Here's my summary of the key issues that affect New Zealand overnight with news of stalling activity worldwide, and New Zealand looks like an island of prosperity in comparison.
In the US, retailers are reporting sluggish Black Friday spending, with sales falling -11% from the same period last year, according to an industry group.
Meanwhile, American factory activity moderated in November, but built rises in new orders and export orders. The moderation is from a high level and all this suggests their economy retains its new mojo despite slowing global growth.
Growth in Chinese factories stalled in November as output shrank for the first time in six months, reinforcing expectations that authorities will roll out more aggressive stimulus.
In Japan, Moody's has downgraded their credit rating from Aa3 to A1 as concerns mount that they will get of top of their issues. The credit rating move suggests confidence in Prime Minister Abe's radical program is ebbing.
In Europe, Germany, Italy and France all reported contracting manufacturing sectors in November. This doesn't look good at all and comes on top of an inflation rate that has almost disappeared.
We reported on the Swiss gold referendum question yesterday but overlooked another issue they were deciding on - immigration levels. Swiss voters however overwhelmingly rejected a proposal by a Green group to drastically curb the influx of foreigners seeking to work and live in their country. It was a second major effort this year aimed at restricting immigration.
UST 10yr bond yields were unchanged in New York overnight, holding at just 2.17%. The NZ swap rate starts today lower and flatter. In fact the 2-10 curve is at just 42 bps and the more important 1-5 curve - from a mortgage point of view anyway - is now at just 33 bps which is a six year low.
Meanwhile, the oil price has seen a small bounce overnight. The US price is now at US$69/barrel and the Brent price is just on US$72/barrel after last weeks sudden fall. No real recovery yet, and we should see the benefits flow into our spending power. The Russian ruble plunged to a record low for a third day, prompting speculation Russia’s central bank intervened to stem losses triggered by the tumbling oil prices.
The gold price however has has made a spectacular comeback overnight adding +5% or more than US$65 to rise back above the US$1,200/oz level again after falling to almost US$1,140/oz. It is currently at US$1,207/oz.
The kiwi dollar strengthened overnight against all-comers. We start today at 79 USc, 92.8 AUc, and the TWI is at 78.9.
If you want to catch up with all the changes from yesterday we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
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10 Comments
In Europe, Germany, Italy and France all reported contracting manufacturing sectors in November. This doesn't look good at all and comes on top of an inflation rate that has almost disappeared.
Cripes, the regulator just ensured disinflation will be a dinosaur in the NZ telecommunications market.
There are two components to the wholesale price. The commission set the draft price of a broadband connection at $10.17, 75c below the price it set through benchmarking last year.
But it fixed the wholesale price of a copper phone line at $28.22, an increase of $4.70 (+16.65%, my emphasis) on the price that currently applies. The lower differential for a phone line with and without broadband is likely to be a disappointment for companies that have spent up on unbundling Chorus' exchanges, such as CallPlus and Vodafone, but is positive for Spark which has been prevented by regulation from unbundling. Read more
I guess the policy must be aimed at boosting the returns of the pigeon breeders association. If it's not an extension of perpetuating the coal age what is such a decision meant to portray to the foreign investor?
Indeed, graph of EU dis-inflation,
http://krugman.blogs.nytimes.com/2014/12/01/oil-prices-and-deflationary…
So indeed the EU is looking sick on a few levels......
"So when oil is going up, it’s a reason to tighten policy, and when it’s going down, it’s a reason not to loosen policy. And people wonder why I talk about sadomonetarism."
It is an interesting point that if the NZD/USA exchange rate falls petrol will rise in price, making inflation look higher than it really is and taking money out of ppls pockets.So if CPI is followed as the setting tool for the OCR our beloved RB should raise.....so a double "tax" whammy. Hence why Im not keen on CPI as a measure to plot the OCR against.
regards
Why has the NZD continued higher overnight when it is already considered the most overvalued currency in the world? Is it that Mr Wheeler's speech yesterday is seen as capitulation; that in his view there's nothing he can do, and that he's not going to meet his inflation target, but that somehow he's pretending it's out of his control? So the market decides if there's nothing he's going to do, then might as well bid the currency up a bit further.
Nope - NZD/USD just got caught up in the Crude relief trade. graphic view
That oil price drop trend seems to be steepening btw,
(1 year shows it well)
I wonder where this will stop, $50? $40? $30?
oh...
regards
". . . news of stalling activity worldwide and New Zealand looks like an island of prosperity in comparison."
May seem a dumb question, but for the uneducated, why does New Zealand seem an island of prosperity (especially considering recent drop in dairy prices) and are we likely to continue to avoid the lingering effects of the GFC??
Lending Club has filed for its IPO - http://www.cnbc.com/id/102228735#.
Different asset classes performances year-to-date. Oil comes last - http://www.businessinsider.com.au/oil-is-worst-performing-assets-of-201…
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