90 seconds at 9 am: China PMI at 6yr low

China's factories keep contracting; US and Europe factories still expanding; VW boss quits; UST 10yr yield 2.15%; oil down, gold up; NZ$1 = 62.5 US¢, TWI-5 = 67.2

24th Sep 15, 7:20am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news the VW boss has quit.

But first, there have been three major pieces of data that have dominated overnight. Firstly it was the Chinese PMI which fell to a six and a half year low and fell for the sixth consecutive month. China's factory output and new orders are contracting. But how serious that is is open to debate. It certainly is serious for Australia and Brazil for instance but it is less clear for New Zealand.

The same factory survey in the US was more encouraging. It is still expanding and output growth picked up pace. But incoming new work and employment numbers rose at slower rates. And factory gate prices fell for the first time in over three years.

And in Europe, the factory survey data pointed to steady growth at the end of the third quarter. Moreover, faster growth of new work and backlogs of orders point to continued expansion in coming months. Selling prices were stable despite sharply reduced commodity prices. France continued to lag the upturn, and growth slowed in Germany.

Staying in Europe, the boss at VW has quit in the midst of the emissions testing fraud case. The focus is now turning to other car manufacturers.

In New York, the UST 10yr yield benchmark is still down at 2.15%.

The US benchmark oil price is lower today, now at US$45/barrel and the Brent benchmark is at US$48/barrel. Markets fell with American crude stocks down as much as -3% after the bullish impact of lower crude inventories was offset by a large petrol buildup that raised concerns about high autumn fuel supplies.

The gold price is up today, now at US$1,130/oz.

The New Zealand dollar starts today a little lower. It is now at 62.5 US¢, at 89.1 AU¢, and 55.8 euro cents. The TWI-5 is at 67.2.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here »

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11 Comments

by Henry_Tull | 24th Sep 15, 8:41am 1443040902

All SS response. DD not moved

https://www.nzx.com/companies/FCG/announcements/270654

by King of the whiners | 24th Sep 15, 9:57am 1443045443

Rather significant:
http://ftalphaville.ft.com/2015/09/23/2140625/a-wink-and-a-nod-later-an…

If you can't get through the Financial Times paywall, Zerohedge has lifted it:
http://www.zerohedge.com/news/2015-09-23/here-we-go-citi-officially-cal…

by Stephen Hulme | 24th Sep 15, 10:03am 1443045800

Gotta wheel barrow?

by steven | 24th Sep 15, 11:08am 1443049681

Well the first, "it admitted that the conventional Fed QE approach of using banks (and excess reserves) as intermediaries, is now widely accepted as a failure (as we noted earlier) and that a more "acute" form of money printing would be required"

ie real money printing into main street, or public works which avoids the inflation trap but provides economic boost (where its genuine and gives a return unlike Japan which built bridges to no where).

so it does not necessarily lead to, "one which nobody would mistake for what took place in Weimar Germany. "

same, same rubbish from the inflationistas (here comes hyper-inflation!).

Of course what the continue to miss is why we are in the mess we are in and that it cannot be solved. As the saying goes "never fight a battle unless you have to and never fight it unless you can win it".

Going to be interesting when finally the financial types get their heads around the cost of energy in a grow forever economic model that cannot get more cheap energy to do so.

by Stephen Hulme | 24th Sep 15, 11:54am 1443052455

by Stephen Hulme | 24th Sep 15, 11:43am 1443051801

same, same rubbish from the inflationistas (here comes hyper-inflation!).

What do Auckland's percentage property price rises represent as a ratio to GDP and personal income growth statistics other than hyperinflation? Relying on a concocted index such as CPI to defend a failure of inflation is wearing. Housing no matter it's capital asset status is consumed by it's inhabitants at cost, hence the lack of disposable income to purchase other products.

Stock markets demand debt servicing costs (consumption) to support a rising price structure, due to a shortage of collective personal disposable income to reflect it's capital raising status value to a nation. Read more

by Roelof | 24th Sep 15, 1:00pm 1443056452

ie real money printing into main street, or public works which avoids the inflation trap but provides economic boost (where its genuine and gives a return unlike Japan which built bridges to no where)

I'm curious to know how that avoids the inflation trap...?? Once money enters an economy...it can flow anywhere.. If there were shortages of food and clothing ( CPI type things ) ... you would find that the money printing spent on main street/public works ....would end up pushing up those prices... as it flowed thru the economy... AND that money would/could also, still, find its way into asset prices.

ALSO... You talk about fighting a War.. The current war is DEBT... Central Banks and Govts' are focused on preventing a deflationary implosion as an outcome of too much debt ( NZ has yet to face this problem ).... and that could well lead into the next problem , which could well be CPI inflation..??? Maybe... maybe not..
I do know that we are in the midst of what might become the biggest asset boom of all time... and that is a result of Monetary inflation... a result of Central Bank Money printing ( liquidity) and ultra low interest rate policy.. driving credit growth.
That policy won't change until there is CPI inflation..

The energy War you allude too has yet to happen... nobody fighting nothing... at this time.

by scarfie | 24th Sep 15, 1:18pm 1443057530

The energy wars have started, that is what is at the core of Syria, and the uprising in Egypt. Both countries turned from net exporters to net importers in the last 5 years.

Inflation has an intimate relationship with the consumption of resources. If money growth exceeds the consumption of resources(plus additional consumption of those resources for interest payments) then where does the money go? It has to go into assets.

Velocity may be overlooked here also. It is possible to increase the money supply, but a decrease in velocity may hold prices back.

by Mike B | 24th Sep 15, 1:42pm 1443058938

Eni's discovery of potentially the world's largest natural-gas field off the Egyptian coast will be a gamechanger for Egypt and the Mediterranean in terms of energy stability, the CEO of the Italian energy giant told CNBC on Monday.

On Sunday, Eni said in a press release that it had discovered a "supergiant" gas field that could hold "a potential of 30 trillion cubic feet of lean gas in place." It said the discovery well was located off Egypt's Mediterranean coastline at a depth of 1,450 metres with the prospective Zohr field covering an area of about 100 square kilometres (60 square miles).

Eni said that the discovery could satisfy Egypt's natural gas demand for "decades".

http://www.cnbc.com/2015/08/30/eni-makes-huge-natural-gas-deposit-find-…

by Mike B | 24th Sep 15, 1:45pm 1443059124

scarfie - The war in Syria is not about shortage of oil and gas it is about pipelins going to Europe to cut out Russia.

It is all about destroying the Russian economy so the yanks can break up Russia etc

by bender | 24th Sep 15, 11:59am 1443052750

Hperinflation, yep. My liveaboard fee just went up all of 1% plus GST for the whole of next year. My container/classic car rental space remains unchanged for the past seven years. The only inflation I've experienced during that time has been all the increased fees, GST, etc by the Nats to fund their mates' income tax cuts (which they avoid to the extent of $6 Billion a year besides and all very "legal" if immoral by favorable legislation and IRD rulings). And they still can't balance the budget much less approach what Cullen left them.