Here's our summary of key economic events overnight that affect New Zealand with news the slowdown in the Chinese economy is embedding and they don't seem to be able to do much about it, other than 'build more infrastructure'.
But first, the US Fed minutes for their December meeting were released this morning. Eyes were on clues about how fast they would reduce QE, and how soon rates would rise. Unfortunately there aren't many new or previously unreleased clues in these minutes on either. But they do show growing unease about the higher-than-expected inflationary tracks. The chances of a faster taper and an earlier rate hike both seem stronger in these minutes.
The UST 10 year yield jumped to 1.70% after their release and to its highest since before that start of the pandemic. The US dollar rose sharpish. Wall Street dived.
At the weekend we will get the US non-farm payrolls report, and at this stage analysts are expecting a +400,000 jobs gain. Today we got the pre-cursor ADP employment report and it was sharply positive, reporting an +807,000 gain in December. Every sector contributed to this result and it is the second best ADP result since the pandemic bounce-back in 2020. Continuing gains are needed because the US labour market is still -4 mln jobs short of the pre-pandemic levels.
Canadian building permit levels in November were very much stronger than expected and driven by residential consents especially in Vancouver.
In China, Premier Li called for larger cuts in taxes and fees in order to counter "fresh downward pressures". He also wants more deductions for research and development spending, and special support for the service sector and other areas that have been heavily impacted by the pandemic. Spreading lockdowns and now a tech sell-off are not helping.
China is pulling out its old playbook to fight its economic woes - building more infrastructure.
East Asian inflation rates are not following the Western track. Thailand reported its December inflation rate at 2.2% and the Philippines reported theirs at 3.6% and falling. Both are elevated somewhat, but not significantly so.
Australian job ad levels fell in December, and rather sharply and unexpectedly. This was a surprise after the high November levels and analysts are confused by the pullback. Was it the strong November hiring levels, or a new Omicron hesitancy?
And still in Australia, we should note that AfterPay's shares are down -30% in a year. After reaching AU$158 in early February 2021, the have since traded progressively lower, now at AU$81 and having fallen -20% in the past month. They have suddenly gone from 'hot' to 'unloved'.
In Australia, there were 35,054 new community cases reported yesterday in NSW, another rise, now with 184,413 active locally-acquired cases (and undoubtedly an undercount), and 8 more deaths. And 17,636 pandemic cases in Victoria were reported yesterday, also another rise. There are now 51,317 active cases in the state - but there were 11 deaths there too. Queensland is reporting 6,781 new cases but no more deaths. In South Australia, new cases have risen to 3493 yesterday. The ACT has 810 new cases and Tasmania 867 new cases. Overall in Australia, 64,735 new cases were reported yesterday and their hospitalisation rates are now above peak Delta levels in some states. The sharp rise in the Northern Territories is very concerning. And their testing regime is buckling under lengthy wait times and stock shortages.
The UST 10yr yield opens today at 1.70% and another +3 bps higher that this time yesterday. The UST 2-10 rate curve starts today noticeably flatter at +88 bps as short rates rise faster. Their 1-5 curve is unchanged +101 bps, while their 3m-10 year curve is also unchanged at +163 bps. The Australian Govt ten year benchmark rate is up another +6 bps at 1.82%. The China Govt ten year bond is up +1 bp at 2.82%. The New Zealand Govt ten year is up +8 bps at 2.40%.
Wall Street was lower again today, but not by much, down -0.1%. in afternoon trade before the Fed minutes. But it sank -0.9% after. Overnight, European markets continued their good gains, up an average of +0.7% and mostly to record highs. Yesterday, Tokyo ended up a marginal +0.1% while Hong Kong ended down a sharpish -1.6%, and Shanghai fell a full -1.0%. The ASX200 fell back -0.3% after Tuesday's gig gain. The NZX50 opened for the year with a building +0.9% rise.
The price of gold started today at just under US$1825/oz and back up, adding another +US$10 from this time yesterday. But it lost all of that after the US Fed minutes were released.
And oil prices start today +US$1 higher at just over US$78/bbl in the US, while the international Brent price is now just over US$81/bbl. They seem to have held these higher levels after the US Fed minutes and rising US dollar.
The Kiwi dollar opens today much lower after the Fed minutes at 68 USc. Against the Australian dollar we are softer at 94 AUc. Against the euro we are little-changed at 60.2 euro cents. That means our TWI-5 starts the today marginally softer at 72.6.
The bitcoin price is little-changed again from this time yesterday at US$46,369. Volatility over the past 24 hours has been modest at +/- 1.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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