Here's our summary of key economic events overnight that affect New Zealand, with news the inflation landscape seems to be changing quickly now.
American inflation slowed more than expected in November, an encouraging sign for Federal Reserve officials who are now meeting in Washington to discuss the next steps in their policy campaign against rapid price increases. The headline rise was 7.1%, a drop from October's 7.7%. Markets had expected a 7.3% rate.
But more importantly, the change to November from October was at an annualised rate of less than 1.5%. And in actual, but not seasonally adjusted terms, it fell at about the same annualised rate. Either way, the impetus has gone out of the American inflation surge in November.
Core inflation rose at about a 2.5% annualised rate in November from October, but that too was less than expected.
All of these shifts do have markets wondering how the recently hawkish Fed will assess this data. Markets are expecting tomorrow's December rate hike to be +50 bps to 4.5%. But the view of how policy is to be set for 2023 will be the key factor markets will be watching for. After today's data, they seem to be betting there will be less need for the Fed to take as hard a stance as they did in 2022. Which means 2023 will face less inflation pressure and fewer rate hikes. And that a soft landing is much more likely now. Commodity prices rose. Bond rates fell. And the US dollar retreated on the rising risk appetite.
Meanwhile the US Redbook retail sales data for last week improved from the week before, but only slightly, and by less than inflation. It rose by +5.9% from the same week a year ago.
In China, one of the consequences of the eased pandemic response is that travel bookings for the January Spring Festival/Chinese New Year are surging. We may see a record internal migration around the January 23 event.
In the EU, they have agreed to impose a new tax on imports based on the greenhouse gases emitted to make them, inserting climate-change regulation for the first time into the rules of global trade. The initial focus will be on cement, steel, aluminium, fertilisers, electricity production, and hydrogen. Brussels has said countries could be exempted if they have equivalent climate change policies to the EU.
Meanwhile, German investor sentiment improved much more than expected in the ZEW survey, but to be fair it is still sharply negative overall, just much less so. Stabilising energy markets, and wider confidence their winter stress can be handled in the face of Russian threats, and cooling inflation, are all helping improve the mood which is now its least negative in nine months.
In Australia, consumer sentiment bounced off its recent lows, an 'improvement' that wasn't very convincing or significant. But those in their 'mortgage belt' seemed to be noticeably cheerier, probably on the basis that they think the bulk of the RBA interest rate hikes are behind them. Good luck with that.
But the mood of businesses in Australia turned somewhat downbeat according to the NAB business confidence survey for the month. It was the first time this survey has turned negative in 2022. Sentiment about the future is deteriorating, but survey respondents agreed that current conditions are good.
The UST 10yr yield starts today at 3.50% and down a very sharp -12 bps from this time yesterday. The UST 2-10 rate curve is less inverted at -72 bps. Their 1-5 curve is little-changed at -99 bps, while their 30 day-10yr curve is more inverted to -27 bps. The Australian ten year bond is up +1 bp at 3.37%. The China Govt ten year bond is up +2 bps at 2.95%. And the New Zealand Govt ten year will start today up another +5 bps at 4.20%.
We should note that locally, markets are now pricing in more than a 50/50 chance the RBNZ's February rate will change by +75 bps.
Wall Street has opened its Tuesday session with the S&P500 up +0.6% in late trade. Overnight, European markets traded about +1.4% higher, except London which gained only half that. Yesterday, Tokyo closed up +0.7%. But Hong Kong fell -0.1%. And Shanghai fell -0.7% in its Tuesday session. The ASX200 closed up +0.3% while the NZX50 ended its session up +0.8% and making back all of Monday's decline.
The price of gold will open today at US$1808/oz and up +US$23 from yesterday.
And oil prices start today up +US$3 from this time yesterday at just on US$76/bbl in the US while the international Brent price is just over US$81/bbl.
We should also note that US researchers are claiming significant progress in delivering fusion power - although they also say it may be decades to bring today's achievement into mainstream energy supply.
The Kiwi dollar will open today at 64.8 USc, and nearly +1¼c higher than this time yesterday. Against the Australian dollar we are soft at 94.3 AUc and down -¼c. Commodity currencies are back in favour today. Against the euro we are at 61 euro cents and up +½c. That all means our TWI-5 starts today at 72.9 and up +50 bps.
The bitcoin price is now at US$17,782 and up +4.6% from this time yesterday. Volatility over the past 24 hours has been moderate at just +/- 2.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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77 Comments
But did the US' inflation decline because of their stronger dollar induced by higher interest rates, or because costs are actually decreasing?
It is both. Oil has come back a lot and that decreases costs across the board.
How much is the oil price manipulated? Gold and Silver are the most manipulated commodities. Paper silver to physical is like 400 to 1. Smarties are buying physical silver.
You're being mislead by your own craftiness pa1nter. Commodities are already priced in USD so if there is any conversion to be done such as for whole milk powder, light sweet crude or coffee beans, it already has been. ??
And that a soft landing is much more likely now.
🙏👍
Maybe for the good old USA, but no chance for NZ....brace.. brace for landing🔥
I don’t have any data to hand but I imagine our economy is much more reliant on house building and real estate than the USA?
Also I know for a fact that their mortgage rates are fixed long term so their housing market is far less susceptible to Interest rate hikes.
GDP of California is bigger than Russia..3.37 trillion..Russia 1.776 trillion
So too are Texas, New York, Florida larger with others Pennsylvania, Arizona, Ohio, Illinois about the same. But Russia has nukes and ballistic go goes.
Nukes help with GDP?
According to Putin, and seemingly too Audaxes on here, nukes help with everything. Undoubtedly relying on the the immortal words of Mae West - if you got it flaunt it.
The Russian Finance Ministry stated that the budget surplus was 557bn rubles in the first 11 months of the year. Link
US winning again: Federal Spending $501bn in November, 6% increase yoy Government Receipts $252bn in November, 10% decrease yoy Economic and fiscal realities are clear for all to see. Link
They could shut the FBI down. That would save a bit.
"their housing market is far less susceptible to Interest rate hikes."
Interest rate hikes are a very blunt tool indeed, they target only a small proportion and not even the ones who are creating the excess demand.
They have 30 years fixed and many do if not for 30 years but for 15 years unlike NZ, where we have maximum 5 years and many do fixed between year or two.
Also US has big and diversified economy unlike NZ, where everything is majority related to housing.
And mortgage interest is income tax deductible for homeowners.
In 2021, Comtrade reported that nearly 70% of all manufactured exports originating in the US were high-tech. NZ posted a low 10.1% and Australia was at a surprising 21.5%. In the same year, less than 10% of our export revenue came from ICT.
Some are quick to pin the blame on NZ's tyranny of distance, but I'd call it a direct result of our resource curse.
Yes it is super interesting how this will play out. We know we will see increase mortgagee sales, will they accelerate price falls like the wealthy Chinese buyers did on the up side? How significant will the likely collapse of small service industries be (given disposable income will reduce very significantly as mortgages reset), will we be protected by our generous benefit structure (that continues to penalise minimum wage earners)?
PM Jacinda Ardern under pressure in a Parliament full of tired, grumpy pricks | Stuff.co.nz
https://i.stuff.co.nz/national/politics/130755374/pm-jacinda-ardern-und…
Did you hear it, well picked up. So if she is like this on sacred ground, it does make me wonder what Jacinda be kind Ardern is like at home when she sees Luxon and Seymour on TV. **bleep bleep**
Close the little Nieve's ears
Good campaign slogan 😂...Gummy must be shocked?
I think the media made a meal of it, David rightly shrugged it off, more clearly though the wind direction is changing in the mass media, not unexpected in this moronic sector of our economy, they are simply following the money. It won't help them hopefully, I hope that the Nats turn over the "public media funding" trough if they get in.
Both the PM and Seymour see it as nothing much. But the kind luvvies are fainting in shock. Beware falling luvvies.
Maybe the luvvies each should be carrying a roadcone.
.....when downfall starts.......she may resign just before election......
Will have to wait until then otherwise would trigger an unwanted by election of the type she decries loudly as a waste of money. But a bale out close to an election would be even more disastrous to Labour than any time earlier. Then as by elections are a no no, if she stands for Mt Albert but loses the election she will have to be in opposition for three years won’t she. That potential could be averted by moving solely to the list of course but in turn that might then be interpreted as a lack of confidence on her part that Labour will be returned to power. Oh dear, decisions, decisions, decisions who would have thought.
There is always the UN
Big egos being used to being kowtowed to, do not like people who challenge the world view they are trying to promote. JA as the Prime Minister will not be any different from any other. Fatigue is not an excuse. If they cannot handle the heat, they shouldn't step into the chamber. This is a fleeting glimpse of the ego and character of the PM. Do not doubt for a moment that the others, no matter the party are any different. But the people who call them on their policies and don't easily get fobbed off are the whole point of parliament and the adversarial structure, so Seymour should be celebrated.
The fact that her actual answer was just a mealy mouthed bundle of nothingness should not go unnoticed either but this is not unusual. She has perfected the fine art of spouting a lot of words but saying nothing of substance. The four words of insult uttered when she sat down in my opinion evidenced much more truth in the mode of her thinking, than all she said when she was standing. Rather unbecoming especially when you have built such a virtuous pedestal for yourself.
Agree..not even conversations in garages in south Auckland stoop to that level of gutter talk (but bang on in my opinion)
And what I would've called him is unprintable.
Why rubbish the PM for speaking the truth??
Michael Cullen (of "rich prick"fame would be proud of her.
doesnt matter what she says,the sexist dinosaurs on here will get outraged.
Now we know what she thinks of the Act Leader lets hope that she can tell us what she really thinks about Putin,Medvedev and Lavros.
We will be waiting a long time.
TA is having another spruik of the housing market on OneRoof again. Shameless.
Does anyone know whether a legitimate legal case, a class action, could potentially be mounted against the Herald for its awfully one sided promotion of the housing market and ‘financial advice’ to that effect? Not intending to promote it, but just curious if there could be a case.
So, remember your bag of salt when reading “predictions” from analysts like myself regarding where prices are headed. They’re just guesses we hope to update quickly before they look silly.
Is this TA's new disclosure statement... maybe we'll see this at the bottom of all his articles going forward.
Maybe a page out of JRE handbook. Disclaimer - "I'm just a stupid comedian, don't listen to me".
No there could be no case, it is clearly not financial advice (assuming that was where you were coming from), the Herald is clearly looking after its advertisers but also perhaps some (of the subscribing customer base) of their audience has have grown used to housing articles etc and remain interested in them.
There should be a disclosure statement or something to that effect making it clear its just an opinion and not financial advice. Additionally the term 'independent economist' is misleading and in my opinion shouldn't be used in companies articles TA's on the payroll for...
False advertising case? Advertising their 'opinion' and 'news' as opinion and news.
Good question there HM. But TA always gives well founded, lengthy and multiple reasons for the views he holds. As well, he will always give a disclaimer as who really knows.
Why not pick up one of his reasons and run with it and discuss it. See if it holds water so to speak.
Speaking of holding water, the Hon Minister of Broadcasting's pet project looks like its coming to a sudden end. No valid basis whatsoever for combining the entities. The real reason for the merger being that he wants a mouthpiece ministry of propaganda.
Ardern knows that the public cannot stomach a gigantic schmozzle waste of funds.
He's certainly not shy of pushing the envelope on financial advice and then hiding behind a disclaimer.
Freedom of speech is a fundamental right, but saying certain things will land you in trouble.
Why not pick up one of his reasons and run with it and discuss it. See if it holds water so to speak.
Sure, let's do that.
His first reason is essentially that prices won't fall further because they already have fallen:
First, late in 2020 the ratio of house prices to incomes nationwide was 30% above levels immediately pre-pandemic. Now that ratio is only 4% above pre-pandemic levels
This might qualify as "well founded, lengthy" reasoning to you. Personally I think it's an embarrassment to a profession that is hardly covered with glory in the first place (economics).
"Why not pick up one of his reasons and run with it and discuss it. See if it holds water so to speak."
Property Values are going up 5% this year. OK, no they are not. Full Stop. Well that was a short discussion !
Lower Hut - -26.6% Crash this year so far. I wonder how those people feel about The Comb ?
But at least Tony The Comb is wise enough to believe The Prophet that interest rates are going to 10% next year. Or so it seems.
18 months ago TA suggested fixing loans for 5 years. I did that for all mine and he could say the moon is made of cheese for all I care.
Certainly a lot to be said about vested interests making public opinions that could be construed as financial advice, particularly with credentials such as Former Chief Economist at BNZ for 25 years. Where is the line drawn?
If TA said "House prices will double in the next 3 years because cash rate will drop to 0.25, people should get in now and borrow what they can. - Tony Alexander, Speaker and Former BNZ Chief Economist. Disclaimer: My opinion." would that be okay?
Fusion power? Snort.
What has happened to powerdownkiwi and his informative posts about how a fusion power plant never built another fusion power plant?
Some cheerleaders have missed a minor flaw:
The experiment calculation excluded the energy required to make the lasers work. See bottom para of this article.
Breakthrough in nuclear fusion energy announced - https://www.bbc.co.uk/news/science-environment-63950962
It's an important point for the debate, but that wasn't the point of the experiment. The experiment was a success as the energy resulting from the fusion was more than that delivered by the lasers. The reactor is too small, so scaling effects should enable (at least that's what the scientists expect) the total power demand to run the background systems to reduce in proportion to the total output. The fact that they've actually achieved fusion is a big step forward. Dropping in more fuel pellets and getting a longer period of fusion will be a step in the process, and at some point that power output should start to exceed the total power demand of the reactor.
Yes. Also, I recall it was a year or two ago the same sort of announcement was made about a net gain. But the same problem remains now as then - they calculate net energy, based on heat output. Converting that heat to something useful like electricity typically has a 50% loss. And we are negative again. :(
You don't build fusion plants with fusion power, you use it to generate hydrogen. Megan Woods knows.
This is called the 'circular economy'. Where hydrogen is fused to make helium, generating heat which is used to make electricity with which to split water molecules, making hydrogen!
This process - known as the "Woodsian Cycle" - generates absolutely nothing of value. However, since it has a zero-carbon footprint, it is automatically eligible for several million dollars worth of government grants.
I was being sarcastic.
Positive news on the inflation front!
Recent cost increases are pretty much baked in by wage rises now.
The question is why banks are being so careful about balance sheet risks? It isn't rate hikes. Total values of all financial assets according to Z1 fell by 1% q/q in Q2 then didn't rebound in Q3. Credit crunch incoming. https://youtube.com/watch?v=pptGs6
Context is huge. That goes for the $80 trillion in forex swaps as well as the several trillion which just "disappeared" from the Federal Reserve's Z1 data during Q3. Where ROW should be providing US$s to Americans, instead consistent with what we've seen of markets (you know, volatility), more evidence for heavy dollar shortages thus heavier curve inversions. Link
In the EU, they have agreed to impose a new tax on imports based on the greenhouse gases emitted to make them, inserting climate-change regulation for the first time into the rules of global trade.
Just a reminder to some that your own little views on climate, methane or whatever don't actually matter in the real world.
COVID rips through China trading desks, banks prep backup plans
China’s COVID-19 wave is rippling through the nation’s financial industry, with currency volumes falling as traders call in sick and banks activating backup plans to keep operations running smoothly.
A sudden uptick in the number of sick traders was one reason behind the drop in onshore yuan-dollar spot volumes to the lowest level since April on Monday, five people familiar with the situation said, asking not to be identified discussing internal matters.
Half of the currency traders at one Chinese bank in Beijing were off sick as of yesterday, one of the people said. The process of executing and confirming trades has slowed considerably for many market participants, exacerbating a seasonal dip in activity at year-end.
To cope with the surge in cases, some financial firms are checking temperatures, telling staff with symptoms or positive tests to stay home, asking traders work in split teams and activating backup trading desks, people familiar with the matter said.
China abruptly ended its stringent Covid Zero policy this month, removing almost all restrictions on tracking and isolating patients. While the opening could could provide a longer term boost to the struggling economy, the unexpected COVID-19 shift raises short-term threats of more economic stress. Goldman Sachs president John Waldron said over the weekend that China’s road to reopening could be “bumpy,” posing a further risk to growth for the world’s second-largest economy.
The government’s overall tally of infections has plunged after mass testing was ended, but signs of disruption are visible in Beijing, with long lines outside hospitals and people struggling to find medicine. In Shanghai, which dealt with a wave of infections and a gruelling two-month lockdown earlier this year, the situation looks to be more contained. Hospitals in the city are posting tips on social media telling people how to cope with an infection, urging them not to come in unless they develop severe symptoms.
Bankers, that is like a xmas wish come true!
Can we form a wish list? I'll nominate politicians, closely followed by lawyers.
Real Estate agents are very safe here, looking at open home numbers and auction results, That cheltenam beach one had good bidding starting at 1 mil, top bid was passed in at 2.1mil (CV was 5.1mil.), I like that place maybe the cliff has stability issues, I though bidding would at least get to 50% of cv.
Covid seems to be tearing through Auckland right now. I know a lot of people who have contracted it in the past 2 weeks. My son has just come down with it a second time.
Talk is that by Xmas day - 1 in 20 in AKL will be positive.
Talk is cheap..
I made it all the way round Europe for a month, back here, workies have had it, went to a party, half of the attendees got it. Convinced Im bullet proof. Whats for Christmas - Michael Baker as Santa....
Michael the Grinch
I reckon about 5-10% of people are wearing masks on planes and trains based on my experience in the last 2 weeks.
I don’t support mask mandates but I don’t really get the lack of mask wearing. Tiny inconvenience to help protect yourself.
Only if you have good masks. The standard medical mask is more about protecting others from yourself. Of course if everyone does it, then everyone is more protected from everyone else.
Apparently everyone in Queenstown has it.
Reinfections have severe long-term sequellae (Nature Medicine large study with controls).
Pretty much our whole Auckland internal sales office are off with it.
I would'nt believe any figures coming out from the US Government. The truth about the absolute corruption is coming out.. Look at the political donations from FTX for a start.
What is corrupt about political donations ..just look at NZs track record? NZ has no laws on lobbyists as well...
What's unfettered in America is "Communism for the Rich" and the normalization of corruption that results from the auctioning of political power to protect monopolies and cartels. Link
The fact that it was fraudulently gained that’s what! Ok when the democrats / left do it but imagine the uproar if it had been trump
SBF has just been arrested..let's see what the spooks bring out, then we can all get outraged one again.
Been saying this for a while the economic news coming out of the USA is about as reliable as it is out of China. They try and shape the outcome the same as the RBNZ trying to engineer a recession. It's all BS and reminds me of the emperor with no clothes.
Nearly Xmas Carlos, how's your BTC to zero prediction going, did you want to switch to next year (again,)?
DJI ended up 100 points, a mere sniff despite the inflation number.
I suspect waiting for tonight's FOMC.
Santa Claus is readying the reindeer 🥳 https://youtu.be/jDUrHsdUlJM
I don't get it. The central banks of the world know that raising interest rates to control inflation comes with a lag time right? As inflation is coming down now, maybe they are better to hold the rate in place? Real risk of doing too much now, too quickly now. Overcorrection seems like a real possibility.
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