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China’s industry in profit recovery; Singapore factory production strong; Swiss vote again on immigration; US durable goods orders weak; Aussie auctions strong; UST 10y at 0.66%; oil and gold stable; NZ$1 = 65.4 USc; TWI-5 = 69.2

Here’s our summary of key economic events over the weekend that affect New Zealand, with news American factory orders are remaining weak and missing analysts recovery projections badly.

But first up, China has reported that its industry is recovering its profitability and in quite a strong manner. In August they were down -4.4% from the same month a year ago, but that was a good recovery from the -8.1% shortfall in July. But not improving however are high inventory and receivables levels.

China’s US$1 tln sovereign wealth fund posted a +17% gain on its overseas investments in 2019. That reverses a small loss in 2018 and is a similar gain it posted in 2017. Much of the gain was from investments in the US which is still where most of its investments are. Norway also has a huge sovereign wealth fund and in 2019 it earned +20% in 2019 – but recorded a -3.4% loss in the first half of 2020. In 2019 the NZ Super Fund reported a +21% return, but has also struggled in 2020.

In Hong Kong there has been a continuing rush for British passports. The trend started in 2019 and has continued unabated in 2020 as riots and China’s tight grip is fuelling the surge.

In Singapore, they reported a very strong rise in industrial production for August, up almost +14% from the same month in 2019 when the expected gain was less than +5%. It is a positive surprise built on gains from their electronics industry.

In South Korea, consumer confidence is falling again and that is from a low base to start with. It is a worrying sign for them.

In Switzerland, they are voting on another referendum trying to limit immigration. A 2014 one passed by a razor-thin margin but was never passed into law because it infringed on agreements it had on freedom of movement with the EU. This one is another attempt to freeze out the EU, sometimes referred to the Swiss Brexit. Results will be known in a few days. If passed it will be tough on Swiss employment because the EU is their largest trading partner. The referendum is supported by one right-wing political party and is not expected to pass this time, although the pandemic impact has added uncertainty about the result.

In the US, their August durable goods orders were weak. They came in -6.3% lower than the same month in 2019 and well below analysts expectations. In fact, business investment in capital goods were down almost -11%. These are big retreats from the boardroom. Perhaps the only positive is that they are inching back up monthly and have done so for four straight months now.

But weak factory orders didn’t stop a strong rise on Wall Street in their final session last week. And the futures market suggests it will rise another 1.5% when it opens tomorrow. That would be enough to wipe out last week’s earlier losses.

Across the border, Canada has reported a four month government deficit of -C$149 bln compared to less than -C$2 bln in the same period in 2019.

In Australia, there is a widespread expectation that their Federal Government will roll back their responsible lending rules next week. These are rules imposed after the Hayne Inquiry into financial system behaviour. Banks have claimed they effectively stifle lending. Consumer groups claim the lending they stifle is irresponsible lending. If the rollback happens, it will render the Hayne Report moot. Bank shares surged in trading on Friday, with the CBA up +3.0%, NAB up +6.9%, Westpac up +7.4% and ANZ up +6.3%. The Aussie banks have had a major lobbying ‘win’ here.

And Sydney’s auction clearance rate rose to 75% this weekend. And Melbourne has removed restrictions on open homes, which is expected to generate a make-up surge.

The latest global compilation of COVID-19 data is here. The global tally is 32,919,000 and up +554,000 in two days. That is a clear signs the pandemic spread is accelerating again. Brazil and Russia are the key countries providing the most impetus, but European nations are as well. New infection levels are exploding in the UK, France and Spain especially. Global deaths reported now exceed 995,000 (+10,000) but clearly many are going unreported.

Just under a quarter of all reported cases globally are in the US, which is up +90,000 since Saturday to 7,297,000 and there is a resurgence there too. The number of active cases are rising at 2,562,000 so they have more new cases than recoveries and making no progress. Their death total is now just over 209,000 and back rising at +1000 per day. It seems destined to track higher soon.

In Australia, there have now been 27,040 COVID-19 cases reported, and that is only +40 more cases that on Friday. Australia, and even Victoria, seem to be managing their community outbreak well now. Deaths are up however at 872 (+3). Their recovery rate is now over 90%.

The UST 10yr yield ended last week at just on 0.66% and that is a -4 bps decline for the week. Their 2-10 rate curve is unchanged at +53 bps, their 1-5 curve is also unchanged at +15 bps, while their 3m-10 year curve is now just under +58 bps. The Australian Govt 10 year yield is down -3 bps at 0.83%. However, the China Govt 10 year yield is up +3 bps at 3.16%. The New Zealand Govt 10 year yield is still at 0.47% and off its record low.

The price of gold is starting the week at US$1861/oz and -US$5 lower than when we checked on Saturday. Over all of last week, the yellow metal has dropped a heavy -4.3% or -US$85/oz. And silver fell even harder, down -15% in one week.

Oil prices have firmer very slightly and are now just under US$40.50/bbl in the US, while the international price is unchanged at just under US$42/bbl.

The Kiwi dollar starts today at 65.4 USc and minor softness the weekend. But against the Australian dollar we are firmer at 93.1 AUc and almost a +½c from Friday. Against the euro we are marginally firmer at 56.3 euro cents. That means our TWI-5 has inched up to 69.2.

The bitcoin price is unchanged from this time Saturday, and still at US$10,729. The bitcoin rate is charted in the exchange rate set below.

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

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