Doubling down

Delivered on By Justin Pyvis

Good morning! Queensland’s government will reopen the state’s borders to the fully vaccinated on 13 December, four days ahead of schedule as the state approaches the 80% fully vaccinated mark. At that point:

  • Travellers will have to produce a negative PCR test within 72 hours of travel.
  • Those coming from a ‘hotspot’ will have to pass an additional test on their 5th day in QLD.
  • International arrivals will have to self-isolate or quarantine for 14 days.

Moving south there was some Christmas certainty provided by the governments of NSW and VIC, which have reportedly vowed not to pursue an “Omicron zero” strategy, agreeing to keep their borders open and to proceed with their respective reopening plans.

Not so SA, where Premier Steven Marshall revealed that over the weekend the state’s Chief Health Officer Nicola Spurrier advised him to close the border, which had barely been open for two weeks. The state is holding firm for now but Marshall “is leaving open the prospect of closing South Australia’s borders”.

Unless you’re in NSW or VIC, you might want to think long and hard about making firm travel plans until more is known about Omicron, although so far the early signs are positive (more infectious but milder).


Fully vaccinated (aged 16+)

ACT
NSW
VIC
TAS
SA
NT
QLD
WA

Reading the tea leaves

Daily % change

AUD/USD

70.4

-0.7%

AUD/CNY

4.49

-0.2%

AU Bond

1.60

+3.6%

US Bond

1.43

+6.8%

ASX200

7,245

+0.1%

S&P500

4,591

+1.2%

Brent (bbl)

73.3

+4.9%

Gold (oz)

1,779

-0.2%

Iron ore (t)

105.0

+3.0%

Bitcoin

49,195

-0.4%

Ethereum

4,219

+0.5%

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 up a solid 1.18% led by shares tied to the so-called economic reopening, such as energy, industrials and airlines, after the White House’s chief medical advisor, Anthony Fauci, said the early Omicron signs were “a bit encouraging”. Meanwhile, tech companies with stratospheric valuations were dumped again as bond yields shot up.

Locally, the ASX200 inched up 0.05% no thanks to the tech sector (-2.2%) where the buy now, pay never crowd was smashed (e.g. Sezzle -16.1%, Zip Co -10.1%, Splitit -5.9% and Afterpay -4.3%).

Are markets finally starting to punish companies that don’t make any money? 🤯


Food for thought

China's property developers owe a lot of money.
China's property developers owe a lot of money. Source

According to Caixin, between July and mid-November China’s local government financing vehicles (LGFVs) “bought 13.38% of land parcels by value across the country, up 4.38 percentage points from the January-to-June period”.

That’s a decent increase during a time of property market turmoil in China. It could be completely innocent, or it could be “that local governments are borrowing from the banks and treating the proceeds as if they were revenues… [representing] a doubling down on the property sector”.

If China’s central government decides to sufficiently stimulate the property sector to alleviate its woes, all is well – the LGFVs will simply sell the land when the market recovers and someone else (a developer) will take on the risk. But if that doesn’t happen, the LGFVs will make a loss and local governments will be screwed twice as bad.

China’s new emperor for life, Xi Jinping, certainly has his work cut out for him. Even more so after the poster child for China’s debt-addicted property sector, Evergrande Group, conceded a default was imminent, sending its shares to an 11-year low.

That’s probably why a meeting of the Communist Party’s Politburo on Monday – attended by Xi – “concluded with a signal of an easing in curbs on real estate”, and was followed by an announcement from the People’s Bank of China that it will cut banks' reserve requirement ratio by 0.5 percentage points next week, “releasing 1.2 trillion yuan ($A267 billion) of liquidity”.

Elsewhere there was strong evidence of a post-lockdown rebound in Australia, with job adverts soaring 7.4% in November from a month earlier to a record 44.2% above pre-pandemic levels. Analysts at ANZ think it means “competition for labour will get even hotter… [with workers] asking for higher wages in 2022”.

Higher wages could mean more inflation (watch out, RBA) but also higher tax receipts for the government, which it’s going to need after Finance Minister Simon Birmingham ruled out raising taxes to improve the budget bottom line, saying “we see that as being very much a counterproductive thing that will only dampen confidence and hurt growth”.

Birmo’s a politician so his word should be good until the next election, so… for the next 3-5 months.

Speaking of the federal election, the latest Newspoll has Labor winning it 47% vs 37% for the LNP, although the result should be taken with a large grain of salt – just 24% thought the LNP would win the last election and we all know how that turned out.


Bits and bytes

🦗 Cricket Australia stripped the 5th Ashes test from Perth due to its hard border with NSW. The WA government had earlier made a desperate 11th-hour bid to poach the 2nd Ashes test from Adelaide, to no avail.

👴 Elon Musk tweeted “Let’s set an age limit after which you can’t run for political office, perhaps a number just below 70.” Such a rule would have eliminated Trump and 4 of the final 5 Democrats at the 2020 election.

🚗 Pure, unadulterated incompetence: A UK council lifted parked cars off the road to paint double yellow lines, issued them fines for being illegally parked then resurfaced the road two days later, erasing the new paint.

🕺 Residents of a Blue Mountain community that lost 12 houses in the Black Summer bushfires had a request for a recovery grant for water storage knocked back at the same time as “a community group from the unburnt side of the mountains had been granted $A300,000 to provide dance lessons in their town”.

👰 The Taliban “banned” the marriage of women “by coercion or pressure”. The catch is that a male relative of the bride can consent for her and the minimum age, previously 16 years, was removed.

🌿 San Francisco’s government suspended its citywide cannabis tax “in an attempt to curb illegal marijuana sales”.

🏅 US government officials will boycott the Beijing Winter Olympics as protest against “ongoing genocide and crimes against humanity in Xinjiang”.

🦠 Some poor bugger may have had a cold and COVID-19 at the same time, allowing the coronavirus to mutate into the Omicron variant by inserting a “particular snippet into itself” to make it look “more human”, helping it evade the immune system.

🔐 Myanmar’s former leader Aung San Suu Kyi was sentenced to four years in prison by the country’s military junta for “inciting dissent and breaking COVID rules”. She is still facing additional charges including “multiple counts of corruption and violating the official secrets act”.

🏭 Factory orders in Germany fell 6.9% in October “as demand for investment goods declined, putting the economy on weak footing in the final months of the year”.

🛂 Italy’s government created another tier of vaccine passport, a “reinforced” green pass that only includes the vaccinated or recovered (not those with a recent negative test). It will be required for indoor restaurants, cinemas, sporting and other public events.

💉 New York City’s government imposed a strict vaccine mandate requiring all private sector employees to be vaccinated by 27 December. In addition, children aged 5-11 will be included in the city’s vaccination passport from 14 December (single dose).