Weekend briefing; “Downside risks” in the Chinese economy

Here is our recap of key overnight economic events affecting New Zealand with news that the IMF is highlighting “downside risks” in the Chinese economy.

But first, let’s note that the Biden administration is about to decide whether to renew Jay Powell as head of the US Fed, or move on to one of his deputies. Lael Brainard. There is a lot of lobbying going on right now and a decision is promised in the coming week, possibly this weekend. Brainard is seen as more accommodating than Powell, and the financial markets will take that into account if she is chosen.

Global supply chain problems appear to be easing. Not only are declining key freight rates (slowly) on shipments from China, but the backlog of ships awaiting unloading at major ports on the west coast of the United States has halved. And the administration’s efforts to clear those ports seem to be working, even if there are some rough edges. Efforts to recycle empty containers with sweeper boat trips are also helping. The holiday rush will naturally abate too, so the worst may be behind us. But the actual shutdown of Vancouver is a complication, and holiday shopping mistakes are likely to happen again. These North American resolutions will quickly ease pressures elsewhere in the global chain.

In the United States Congress, the House approved a broad US $ 2.1 billion in social support and climate action Among other things, this would “invest” US $ 500 billion in climate action and increase support for health care and childcare. He faces a difficult path through Senate approval.

Retail sales in Canada fell in September compared to August, but not as much as expected. Car sales were the weakest category, but that could be due to supply chain restrictions. Analysts believe overall retail sales recovered in October.

In China, Alibaba shares fell more than -11% after the online retail giant warned of slowing consumer spending. But it’s still assignment double-digit growth over one year of + 10% in its quarterly results. The company also said it expects its annual revenue to increase between 20% and 23%, but that is lower than analysts’ forecasts.

And China’s tax revenue fell in October for the second month in a row as the economic recovery slows, but tax spending has returned to growth. In particular, government revenues from land sales declined for the fourth consecutive month.

Meanwhile, the IMF noting that “downside risks are mounting” in China as its economy slows.

That doesn’t seem to put investors off, however. Inward FDI is on the rise, even though it’s outside a base affected by a pandemic, making it look better than it does otherwise.

The Australian coal industry faces a challenge that undermine its customers and one that has been thought to provide solid demand for decades. The Asian Development Bank (AfDB), lender HSBC, and the philanthropic foundations of Amazon founder Jeff Bezos and the late John D. Rockefeller, as a group, are offering substantial incentives to governments in Southeast Asia to shutting down their relatively young coal plants. factories and replace them with low-emission alternatives. Coal customers in the Philippines, Vietnam, Indonesia and Pakistan are lining up to be part of the plan.

In Australia Delta case in victoria rose to 1,273 cases reported yesterday. There are now 13,813 active cases in the state and there were 8 more deaths yesterday. In NSW there was another 216 new community cases reported another drop yesterday, with 2,840 active cases acquired locally, and they still had no deaths yesterday. Queensland is report zero new cases again. ACT has 17 new cases. Overall, in Australia, just under 84% of eligible Australians are fully vaccinated, and 7% have only had one injection so far.

The 10 year UST yield opens today at 1.54% and -4 bps lower than yesterday at the same time. The US 2-10 yield curve starts flatter today at +105bp. And their 1-5 curve is little changed at +106 bps, while their 3m-10 year curve is much flatter at +144 bps with rising short rates. The ten-year Australian government benchmark rate is -4 basis points below 1.77%. The ten-year Chinese government bond is still unchanged at 2.94%. The ten-year New Zealand government is down -1bp to 2.59%.

In equity markets, the S & P500 is up + 0.2% on Wall Street in its Friday afternoon session and is heading for a minor gain of + 0.5% for the week. Overnight, European markets were all down around -0.5%. Over the week, Frankfurt was down -0.3%, Paris was down -0.3%, but London lost -1.7%. Yesterday, the very large Tokyo market closed up + 0.5%, to limit its weekly loss to -0.2%. Hong Kong closed down -1.1% to cap a weekly decline of -1.5%. Shanghai closed up + 1.1% yesterday, ensuring a weekly gain of + 0.5%. The ASX200 ended with a minor gain of + 0.2% but a weekly loss of -0.6%. The NZX50 lost another 0.5% yesterday, bringing the weekly decline to -1.3%.

The price of gold will start today down -US $ 15 to US $ 1,846 / oz, down -0.8% for the day and down nearly -1.0% for the week.

And oil prices are -2 US $ lower to just under US $ 76 / bbl in the US, while the international price of Brent is now just over US $ 78 / bbl. These represent a decrease of -4.5% or -US $ 3.50 for the week.

the Number of North American platforms continues its relentless recovery. It has now returned to April 2020 levels when it began its collapse. At the start of 2020, 800 rigs were in service. It fell to just 244 in August 2020. But since then it has steadily increased and is now back to 563.

The Kiwi dollar today opens slightly lower at just under 70.2 USc. Little has changed in a week. Against the Australian dollar we are holding just under 96.7 AUc. Against the euro we are at 62 euro cents, also little changed since yesterday but up + ½c in one week. This means that our TWI-5 starts today at 74.7 and is very similar to levels from a week ago. But it’s down -60 bps since the start of the month.

The price of bitcoin has recovered somewhat since yesterday, up + 1.5% to US $ 58,337. A week ago, however, it was US $ 64,037, a net decrease of -9% since then. Volatility over the past 24 hours has been moderated to just over +/- 2.6%.

The easiest way to stay on top of the risks of events today is to follow our Economic calendar here ».

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