decade in the role. Its transition has not gone well.
The UST 10yr yield starts today at 4.11% and up +2 bps from yesterday. The key 2-10 yield curve inversion is lower at -28 bps. Their 1-5 curve inversion is unchanged at -78 bps. And their 3 mth-10yr curve inversion is also essentially unchanged at -127 bps. The Australian 10 year bond yield is now at 4.13% and up another+2 bps from yesterday. The China 10 year bond rate is down -2 bps at 2.45% but still off its lows. The NZ Government 10 year bond rate is up +9 bps at 4.82% and reflecting market nerves that an OCR rise is possible.
Wall Street is in its Wednesday trade and up +0.7% from yesterday to new record highs. Overnight European markets all closed lower by about -0.7%. Yesterday Tokyo ended its Wednesday session down -0.1%. Hong Kong fell -0.3%. But Shanghai rose +1.4% on local stimulus talk. Singapore was up +1.0% yesterday. And the ASX200 rose +0.5% while the NZX50 rose +0.2%.
The price of gold will start today up +US$2/oz from Monday at just on US$2039/oz.
However oil prices are little-changed at just over US$73.50/bbl in the US while the international Brent price is now just over US$78.50/bbl.
The Kiwi dollar starts today at just on 61.1 USc and up a bit less than +½c from this time yesterday. Against the Aussie we are up nearly +½c too at 93.7 AUc. Against the euro we open at 56.7 euro cents and almost a +¼c gain. That all means our TWI-5 starts today at just on 70.4 and up +40 bps from yesterday at this time.
The bitcoin price starts today at US$43,161 and essentially unchanged from this time yesterday. Volatility over the past 24 hours has been low at just on +/- 0.6%.
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49 Comments
And in the US the Senate Republicans have again stymied a bill for aid to Ukraine, while the Ukrainian effort to hold off Russia appears to be faltering. That conflict could have been avoided early if the political will had been there, now the cost is huge and it is going to get a lot larger. The rest of the world will pay for that as Europe comes under threat. China will be waiting for it's moment.
Suggest spring will be the decider. If a Russian offensive can move significantly up the east bank of the Dnieper they are on the way to establishing that as a natural border, for the time being at least. That is why the Ukrainians have established a salient on the east bank but they have no chance of holding that in the face of an all out offensive. The question is whether Russia still maintains, has the capability of such a strike and then the next question is, if they don’t or it fails, does Putin then answer for the adventure in the same manner as the failures of Khrushchev & Brezhnev.
China publicly supported Russia in the Special Military Operation for the first time - Le Figaro. The new Minister of Defense of the People's Republic of China, Dong Jun, said this during a meeting with his Russian counterpart Sergey Shoigu, which became the first open manifestation of support for the Russian Federation in the issue of the conflict. “We will support you on the Ukrainian issue, even if the US and Europe continue to put pressure on China, even if military cooperation between China and the EU suffers,” Le Figaro reports Dong Jun as saying. The material also noted that Beijing had not previously demonstrated public support.-FRWL reports Link
Can they not? What would the consequences be if Russia with it's current attitude wins there and takes over Ukraine. Consider the immediate civilian casualties, then think of the countries it borders with. It looks very much like Russia is trying to control all of the Black sea, so Turkey will come under threat, as it controls the Bosphorus Strait. Poland will be under threat in the north west, Moldova and then Bulgaria in the SSW.
There is always the possibility that Russia will burn itself out while still winning. But that will likely result in an ongoing guerrilla conflict to little good outcome, but would spread instability. The Russians have taught the Ukrainians to fear and hate them, with good reason. They have also proven to all the surrounding countries why NATO is still relevant. Russian posturing will continue, as will their efforts to destabilise that part of the world.
There will not be a conventional war between NATO and Russia, as Medvedev emphasized today once again. To eliminate any risk, if Russia as a single state faces a group of states, it will immediately proceed to eliminate tactical and strategic targets with nuclear weapons. As a reminder, Russian intercontinental missiles were completely modernized last year and are known by the name Sarmat. Link
Of course there wont be a conventional war. We have seen the servicability/reliability/functionality of their much vaunted military in action.
While I expect the nuclear program to be slightly better maintained, the endemic corruption/self sabotage that is rife across all of Russia leads me to suspect that it probably suffers the same issues.
So, while Russia have indeed said they modernized the "missile". There are plenty of other places for them to fall down. Launch systems, delivery systems, transportation, fuel, guidance, etc...
As for manufacturing. Russia seems to be mostly using Chinese and North Korean hardware (and has been since the beginning - I suspect to keep their better stuff in reserve), so yes they have the quantity, but as for quality. Who knows?
Not entirely an accurate statement is it? Russia is the aggressor, and has been faced with a group of states both as the Soviet union and as Russia without any actual external threat to it's existence irrespective of what it says. It has postured and ranted while NATO and Europe have planned and practised defending themselves. NATO stock US nukes on European soil and the Dutch have recently passed the initial operational capability requirement for delivering those nukes with its F35's and can still use the remaining F16s for that. The Germans, French, UK, Belgians at least will all have similar capability as will the US forces Europe. Medvedev's threat will see the destruction of Russia more than Europe. But I suggest it is just more posturing. We should remember that Russia has reportedly stationed some nukes in Belarus too. But Russia is scraping the bottom now and has been for some time. A perspective on that could be that the nuke threat is more real as the desperation grows. It has certainly been reported that there are Russian military who have wanted to use nukes before now.
It surprises me that a small tactical nuke hasn't been used by Russia yet. If small enough and justifiably targeted, I think the "west" would likely let it slide so as not to escalate.
Optics on the other hand would be terrible, and should even a single rad of fallout land on a NATO nation then it would be all in.
I don't mean justified as in ethical/moral. I mean as in a legitimate military target. e.g. airforce base, training camp, troop mass.
The West are all bluster. Despite catastrophic civilian casualties, numerous war crimes, and all sorts of other heinous acts. We have not put boots on ground, handed over a single piece of currect A-spec tech, or even enforced a no-fly one. The UN are hamstrung, and NATO don't want WWIII.
So, a small tactical Nuke hitting an airforce base, while ethically, morally, and optically bad. Is unlikely to illicit anything other than more bluster, tighter sactions and a bit more cash/b-grade arms going to Ukraine. So yes, in the interests of greater global security, we would let it slide. Additional nuclear strikes, would likely garner a different reaction.
However I suspect, that internally it would likely be the end of Putin, hence why we haven't seen it yet.
I would suggest you have it wrong. In part though you are correct, that the west has proven to be all bluster. In the past I have suggested that Putin saw NATO and the west as 'paper tigers' and to all intents he has been proven correct. But I am not convinced that the west would sit by and not respond if Russia escalated to using nukes. They couldn't afford not to. First any and all potential opponents would think the nukes are not viable, and there is no political will to employ them, even in the extreme. Europe and NATO would lose any and all credibility they might have left. Secondly they have to know that it is a big emotional leap to escalate to nukes by the Russians, and once it is done once, the next time will be much easier (they're already tarred). And there is potentially no limit, given Russia's demonstrated belligerence, to where or when they'd use them.
Russia has already demonstrated they can't be trusted, and now many more people fear and hate them. To all intents they have become the nazis of the 21st century. and that little piece of history should remind people of the cost of appeasement.
Another little piece of history should also remind people that Europe was a wasteland for two years before the Japanese poked the beast.
As long as Russia aren't threatening US lives, the US will let is slide. Yes, Putin wants the old USSR, and those ex-soviet nations are going to suffer terribly. But were the USA to directly help them, then it likely results in a nuclear attack on US soil. Turning a blind eye removes this possiblity.
NATO complicates things somewhat, but USA would ditch them in a heartbeat if it meant they avoided the threat of a Nuclear attack.
I agree on your point, but a tactical nuke would make no sense for them to use. Regular bombs can disable and destroy any airforce base with much less negative reaction from the world.
If it did happen it would make it easier for the west to break out their own weapons catalogue in future conflicts - 'well Russia got away with doing it..'
The world is already negative on Russia. My point is we can't do anything more short of direct confrontation, and like it or not, when that happens, we become the agressor, and can expect repercussions.
We will therefore tut-tut dissaprovingly, but will ultimately let Ukraine take one for the team.
Think of it in sporting terms. Opponent punches you, and you punch back - defence. Opponent punches you, and the rest of your team jump in, that is aggression, an all in starts, and the cards start to get issued.
While Russia (Or should it be solely on Putins head) invaded Ukraine, at no point have they attacked the rest of Europe or the USA in this conflict.
So, the minute the West join, let alone cross the border (and at some point you will have to, in order to decisively end it) you are attacking Russia.
If/when we do eventually join, the suffering in Ukraine immediately goes Global. That is why we watch, rather than jump off the bench.
Yes, vigilante justice, the best sort of justice. Particularly without full information, knowledge, or authority, is generally deemed a crime, and participants can and do get charged.
Odly, your example tends to back up how the West are acting more than you think. Look at all the kiddie murders, Domestic Violence, and other assorted community crime... We all stand back lest it turns back on us.
Further, the West hardly have a stellar record in terms of moral highground. So what gives us the authority to act as Judge/Jury/Executioner? We did everything Russia and China are doing (usually significantly worse), we just did it a few centuries earlier. Africa, Asia, the Americas, Oceania, even Europe itself.
For the record, I believe we should have intervened at the start, and should get involved now. But I also see why we don't. Auckland is within range of an ICBM after all.
It's the application not the method. Defending others is usually upheld, but when people take it too far, then there are issues.
But yes I'd agree every country has a history that is less than stellar. But cultures change for most as we try, at least, to get smarter/wiser. Democracies tend to do that better than the other options.
Russia needs to be made to understand that an escalation will be met in kind. The problem is, as you have pointed out, that may actually be less than certain, although I'd like to believe that as I have said the NATO/European leadership must realise what such an escalation would result in if not met head to head.
The thing in this instance, is that you have a nutbar who will take it too far.
Hence my original point. Putin could likely get away using a nuke if limited to a Ukranian Military target. I am not condoning, endorsing, or otherwise applauding it. It is just something I could see happening without retaliation, as to retaliate could well end the world.
I believe the only reason Putin hasn't is because internally most Russians view it the same way. So if he did, we would just stand back and watch the inevitable revolt, and Putin's reign would end in much the same way as most of his historic idles.
Russia is a mafia run state. There is no valid reason for it to be killing people in a neighbouring country.
https://www.theguardian.com/world/2024/feb/07/kyiv-ukraine-russia-airst…
Fixed it
"There is no valid reason for anyone to be killing people in a neighbouring country."
Yet, look at all the past/current/future interference from the West.
Putin is bad, real bad, no disagreement from me. But this is exactly why we stay out of it. He will press the button if we go in. Do you understand the ramifications of that?
We enter the conflict and climate change becomes a lot more immediate.
"He will press the button if we go in." I've said this before too, I think he'll push the button if it is clear Russian forces are in the final collapse to lose. It won't need European involvement, but will result in it. Currently Ukraine and Russia are close to a stalemate on the ground. Internal resistance in Russia appears to be ramping up, either by Russian partisans or by Ukrainian insurgents or both. That avenue is potentially the least damaging way to end this - in internally driven collapse of the power structure in Russia leading to a change in leadership that is more democratic.
I think we are in agreement overall about the end result.
The issue as I see it, is that Putin likely has his own collection of private weapons, seperate to those controlled by the state, and I also imagine they have been a lot more well maintained. He only needs 1 or 2 to make most challengers dissapear (My suspicions arose when Prigozhin turned around mid drive.)
So the result may not be as forthcoming as we hope.
Believe if the Belarusian president was confident of a Russian victory they would be involved by now mainly for the prospect of “acquiring “ some territory and spoils of course. Might still happen of course if Putin turns push into shove. A move on Kharkov from the north would strategically and tactically support any Russian offensive from the south.
Putin will be more than hoping for a return of Trump and an intervention by him that Putin can dictate. However the Ukrainians know, from all the savagery previously inflicted by Russia, what lies in store and they will resist. As the Wehrmacht discovered it is huge territory to first subdue then control. It will be a bleeding ulcer in Russia’s side and in the conflict of all of that, the world including China, is going will lose a vital supplier of essential food.
There is one thing for certain is that war will carry on. There have been 36 significant wars since 1899 , so average one every 3 years. So going on that the conflict won't just stop. Sadly it's in our DNA. Hence why some say NZ doe not need a defense force but don't think we will be immune from war, we hav'ent been in the past and humans have not evolved that much.
Murray. That's reminiscent of the "domino theory". And how in the 60s we were lectured on it. 50,000 Americans and 28 New Zealanders died for that theory. Vietnam.
Didn't work out as they said.
I don't believe Ukraine is a vast geo political move. It's a local ethnic conflict. And murderous as those are.
The 2023 deficit with China shrank to the smallest total since 2010 while trade gaps hit records with Mexico, the EU, South Korea, Taiwan, and India. In fact the US imports more from Mexico now than China. Logistics are easier and safer too.
There is NO meaningful decoupling of global trade from China. China's trade surplus with countries like Mexico (black) and Vietnam (blue) is up massively. Those goods don't stay in Mexico or Vietnam. They're trans-shipped to the rest of the world. No decoupling, only rejiggering. Link
About Ardern's record low unemployment and unreported government reports.
"According to The Herald:
"... recipients of the main Jobseeker payment [are] now expected to spend an average of 13 years on a benefit."
"Sole Parent Support clients are projected to spend an average of 17 working-age years on a benefit (up from 12.5 years in 2019), but the upper quartile of this group – about 18,700 people – are expected to spend more than 25 years in the system."
"...about 2000 teens on the Youth Payment or Young Parent Payment [are] now expected to spend an average of 24 working-age years on a benefit – a 46 per cent increase from the 2019 estimate. About 500 of them are expected to be on income support for more than 38.5 years, almost the rest of their working lives."
The UST 10yr yield starts today at 4.11% and up +2 bps from yesterday
Record Large 10Y Auction Sees Stellar Demand, First Stop-Through In 12 Months
I have just read all the posts and the detailed military and geo-political knowledge on this forum is astonishing. I can only imagine how much time is devoted in the US, Russia and the EU to poring over the insightful contributions from Murray86 and all the others.
I am in awe. How did these apparently ordinary people acquire this detailed knowledge?
Reading for my part. My father was a professional soldier firstly army officer then RNZAF as a pilot. He built up a very large library of military history, mostly WW2 including a lot of biographical editions. Just about all of these I read, starting quite young. Amongst these were, as previously advised, good material from one Mr Eric Linklater, for instance a column 1943 Italy in company with a Wynford Thomas. Unfortunately ChCh eq’s burst water pipe destroyed much of what I had kept, but as with that, some survived. Sometimes I think I have now read too much, but then invariably something interesting finds its way here.
Ex military, plus analyst by trade with IT degree and not afraid to learn new things. Lots of reading. Lots and lots of reading, but also listening to others and their opinions and views and asking why or being willing to debate perspectives. Always interesting, always fun. Always respect someone prepared to put out an opinion even if you disagree with it. Difference doesn't make it wrong or right. It is all about learning.
Nope, chose to ignore it. How often have you seen a politician stand up and spout rubbish to the point where you're incredulous that he actually believes it? I have found the majority if not all the contributors to these threads learned and knowledgeable and will to debate views. Most of us have blinkers, and sometimes we don't know they are there until someone challenges our opinion. It's always fun.
Not missed, just accommodated and alluding, rather than resorting to sarcasm, in return which though you may have missed, in so much that there would be little use in such as Mr Eric Linklater authoring his war time experiences if readers didn’t bother to learn from them.
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