Here's our summary of key economic events overnight that affect New Zealand with news of some eye-catching optimism sweeping over Chinese stock markets after unprecedented money-printing fiscal stimulus there.
But first, US PCE inflation rose at an annualised rate of +2.2% in August, a confirmation that inflation's impulse is back under control. That is its tamest rise since February 2021.
American disposable personal income was up +3.1% in August from the same month a year ago, personal consumption expenditure was up +2.9% on the same basis.
The final September reading of the University of Michigan consumer sentiment survey was released overnight and it was revised up from the flash result. The main reason for the increase was higher confidence in the 'present conditions' part of the survey. This survey is now at a five month high.
US wholesale inventories slipped in August from July, but were up less than +1% from a year ago. It was similar for their merchandise trade deficit; down in August from July but up from a year ago. We have made the point before, but the size of these deficits is minor compared to their overall economic activity. It is only talked about because partisans are clueless about the impacts and they can score cheap points with voters who are equally clueless.
Nothing in today's second-tier data releases alters the expanding track of the giant American economy.
In Japan, they are about to get a new prime minister, a self-acknowledged policy wonk, and someone who has been on the outer of the main political establishment for years. He will now be at the center. Shigeru Ishiba is set to make the economy his top priority, signaling plans to lighten the burden of rising prices.
In Hong Kong, the noose is getting tighter and tighter on independent thinking.
In China, leading economist Ren Zeping (任泽平) believes the recent round of mass loosening measures unveiled by the Chinese central bank is paving the way for fiscal stimulus of at least ¥10 tln (NZ$2.2 tln). What we have had from the central bank is just the warmup act. But the effectiveness of monetary policy is thought in Beijing to be about exhausted. Now they will issue a mountain of bonds (fiscal policy, effectively money-printing), and about half of that could go towards propping up housing and the property development sector.
Still, the signaled monetary policy changes from the People Bank of China are now being rolled out. Yesterday they cut the seven-day reverse repurchase rate by 20 bps to 1.5%. They also cut the reserve requirement ratio (RRR) by 50 bps, the second reduction this year, bringing the weighted average RRR for financial institutions to around 6.6% after the cut.
They clearly need it. Construction firms are failing at a much faster rate now.
The Hong Kong and Shanghai equity markets may be roaring, in anticipation of the coming stimulus. But Chinese industrial profits are weak. For the eight months to August, they are a touch less than for the same period last year. For August alone they were -23% lower than the same month in 2023.
In Taiwan, consumer sentiment rose in September to its highest level since March 2020. The independent island nation is an uncomfortable mirror for its huge neighbour.
The Chinese Ministry of State Security (MSS) used its WeChat account to criticise New Zealand for its recent report describing the PRC as a “complex intelligence concern”. According to the MSS, the NZ report “openly smears the broader overseas Chinese community and students. Following the release of this report, some overseas Chinese in New Zealand have been subjected to harassment and intimidation by so-called New Zealand "intelligence personnel.“ The agency also warned New Zealand: “Whether out of imagination, ulterior motives, or instigation by external forces, creating contradictions and differences between China and New Zealand and pushing someone else's agenda will not solve any of one's own problems, but will instead harm one's own interests and bilateral relations.”
EU sentiment is broadly stable in September. Firmer consumer sentiment offsets a slight weakening in business sentiment in the month.
In Australia, their government is welcoming the Chinese fiscal stimulus, anticipating it will boost demand for its mineral exports. New Zealand will also welcome that same stimulus if it boosts demand in the Chinese foodservice sector for dairy products.
The UST 10yr yield is now at just on 3.76% and down -3 bps from yesterday although up +3 bps from a week ago. The key 2-10 yield curve is still +19 bps positive. Their 1-5 curve inversion is still inverted by -43 bps. And their 3 mth-10yr curve inversion is deeper, now at -103 bps. The Australian 10 year bond yield starts today at 3.97% and unchanged. The China 10 year bond rate is at 2.10% and up +3 bps. The NZ Government 10 year bond rate is now just on 4.26% and unchanged from yesterday but up +6 bps for the week.
Wall Street is down -0.1% on the S&P500 to end its week up +0.5%. Overnight European markets were bookeded by London's +0.4% gain and Frankfurt's +1.2% gain in Friday trade. All these key markets ended up about +1% for the week. Tokyo ended its Friday trade up a very strong +2.3% on the day, up +5.6% for the week. Hong Kong was up +3.6% on Friday, up +13% for the week. Shanghai was up +2.9% on Friday, also up almost +13% for the week. Singapore ended its week down -0.2%. The ASX200 ended up a minor +0.1% on Friday for no-change for their wee. The NZX50 ended little-changed on the day, up +0.2% for the week.
The Fear & Greed Index ends the week well into the 'greed' range, just more so than last week. Overall markets have recovered their risk appetite.
The price of gold will start today at US$2643/oz and down -US$27 from yesterday and off its all-time high. But it is up +US23/oz from a week ago.
Oil prices are holding lower and little-changed at just over US$67.50/bbl in the US while the international Brent price is still just on US$71.50/bbl. A week ago these prices were US$71 and US$74.50, so a -5% drop since then.
The Kiwi dollar starts today at 63.5 USc and up +20 bps from this time yesterday, up more than +1c from this time last week. Against the Aussie we are little-changed at 91.9 AUc. Against the euro we are up +30 bps at 56.9 euro cents. That all means our TWI-5 starts today at 70.7, up +10 bps from yesterday and up +70 bps from last week (which itself was up +60 bps from the week prior).
The bitcoin price starts today at US$65,884 and up +1.1% from this time yesterday. And that is up +5.4% for the week. Volatility over the past 24 hours has been modest at just on +/- 1.4%.
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37 Comments
Interesting USA stats. But the one that no one wants to talk about, and the one that really matters, (well summed up by the line in the above "partisans are clueless about the impacts, and ... voters who are equally clueless) is:
"A $28 trillion problem is about to get much worse. The US is knee-deep in debt. At $28 trillion, publicly held federal debt is worth almost as much as the entire US economy. There’s also a risk that inflation will ramp up if the widening deficit prompts the Fed to “print more money” to help the government pay off its debt. "
https://edition.cnn.com/2024/09/27/economy/deficit-danger-harris-trump/…
Dalios pretty onto it, but he had his head in the sand about China.
2 years ago he was all "The US is screwed, they've too much debt, China is going to eat their lunch, I've been watching China now for decades".
Now he's all "China is borked, I wouldn't be too enthusiastic about investing too much there, can't see how they get out of this"
Same here. We have had to make hard choices with how much work can be handled without overburdening ourselves.
The economy has taken a lot of abuse from a lot of fiscal and monetary stimuli that has jacked up the cost of doing business far higher than pre-Covid, so if productive sectors are still afloat, let's consider it a miracle.
The difference in how people discuss China and the US is always interesting. The US have an apparently miraculous increase in disposable incomes and consumer spending - wow! Is this due to the entrepreneurial spirit - the free market powerhouse wealth creation machine? Nope. It is because the US Govt is literally pumping money into the economy - making households and businesses wealthier. Look at the data - it is very obvious.
Meanwhile in China - crazy communist stimulus coming to the rescue of their apparently ailing economy, while commentators infer that China is 'cheating' by providing subsidies to Chinese companies, not playing fair etc. It's just not cricket.
What China and the US are doing is using their obvious power to make their citizens wealthier. Who is getting richer within each country, and who is being left behind, is a separate matter.
Meanwhile the countries still left running their Govt budgets like a household - as if they are limited fiscally somehow - will limp along with their economies relying on increasing private debt via property ponzi schemes to enable the lucky few to accummulate enough claims on future resources (savings, shares, etc) to retire comfortably. I mean look at the sectoral balance of the US and NZ and ask yourself, which is the least sustainable model?
Who is getting richer within each country, and who is being left behind, is a separate matter.
There's apparently a million Uyghurs in re-education camps making nice things for us to buy on SheIn and Timu.
That both of these countries manipulate their currency values and money supply is no secret. And the US has conducted itself..... foolishly in recent times.
But also pretty hard to argue that one regime doesn't stifle innovation and entrepreneurship at a totally different level than the other.
It burned too fast, too quick.
Measuring harm is difficult.
Internally, hard to overlook the Great Leap Forward, the annexation of the likes of Tibet, and Tiananmen Square.
The US wins globally, but then again China's not been in a position to project that sort of power until only recently.
Our media is definitely going to have an anti-Chinese bias. The best gauge is probably the fact one country is depopulating, and has one of the highest millionaire flight rates on earth, and the other can't shore up it's borders enough.
And internally, the USA had the horror of slavery and hundreds of years of systematic racism towards black and indigenous people. Externally, they have executed numerous horrors. As well as done the right thing, sometimes.
But as you say, measuring harm is hard, in fact impossible.
I would suggest trajectory is important, though. And I don’t think China’s trajectory looks great, in terms of human rights and humanity in general.
And internally, the USA had the horror of slavery and hundreds of years of systematic racism towards black and indigenous people
True, but at a time when slavery and European ethnic superiority where de facto positions in many places around the globe.
And I don’t think China’s trajectory looks great, in terms of human rights and humanity in general.
Even property rights there are iffy. That's not to say the Western system works mint, but it's a better foundation.
Yet that de facto historic fact in no way excuses it. one can’t say it’s less bad because it happened 200 years ago.
Depends which era's zeitgeist we're viewing it through. In another set of circumstances, it's possible any one of us could've been a Nazi, a slaver, or a part of the Mongolian horde.
Likewise, future generations won't view a lot of today's conduct favourably. We've said slavery is bad, yet it's more prolific today than ever, and us on the "morally right" side of the ledger don't appear to be putting in much effort to stamp it out. On the contrary, we are willingly (or blissfully) ignorant of the chain of custody providing us with the goods and resources to subsidize such abundant, comfortable lives.
We want generous protections and benefits for ourselves, employee rights, sick and holiday pay, fair (or more than fair) wages, safe workplaces, less pollution, and more recycling, but very happily make consumer choices for cost reasons that often overlook all or any of these so called rights or benefits.
The fact we supposedly now "know better", but choose not to, is arguably worse.
Measuring harm is not difficult. You start with a couple of Atomic bombs and then work your way down the list and its a very very long list for the USA as they have run interference in just about every country on the planet. You add up the body count, the USA is the easy winner.
If the US invaded Japan, which was the other alternative. The body count would've been higher. And Japan started the war.
20th century bodycount:
Germany - 50 million+
Communist China - 20-50 million+
Imperial Japan - 30 million+
Soviet Russia - 10 million+
Khmer Cambodia - 3 million
What's the US tally in your view.
The Kiwi dollar starts today at 63.5 USc and up +20 bps from this time yesterday, up more than +1c from this time last week.
Big jumps in JPY crosses y'day - JPYUSD up 1.87% and JPYNZD up 1.62%.
Predictable rationale is that this reflects this both Ishiba’s win (who is supportive of BOJ policy normalization & rate hikes), AND the pricing out of pre-election front-runner Takaichi, who was the only candidate with a pro-Abenomics continuation (buy JGBs endlessly) / rate hike opposition.
In the case of Japan, the BOJ and MOF have never pretended to be independent.
The Hong Kong and Shanghai equity markets may be roaring, in anticipation of the coming stimulus. But Chinese industrial profits are weak.
Michael Burry significantly increased his investments in Chinese equities, particularly in technology stocks in mid-2024. Nearly half of his portfolio at Scion Asset Management is allocated to major Chinese companies, including Alibaba, JD.com, and Baidu.
Burry's bullish stance is based on government stimulus measures aimed at revitalizing the economy. These measures include interest rate cuts and liquidity support for the stock market.
YTD Stock performances
Alibaba Holdings (NYSE) +42%
JD (NASDAQ) +42.5%
Baidu (NASDAQ) -10% but up 25% in past month
Thousands march against ‘broken promise’ as new Dunedin hospital project faces massive cuts
An estimated 35,000 people have marched through the streets of Dunedin
Tax cuts for landlords and blowing the infrastructure budget on the world's most unnecessary and expensive roads or health infrastructure?
I hope none of those people marching voted for the coalition as they must have known what they were voting for. Buyer beware. Back on Track.
https://www.nzherald.co.nz/nz/dunedin-march-against-broken-promise-as-n…
It was a tax reset for landlords with mortgages to the previous long accepted business deductible status - which Labour never said they'd change until after the 2020 election so had no mandate for.
I've driven Wgtn Auckland return twice in the last month. Apart from Transmission Gully and the Hamilton Auckland expressway our roads are the same unsafe 2 lane blacktop I've been driving on for the last 50years (with less passing lanes). In the meantime our population has nearly doubled.
The Coalition have increased the health budget & are meeting the Dunedin hospital financial commitment Labour promised.
https://www.health.govt.nz/about-us/new-zealands-health-system/vote-hea…
Milei is the protagonist of David Seymour's wet dreams. Sounds like things are Hunky Dory in Argentina
Poverty in Argentina soars to over 50% as Milei’s austerity measures hit hard
https://www.theguardian.com/world/2024/sep/27/poverty-rate-argentina-mi…
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