Here's our summary of key economic events over the weekend that affect New Zealand, with news all eyes will be on China this week, especially its financial markets, as it returns from a week-long holiday.
In the week ahead, there will only be second-tier data and events. The Fed's FOMC will drop the minutes of its late January meeting on Thursday, NZT. They will be watched for rate-cut signals. There will be a big set of preliminary PMIs for February released this week for a range of key countries. Canada will release its CPI result for January on Wednesday. And Wednesday is when we will get the results of the latest dairy auction.
In China, financial markets return later today after the Chinese New Year break. Authorities will be ready to cover any weaknesses, and investors are likely to take advantage. The 'Beijing put' is going to save many investors. But it might work for Beijing who seem to be engineering a substantial rise in the proportion of SOE control of overall GDP. Private ownership and control of large enterprises is now not seen by Beijing as in the country's best interests.
Overnight the People's Bank of China kept the rate of ¥500 bln worth of one-year policy loans to some core state financial institutions, known as the medium-term lending facility, at 2.5%. The 'hold' was seen as an effort to prevent more pressure on the yuan. The operation resulted in a net ¥1 bln injection into their financial system (+NZ$227 mln), the smallest boost since August, because ¥499 bln worth of MLF loans are set to expire over the rest of February. A related Loan Prime Rate cut is still likely in February however.
And official data claims that this Chinese New Year activity was the best ever. Total domestic trips for the eight-day long holiday rose more than a third to 474 million, while tourism receipts grew by almost +50% to ¥633 bln. That's +19% more in term of trips and +7.7% more in terms of tourism spending from the equivalent 2019 holiday period.
Meanwhile, updated data also released overnight on China's balance of payments transactions shows that inbound investment in 2023 was its lowest since 1995 at just ¥148 bln (NZ$34 bln). In fact that 2023 level is just one tenth of the 2021 level.
Singapore's exports rose notably in January from December and were up almost +17% from a year ago. Analysts were expecting a more modest +5% rise so that is a notable change.
And as widely expected, the Russian Central Bank held its policy rate unchanged at 16%, a pause to the +850 bps hiking campaign that started in July 2023.
We should also note that it is another long holiday weekend in the US. Monday in the US (Tuesday NZT) will be President's Day and markets, both bond and equity markets, will be closed.
The next release of a survey on consumer sentiment has it rising and confirming earlier surveys. The University of Michigan version rose slightly to a fresh high since July 2021 even if it was marginally below market forecasts.
US residential building consents slipped in January from December, but were +8.6% higher than a year ago.
But American housing starts slumped almost -15% in January to an annualised rate of 1.331 mln, lower than year-ago levels and the lowest since August and missing market forecasts by a lot. It is the biggest fall since April 2020.
Inflation is clearly not beaten yet even if it is down. US producer prices were up +0.3% in January from December, the biggest month-on-month increase in five months, following a -0.1% decline in December. Analysts expected a rise of +0.1%. Cost of services rose +0.6% m/m, the largest increase since July. But that all means producer prices are only a modest +0.9% higher than a year ago. It is the recent pickup that worries markets.
On Wall Street, with the December company results three quarters released by now, they show a modest +3.2% lift from a year ago. Against expectations however the story is more positive; 75% of S&P 500 companies have reported a positive EPS 'surprise' and 65% of S&P 500 companies have reported a positive revenue 'surprise'. This reminds us that late 2023 expectations were low - and unnecessarily so it turns out.
Money that shifted out of equities into money market funds is now moving back. Global equity funds racked up significant inflows in the week to February 14 as investor optimism returned for this stock market rally, despite lingering uncertainties over the Federal Reserve's rate cut plans. It is a global thing, including Australia.
Earnings reported in Australia have also been better than expected overall. About a third of the major companies have reported earnings for the December half so far; almost a half of those have beaten consensus expectations, an unusually high proportion, and while a third have missed analyst estimates.
International nickel prices are remaining "very low" at levels first reached in 2003. At these levels, miners are giving up, especially as the low-cost source is Indonesia who can survive at these levels. But Australia doesn't want mine shutdowns as it needs a viable local industry to power its green transition. So late last week Australia classified nickel as a “critical mineral”, opening the way for the crisis-hit industry to access billions of dollars in cheap Federal government loans.
The UST 10yr yield starts today at 4.28% and down -2 bps from Saturday. The key 2-10 yield curve inversion is holding at -36 bps. Their 1-5 curve inversion is also still at -71 bps. And their 3 mth-10yr curve inversion has moved to -111 bps. The Australian 10 year bond yield is now at 4.22% and little-changed. The China 10 year bond rate is unchanged at 2.45% at the end of their holiday. The NZ Government 10 year bond rate is unchanged at 4.92%. A week ago it was at 4.91% so little net change.
The price of gold will start today up +US$3/oz from Saturday at US$2013/oz.
Oil prices are still just over US$78.50/bbl in the US while the international Brent price is slightly softish at US$82.50/bbl.
The Kiwi dollar starts today at just on 61.2 USc and unchanged from Saturday. Against the Aussie we are marginally firmer at 93.8 AUc. Against the euro we are still at 56.8 euro cents. That all means our TWI-5 starts today at just on 70.7 and little-changed.
The bitcoin price starts today at US$51,784 down -0.4% from this time Saturday. But it is up a net +9.2% from this time last week. Volatility over the past 24 hours has been modest at just on +/- 1.1%.
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15 Comments
Private ownership and control of large enterprises is now not seen by Beijing as in the country's best interests.
Indeed, the American economy, much to the chagrin of many, still primarily relies on consumers to make choices in their best interest. When that doesn’t happen, no amount of subsidies can make up the difference. Link
A tad pessimistic? World Wars 1 and 2 were the result of the current 'super-powers' squaring up directly against each other. That's not happening at this time. Sure, lots of sabre rattling but that's going on all the time and usually only surfaces in MSM when there's a slow news day. Superpowers don't stay superpowers for long if direct conflict breaks out between them.
My sanguine view is that a escalation in a relatively minor conflict that has been going on for almost a century isn't likely to trigger any superpower to engage in testing whether it can survive or prevail in a conflict with another superpower. Far better to just keep chipping away at the other's economy (or societal cohesion) and wait for the inevitable.
As was recently headlined in Fox News: “Leaked German documents show leaders are preparing should Russia launch World War 3.” Seriously, at what point does ignoring or brushing off that cataclysmic prospect amount to criminal malpractice of the highest order?
As with the CNN report detailing the current “trench warfare” replicating the horrors of World War I, maybe those continually pushing for this war should do a bit of research and remind themselves what triggered World War I in the first place. One seemingly unconnected trip wire led to the next and the next, and before anyone knew what had happened, over 20 million human beings were dead.
What would that number be today if a Russian general ordered the launch of a tactical nuclear weapon into the heart of London? Impossible? Not only have some in Russia articulated just such a response, but as my former high-level intelligence contact told me, under a “combat” designation, Russian generals have the “autonomy” to launch tactical nuclear weapons on their own. Link
Yes but super powers, US and UK, are already involved. You can bet Putin wants a further escalation to enable him to get more traction in Ukraine. Republican dithering in the US has already cost ground in Ukraine that will cost much more to regain.
"My sanguine view is that a escalation in a relatively minor conflict that has been going on for almost a century isn't likely to trigger any superpower to engage in testing whether it can survive or prevail in a conflict with another superpower." Are certain of that view. My view was that Hamas's actions were guaranteed to exact an outsize response. Why would they be prepared to sacrifice so much for so little gain, unless there were other players behind the scenes? Are those connections now becoming more visible? What others are there that we cannot see?
https://en.wikipedia.org/wiki/History_of_Taiwan
Worth a read, Xi is probably right that its a breakaway part of china historically....
I think he does want it back but doubt he wants to try to take it back by a direct invasion force.
That's probably the most in-dispute page on Wikipedia (after Trump's ones of course). Usually page disputes are left to subject matter experts. Not so that one. The Great Firewall of China has blocked wikipedia so many chinese simply can't access it. And even though chinese can't visit the site, China's government is directly involved disputing just about everything on wikipedia related to Taiwan. It's real popcorn stuff.
who could have seen this coming
https://www.nzherald.co.nz/business/ryman-healthcare-downgrades-profit-…
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