US eyes real estate as a money laundering channel; China's power slips; China cuts reserve ratio; Aussie personal tax OECD's highest
Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with we have an Omicron bounce in markets today, reversing the Omicron fall over the past ten days. Markets seem convinced the new virus strain will not upend markets in the way they first feared.
There is a general risk-on mood in most global markets, although that is not evident in Asian markets.
In the US, a senior Treasury official said it is about to crack down on "criminals, kleptocrats and others" paying cash for houses to launder money as part of a broader anti-corruption drive.
German factory orders slumped in October after a small rise in the prior month. This was a retreat far sharper than expected. In was driven by a sharp fall in export orders, which were down -13% on an annualised basis.
An updated ranking of the 'power' influence among 26 Asian-related countries shows that New Zealand slipped -1 place to 13th, above Taiwan, but lower than Vietnam. Australia is #6 and slipped as well. The big mover is China #2 which recorded its first-ever retreat and is now further behind the US which is still #1 and rising. Overall, Asian power fell in 2021 on a global basis.
In a meeting with the head of the IMF, Chinese premier Li Keqiang was at pains to point out that they will likely cut their reserve requirement ratio (RRR) rates if the property slowdown requires policy action and their overall economy staggers for much longer. They are currently focused on keeping liquidity levels elevated. And overnight, they did, reducing the RRR from 8.9% to 8.4%. It should release ¥1.2 tln in funding (NZ$280 bln) to help their sagging economy.
And Evergrande shares fell another -19% in yesterday's trading, taking the fall from July 2020 to -93%.
According to updated OECD comparisons, Australians are paying more personal income tax as a share of government revenue than any other advanced economy, except for the high-taxing Scandinavian welfare state of Denmark. New Zealand is the 5th highest in these comparisons.
The UST 10yr yield opens today at 1.43% and up +7 bps overnight and rising.
The price of gold will start today at US$1778/oz and down -US$6 overnight.
And oil prices are up +US$2 at just over US$68/bbl in the US, while the international Brent price is up a bit more and now just under US$72/bbl.
The Kiwi dollar opens today little-changed at 67.5 USc. Against the Australian dollar however we are softer by -½c at 95.8 AUc. Against the euro we are also unchanged at 59.8 euro cents That means our TWI-5 starts today at 72.4 and little-changed.
The bitcoin price has risen to US$49,182 and +1.3% firmer than the level at this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.5%.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.