China trundles along
By Justin Pyvis – Delivered on 16 Nov 2021

Good morning! South Australia's government will officially do away with "whole-of-state lockdowns" as of next Tuesday when the state's borders come down. In addition, fully vaccinated residents will only have to self-isolate for seven days if they get flagged as a close contact of a COVID-19 case, down from the current fourteen-day requirement.

On the subject of borders, Queensland brought forward its reopening to 5pm yesterday afternoon after the state hit the 70% second-dose milestone (people aged 16+). 🙌 That means the state is now open to fully vaccinated domestic air travellers, provided they can produce a negative COVID-19 test taken within the past 70 hours. Those coming from declared 'hotspots' (all of NSW and VIC) will still need to quarantine at home for 14 days.

Elsewhere, the Victorian government agreed to water down its controversial pandemic laws at the last minute following negotiations with the three crossbenchers whose votes are needed to clear the upper house. The decision came after the Coalition tabled 18 of its own amendments and protestors started camping out on the steps of parliament house in opposition of the bill.

Finally, unfortunately the greater Katherine region in the NT was plunged into yet another 72-hour lockdown after an Aboriginal man and woman from the same household tested positive for COVID-19, one of whom may have been infectious while in a remote community.


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Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries. The S&P500 is a snapshot 30 minutes before close.

At the time of writing the US S&P500 was trading flat (-0.02%) despite a better-than-expected reading on the New York Fed's Empire State manufacturing business conditions index, which jumped 11.1 points to 30.9 (versus a consensus forecast of 22). A reading above zero indicates improving conditions.

Locally, the ASX200 added 0.36% after solid gains for healthcare (+1.2%) and tech (+1.1%) and not much movement in the other direction (energy -0.20%, materials -0.04%).


More stimmy coming: Clearly the government hasn't spent enough – Japan's economy contracted an annualised 3.0% in the September quarter, much more than the consensus forecast for a 0.8% decline "as global supply disruptions and fresh COVID-19 cases hit business and consumer spending".

Must be election season: Yesterday, ScoMo – who in the two years since becoming PM has increased government debt by ~$A275 billion, or roughly $A25,000 per Australian – made the bold statement that "Australia's economic recovery has to be secured by people who have a track record in economic management, otherwise you will see petrol prices go up, you will see electricity prices go up, you will see interest rates go up, more than they would need to".

Underdog: Speaking of elections, ScoMo claimed it's "fairly clear" that he will be the underdog in the forthcoming federal election, after the latest Newspoll showed his net approval rating had slipped to the lowest since March 2020.

Our bad: After playing a major role in blowing up property prices by ~25% over the past year, the Reserve Bank of Australia told a Senate Committee that [paraphrased by the ABC's David Taylor] "children of parents who rent will find it much harder to get onto the property ladder", and that "if you don't own a home in retirement you're heading for poverty".

Risky business: The head of the Finance Brokers Association of Australia warned that "Australians are sleepwalking into disaster", after research it commissioned found that "66% of borrowers would be under pressure if interest rates were to rise and 57% would not be able to make repayments if their mortgage were to increase by as little as $300 a month.".

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China trundles along

It was a big day for official data out of China yesterday including October's retail sales, industrial output, fixed asset investment, property investment and new home prices.

Breaking it down: Weak but better than expected. Chinese consumers spent 4.9% more last month than they did in October 2020, which was above the Bloomberg consensus forecast of a 3.8% rise. Industrial output also expanded by 3.5%, beating September's 3.1% gain even as the self-inflicted energy crisis ravaged producers. Perhaps as a sign of the administration's "Made in China 2025" focus, hi-tech manufacturing sector was the standout with a 14.7% increase.

New home prices fell 0.25% from the month prior and property investment cooled slightly with growth of 7.2% from a year ago, down from September's 8.8%, as the property sector grapples with China Evergrande's collapse.

Why this matters: We don't have to remind you but China is Australia's largest trading partner, selling us our Christmas goodies while also paying top dollar for the majority of our commodity exports, such as iron ore. A 'soft landing' in China is good for everyone (it's by far the world's largest exporter), especially as supply chains struggle to keep up with the enormous demand stimulus flowing out of developed economies.

Looking forward: China's leaders appear to be content to trundle along, playing Whac-A-Mole with COVID-19 outbreaks and tolerating lower economic activity in an effort to keep the skies clear for the Beijing Olympics while also working on slowly deleveraging parts of its economy, specifically the heavily indebted property sector.

Official data are notoriously suspect so a better indicator is probably the country's central bank, the People's Bank of China, which has remained on the sidelines through the Evergrande crisis, leaving the reserve requirement ratio (the amount of cash banks need to hold) unchanged since July and interest rates steady since early last year.

The Wrap Up
    🎮Epic Games will shut down popular video game Fortnite's servers in China after three years having never generated a cent of revenue (it was a "trial"), due to an "increasingly stringent and often unpredictable" licencing process.
    🌊Wyangala Dam in NSW (~350km west of Sydney) reached 104% capacity yesterday, forcing thousands of residents to flee their homes ahead of possible major flooding.
    💸They didn't ask for a deposit? The NSW government is still "owed more than $A175 million in unpaid COVID-19 hotel quarantine fees".
    😲US Senator Bernie Sanders tweeted that the "extremely wealthy pay their fair share", to which Elon Musk responded "I keep forgetting that you're still alive".
    💉New Zealand's government will make Pfizer booster shots available from 29 November to anyone aged over 18 from who completed their two dose course more than six months ago.
    🥝The Ngati Toa Maori tribe – the legal cultural guardian of the Ka Mate haka – told antivaxxers to stop using the war dance at protests.
    🔐Western Australian government documents revealed that it will continue to pursue COVID-19 elimination through the use of lockdowns until it reaches the 90% vaccination target.
    🤔A government-approved COVID-19 testing company in the UK plans to sell three million swabs containing customers' DNA for medical research. Customers had to "tick a box to agree to a 4,876-word privacy policy", which linked to a separate document containing the details.
    🏉New Canterbury Bulldogs recruit John Asiata, who is due to be paid $A180k this year, said he would rather work construction than get a COVID-19 jab (despite it also being mandatory in that vocation). 15 of 480 contracted NRL players remain unvaccinated.
    💥A UK taxi driver is in hospital after preventing a terror attack on a Liverpool hospital by noticing his passenger had a suspicious device and locking him in, at which point the passenger detonated the bomb.
    😷Germany's new coalition government is reportedly preparing to announce a "lockdown for the unvaccinated", as cases surge ahead of winter.
    🎅UK Prime Minister Boris Johnson refused to rule out a Christmas lockdown, adding that "if we want to avoid restrictions on our daily lives we must all get vaccinated as soon as we are eligible".
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