Global PMIs ease along with some key inflation drivers; China struggles with pandemic pivot; Australia says energy market has failed them; UST 10yr 3.48%; gold up and oil down; NZ$1 = 63.8 USc; TWI-5 = 72.6

Here's our summary of key economic events overnight that affect New Zealand, with news markets are ending the year mired in uncertainty. (H/T Westpac)

They are coming to realise that central banks are really (truly) focused on beating the inflation threat, and are unlikely to be dissuaded by a few bumps along the way - like a recession, or a deteriorating labour market. This is new for investors, who had until now priced in an easing bias on the expectation central banks would blink. They aren't so sure now.

Certainly a slowdown is coming. The first of the December PMIs are now available, on a 'flash' basis, and the American factory sector is now at its lowest ebb in 31 months, and now contracting. Their giant services sector is actually shrinking at a faster pace. The demand retreat the Fed wants is here.

And there are signs inflation is easing too.

American petrol prices are falling noticeably now. From a year ago, this week's national average price is -3.8% lower. More importantly for consumers there it is -15% lower than just a month ago. On average, American pay NZ$1.328 per litre retail. (Yes, these are "pump prices" so they do include taxes, but sales taxes do vary widely between states and counties. So this the just an average.)

Import activity at some key US west cost ports are down sharply. There were steep declines in November and they are extending into December too. The US import engine is stuttering and many economies across the Pacific will feel the impact in an outsized way.

There were flash PMIs out for other countries too. In Japan, the Markit survey shows factory activity is now contracting at a similar rate to the US, while they still have an expanding services sector, and interestingly a faster expansion than in November. That may surprise a few analysts.

In the EU, everything is contracting however. Their factory sector is shrinking at a lesser rate however, and their services sector is shrinking at a lesser rate too. These 'improvements' weren't expected. Germany provided the moderation here, a turnaround from November when it was France, but France is weakening faster now.

The German central bank sees a mild recession in 2023, and a moderate recovery after that. For them, it will be a soft landing, they say.

In Australia, private sector activity slowed amid higher interest rates in December. The service sector is still contracting and the wind has gone right out of the expanding factory sector, and that expansion has disappeared now.

Separately in Japan, they have approved a major defense overhaul in a dramatic policy shift. The security threats from China, Russia and even North Korea has jolted them into action, reversing policies that have been in place for 70 years.

And separately in China, policymakers suggested that anti-pandemic restrictions could be loosened further as the government seeks to stabilise flagging growth. At their Central Economic Work Conference officials said they will "optimise and adjust" pandemic control policies. The streets of key cities are eerily quiet has infections spread and people stay home, either to self quarantine, or avoid infection. Foreign investors see a very tough 2023 ahead in China, especially American investors.

And that negative view is showing up in the Chinese government bond market. Foreign holdings of yuan-denominated bonds traded in China's interbank market declined further in November, making the 10th consecutive month of outflows.

And separately in Australia, their new prime minister has declared their energy market has failed, and a central government intervention is the only way to fix it. This is new for Australia; the attitude of the last 50 years has been to roll over to the interests of large commercial investors. There is fierce pushback this time too, but not the usual acquiescence by government. It will be an interesting tussle to watch.

The UST 10yr yield started today at 3.48%, and up +4 bps from this time yesterday and re-building after the recent big drop. A week ago it was at 3.56%. The UST 2-10 rate curve is less inverted from yesterday at -70 bps. Their 1-5 curve is also less inverted at -101 bps, while their 30 day-10yr curve is more inverted at -37 bps. The Australian ten year bond is down -2 bps at 3.46%. The China Govt ten year bond is unchanged at 2.92%. And the New Zealand Govt ten year will start today also very little-changed at 4.33%.

Wall Street's Friday session is negative again with the S&P500 down -1.5% and heading for a weekly retreat of -2.7%. Overnight, European markets were down on average about -1%. That left London -1.9% lower for the week, Paris and Frankfurt -2.9% lower. Yesterday, Tokyo closed down -1.9% for the day to be -0.8% lower for the week. Hong Kong rose -0.4% yesterday, to be -0.7% lower for the week. And Shanghai ended flat in its Friday session to be -0.9% lower for the week. The ASX200 closed down -0.8% for a -0.9% weekly change, while the NZX50 ended its session unchanged for an essentially unchanged week. But that was enough for the NZX50 to come out on top of the markets we follow.

The price of gold will open today at US$1790 and up +US$12 from yesterday. But that is down from US$1800 a week ago.

And oil prices start today down -US$1 from this time yesterday at just under US$75/bbl in the US while the international Brent price is just over US$80/bbl. A week ago these levels were US$71/bbl and US$76/bbl respectively.

The Kiwi dollar opened today at 63.8 USc and a little firmer from yesterday. A week ago it was at 64.1 USc. Against the Australian dollar we are up more than +¾c to 95.4 AUc. Against the euro we are at 60.2 euro cents and up +½c. That all means our TWI-5 starts today at 72.6 and up +40 bps and back to week-ago levels.

The bitcoin price is now at US$16,821 and down another -3.3% from this time yesterday. A week ago it was at US$17,161 so a net -2.0% fall over the past 7 days. Volatility over the past 24 hours has been moderate at just +/- 2.3%. The auditing firm working on Binance and crypto.com has dropped (or "paused") work at both firms.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».