Shift the thinking

Delivered on By Justin Pyvis

Good morning! Victoria’s vaccine mandate and restrictions on the unvaccinated were eased yesterday, with non-essential retail (excluding hair/beauty services), real estate inspections and auctions, places of worship, weddings and funerals all opened to anyone regardless of vaccination status.

Victoria is well over 90% fully vaccinated now so some easing makes sense, despite Premier Andrews' repeated comments that the unvaccinated would remain restricted until “well into 2022” (he is a politician, remember).

We’re just a little confused by the health advice that says on the one hand a wedding is fine but on the other “if that same ceremony is underway at a hospitality setting, then vaccination requirements will continue to apply”. πŸ€”

Moving on, NSW Health Minister Brad Hazzard said new modelling from UNSW predicted that the state could have 25,000 new COVID-19 cases per day by the end of January.

Omicron is spreading through NSW so that’s plausible. The oddity was why he disclosed it at all (the modelling is not public), given Premier Dominic Perrottet stood up not 15 minutes later and said the media needs to “shift the thinking in the news tonight” away from case numbers.

Perhaps ask your ministers to do the same first? Just a thought. Hopefully they can get their stories straight before case numbers start to set new records.

Please note that barring some new global catastrophe we’ll be taking a few weeks off after tomorrow’s issue, returning on 10 January 2022.


Fully vaccinated (aged 16+)

ACT
NSW
VIC
TAS
SA
QLD
NT
WA

Reading the tea leaves

Daily % change

AUD/USD

71.7

+0.6%

AUD/CNY

4.56

+1.3%

AU Bond

1.60

+3.6%

US Bond

1.46

+1.7%

ASX200

7,327

-0.7%

S&P500

4,703

+1.5%

Brent (bbl)

74.4

+0.9%

Gold (oz)

1,778

+0.5%

Iron ore (t)

113.2

+0.2%

Bitcoin

49,156

+5.5%

Ethereum

4,055

+8.3%

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 theΒ US S&P500Β was up around 1.5% despite weaker than expected US retail sales in November (just 0.3%) and an accelerated tapering plan from the Federal Reserve, which now predicts three 25 basis point interest rate hikes in 2022. The Fed will also double the pace at which it slows its bond buying programme in January.

We can only speculate that markets had priced in an even more hawkish Fed announcement than what was delivered today, helping to propel valuations higher (including crypto, which very much looks to be a risk-on asset these days).

Locally, theΒ ASX200 dropped 0.7% in a broad-based decline with only utilities (+0.3%) providing any resistance, following a big sell-off in the US the night before due to soaring producer prices.


Food for thought

Could China be about to release the stimmy?
Could China be about to release the stimmy? Source

All eyes might have been on US Federal Reserve last night but yesterday China’s government also released a slew of data that was, shall we say… mixed.

First the positives. China’s industrial production grew by 3.8% from a year ago in November, which was up from October’s 3.5% increase and above the 3.6% expected in a Reuters poll.

Aaaand that was it. Everything else disappointed including retail sales, which rose 3.9% from a year ago, well down from the 4.6% forecast in a Reuters poll and below October’s 4.9% rise.

Fixed asset investment was soft, growing 5.2% from a year ago against a 5.4% forecast. Property investment also disappointed, slowing to 6.0% through November, a sharp decrease from the 7.2% recorded during the January-October period, “as financing rules remained strict and home sales plunged”.

China’s policymakers have some key decisions to make in the coming weeks as Omicron threatens its COVID-zero policy.

If it sticks with an elimination policy it’s only going to get more difficult from here, given the nation’s weakened defence due to the government’s nationalistic vaccine policy, where effective mRNA candidates such as Pfizer have still not been approved a full year after applying. According to researchers in Hong Kong, Sinovac – China’s leading vaccine – produces no “detectable neutralising antibody to the Omicron variants”.

On the flip side, repeatedly locking people up as outbreaks emerge means more stimulus will be needed to achieve its growth targets, which all else equal should provide some support for Australian mining companies (and the government’s bottom line), given Chinese stimmy tends to be infrastructure-heavy.


Bits and bytes

πŸ“ˆ Consumer prices in the UK grew by 5.1% in November, a 10-year high with upward pressure across almost all goods and services. The figure far outstripped expectations and will heap pressure on the Bank of England – which meets tonight – to raise interest rates.

🍁 The rate of increase in Canada’s consumer prices held steady at 4.7% in November, an 18-year high that means real wages are declining at a rate of around 1.9% per year.

🏨 The WA government halved the hermit state’s international arrival cap to 265 “given heightened Omicron risk” and moved NSW to “extreme risk”, preventing almost all travel between the states.

πŸ“‰ The Westpac-Melbourne Institute Index of Consumer Sentiment fell in December, although “remains comfortably in positive territory”. The decline was driven by people in NSW and VIC, due to Omicron and “a heightened sensitivity to virus developments in those states”.

πŸ’‰ Moderna is expected to share data on how effective its vaccine is against the Omicron variant “within the next week or so”.

✈️ Qantas will start flying direct from Perth to Rome three times a week in June 2022 and will reinstate its Perth to London route from late March 2022.

πŸ•Ί Sydney’s nightlife was ranked second-worst in the world, with only Boston rated lower.

πŸ‘©β€πŸŽ“ Data from Australia’s Naplan test showed that “COVID-19 was not detrimental to students' literacy and numeracy skills”, with no statistically significant changes in testing in 2021 versus 2019.

πŸ¦— David Warner was passed fit for today’s second Ashes test despite a rib injury while fast bowler Jhye Richardson was confirmed as the replacement for the injured Josh Hazlewood.

🏏 The Perth Scorchers won’t get another home game this season after they flew to Hobart via Sydney, flagging them for 14 days of supervised quarantine under WA’s strict new border rules.

πŸ‘©β€βš–οΈ Former Australian test opener Michael Slater was arrested and refused bail “after allegedly breaching an apprehended violence order”.

πŸ‘©β€πŸ’» Imagine how bad it is in China. Japan’s government “overstated construction orders data received from builders for years”, damaging the reliability of the country’s official statistics.

πŸ•΅οΈβ€β™€οΈ Meta said that Facebook posts marked “fact-checked” are not an admission that they contain actual facts but are instead simply “protected opinion”.

🍿 Former Victorian Labor-turned independent MP Adem Somyurek tweeted “Tomorrow I will give an insight into Dans [Andrews] mind re social media. Also I will expose another inner city elitist lefty wanker representing a very working class outer suburban electorate. This person is a 10 on the wanker scale.”