Here's our summary of key economic events overnight that affect New Zealand with news Wall Street is reassessing its valuation basics, and there is a general pullback across the board. It started with questions about an AI valuation bubble, but is extending to others now. "Risk-off" is the mood today.
But first, yesterday's reporting of China's official PMIs for January all took a step lower, now recording virtually no expansion. This was weaker than expected. Their factory PMI fell into a contraction state (49.1), while their services PMI retreated to only a weak expansion (50.2). It wasn't the result policymakers there would have wanted given they have been trying to stimulate their economy for more than three months now. If that effort is working, the core must have been quite compromised.
Chinese industrial profits were reported to be -3.3% lower in the year to December than the same period in 2023. But perhaps there are some reason to be positive for December alone, they were +7.0% higher than the same month a year ago - and that might have been their best December on record. Hard to tell how much Beijing stimulus was part of that late effort however. However, the January PMIs probably mean they have got off to a weak start in 2025.
China's tax take grew +1.3% in 2024 following a 6.4% rise in 2023. The sharp slowing followed slowing domestic demand and a slump in their property market, all consistent with the overall economic challenges they have.
Bloomberg is pointing out that current commercial real estate activity in Hong Kong is crystalising some very large losses. This re-rating will have loud echoes in many places. It is one of Hong Kong's worst slumps in history, with no end in sight. Average prices of office buildings, shopping malls and other properties have fallen more than 40% from their highs in 2018, eroding the value of the collateral backing many bank loans. Defaults are also rising as more property owners and developers run into severe cash flow difficulties.
None of these China-based news data items will be helping the Spring Festival mood in the business sector.
In the US, the Dallas Fed's Texas manufacturing survey picked up pace in January to its highest since October 2021. New orders hit their highest since April 2022, while capacity utilisation and shipments also rose.
Meanwhile, there was also a rise in new home sales in the US in December, taking them back to mid-range for any 2024 month.
And the Chicago Fed's National Activity index improved in December. All this gritty economic activity bodes well for the 2024-Q4 GDP result due out on Friday.
The UST 10yr yield is lower at 4.53%, down -9 bps from yesterday at this time. The key 2-10 yield curve is less positive at +34 bps. Their 1-5 curve is also less positive at +21 bps. And their 3 mth-10yr curve is also flatter at +21 bps. The Australian 10 year bond yield starts today over 4.45% and down -2 bps. The China 10 year bond rate has recovered+3 bps to 1.64%. The NZ Government 10 year bond rate is now at 4.61%, down -2 bps.
Wall Street is down sharply today with the S&P500 down -2.0% to start its week. The reason may be in the second part of this. Overnight, London was unchanged, but Paris and Frankfurt fell about -0.3%. Yesterday Tokyo closed down -0.9%, Hong Kong was up +0.7%, but Shanghai slipped a minor -0.1%. Singapore fell -0.2%. Of course, Australia was closed yesterday for its holiday. But the NZX50 traded but ended down -0.2%.
The price of gold will start today at US$2733/oz and down -US$37 from yesterday.
Oil prices are down -US$2 at just over US$72.50/bbl in the US and the international Brent price is now under US$76.50/bbl.
The Kiwi dollar is now at 56.8 USc and down -30 bps from this time yesterday. Against the Aussie we are unchanged at 90.5 AUc. Against the euro we are down -20 bps at 54.2 euro cents. That all means our TWI-5 starts today just on 67.1, and down -30 bps from yesterday.
The bitcoin price starts today at US$99,190 and down -5.5% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.8%.
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69 Comments
What I thought oil was going to go thru the roof so imported inflation aint happening in regards to fuel
the price is US$ but the devalued NZ$ will still mean a rise in the price at the pumps. Besides the price of crude is a lot different from that of the refined product from refineries, and that may well be influenced by other factors too. Others will understand this better.
Tech stocks tumble as a Chinese competitor threatens to upend the AI industry; Nvidia down 16%
https://www.stuff.co.nz/business/360561308/tech-stocks-tumble-chinese-c…
ouchy ouch, but I think simply better coding on faster chips will still win.
Massively multi-threaded code will run the same (well, almost the same) on fewer fast chips, or many more slower chips. Other things, like power consumption, might be quite different but throughput can be scaled to be the same. The trick is getting the code to be in fact 'massively multi-threaded' so every CPU or core is running at a 100% all the time. A CPU - with queued work to do - that drops below 98% indicates a blocking action that needs addressing. (Note the % are representative and not quite how this is measured.)
The AI competition between China and the USA is boiled down to the competition between
the Chinese educated all in China vs. the Chinese educated partially in China (up to undergraduate level) and partially in the USA (postgraduate level and above)
haha
...& competition in censorship
Watch: We test DeepSeek for censorship. It doesn’t go well
https://www.stuff.co.nz/nz-news/360562380/watch-we-test-deepseek-censor…
Tech stocks tumble as a Chinese competitor threatens to upend the AI industry; Nvidia down 16%
Nvidia lost $560 billion in market cap today - the largest single day loss in market history. Similar to the entire listed market of Mexico going to zero.
Hype v's reality
Nz - welcome to third world public transport!
Woke up this morning to discover that the trains are running on a reduced service. My understanding was that things would be ‘back to normal’ today. What a joke
The car it is
What do you expect in a car centric utopia...?? Get into your ICE SUV and get in into a long queue like a sensible sheeple.
You are basically punished for not owning a car in NZ. Local governments provide 10's of billions of dollars of free car storage to car owners. If you don't own a car you miss out on using this very expensive free service.
I agree - especially when you consider a few hundred buck a year in rego gives you car the right to occupy several square metres of laid tar seal 24/7, 7 days per week.
Imagine if one could lease a tiny house site for that - homeless solved.
Always makes me chuckle when the Karens complain to the council about someone parking outside their house in 'their' spot when it is a public road, or thinking it obstructs their view etc. Wellington is notorious for it.
.... there's thousands of tiny homes for sale for less than $ 5000 ... look on TradeMe ... under Cars 4 Sale ... ... Toyota ...
Yvil, I owe you an apology. I questioned your approach to dealing with that teenage girl, things are more complex that I thought. I'll refrain from commenting on it going forward and take back what I said. My bad.
https://www.waikatotimes.co.nz/nz-news/360554582/hamilton-motelier-who-…
That's a sad read.
There’s a lot of sadness out there Guy.
My reaction as well... throw the book at them for tax not paid..FFS!!!
Sounds like they could recoup a couple mil from that mansion if it actually sold. then again, it could be tainted with all of that ego sprayed all round it
They leased it, no one is saying the property owner is behind on tax.... it seems to be the operator.
Are you people serious? What’s with all the shock and horror? Are you really that insulated in your bubbles of joy and wealth?
Are you people serious? What’s with all the shock and horror? Are you really that insulated in your bubbles of joy and wealth?
This story encapsulates all that is wrong with Aotearoa. We should all hang our heads in shame - our belief systems; our ruling elite; our morality all on display in this tale of sadness.
... or , this story illustrates the sheer incompetence of the Ardern/Hipkins government ...
Perhaps this tenants would've been better behaved if DJ Trevor Mallard had've piped whale song music into the units ...
... or , this story illustrates the sheer incompetence of the Ardern/Hipkins government ...
Question is would the wingnuts have been any different? Probably not. We can rag on Team Jacinda all we like. But nothing changes.
The lock downs showed just how many homeless there was.
Police" you need to go home and stay there".
Homeless, " this is home"
... you're never without a roof over your head if you own a Toyota ...
And what about the Govt dept role in this? Providing the tenants and paying the rents. Wilful blindness?
That's magnanimous of you Agnostium, thank you. Although the link you provided has nothing to do at all with the girl you're apologising for.
Not trying to be magnanimous 😊, I just spoke without knowing enough about how the system was set-up and owe you an apology.
I realise this article was not about the girl, but I said you should have left it to her minders. After reading this article it's clear that more of the responsibility for addressing bad behaviours falls on the owner/operators than I thought. I was wrong about saying you should have stayed out of it.
Look Adrian Orr, some growth!
Yesterday I made a comment in the DNS article about below quote and the nz standing for New Zealand and it's no wonder we play whale songs to heal forests. It was apparently deleted.
.nz being the country-code top level domain for Aotearoa
Have others had comments just deleted with no trace?
It's the first time it's happened to me that I know of, but I'd suggest a note from the Ed in place of the comment is a better method. The reason is so the level of 'cancellation' or 'censorship' is public.
I could play you a whale song to make you feel better- like Enya but more irritating after a while however?
Cannot be wrse then Taylor swift on a long road trip.
Some of us think further than the low value comment I posted yesterday which I'm not at all worried about. However, it's called a slippery slope for a reason.
Are you also okay for posts of a certain political persuasion to be 'disappeared' without trace nor reason?
I think my comment/suggestion today could be beneficial to the site and how it's perceived long term.
Anyway, quite liked listening to Enya back in the day.
To be fair ... It is incorrect. (And the fragile and/or thin-skinned would have been mightily offended.)
I also had comments deleted in full or partial comments deleted over the weekend. One of my partial comments was directly related to the article, questioning the authors viewpoint. The other comment, I guess I was shit stirring but it was more a bit of banter, that was my take on it anyway. That’s what makes this site great. Open and free discussion, it’s not a swamp of abuse on here. Hands off the comments unless it clearly crosses the line.
I don't mind the site doing what the site wants, I think it should be open and transparent about it. Questioning things shouldn't in of itself be a reason for deletion in my view, but again, not my site. This was a first for me, so I wondered how prevalent it was. I like it when it's removed/edited with a note from the Ed ideally as to why so everyone may learn.
Some time ago posts came to be deleted with no explanation. Suggest firstly because the editorial staff had enough to do wading through some of the suspect offerings in the first place and secondly, because it should cause the poster to have a think about what was being seen as unacceptable. As someone expressed at the time something like sending a naughty child to their room until they confessed to what they had done wrong. That way the parents often found out as an added bonus about other “crimes” they weren’t aware of.
I understand the site has bound itself to the Media Council.
They are a not-entirely-onto-it bunch, and the self-imposed criteria still allow them to peddle falsehoods (the excuse is its 'balanced'; he-said/she-said allows 50% bulls-it - but it can claim 'balance').
And I'm here to tell you the edifice plays games (will stand in court anytime and explain, happily), obfuscates, and avoids. Mary Major and Tim Watkin are names I will not long forget.
Nonetheless, if one feels enough about censorship - which is what it is, private site or not - then that is a first avenue.
Equities, Gold and Bitcoin dropping in unison is not a good sign. It signals that money is not moving from one asset classe to the next. It suggests money is being withdrawn because of the need to repay debt (edited) rather than being able to keep it invested.
These are all liquid assets, can also mean that margin requirements caused these where the first to be sold.
You often see Gold sold on a big equities down day. Its a need to pay down leverage , not a need to spend.
Big 7 will be highly leveraged by many.
You understand well young Jedi.
Remember, Lehman had an $800B balance sheet when it went bankrupt but its bankruptcy very nearly collapsed the entire western banking system.
China has an estimated $37T balance sheet. What if something happens to China. You would be hoping you had some exposure to Gold and BTC.
Water cooler buddy asked who would want BTC when everything started collapsing. In a major panic, either they print the money to cover the banking system or your money in the bank disappears.
"You would be hoping you had some exposure to Gold and BTC. "
Unless they too get sold off to reduce leverage and cover losses. Both are pretty liquid and are good candidates to release cash quickly to cover margin calls, banking covenants, severe cashflow stress, etc., etc.
Methinks this could be the beginning? The quality of the dead cat bounce (if there is one) will tell us much. Cash & near-cash is looking pretty good at this time.
Unless they too get sold off to reduce leverage and cover losses.
I think you missed the point of holding assets without counterparty bank risk.
No I didn't. I was referring to the very short term. My comment below mentioning central banks refers to the longer term.
No I didn't. I was referring to the very short term. My comment below refers to the longer term
I was posing an answer to a water cooler buddy who doesn't understand counterparty risk. Short-term market value is irrelevant in this context.
"Short-term market value is irrelevant in this context. "
No so. Short term market value was extremely relevant in understanding counter party risks. You mentioned an example yourself: Lehman.
"Lehman had an $800B balance sheet when it went bankrupt but its bankruptcy very nearly collapsed the entire western banking system."
That's a misrepresentation. Lehman's collapse is just the 'most remembered' victim, of which there were others, in a industry wide collapse in an 'asset' class that were wildly overvalued. Ergo, $800B is a misleading value in the context you portray it in. (And to then immediately compare it to China in the next sentence is absurd.)
Sigh. I won't bite.
Best you don't.
For others, it was the asset class's collapse in value the brought about the GFC. Lehman was just the 'most remembered' victim. Others had failed before Lehman. And others failed afterwards. And more would have failed had not central banks stepped in. It would have almost certainly have happened regardless. It is extremely rare for asset bubbles to deflate without a bang.
Best you don't.
The ego has landed...
But am I wrong?
Again - yes
Me thinks this could be the beginning? The quality of the dead cat bounce (if there is one) will tell us much. Cash & near-cash is looking pretty good at this time.
I'll let Warren Buffet know your opinion... ;-)
But the issue is J.C.'s assertion that $800B was enough to collapse market and we should consider what China's $37T would do.
"Its a need to pay down leverage , not a need to spend."
Sorry, I expressed myself badly, I was trying to make exactly this point, but you said it more clearly than I did.
"It suggests money is being withdrawn because of the need to to spend it rather than being able to keep it invested."
Partially, yes. But when losses are real, and are system wide, money is destroyed. I.e. it just ceases to exist. Which is one of the reasons central banks pump 'new' money into the system when the sticky brown stuff hits the whirly thing.
I must have missed the local media reports on Trump pulling out of the OECDs base erosion global 15% corporate tax avoidance program.
"America first" etc
Is NZ Digital Services Tax really going to proceed in the face of Trump's tariff threats ?
https://www.whitehouse.gov/presidential-actions/2025/01/the-organizatio…
At present the USA is a major beneficiary of there being no such agreement. Google, FB, MS, etc. etc. are major examples. They operate globally but pay little or no tax in many places where they operate. It is one of the reasons why US 'productivity' looks so good.
The new administration is simply demonstrating their contempt for all other countries in asserting the status quo serves anyone except themselves and a small number of others. If a business operates in country, they should pay the same taxes as everyone else in that country.
"I'm not a big believer in this whole deep sea story at all," Polcari states," because I find it really interesting that here we are in America, spending billions of dollars. Some of the greatest minds in the world, in the country, putting this AI stuff together... And then we get some guy from China in a startup company that comes out and he does it with lower-quality chips and an OpenAI system that functions better than what we've been designing. It just doesn't make sense."
Talk about a wow moment. The above from a US based 'chief strategy' dude. Fairly typical of those that believe US tech has an un-assailable lead in A.I. He clearly doesn't pay any attention to what the Chinese have been doing for over 10 years.
Two collaborators of mine, based in China, and A.I. fanatics (in terms of the tech, not all the applications & hype), have been rabbiting on about DeepSeek (and its past incarnations) for years. They believe the Chinese have a 'natural advantage' in language processing because their language is so damn complicated. Case in point, do people know that 'predictive text' came from China because there was no way to get even simplified Chinese on a keyboard?
Anyways, this really shouldn't have come as a surprise. DeepSeek has had previous releases available to anyone that was interested and/or wanted to contribute. They've hardly been keeping it secret. In fact, quite the reverse.
Meme quote one of them sent me today: "Why would you pay for a calculator that is only right 90% of the time?"
https://www.nzherald.co.nz/nz/politics/christopher-luxon-floats-nationa…
As predicted, sell the family silverware to foreign interests and the super rich is Luxon's only economic growth strategy. Worse National leader in loving memory, he's going to be hard to beat.
... " in loving memory " ... isn't that what they write on cemetery headstones ? ...
As it happens , the Crown owns well over $NZ 500 billion in assets ... a chunk of which are underperforming , or just unnecessary ... it makes sense to free them up for private ownership ...
Government owns a lot of assets that it makes sense to keep in public ownership: rail, internet security (Kordia), roads, major power companies. Many more are in public ownership (lines companies, ports etc). There is a public interest in certain services being provided at low cost to the public to ensure they're not sold for a song, asset stripped and left to die, with New Zealand losing the ability to benefit from them.
An "underperforming" asset that meets the public or merit good test should have everything possible done to increase their "performance", not sold. If it makes no sense for the government to own the asset (frivolous example: a supermarket), sure, asset sales are good. But we must be careful about just calling something strategically important to the country like rail "underperforming" and flog it off for a song, only to enrich someone like Carlos Slim.
We have a public interest in the likes of keeping electricity cheap. It could have been cheaper today if they didn't sell near-half of the gentailers off, and now as it is profitable, in a squeeze like we are in currently, the govt had a vested interest on letting the profits crank along with the power prices as they are getting tax and a share of the profit from it.
How about a slightly different take on the same ...
How about Government owning, or supporting, at least one 'hands-off', non-profit business (i.e. co-op, mutual) in every market sector to keep the private players from forming oligopolies, intentionally or not.
By 'hands-off' I mean they operate as businesses and are not used by successive governments to implement any policy whims. Because our market is so small, we can't have the number of competitors required to introduce real competition (7+ by some estimates), but a non-profit in every market sector would create competition for the profit driven companies.
Obvious sectors for starters would be banking and supermarkets. And yes, other countries do this, even the USA.
As it happens , the Crown owns well over $NZ 500 billion in assets ... a chunk of which are underperforming , or just unnecessary ... it makes sense to free them up for private ownership ...
Would you put the Navy in this bucket?
How do you define underperforming? Schools, hospitals, roads, bridges?
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