Here's our summary of key economic events overnight that affect New Zealand with news financial market traders are bracing for volatility over the US election-counting period. (This is interesting.)
But elsewhere, global manufacturing remains subdued as new order intakes contract for a fourth successive month. The global factory PMI is dominated by large countries, especially the US and China. But at the positive end are healthy expansions in India, Spain and Brazil. At the other end however is the Eurozone, Turkey and Australia. (New Zealand would be too if it was included in these benchmarked surveys.)
New orders for manufactured goods in the US fell by -0.5% in September from the previous month, extending the revised -0.8% decline in August and loosely in line with market expectations of a -0.4% drop. They rose if you exclude aircraft however. Year on year this retreat is -2.1%. But if you exclude defence orders, there is a fall in private sector orders of -3.2% year-on-year.
There was a popular UST 3 year bond auction earlier this morning where the median yield came in at 4.09%. But despite high demand, that was +27 bps higher than the 3.82% median yield at the prior equivalent event a month ago.
In China, banks are foreclosing on a growing number of apartments after homeowners could not pay their mortgages, as the country’s housing crash threatens the financial system. And the surge is overwhelming their legal system in some places. Bank balance sheets are being weakened by the trend.
But maybe this will pass soon? Their housing market got year-on-year growth in October for the first time since February, after a raft of recently introduced supporting measures, according to the latest data released by the Ministry of Housing and Urban-Rural Development. Sales of newly built and pre-owned homes climbed +3.9% in October from the same period last year.
India’s factory sector came in with an improvement in performance in October with their PMI rising marginally and regaining momentum. Output growth rose, fuelled by faster increases in total new orders and especially export orders.
In Europe, their factory sector remains in a deflationary funk. But at least it isn't getting worse. As measured by the overall Eurozone PMI, October brought a lesser retreat. There is expansion going on in Spain, Greece and Ireland, but Germany, France and Italy are all contracting, even if less so.
In Australia, the Melbourne Institute Monthly Inflation Gauge recorded a rise in both monthly and annual inflation during October. The monthly rise (+0.4%) was the most since July. But the annual rise (+2.1%) is still within the RBA's desired range. The monthly and annual cost of living also rose across selected household types (age pensioners, pensioners and beneficiaries, employees, government transfer recipients, and self-funded retirees).
Later today, the RBA will review its cash rate target. Almost everyone expects them to hold that rate unchanged at 4.35%.
And we should note something that Australia will be concerned about. Indonesia is getting closer to Russia.
The UST 10yr yield is now at just on 4.33% and down -4 bps from this time yesterday in fairly volatile shifts. The key 2-10 yield curve is now less positive, by +14 bps. Their 1-5 curve inversion is less inverted, now by -9 bps. And their 3 mth-10yr curve inversion is more inverted, now by -34 bps. The Australian 10 year bond yield starts today at 4.62% and up +6 bps. The China 10 year bond rate is unchanged at 2.13%. The NZ Government 10 year bond rate is up +10 bps to 4.59%.
Wall Street has opened its week with the S&P500 down -0.1%. Overnight, European markets made a similar retreat, except London. Yesterday, Tokyo ended its Monday session down -2.6%. Hong Kong was up +0.3% and Shanghai up +1.2%. Singapore rose +0.5%. The ASX200 ended its Monday session +0.6% higher, but the NZX50 only rose +0.2%.
The price of gold will start today at US$2733/oz and down -US$3 from yesterday and still well off its high.
Oil prices are up almost +US$2 at US$71.50/bbl in the US while the international Brent price is now at US$74.50/bbl.
The Kiwi dollar starts today at 59.8 USc and up +20 bps from this time yesterday. Against the Aussie we are down -10 bps at 90.8 AUc. Against the euro we are down -10 bps at 54.9 euro cents. That all means our TWI-5 starts today at just under 68.7, marginally softer from yesterday at this time.
The bitcoin price starts today at US$67,740 and down -0.6% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.3%.
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37 Comments
"...This led us to the comments made in September by Ford chief executive officer Jim Farley. Freshly returned from a visit to China, Farley told The Wall Street Journal that the growth of the Chinese auto sector poses an existential threat to his company, and that “executing to a Chinese standard is now going to be the most important priority.”
By any measure, this is an earth-shattering statement.
...This brings me to the third vision of China: that it is only just beginning to leapfrog the West in a whole range of industries. This vision is starting to show up itself in the perception of Western brands in China, and their sales. For example, Apple’s iPhones no longer figure in the five best-selling smartphone models in China. And Audi’s new electric cars made and sold in China will no longer carry the company’s iconic four-circle logo; the branding is now perceived to be more of a hindrance than a benefit.
...On September 9, the US House of Representatives approved a bill entitled “Countering the PRC Malign Influence Fund Authorization Act” by 351 votes to 36. ...So yes, at a time of record debt and swelling budget deficits, the US government proposes to spend US$325mn a year paying “independent” media (the irony!) to push stories about the negative impact that China may be having around the world."
Years ago we all seemed to understand that to get something manufactured in China was inviting them to steal your technology and intellectual property. These moves should not really be a surprise to anyone, only the length of time it took for them to get here. The big corporations brought it on themselves.
There's a few others...This includes the Four Great Inventions: papermaking, the compass, gunpowder, and early printing (both woodblock and movable type)
https://en.m.wikipedia.org/wiki/List_of_Chinese_inventions
Could more than suggest that by the time the CCP took over China had had the rough end of the stick from the Western powers that be. Coerced into the opium wars and had to cough up Hong Kong & Macau. The nefarious Britisher who stole the tea. Germany demanding the Tsingtao enclave which subsequently enabled Japan to launch their genocidal invasion. You could understand the CCP concluding that China will never again be in such a position and it that regard, they have certainly succeeded.
Or you could argue that the ruling powers of China had grown complacent, but wealth and power had created division and envy within China that left them exposed to the predations of other powers, and ultimately vulnerable to unrest from within. It doesn't change anything though. What has the CCP done for the world as a whole other than stole technology?
Noncents is correct, where they are made is relevant, where they are designed is the point and they are not the same place.
The west has gifted technology to China in the last 50 or so years because of greed. The payback is coming and I don't think the west is prepared for it.
You could - but Foxglove is correct; the hegemon which turned up with the most energy, won the skirmish. And did what we winners have always done; extracted what we valued, from underneath those 'others' (who would, of course, have succeeded like us if they only had had our... whatever).
Don't blame the current political structure in countries we've extracted from, like Trump and Farage, they are consequences, not forcings.
If it hadn't been for the Chinese revolution, and assuming ongoing political stability China would likely be the dominating world power today. And I think a largely benevolent one. But politics and greed always rears their ugly heads and dirties the water.
Trump and Farage are consequences of internal corruptions, not what happened a long time ago and far away. Politics tends to have (but not always) a short memory.
But yes the cultures of the 1700, 1800 and 1900s meant that those in power then, just as they are tending to do today, seek to seize wealth, power and influence firstly for the individuals and then for the nations.
But too long a period of stability always tends to create internal divisions because no power has ever worked hard to ensure all the population shares in the wealth that is gained. Only a few get that.
You have a rather over inflated view of the Kuomintang. When they landed on Taiwan they suppressed all political descent, were ruthless to the native Taiwanese and implemented martial law for a few decades for good measure. Benevolence at the end of a series of massacres to suppress descent... then ensure its enforced militarily for a generation.
They sowed the seeds for the CCP to thrive, through corruption, keeping feudalism and weak foreign and domestic economic policies resulting in easy invasion for the Japanese. It shouldn't surprise anyone the Chinese people then wanted strength, to not be abused and for equality. Yes that took some serious reordering of the society, but now, would anyone even think about invading China or competing with them economically? I don't agree with the Chinese military adventurism in the South China sea, but nobody is really opposing them...
They are setting the stage to be the next leaders of the world and I don't know if there is much anyone can do to stop it.
Didn't mention the Nationalists at all, but their history isn't all that salubrious. Having said that though they were the mainland government until 1949 when the communists attacked them. Admittedly their anti-communists activities were harsh on Taiwan, but when you think about they really had little choice considering who their main enemy was.
This historical record doesn't mention corruption when they were the government on the mainland, but rather political factionalism and a lack of control over large swathes of the country, allowing other political factions including the now CCP to form and flourish. That political factionalism created a pretty nasty environment of in fighting and violence.
Nobody opposing them on their stance against Taiwan; that is a view as the rest of the Asia Pacific area bend over backwards to avoid a conflict, but China is push too hard and I'm not sure there is much more 'give' to go...
And their aspirations are clearly world domination, starting with the pacific theatre, and if the west has learned anything from Ukraine, they will be stopped.
Surely the nationalists would be in power if the CCP weren't? You said above that if it weren't for the CCP China would already be dominating the world?
Ask old people in China, the corruption was kind of a semi-feudalistic if you were mates with landlords, you were sorted as they were also the government type corruption. Peasants had zero real say in how they lived, their lives were controlled by capitalists and enforced by the government.
When Chiang Kai Shek blew the dyke on the Yellow River to stop the Japanese advance, while killing around 800k of the peasantry, that was probably the final straw.
I doubt China would want world domination, they know they couldn't keep it for any length of time, such a thing is unenforceable for any length of time without the ability to move large numbers of robots/troops to hotspots very quickly (i.e. by space based means). To reshape the economic order of the world to their favour however, almost certainly. As does every other major power...
The nationalists toppled the Quing dynasty which was more or less feudalistic. It could be argued that it was the only form of government they knew. But as their society developed on Taiwan, and under pressure from their Independence Movement, established after the Feb 28 massacre, they instituted a full democracy, and its a fairly robust one too, despite the CCP meddling. Any discussion and suggestion of a proper democracy in China is ruthlessly squashed.
"To reshape the economic order of the world to their favour however" How is that different from 'domination'?
I agree that most world powers want to influence the world, but how many do it from a democratic perspective? The CCP is authoritarian, and it would expect to spread it's domination from that aspect. Irrespective of how they might couch it, their expectation would be that all other countries bend the knee.
Interesting passage of history typifies the exploitation. During the 1930s as the Japanese invasion of China intensified, the Royal Navy deployed such as HMS Berwick & HMS Verity to patrol the Yangtze river to ensure that the passage of their mercantile fleet remain unaffected, and so too the profitability of the various trading houses, by the warfare raging on either bank. That was not forgotten and that in 1949 culminated in the Yangtze Incident when HMS Amethyst and HMS Consort were fired on by shore batteries, and heavily damaged. Don’t believe any foreign warship has sailed up any Chinese river uninvited ever since.
I would probably buy a Chinese car. I wouldn't have dreamt of it a few years ago. Almost everything is made there anyway; why pay a lot extra for a Euro or Japanese brand when the Chinese ones are pretty much as good or maybe even better.
China is becoming the next Japan. The Japanese must be fairly worried, the Germans are already crapping their pants.
I was talking about this with my son with regard to his business studies and eco. Having established operational excellence and obliterated European car manufacturers on price, China are now rapidly moving up the differentiation/quality curve. Take a look at the Tank 700, it's a $350k Range Rover for $135k, likely much better tech and quality too. What China have achieved in 20 years is staggering.
They will need to go robotic in a big way. Would not want to be baby formula seller.
"China is on track to record its lowest marriage rate since official records began, signalling a deepening demographic crisis that has major implications for the country’s economic future. In the first nine months of 2024, only 4.74 million Chinese couples registered their marriages, a sharp drop of 16.6 per cent from the 5.69 million recorded in the same period last year. This downturn is part of a consistent decline from a 2013 peak of over 13 million marriages.
...The ramifications of falling marriage rates – and by extension, plummeting birth rates – present a significant challenge for Beijing as it confronts a shrinking workforce and rapidly aging population, both of which threaten to stall economic growth. After two consecutive years of population decline and a birth rate that hit its lowest since the founding of the People’s Republic in 1949, China’s demographic worries are intensifying."
https://www.business-standard.com/world-news/why-are-young-chinese-ditc…
I remember a decade (at least) of the same criticisms of Japanese cars back in the day....wouldnt touch a euro with a barge pole now if i was planning on holding it past warranty (or probably even before)....the Chinese are doing what the Japanese did a few decades ago.....not that it will solve anyones problems.
I would suggest that with the geopolitical tensions that are building, that that will happen anyway whoever id the President in the US. If China would escalate to active conflict (and they really are not far from that now) it is pretty certain that all manufacturing for the west that occurs in China will crash to a stop instantly one way or another. The alternative is that the customers will be financing China's wars. Any government and corporate risk managers should be well down the track in identifying those risks and building alternative options.
Sadly in NZ that really does not look like it is the case.
Indonesia's navy exercising with Russia has all sorts of implications. Strategically it may well be a move to get some help at holding China at bay, although I suspect that ploy may be somewhat fraught. But in may respects it will also provide Indonesia with some level, albeit low, of comparable capabilities of potential enemies and upskilling it's own military on what it may be seeing in the not too distant future. They may learn nothing new, as shared intel would have a lot if not all of the information they would gain, but then there are operating patterns and processes.
Aussie will be watching very closely, and so should NZ.
Indonesia could also be a proxy information gatherer for western interests. This is common. And carries 'information leakage' risks to both sides. My guess is Pootin is so 'contained' that the Kremlin is prepared to take the risk. Some information gathered by Russia will be shared with China (and others) to maintain the friendship - but certainly not all. Ditto Indonesia will share with others some of what they learn - perhaps even with with China. And they'll be the inevitable fake leakages of information. These exercises are seldom as MSM paints them.
I think that is very likely Chris. Plus the fact that the Russians have likely figured their navy is a lot safer not being in the Black Sea. Might as well put them to use. They'll be gathering as much info as they can on Indonesia, Aussie and anyone else in the area too.
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