A prominent New Zealand businessman’s regular reports on the global economy.

by The REJIGIT Blog

John Ryder, M.Com (Hons); CA; CMA, is a well known New Zealand Company Director, Investment Analyst, Property Investor and Writer etc. He is the author of “Global Investing: A Guide for New Zealanders”, published in 2016 by David Bateman Ltd (ISBN : 9781869539375).

He was one of the two founding directors of Ryman Healthcare Ltd and his present numerous company directorships include Executive Chairman of Qestral Corporation Ltd, Chairman of NZ King Salmon Ltd and Director of Tuatara Tours NZ Ltd.

Mini Global is reproduced verbatim and with the consent of the author and will be updated by Rejigit as further Mini Global reports become available.

The Global format below contains shortened descriptions of financial, investment, political and coronavirus issues, so as to make for easier initial reading. For an expanded version please go to www.globalnews.co.nz

29TH November 2021

Equity markets have been hammered by the discovery of a new Covid-19 variant (Omicron), first sighted in Botswana, that is causing concern around the world. It is spreading rapidly, with cases reported in South Africa, the UK, Belgium, Italy, Israel and Hong Kong.

The variant, which originated in southern Africa, is causing concern because of the unprecedented number of genetic mutations. Omicron has 50 mutations, including more than 30 on the spike protein that binds with human cells (compared with just 3 for Delta in this region).

Many believe that the emergence of this variant is a direct result of wealthy countries monopolising the global stock of vaccines and pursuing policies like booster jabs, before considering the plight of poor nations.

Reported deaths from Covid-19 in Europe reached 4,200 a day last week, twice the number at the end of September, as concerns over the fourth coronavirus wave escalate.

German Health Minister Jens Spahn has issued a dire warning that by the end of the European winter “pretty much everyone in Germany will have been vaccinated, recovered or died”.

For herd immunity, the Australian Financial Review believes that the number should be 85% - but of the entire population (irrespective of age), not the eligible population… and that may require the introduction of mandates.

In Australia, lawyers say that employees who take unfair dismissal claims against employers who have mandatory double jab policies are unlikely to succeed.

One of the problems in trying to get people fully vaccinated is that there are often large parts of a country where citizens do not trust the government – as shown in places like Bulgaria, in spite of vaccines being available.

Researchers from the University of Pennsylvania have developed an experimental chewing gum they have shown to be successful in reducing the Covid-19 viral load in saliva, which may help reduce transmission from infected people when eating, speaking or breathing.

On Friday, the emergence of Omicron, the new Covid-19 variant, caused the S&P 500 index to fall by 2.3% and the European Stoxx 600 to drop by 3.7%, while the FTSE All World Index lost 2.2% in its worst day since October 2020. It was like early 2020 all over again.

IPOs (share floats) are booming in Australia this year, as an abundance of liquidity seeks a home in a low interest rate environment.

The discovery of the new Omicom variant has caused analysts to reassess the possibility of central banks hiking interest rates in the immediate future.

The Reserve Bank of New Zealand (RBNZ) last Wednesday increased its benchmark interest rate by 0.25%, to 0.75% - in the face of rising inflation and rampant house price growth.

An interesting theory is that monetary policy has failed to stimulate supply as much as it has demand. Recent data from the European Commission has revealed the highest percentage of companies in 40 years reporting shortages of equipment, raw materials and labour.

Asia is proving to be the exception with regard to the general surge in inflation around the world. Across much of Asia, price rises are subdued.

The release of positive economic data in conjunction with rising projections of future interest rates have continued to fuel a rally in the US dollar.

President Tayyip Erdogan of Turkey has inadvertently given the world a lesson on how not to run an economy – by lowering interest rates during a time of high inflation.

The US economy is expected to grow rapidly in the 4th quarter, putting further pressure on inflation.

The massive increase in Covid-19 cases in the EU is threatening to impact on the economic recovery, this year and next.

Soaring freight costs, because of dislocations and bottlenecks in the global supply chain, are now falling.

Air cargo will rise to 36% of carriers’ revenue this year, from 12% in 2019. However, airfreight executives are not treating it as “one off” and are committing to increased capital expenditure.

The Commonwealth Bank of Australia (CBA) is predicting commodity prices to weaken next year, including Australia’s key commodities.

The price of oil sank on Friday as news of the Omicron variant hit the markets.

With winter looming in the Northern Hemisphere, President Putin of Russia is consolidating his position in energy markets with further restrictive strategies. In a related geopolitical move Russia has amassed 100,000 troops on the border with Ukraine.

Gold prices have retreated sharply from multi-month highs, following the release of higher-than-expected inflation data.

Data from TradeMe Property has shown Christchurch properties are being bought at their fastest rate on record. It represents a realignment of property prices, as people seek better value in cities where employment can readily be found.

The Real Estate Institute of New Zealand has released data showing lower quartile house prices spiked $85,000 in just one month, with average prices increasing from $850,000 in September to $935,000 in October. The lower quartile price is the most “affordable” end of the market.

NZ commercial property tenants are having difficulties paying their rent, with Auckland being a particular problem under the lockdown.

In the US, data from the National Association of Realtors has shown existing home sales increased by 0.8% in October.

It is what it is.

Take care out there.

Kind regards,

John Ryder and Devon Ashby