Here's our summary of key economic events over the weekend that affect New Zealand, with news the world economy is about to get a 'boost' from the approval of the Biden stimulus plan.
But first, all eyes are on inflation tendencies, the driver of some substantial global market pricing changes over the past week. And the US PCE, the US Fed's preferred measure of inflation, came in at +1.5% pa and higher than the expected +1.4%.
In the same data release there was an unusual spurt in disposable personal incomes, up +11.4%, and almost all drive by the January disbursement of the US$600 per person stimulus payments. And that drove an unusual rise in consumption spending, up +2.4% in a month.
In the US Congress, they are on course to pass the US$1.9 tln Biden stimulus plan, after a last minute roadblock to a minimum-wage increase. Given the good recovery underway anyway, there are voices that worry this may be overdoing it. This worry compounds inflation rise expectations.
And the US has changed policy and is now on board for a global digital tax arrangement being progressed by the OECD.
(The Fed said a four hour outage of its key financial services on Thursday (NZT) was caused by a maintenance mistake and it is taking steps to prevent a recurrence. It was an update that was supposed to happen after-hours. This is just the latest in a string of admin fluffs by central banks.)
The Chicago PMI took a bit of tumble in its February result. It is still expanding fast, abut the rate of expansion eased this month quite noticeably with a sharp drop in new orders.
The US January merchandise trade balance came in with another large -US$76.4 deficit with exports down -1.1% and imports up +3.8% from the same month in 2020
White China is mulling an application to join the TPP, the new US administration says it will take its time with its own reassessment.
Chinese house prices rose in January in most major cities and are up between +2.9% and +4.4% year-on-year in Beijing and Shanghai respectively. The range across the country is between a fall of -2% and +14% in Yinchuan.
China is grappling with its demographic issues and may update its retirement age policies soon.
And China continues to face higher food prices with notable rises for rice, corn and soybean prices since the end of the Spring Festival in commodity trading.
Japanese industrial production made a rebound in January, according to official statistics. They are now only down -5.3% year-on-year after a better than expected +4.2% rise from November.
Singapore's industrial production growth is also staying quite elevated in a pattern that has lasted for three consecutive months now.
India reported it was out of recession in its Q3-2020 GDP data, and analysts expect its Q4-2020 growth to be positive too. But that is likely to leave the overall 2020 decline exceeding -7%. However a swift growth recovery is now underway there.
British carmaker Jaguar-Landrover (JLR) said it will write down its business by NZ$2 bln and slash capacity by -25% and canceling a major EV project. JLR is owned by the Indian carmaker, Tata.
Wall Street is heading for a minor +0.1% gain today which will trim the large weekly loss to -1.9%. European markets averaged a -1.5% fall overnight with the -2.5% drop in London as a notable outlier. Yesterday, the very large Tokyo market fell a huge -4.0% taking its weekly dive to and ugly -3.5%. Hong Kong fell -3.6% yesterday for a weekly drop of and even uglier -5.4%. Shanghai fell -2.1% and its own ugly weekly fall of -5.1%. The ASX200 ended down -2.4% and a weekly drop of -1.8% while the NZX50 Capital Index was a daily outlier, closing up +0.7% for a net weekly drop of -2.6%. The rising bond yields are behind all these sharp repricings of risk.
The latest global compilation of COVID-19 data is here. The global tally is still rising and at a faster pace, now at 113,207,000 and up +490,000 no let-up in one day. But it seems to be easing in some notable places in the first world. Global deaths reported now exceed 2,512,000 and +11,000 since yesterday.
More countries (112) have started their vaccination programs. About 227.6 doses have been given so far (+5.8 mln in the past day). There is clear evidence the vaccines are working to reduce or even eliminate deaths for those who have taken it.
The largest number of reported cases globally are still in the US, which rose +81,000 over the past day for their tally to reach 29,065,000. The US remains the global epicentre of the virus although there is clearly an easing there. And the number of active cases fell overnight and is now just on 9,106,000 and -6,000 fewer overnight, so more recoveries that new infections again. Their death total is still rising however but at a much slower pace and is up at 521,000 (+2000) in one day. The US now has a COVID death rate of 1568/mln, and that compares to the disastrous UK level (1797) where deaths are rising a bit more slowly now their vaccinations are rolling out. The current daily level of death in the UK is higher than the daily toll in the USA, a country more than five times as large.
In Australia, their community control remains impressive. Their all-time cases reported is now 28,958 and only +11 more case overnight, but with +2 new cases in the community and the rest new arrivals, and all in managed isolation. 33 of these cases are 'active' (+3). Reported deaths are unchanged at 909.
[We plan to reduce our daily detailed coverage of the pandemic spread starting in March. But if you have feedback on this, please add it in the Comment facility below.]
The UST 10yr yield is lower today, down -1 bp at 1.45% now in a steadying shift. At one point it got as high as 1.56% but the momentum of this selloff seems to be slowing. The US 2-10 rate curve is steeper at 132 bps. Their 1-5 curve is also sharply steeper at +72 bps, while their 3m-10 year curve is steeper at +144 bps. The Australian Govt 10 year yield is down -10 bps at 1.75% and a sharp correction. The China Govt 10 year yield is creeping slightly higher at 3.30%, while the New Zealand Govt 10 year yield is up another +3 bps to be at 1.91%. (Yesterday the RBNZ recorded its benchmark at 2.01% and its highest in 22 months so current rates are lower than that.)
The price of gold starts today down another -US$39 at US$1731/oz and still falling. Silver is falling harder
Oil prices are falling today, down about -US$1.50 and are now at just on US$62/bbl in the US, while the international price is just under US$65/bbl. But at these generally higher prices, more rigs were brought back into production in the past week.
And the Kiwi dollar opens at 72.5 USc and almost -2c lower than at this time yesterday. It is back to where it was about a week ago. Against the Australian dollar we are firmer at 93.9 AUc. Against the euro we have slipped further, back at 60 euro cents and a -¾c decline. That means our TWI-5 is now down at 74.1 and unchanged from this time last week.
The bitcoin price is now at US$47,754 and -6.0% lower than this time yesterday. It did get down to US$44,181 in between and is struggling to find a new level. Volatility in the past 24 hours is still very high at +/- 6.7%. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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18 Comments
"the world economy is about to get a 'boost' from the approval of the Biden stimulus plan."
Kill authentic price discovery, you also kill markets, and in killing markets, you kill allocation of capital and risk management, and in killing those, you kill the economy.
(CH Smith)
In the US Congress, they are on course to pass the US$1.9 tln Biden stimulus plan, after a last minute roadblock to a minimum-wage increase. Given the good recovery underway anyway, there are voices that worry this may be overdoing it. This worry compounds inflation rise expectations.
You might need to qualify that last observation - dealers are prepared to lend cash to access pristine US Treasury collateral at 0.009% in the private clearing sector and 0.0% at the Fed Reverse Repo window - something is not right in the bowels of the US financial sector. Too much leverage secured by what is now considered junk assets, suddenly in need of the most liquid collateral support? Has a domino fallen?
The clatter is repo trades executed at zero percent, especially when the US benchmark short term interest rate, interest on excess reserves (IOER), set by the Fed is 0.10% .
Low interest rates aren’t a central bank providing accommodation, they are instead its worst nightmare being shoved right back in their face. Well, our worst nightmare because for one thing despite repeated failures, rates that never rise testifying to that failure, central bankers are never held to account. Link
There is only 1 Central Banker now and that is J Powell. The rest are just playing follow my leader. They are all intent in issuing as much debt as possible to as many countries and people within those countries. While screaming we must have inflation we will get it by whatever means. Unfortunately, ignoring the great big deflation elephant in the room. Our future is based on incredible advances in technology. Advances in technology enable goods and services to be produced more cheaply over time. This makes it cheaper for us the consumer. But deflation and stagflation won’t inflate away all the debt and that’s what central bankers are afraid of.
I for one enjoy the Covid reports, and would love a similar level of detail about the vaccination race.
David, if I've got your eye, would also ask you to consider policy around insulting public figures. The amount of appearance-based insults about politicians on this site seems to be increasing daily, and lowers the tone of the show, with no value add.
Cheers
Or preparing in advance to start paying down debt. Personally I no longer believe any of the stats coming out of the USA, we all know its going down the toilet over there, has been for years and Biden will not turn it around, its an endemic problem brought on themselves by corporate greed. It will take them decades to get back past China and I'm not sure if thats even possible. Crashing Gold prices cannot be a good sign. Maybe they are selling Gold to buy Bitcoin ? if thats the case the world has truly gone mad.
If keep doing doing the covid stuff please add in some perspective. The UK is daily touted as "disaster" but had higher age adjusted death rates from 1946-2008. I presume these death rates weren't regarded as disasters at the time nor published daily. Have we all become more squeamish about death?
https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarr…
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